PURCHASE AND SALE AGREEMENT between STEWART & STEVENSON LLC as Seller, and KIRBY CORPORATION as Buyer dated as of June 13, 2017

 

between

 

▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLC

 

as Seller,

 

and

 

▇▇▇▇▇ CORPORATION

 

as Buyer

 

dated as of June 13, 2017

 

TABLE OF CONTENTS

 

 

TABLE OF CONTENTS

(continued)

 

TABLE OF CONTENTS

(continued)

 

 

 

 

This PURCHASE AND SALE AGREEMENT, dated as of June 13, 2017 (this “Agreement”) is made and entered into by and between ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLC, a Delaware limited liability company (“Seller” or “S&S”), and ▇▇▇▇▇ Corporation, a Nevada corporation (“Buyer”).

 

RECITALS

 

Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, on the terms and subject to the conditions set forth herein, all of Seller’s right, title and interest in and to (i) the entities set forth on Schedule PE (the “Purchased Entities”) and  (ii) the Purchased IP (as defined below).

 

AGREEMENT

 

Now, therefore, in consideration of the premises and the mutual representations, warranties, covenants and agreements in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS AND CONSTRUCTION

 

1.1           Definitions.  As used in this Agreement, the following capitalized terms have the meanings set forth below:

 

“2017 Budget” means the written budget of the Companies for the fiscal year ending January 31, 2018 in the form provided to the Buyer prior to the date hereof.

 

“Accounting Firm” has the meaning given to it in Section 2.6(b).

 

“Acquisition Proposal” has the meaning given to it in Section 5.15.

 

“Additional Cash Consideration” means, (a) if the ▇▇▇▇▇ Volume-Weighted Average Price is less than $62.3216, then an amount of cash equal to the amount, if any, by which (i) $355,000,000, exceeds (ii) the product of (A) the number of shares of ▇▇▇▇▇ Common Stock comprising the Share Consideration, and (B) the ▇▇▇▇▇ Volume-Weighted Average Price, and (b) if the ▇▇▇▇▇ Volume-Weighted Average Price equals or exceeds $62.3216, then zero.

 

“Affiliate” means, with respect to any Person, a Person directly or indirectly controlling, controlled by or under common control with such Person.  In this context control means the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the United States Securities Exchange Act of 1934) of one or both of the following:

 

(a)           (i) in the case of a corporation, more than 25% of the direct or indirect economic interest in the outstanding equity securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 25% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, more than 25% of the beneficial interest therein; and (iv) in the case of any other entity, more than 25% of the economic or beneficial interest therein; or

 

(b)           in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to control or direct the management and policies of the entity.

 

“Agreement” has the meaning given to it in the introduction to this Agreement.

 

“Allocation” has the meaning given to it in Section 2.7.

 

“Allocation Principles” has the meaning given to it in Section 2.7.

 

“Anti-Boycott Laws” means all applicable Laws of the United States relating to the boycott of certain countries including those promulgated by the U.S. Department of Commerce or the U.S. Department of Treasury, and such laws of other applicable jurisdictions to the extent not inconsistent with the Laws of the United States.

 

“Asserted Liability” has the meaning given to it in Section 9.5(a).

 

“Assets” of any Person means all properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.

 

“Audited Financial Statements” has the meaning given to in Section 3.6.

 

“Balance Sheet” has the meaning given to it in Section 3.6.

 

“Balance Sheet Date” has the meaning given to it in Section 3.6.

 

“Base Cash Purchase Price” has the meaning given to it in Section 2.2(a).

 

“Base Survival Period” has the meaning given to it in Section 9.1.

 

“Benefit Plan” means (a) each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, (b) each plan, program, policy, contract, agreement or other arrangement that would be an “employee benefit plan”, as such term is defined in Section 3(3) of ERISA, if it was subject to ERISA, such as foreign plans and plans for directors, (c) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock, or other stock or stock-related plan (whether qualified or nonqualified), (d) each compensation, deferred compensation, performance award, bonus or incentive compensation plan, and (e) each change in control benefit, retention benefit, severance or separation benefit, perquisite or fringe benefit plan, in each case that is or has been sponsored, maintained, contributed to or required to be contributed to, by a Company or any of its ERISA Affiliates for the benefit of such Company’s current or former directors, officers, employees, or consultants, or with respect to which a Company has or may have any liability or obligation.

 

“Business” means all of the following as currently conducted by the Companies: the design, manufacture, remanufacture, distribution, service and rental of specialized equipment and parts in the oil and gas, power generation, marine, construction, industrial and mining, on highway and agricultural markets, including well stimulation systems, work over and well servicing rigs, cementing equipment, pumping units, coil tubing units, power train and power generation equipment, controls and drives.

 

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of New York or the State of Texas are authorized or obligated to close.

 

“Buyer” has the meaning given to it in the introduction to this Agreement.

 

“Buyer Financial Statements” has the meaning given to it in Section 4.8.

 

“Buyer SEC Documents” has the meaning given to it in Section 4.9.

 

“Cash” means money, currency or a credit balance in a deposit account at a financial institution, net of checks outstanding as of the time of determination.

 

“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition, (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Corporation or ▇▇▇▇▇’▇ Investors Service, Inc., (c) commercial paper issued by any bank or any bank holding company owning any bank maturing no more than one year from the date of its creation and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Corporation or ▇▇▇▇▇’▇ Investors Service, Inc., and (d) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition issued by any commercial bank organized under the Laws of the United States of America having combined capital and surplus of not less than $500,000,000.

 

“CBA” has the meaning given to it in Section 5.12(a).

 

“Charter Documents” means with respect to any Person, the articles of incorporation or organization, memorandum of association, articles of association and by-laws, the limited partnership agreement, the partnership agreement or the limited liability company agreement or such other similar organizational documents of such Person.

 

“Claim” means any demand, claim, action, investigation, or Proceeding.

 

“Claims Notice” has the meaning given to it in Section 9.5(a).

 

“Closing” has the meaning given to it in Section 2.3.

 

“Closing Date” means the date on which Closing occurs.

 

“COBRA” has the meaning given to it in Section 3.22(f).

 

“Code” means the United States Internal Revenue Code of 1986, as amended.

 

“Company” means any of S&S and its direct or indirect Subsidiaries and “Companies” means S&S and all of its direct or indirect Subsidiaries.

 

“Company Assignment Agreement” has the meaning given to it in Section 2.4(e).

 

“Company Consents” has the meaning given to it in Section 3.5(b).

 

“Company Indebtedness” means all indebtedness for borrowed money of the Companies, including all amounts owing under the Credit Facilities (collectively, the “Company Indebtedness”).  The term “Company Indebtedness” shall include all fees, prepayment penalties, make-whole payments, reimbursable expenses and other amounts payable to the lenders or other counterparties thereunder and any other amounts owed or payable by the Companies in connection with any Company Indebtedness.

 

“Company Interests” means (i) 100% of the Equity Interests in the Wholly-Owned Purchased Entities, (ii) Equity Interests representing a 99.95% equity interest in ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ de Venezuela, S.A., and (iii) Equity Interests representing a 99% equity interest in ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ de las Americas Colombia Ltda.

 

“Contributed Assets” has the meaning given to it in the Drop-Down Agreement.

 

“Corporate Subsidiaries” has the meaning given to it in Section 5.6(a).

 

“Confidentiality Agreement” means that certain Mutual Non-Disclosure Agreement between Buyer and S&S, dated as of April 10, 2017.

 

“Contract” means any legally binding written contract, legally binding written agreement (including letter agreement), lease, license, evidence of indebtedness, mortgage, indenture, legally binding written purchase order, binding bid, letter of credit, security agreement or other legally binding written arrangement.

 

“Credit Facilities” means (i) the Fourth Amended and Restated Credit Agreement, dated as of December 23, 2016, among S&S, Power Products, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Petroleum Services LLC, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Material Handling LLC, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Manufacturing Technologies LLC, EMDSI-▇▇▇▇ Power, L.L.C. and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ FDDA LLC, as borrowers, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (as defined therein) and (ii) the Loan Agreement, dated as of March 15, 2012, between ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Acquisition LLC and National Investment Bank (N.A.) N.V.

 

“Deductible” has the meaning given to it in Section 9.4(a).

 

“Dispute” has the meaning given to it in Section 9.8(a).

 

“Disregarded Entity” has the meaning given to it in Section 3.17(h).

 

“Drop-Down Agreement” has the meaning given to it in Section 2.4(c).

 

“EI” has the meaning given to it in Section 5.18.

 

“Environmental Law” means all applicable Laws relating to the prevention of pollution, remediation of contamination, protection of natural resources, or the environment (including air, water or land), exposure to hazardous, or toxic substances, or the preservation of environmental quality, each as amended on or prior to the Closing Date.  The term “Environmental Law” shall include, but not be limited to, the following statutes and the regulations promulgated thereunder: the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Emergency Planning and Community ▇▇▇▇▇-▇▇-▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. § ▇▇▇▇▇ et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq., the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., and any state, county, or local laws and regulations similar thereto.

 

“Equity Interests” means capital stock, partnership or membership interests or units (whether general or limited), and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means, with respect to a Company, any entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes such Company, or that is a member of the same “controlled group” as such Company pursuant to Section 4001(a)(14) of ERISA.

 

“Estimated Working Capital Adjustment” means the difference of Seller’s good faith estimate of Net Working Capital as of the close of business on the Business Day immediately preceding the Closing Date minus the Net Working Capital Target.

 

“Excluded Assets” means those Assets, Contracts or other items set forth on Schedule 1.1-EA.

 

“Excluded Liabilities” means (i) all liabilities and obligations of any kind related to or arising from the ownership, operation or existence of a NetJets fractional interest in a Bombardier Global 6000 aircraft and (ii) the deposit liability of approximately $23.5 million associated with the Rigs.

 

“Excluded Representations” means the representations and warranties set forth in Sections 3.1(a) and (b) (Organization; Good Standing), 3.2 (Authority), 3.3 (Capitalization), 3.4 (Subsidiaries), 3.5(a) (Violation of Charter), 3.26 (Securities Matters), and 3.27 (Broker’s Commissions).

 

“Export and Sanctions Laws” means all Laws of the United States and all other applicable jurisdictions relating to any economic sanctions or export restriction including: (i) the sanctions regulations administered by U.S. Department of Treasury’s Office of Foreign Assets Control; (ii) export and trade controls and related sanctions administered by the U.S. Department of Commerce, Bureau of Industry and Security; and (iii) the International Traffic in Arms Regulations administered by the U.S. Department of State’s Directorate of Defense Trade Controls.

 

“FCPA” has the meaning given to it in Section 3.11.

 

“Financial Statements” has the meaning given to it in Section 3.6.

 

“GAAP” means generally accepted accounting principles in the United States, applied on a consistent basis.

 

“Governmental Authority” means any applicable U.S. or foreign, federal, national, state, provincial or local governmental or quasi-governmental authority, agency, board, commission, court or official.

 

“Hazardous Material” means each substance designated or classified as a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law, including asbestos, polychlorinated biphenyls, mercury, flammable or explosive materials, radioactive materials, petroleum or petroleum products (including crude oil), and any other chemical, pollutant, contaminant, substance or waste that is regulated or for which liability or standards of care are imposed under any Environmental Law.

 

“HSR Act” means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976.

 

“HSR Approval” means approval pursuant to, or the expiration of applicable waiting periods under, the HSR Act.

 

“Indemnity Escrow Account” means the account established by the Indemnity Escrow Agent, Buyer and Seller pursuant to the Indemnity Escrow Agreement into which the Indemnity Escrowed Shares, or any part thereof, is deposited and held from time to time.

 

“Indemnity Escrow Agent” means ▇.▇. ▇▇▇▇▇▇ Escrow Services (or an affiliate of ▇▇ ▇▇▇▇▇▇ Chase & Co. performing similar services).

 

“Indemnity Escrow Agreement” means that certain escrow agreement dated as of the Closing Date, by and among the Indemnity Escrow Agent, Buyer and Seller, in the form provided by the Indemnity Escrow Agent and reasonably acceptable to both Parties.

 

“Indemnity Escrowed Shares” a number of shares of ▇▇▇▇▇ Common Stock equal to $50,000,000 divided by the ▇▇▇▇▇ Stock Price, rounded to the nearest whole share.

 

“Intellectual Property” shall collectively mean all of the following legal rights, title, or interest in or arising under the Laws of the United States, any state, any other country, or international treaty regime, whether or not filed, perfected, registered, or recorded and whether now or hereafter existing, filed, issued, or acquired, including all renewals thereof: (i) certificates of invention and other indicia of invention ownership, patents, patent applications, and patent rights, including any such rights granted upon any reissue, reexamination, division, extension, provisional, continuation, or continuation-in-part applications, and equivalent or similar rights anywhere in the world in inventions and discoveries; (ii) rights associated with works of authorship and literary property rights, including copyrights, copyright applications and copyright registrations, and moral rights; (iii) trade secrets and confidential information, including ideas, designs, concepts, compilations of information, methods, techniques, procedures, processes and other know-how, whether or not patentable; (iv) trademarks, service marks, logos, trade dress, domain names, trade names, and service names, whether or not registered, and the goodwill associated therewith; and (v) any rights analogous to those set forth in the preceding clauses and any other proprietary rights relating to intangible property anywhere in the world.

 

“Interim Financial Statements” has the meaning given to in Section 3.6.

 

“Interim Period” has the meaning given to it in Section 5.2.

 

“▇▇▇▇▇ Common Stock” means the common stock, par value $0.10 per share, of ▇▇▇▇▇ Corporation.

 

“▇▇▇▇▇ Stock Price” means the ▇▇▇▇▇ Volume-Weighted Average Price; provided, however, that (a) if the ▇▇▇▇▇ Volume-Weighted Average Price is less than $62.3216, then the ▇▇▇▇▇ Stock Price will equal $62.3216, and (b) if the ▇▇▇▇▇ Volume-Weighted Average Price is more than $72.4278, then the ▇▇▇▇▇ Stock Price will equal $72.4278.

 

“▇▇▇▇▇ Volume-Weighted Average Price” means (a) the sum of the daily dollar volume-weighted average price for a share of ▇▇▇▇▇ Common Stock on the New York Stock Exchange, as reported by Bloomberg, L.P. (or, if Bloomberg, L.P. ceases to provide such information, by any substitute function or service mutually agreed among the Parties) for the twenty (20) Trading Days ending on and including the Trading Day immediately preceding the Closing Date, divided by (b) twenty (20).

 

 “Knowledge” when used in a particular representation or warranty in this Agreement with respect to Seller, means that any of the individuals listed on Schedule 1.1-K has actual knowledge of the event, matter or information in question or would have knowledge of such matter following reasonable inquiry of those employees who report directly to such individuals.

 

“Laws” means all laws, statutes, rules, regulations, ordinances, court orders and other pronouncements having the effect of law of any Governmental Authority.

 

“Leased Real Property” means all of the real property leased by a Company.

 

“Lien” means any mortgage, pledge, deed of trust, assessment, security interest, charge, lien, option, warranty, purchase right, lease or other similar property interest or other right or encumbrance.

 

“Loss” means any and all judgments, losses, liabilities, amounts paid in settlement, damages, fines, penalties, deficiencies, cost of investigation, Taxes and expenses (including interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other Proceedings or of any Claim, default or assessment).  For all purposes in this Agreement the term “Losses” shall not include any Non-Reimbursable Damages.

 

“Material Adverse Effect” means any change, event, violation, development, circumstance, effect or other matters that, individually or in the aggregate, have, or would reasonably be expected to have, a material adverse effect on the business, condition (financial or otherwise), capitalization, assets, liabilities, or operations of the Companies, on the one hand, or the Buyer and its subsidiaries, on the other hand, taken as a whole, or on a party’s ability to consummate the transactions contemplated hereby; provided, however, that none of the following shall constitute, or shall be considered in determining whether there has occurred, and no change, event, violation, development, circumstance, effect or other matter resulting from or arising out of any of the following shall constitute a Material Adverse Effect: (i) changes in conditions in the United States or global economy; (ii) changes in GAAP or other accounting standards, or authoritative interpretations thereof after the date hereof; (iii) the public announcement or pendency of this Agreement and the transactions contemplated by this Agreement; and (iv) the existence or occurrence of war, acts of war, terrorism or similar hostilities; (v) the effect of any change that generally affects any industry in which the Companies or the Buyer and its subsidiaries, as applicable, operate; (vi) the failure of any Company to meet any of its internal projections; (vii) the termination of employment of any employee of the Companies; or (viii) national or international political, labor or social conditions, so long as, with regard to matters described in (i), (ii), (iv), (v), and (viii), such matters do not have a materially disproportionate impact on the Companies or the Buyer and its subsidiaries, as applicable, relative to other companies in the industries in which the Companies or the Buyer and its subsidiaries, as applicable, operate; provided, further, that the parties hereto agree that any suspension or debarment rendering any of the Companies ineligible to enter into contracts with the federal government or as a subcontractor to the federal government shall constitute a Material Adverse Effect with respect to the Companies.

 

“Material Contracts” has the meaning given to it in Section 3.18(a).

 

“Material Customers” has the meaning given to it in Section 3.20.

 

“Multiemployer Pension Plan” has the meaning given to it in Section 5.12(h).

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 3(37) of ERISA.

 

“Net Working Capital” means, as of a particular date or time, (a) the sum of the following consolidated current assets of the Purchased Entities: (i) accounts receivable, (ii) costs in excess of ▇▇▇▇▇▇▇▇, (iii) inventory and (iv) prepaid expenses and other assets, less (b) the sum of the following consolidated current liabilities of the Purchased Entities: (w) accounts payable, (x) customer deposits, (y) accrued payroll and incentives and (z) other accrued liabilities.  Notwithstanding anything in this Agreement to the contrary the following items will be excluded from the calculation of Net Working Capital: (a) accrued interest payable, (b) current maturities of long-term debt, (c) bank notes payable, (d) Cash and Cash Equivalents, (e) deferred Tax assets and liabilities established to reflect timing differences between book and Tax income, (f) Excluded Assets and (g) Excluded Liabilities.  For illustrative purposes only, attached as Schedule 1.1-A is a sample calculation of Net Working Capital prepared by the Parties as of May 6, 2017. The elements of Net Working Capital will be calculated using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments, reserves and valuation and estimation methodologies that were used in the preparation of the Balance Sheet.

 

“Net Working Capital Target” means $122,480,926.

 

“Non-Reimbursable Damages” has the meaning given to it in Section 9.6(b).

 

“Offer Letter” has the meaning given to it in Section 5.12(a).

 

“Offered Employee” has the meaning given to it in Section 5.12(a).

 

“Outside Date” has the meaning given to it in Section 8.1(b).

 

“Parties” means each of Buyer and Seller.

 

“Partnership” has the meaning given to it in Section 3.17(g).

 

“Payoff Amount” has the meaning given to it in Section 2.4(a).

 

“Payoff Letters” has the meaning given to it in Section 2.4(a).

 

“Permits” has the meaning given to it in Section 3.12.

 

“Permitted Lien” means (a) statutory Liens for Taxes, special assessments or other governmental and quasi-governmental charges not yet due and payable (or those with respect to which the amount or validity of is being contested in good faith and that are set forth on Schedule 1.1-PL), (b) landlords’, warehousemans’, mechanics’, materialmens’ and carriers’ Liens to secure claims for labor, material or supplies and other similar Liens that relate to obligations not due and payable and that arise in the ordinary course of business, (c) the interests of the lessors and sublessors of any leased properties, (d) such liens, easements, rights of way and other imperfections of title or encumbrances that do not materially interfere with the value or present use of the property related thereto, and (e) the matters identified on Schedule 1.1-PL.

 

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, unlimited liability corporation, proprietorship, other business organization, trust, union, association or Governmental Authority.

 

“Power Products” has the meaning given to it in Section 5.12(b).

 

“Pre-Closing Period” means any Tax period ending on or before the Closing Date.

 

“Proceeding” means any complaint, lawsuit, action, suit, investigation, administrative proceeding or review, or other proceeding at Law or in equity or order or ruling, in each case by or before any Governmental Authority or arbitral tribunal.

 

“Purchased Entities” has the meaning given to it in the Recitals.

 

“Purchased IP” means the intellectual property assets set forth on Schedule 1.1-IP.

 

“Purchase Price” has the meaning given to it in Section 2.2.

 

“Real Property” means the real property owned in fee or leased, used or held for use by a Company, and all buildings, structures, improvements, and fixtures thereon, together with all rights of way, easements, privileges and appurtenances pertaining or belonging thereto, including any right, title and interest of such Company in and to any street or other property adjoining any portion of such property.

 

“Registration Agreement” means a Registration Agreement in the form attached hereto as Exhibit D.

 

“Release” means any release, spill, emission, leaking, pumping, depositing, pouring, placing, discarding, abandoning, emptying, migrating, escaping, leaching, dumping, injection, disposal or discharge of any Hazardous Materials into the environment.

 

“Representatives” means, as to any Person, its officers, directors, employees, managers, members, partners, shareholders, owners, counsel, accountants, financial advisers and consultants.

 

“Rig Agreement” has the meaning given to it in Section 5.18.

 

“Rig Construction Contracts” has the meaning given to it in Section 5.18.

 

“Rigs” means the four undelivered self-propelled, carrier mounted workover/drilling rigs manufactured by Power Products for Energy Equipment International Ltd., pursuant to purchase contracts dated October 30, 2009.

 

“Scheduled Excluded Employees” means those employees of Seller set forth on Schedule 1.1-SEE.

 

“Schedules” means the disclosure schedules prepared by Seller and attached to this Agreement.

 

“SEC” has the meaning given to it in Section 3.26.

 

“Securities Act” has the meaning given to it in Section 3.3.

 

“Seller” has the meaning given to it in the introduction to this Agreement.

 

“Seller Approvals” has the meaning given to it in Section 3.5(c).

 

“Seller Taxes” means any and all Taxes imposed on the Companies for any Pre‑Closing Period and for the portion of any Straddle Period ending on the Closing Date (determined in accordance with Section 5.6(d).

 

“Share Consideration” has the meaning given to it in Section 2.2(b).

 

“S&S” has the meaning given to it in the introduction to this Agreement.

 

“Straddle Period” means any period relating to the computation of Taxes that begins on or before and ends after the Closing Date.

 

“Subsidiary” has the meaning given to it in Section 3.4.

 

“Taxes” means all taxes, charges, fees, imposts, levies or other assessments or fees of any kind, including income, corporate, capital, excise, property, sales, use, turnover, unclaimed property, escheat, employment, unemployment, social security, disability, withholding, real property, personal property, environmental (including any tax imposed by Section 59A of the Code), customs duties, transfer, registration, value added and franchise taxes, deductions, withholdings and customs duties, imposed by any Governmental Authority, and including any interest or penalty imposed with respect thereto, whether disputed or not, as well as any obligation to indemnify or otherwise assume the Tax obligations of any other Person, whether pursuant to Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign applicable Law, as a transferee or successor, by contract or otherwise.

 

“Tax Returns” means any return, report, rendition, claim for refund, statement, information return or other document (including any related or supporting information or schedule attached thereto, or amendment thereof) filed or required to be filed with any Governmental Authority in connection with the determination, assessment, collection or administration of any Taxes or the administration of any Laws, regulations or administrative requirements relating to any Taxes.

 

“Taxing Authority” means, with respect to any Tax, the Governmental Authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with collection of such Tax for such entity or subdivision.

 

“Termination Fee” has the meaning given to it in Section 8.2.

 

“Trading Day” means a day on which the New York Stock Exchange is open for the transaction of business and trading of securities.

 

“Transaction Expenses” means the amounts owed by Seller or any Company to (a) ▇▇▇▇▇ Day, and (b) any other third party who provides services to Seller, any Company or any of their Affiliates in connection with the transactions contemplated by this Agreement.

 

“Transfer Taxes” has the meaning given to it in Section 5.6(h).

 

“Wholly-Owned Purchased Entities” means the following entities:

 

(a)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Power Products LLC, a Delaware limited liability company;

 

(b)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Material Handling LLC, a Delaware limited liability company;

 

(c)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Funding Corp., a Delaware corporation;

 

(d)           EMDSI-▇▇▇▇ Power, L.L.C., a Delaware limited liability company;

 

(e)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Canada Inc., a New Brunswick corporation;

 

(f)            ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Petroleum Services LLC, a Delaware limited liability company;

 

(g)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Distributor Holdings LLC, a Delaware limited liability company;

 

(h)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Finance LLC, a Delaware limited liability company;

 

(i)            ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Manufacturing Technologies LLC, a Delaware limited liability company;

 

(j)            ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Acquisition LLC, a Delaware limited liability company;

 

(k)           ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Rentals LLC, a Delaware limited liability company; and

 

(l)            ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ FDDA LLC, a Delaware limited liability company.

 

“Working Capital Adjustment” means the sum of (a) the difference between Net Working Capital as of the Closing and the Net Working Capital Target and (b) any Cash or Cash Equivalents of the Purchased Entities as of the Closing.

 

“Working Capital Escrow Account” means the account established by the Working Capital Escrow Agent, Buyer and Seller pursuant to the Working Capital Escrow Agreement into which the Working Capital Escrowed Cash, or any part thereof, is deposited or held from time to time.

 

“Working Capital Escrow Agent” means ▇.▇. ▇▇▇▇▇▇ Escrow Services (or an affiliate of ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & Co. performing similar services).

 

“Working Capital Escrow Agreement” means that certain escrow agreement dated as of the Closing Date, by and among the Working Capital Escrow Agent, Buyer and Seller, in the form provided by the Working Capital Escrow Agent and reasonably acceptable to both Parties.

 

“Working Capital Escrowed Cash” means an amount equal to $2,500,000.

 

1.2           Rules of Construction.

 

(a)          The exhibits and schedules attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.  All underscored article, section, subsection and exhibit references used in this Agreement are to articles, sections, subsections and exhibits to this Agreement unless otherwise specified.

 

(b)          The headings preceding the text of Articles and Sections included in this Agreement and the headings to Schedules attached to this Agreement are for convenience only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement.

 

(c)          If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa.  The words “includes” or “including” shall mean “including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear.  All currency amounts referenced herein are in United States Dollars unless otherwise specified. The singular shall include the plural and the plural shall include the singular wherever and as often as may be appropriate.

 

(d)          Time is of the essence in this Agreement.  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.  Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.

 

(e)          All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP and shall be calculated in a manner consistent with that used in preparing the Financial Statements.

 

(f)           Any reference herein to any Law, statute, rule or regulation shall be construed as referring to such Law, statute, rule or regulation as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time and references to particular provisions of a Law include a reference to the corresponding provisions of any prior or succeeding Law.

 

(g)          Each Party acknowledges that it and its attorneys have been given an equal opportunity to negotiate the terms and conditions of this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party or any similar rule operating against the drafter of an agreement shall not be applicable to the construction or interpretation of this Agreement.

 

ARTICLE II

PURCHASE AND SALE AND CLOSING

 

2.1           Purchase and Sale.  On the terms and subject to the conditions set forth in this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell and to convey to Buyer, at Closing, (i) the Company Interests, and (ii) the Purchased IP.

 

2.2           Consideration.  The consideration in full (collectively, the “Purchase Price”) to be paid by the Buyer for the sale and purchase of the Company Interests, the Purchased IP, and the non-competition agreements in ARTICLE X will be:

 

(a)          $355,000,000 (the “Base Cash Purchase Price”), plus (if positive) or minus (if negative), the Working Capital Adjustment;

 

(b)          a number of shares of ▇▇▇▇▇ Common Stock equal to $355,000,000 divided by the ▇▇▇▇▇ Stock Price, rounded to the nearest whole share (the “Share Consideration”); and

 

(c)          the Additional Cash Consideration, if any.

 

2.3           Closing.  The consummation of the purchase and sale of the Company Interests and the Purchased IP (the “Closing”) shall take place at the offices of Norton ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ US LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M. local time, on the third Business Day after the conditions to Closing set forth in Articles VI and VII (other than actions to be taken or items to be delivered at Closing) have been satisfied or waived, or on such other date and at such other time and place as Buyer and Seller mutually agree.  All actions listed in Sections 2.4 or 2.5 that occur on the Closing Date shall be deemed to occur simultaneously at the Closing.

 

2.4           Closing Deliveries by Seller to Buyer.  At the Closing, Seller shall deliver, or shall cause to be delivered, to Buyer the following:

 

(a)          payoff letters from the Company’s lenders with respect to any Company Indebtedness in form and substance reasonably satisfactory to the Buyer, which payoff letters will (i) evidence payoff and satisfaction of all outstanding Company Indebtedness (ii) provide for the termination of all obligations of the Companies with respect to the Company Indebtedness, and (iii) provide for the automatic termination, upon payment of the payoff amount indicated in such payoff letter, any Liens securing the obligations of any Company under such Company Indebtedness (such letters being the “Payoff Letters” and the aggregate amount indicated for payment on the Closing Date in all of the Payoff Letters being the “Payoff Amount”);

 

(b)          any other evidence reasonably required by Buyer to evidence the satisfaction of any Company Indebtedness and the payment of any amounts required to be paid at the Closing pursuant to Section 5.5;

 

(c)          an original copy of the Assignment, Assumption and Contribution Agreement in the form attached hereto as Exhibit A (the “Drop-down Agreement”), duly executed by Seller and Power Products;

 

(d)          counterparts duly executed by Seller of assignments of the Purchased IP, including separate assignments of all registered marks, patents and copyrights included in the Purchased IP in the form attached hereto as Exhibits ▇-▇, ▇-▇ and B-3;

 

(e)          a counterpart duly executed by Seller of an assignment of Equity Interests (the “Company Assignment Agreement”) in the form attached hereto as Exhibit C evidencing the assignment and transfer to Buyer of the Company Interests; provided, however, that at Buyer’s election, such Company Interests may be assigned directly to another Person designated by Buyer that is an Affiliate controlled by Buyer;

 

(f)          original stock certificates evidencing the corporate Company Interests accompanied by stock powers duly executed by Seller in a form reasonably acceptable to Buyer evidencing the assignment and transfer to Buyer of such Company Interests; provided, however, that at Buyer’s election, such Company Interests may be assigned directly to another Person designated by Buyer that is an Affiliate controlled by Buyer;

 

(g)          the originals or copies of all of the Companies’ books, records, ledgers, proprietary information and other data, and all other written or electronic depositories of information  (which delivery may be made and will be deemed to be received at the offices of the Purchased Entities);

 

(h)          copies of the Certificate of Incorporation of each Purchased Entity (certified as of the most recent practicable date by the Secretary of State of the state of incorporation of such Purchased Entity) that is a corporation incorporated in the United States;

 

(i)           copies of the Certificate of Formation or other similar organizational document of each Purchased Entity (certified as of the most recent practicable date by the Secretary of State of the state of formation of such Purchased Entity) that is formed, organized or otherwise incorporated in the United States but that is not a corporation;

 

(j)           copies of the Certificate of Formation or other similar organizational document of each Purchased Entity that is formed, organized or otherwise incorporated in a jurisdiction that is not part of the United States;

 

(k)          true and correct copies of the limited liability company agreements, limited partnership agreements (or other governing agreements) for each Purchased Entity that is not a corporation;

 

(l)           a certificate of the Secretary of State of the state of formation or incorporation for each Purchased Entity that is formed, organized or otherwise incorporated in the United States certifying as to the good standing of each such Purchased Entity as of the most recent practicable date;

 

(m)         a certification of non-foreign status in the form prescribed by Treasury Regulation Section 1.1445-2(b) with respect to Seller;

 

(n)          the resignation or removal (effective as of Closing) of such managers, partners, officers and directors, of any of the Purchased Entities as Buyer shall request;

 

(o)         a closing certificate in a form reasonably acceptable to the Buyer duly executed by the President and Chief Executive Officer of Seller as to satisfaction of the conditions set forth in Sections 6.1 and 6.2;

 

(p)         a secretary’s certificate of Seller in a form reasonably acceptable to the Buyer duly executed by the secretary or assistant secretary of Seller;

 

(q)          a counterpart duly executed by Seller and each member of Seller of the Registration Rights Agreement;

 

(r)           a counterpart duly executed by Seller of the Working Capital Escrow Agreement;

 

(s)          a counterpart duly executed by Seller of the Indemnity Escrow Agreement;

 

(t)          evidence reasonably satisfactory to Buyer of the termination of the sales consulting agreements identified as “relationship inactive” on Schedule 3.5(b); and

 

(u)          a copy of the Rig Agreement in form and substance reasonably acceptable to Buyer duly executed and delivered by both Power Products and EI.

 

2.5          Closing Deliveries by Buyer to Seller.  At the Closing, Buyer shall deliver, or cause to be delivered, to Seller (or such other Persons as are set forth below) the following:

 

(a)          a wire transfer of immediately available funds (to such account as Seller shall have notified Buyer of at least two Business Days prior to the Closing Date) in an amount in the aggregate equal to the Base Cash Purchase Price, plus (1) the Additional Cash Consideration (if any), minus (1) the Working Capital Escrowed Cash, minus (2) the Payoff Amount, plus (if positive) or minus (if negative) (3) the Estimated Working Capital Adjustment;

 

(b)          wire transfers of immediately available funds of the Payoff Amount to the accounts listed for payment in the Payoff Letters;

 

(c)          a wire transfer to the Working Capital Escrow Agent of the Working Capital Escrowed Cash;

 

(d)          a certificate representing a number of shares of ▇▇▇▇▇ Common Stock equal to the Indemnity Escrowed Shares to the Indemnity Escrow Agent  (or evidence from Buyer’s transfer agent as to the issuance of such shares of stock in book-entry form);

 

(e)          a certificate representing a number of shares of ▇▇▇▇▇ Common Stock equal to the Share Consideration less the Indemnity Escrow Shares (or, at the request of Seller, evidence from Buyer’s transfer agent as to the issuance of such shares of stock in book-entry form);

 

(f)          counterparts duly executed by Buyer of assignments of the Purchased IP, including separate assignments of all registered marks, patents and copyrights included in the Purchased IP in the form attached hereto as Exhibits ▇-▇, ▇-▇ and B-3.

 

(g)          a counterpart duly executed by Buyer of the Company Assignment Agreement to the Seller;

 

(h)         a closing certificate in a form reasonably acceptable to Seller duly executed by the President and Chief Executive Officer of Buyer, certifying as to the satisfaction of the conditions set forth in Sections 7.1 and 7.2;

 

(i)          a secretary’s certificate of Seller in a form reasonably acceptable to the Seller duly executed by the secretary or assistant secretary of Buyer;

 

(j)           a counterpart duly executed by Buyer of the Registration Agreement;

 

(k)          a counterpart duly executed by Buyer of the Working Capital Escrow Agreement to the Seller; and

 

(l)           a counterpart duly executed by Buyer of the Indemnity Escrow Agreement to the Seller.

 

2.6           Working Capital Adjustment.

 

(a)          Seller and Buyer shall cooperate and provide each other access to their respective books, records and employees as are reasonably requested in connection with the matters addressed in this Section 2.6.  Within five Business Days prior to the expected Closing Date, Seller shall in good faith estimate Net Working Capital as of the close of business on the Business Day immediately preceding the Closing Date and shall provide Buyer with written notice thereof and of the Estimated Working Capital Adjustment.  The existence of any dispute with respect to any such calculations shall not delay or otherwise affect the Closing or the obligation to make the payments specified in Section 2.5 at the Closing.  For purposes of calculating Net Working Capital, all payments made at Closing pursuant to Section 5.5 shall be deemed to have been paid as of as of the close of business on the Business Day immediately preceding the Closing Date.

 

(b)          Within 45 days after Closing, Buyer shall provide Seller with its good faith calculation of Net Working Capital as of the Closing and the Working Capital Adjustment, as well as detailed supporting information, which clearly delineates the specific line item differences between Buyer’s new calculation and Seller’s previous calculation.  If Seller disagrees with any of the calculations provided by Buyer pursuant to the notice referenced in the foregoing sentence, then it shall provide Buyer with written notice thereof within 30 days after receiving written notice thereof and shall include reasonable detail regarding such specific objections.  If Buyer and Seller working in good faith are unable to agree on such disputed items on or prior to the 90^th day following the Closing Date, then either Party may refer such dispute to Deloitte LLP or, if that firm declines to act as provided in this Section 2.6(b), another firm of independent public accountants, mutually acceptable to Buyer and Seller (such selected firm being the “Accounting Firm”), which firm shall make a final and binding determination as to all matters in dispute on a timely basis and promptly shall notify the Parties in writing of its resolution.  Such Accounting Firm shall act as an expert and not as a mediator or arbitrator and shall not have the power to modify or amend any term or provision of this Agreement.  Each of Buyer and Seller shall bear and pay one-half of the fees and other costs charged by such Accounting Firm.  If Seller does not object to Buyer’s calculations within the time period and in the manner set forth in the second sentence of this Section 2.6(b) or accepts Buyer’s calculations, then such calculations as set forth in Buyer’s notice shall become final and binding upon the Parties for all purposes hereunder.

 

(c)          If the Working Capital Adjustment (as agreed between Buyer and Seller or as determined by the above-referenced accounting firm or otherwise) is (i) greater than the Estimated Working Capital Adjustment as paid by Buyer at Closing, then Buyer shall pay to Seller within five Business Days after such amounts are so agreed or determined, by wire transfer of immediately available funds to an account or accounts designated by Seller, the amount of such difference or (ii) less than the Estimated Working Capital Adjustment as paid by Buyer at Closing, then Seller and Buyer shall execute a joint instruction to the Working Capital Escrow Agent to pay to Buyer, within five Business Days after such amounts are agreed or determined, by wire transfer of immediately available funds to an account designated by Buyer, the amount of such difference (provided, however, that if such difference exceeds the amount of funds in the Working Capital Escrow Account, then Seller shall pay the amount of such shortfall to Buyer, it being agreed that (x) such amount shall be paid by Seller by wire transfer of immediately available funds to an account designated by Buyer, and (y) such amount shall be paid directly by Seller and not from the Indemnity Escrow Account).

 

2.7           Purchase Price Allocation.  Seller and Buyer agree to allocate the Purchase Price and any other items of consideration for federal income Tax purposes in accordance with Exhibit E (the “Allocation Principles”).  Within sixty (60) days after the determination of the Net Working Capital is agreed to or determined in accordance with Section 2.6, Seller shall prepare and deliver to the Buyer an allocation of the Purchase Price and any other items of consideration for federal income Tax purposes, which shall be allocated among the Purchased IP, the stock of the Corporate Subsidiaries, the assets of the Companies (other than the Corporate Subsidiaries), (taking into account any adjustments for Tax purposes pursuant to Section 2.6 (the “Allocation”), and thereafter, Buyer and Seller will act in good faith and reasonably cooperate with each other to agree on the Allocation.  If Buyer and Seller cannot agree on the Allocation within thirty (30) days of the delivery of the Allocation to Seller, Buyer and Seller will resolve the dispute in accordance with the dispute resolution procedures contained in Section 2.6(b).  Any Allocation determined by the Accounting Firm shall incorporate, reflect and be consistent with the Allocation Principles.  The cost of the Accounting Firm shall be borne equally by Seller and Buyer.  Buyer and Seller agree (a) to file, and to cause their respective Affiliates to file, all Tax Returns in a manner consistent with the Allocation agreed to by Buyer and Seller or, if applicable, determined pursuant to the dispute resolution procedures contained in Section 2.6(b) and not to take (and to cause their respective Affiliates not to take) any position inconsistent therewith in any Tax Return, audit, examination, claim, adjustment, litigation or other Proceeding with respect to Taxes, unless required to do so by applicable Law or with prior written consent of the other Party, and (b) that the Allocation shall be further revised, as necessary and in a manner consistent with the Allocation, to reflect any adjustment to the Purchase Price pursuant to Section 5.6(i) or otherwise that is not reflected in the Allocation.  In the event any Taxing Authority disputes such Allocation, the Party receiving notice thereof shall promptly notify and consult with the other Party concerning such dispute.

 

2.8          Withholdings.  Notwithstanding anything contained in this Agreement to the contrary, Buyer shall be entitled to deduct and withhold from the Purchase Price all withholding Taxes that the Buyer is required to deduct and withhold.  All such withheld amounts shall be treated as having been paid hereunder.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

REGARDING SELLER AND THE COMPANIES

 

Seller hereby represents and warrants (subject to any disclosures in the Schedules) to Buyer as follows:

 

3.1           Organization; Good Standing.

 

(a)          Seller is duly formed, validly existing and in good standing under the Laws of the State of Delaware.

 

(b)          Each Company is a limited liability company, partnership or corporation duly formed, validly existing and in good standing under the Laws of its jurisdiction of formation, and has all requisite limited liability company, partnership or corporate power and authority to own its properties and conduct its business as it is now being conducted.  Each Company is duly qualified or licensed to do business in each jurisdiction in which the ownership or operation of its Assets makes such qualification or licensing necessary, except in any jurisdiction where the failure to be so duly qualified or licensed would not be material to the Companies.

 

(c)          True and complete copies of the Charter Documents of each Purchased Entity and all amendments thereto have been furnished to Buyer.

 

3.2           Authority.  Seller has the requisite limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution, delivery and performance by Seller of this Agreement, and the performance by Seller of its obligations hereunder, have been duly and validly authorized by all necessary limited liability company action.  This Agreement has been duly and validly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms and conditions, except that the enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.

 

3.3           Capitalization of the Purchased Entities.  The Company Interests are owned beneficially and of record by Seller, free and clear of all Liens other than those under the Charter Documents of the applicable Purchased Entity.  Except for the Company Interests or as set forth on Schedule 3.3, none of the following are issued, reserved for issuance or outstanding:  (a) interests of any Purchased Entity convertible into, or exchangeable or exercisable for Equity Interests of such Purchased Entity or (b) options, warrants, calls, rights, commitments or Contracts to which a Purchased Entity is a party or by which it is bound, in any case obligating such Purchased Entity to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, Equity Interests of such Purchased Entity, or obligating any Purchased Entity to grant, extend or enter into any such option, warrant, call, right, commitment or Contract.  The Company Interests of each Purchased Entity are duly authorized, validly issued, fully paid (to the extent required by the Charter Documents of such Purchased Entity) and, subject to the Laws of the state of organization of such Purchased Entity, nonassessable and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right or other similar right, or in violation of the Securities Act of 1933 (as amended, the “Securities Act”), any applicable state securities laws, or any of the rules and regulations promulgated thereunder.  There are no outstanding bonds, debentures, notes or other instruments or evidence of indebtedness of any Purchased Entity having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which the Seller may vote.

 

3.4           Subsidiaries.  Schedule 3.4 sets forth a list of each Person in which S&S owns, directly or indirectly, any Equity Interests or interests (each a “Subsidiary”).  Additionally, Schedule 3.4 sets forth for each Subsidiary (a) the amount and classification of its authorized Equity Interests, (b) the amount and classification of its outstanding Equity Interests and (c) the record owner of its membership interest or other Equity Interests.  All of the issued and outstanding Equity Interests of each Subsidiary have been duly authorized and validly issued and is fully paid and, except as set forth on Schedule 3.4, the Equity Interests of each Subsidiary are owned directly or indirectly by S&S free from Liens other than those under state and federal securities Laws and the Charter Documents of the issuing Subsidiary.  Each Subsidiary has been duly organized and is in good standing under the Laws of the states, provinces or foreign jurisdictions indicated for each such entity in Schedule 3.4, with power and authority to own its properties and conduct its business as it is presently being conducted are as it is proposed to be conducted.  Each Subsidiary is duly qualified to do business and is in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect.  Except for interests in the Subsidiaries as set forth on Schedule 3.4 and as otherwise set forth on Schedule 3.4, neither S&S nor any Purchased Entity owns, directly or indirectly, any Equity Interests or interests in any Person.

 

3.5           No Conflicts; Consents and Approvals.  The execution and delivery by Seller of this Agreement, and the performance by Seller of its obligations under this Agreement do not:

 

(a)          violate or result in a breach of the Charter Documents of Seller or any Company;

 

(b)          assuming the consents disclosed on Schedule 3.5(b) (the “Company Consents”) have been obtained or made, violate or result in a material default (or an event that with notice or the lapse of time or both would constitute a material breach or material violation) under any Material Contract to which Seller or any Company is subject to or bound or by which any material asset owned by the Companies or otherwise used in connection with the Business is in any way bound or obligated, including any Material Contract; and

 

(c)          assuming all required filings, waivers, approvals, consents, authorizations and notices disclosed on Schedule 3.5(c) (collectively, the “Seller Approvals”) and the HSR Approval, if required, have been received and the Company Consents have been made, obtained or given, (i) violate or result in a breach of any Law applicable to Seller or any Company in any material respect, or (ii) require any consent or approval of any Governmental Authority under any Law applicable to Seller or a Company.

 

3.6           Financial Statements.  The Sellers have provided the Buyer with true and complete copies of: (i) the combined unaudited balance sheet of the Companies (the “Balance Sheet”) as of May 6, 2017 (the “Balance Sheet Date”) and the related combined unaudited statements of operations of the Companies for the three (3) months then ended (the “Interim Financial Statements”); and (ii) the audited consolidated balance sheets of the Companies as of January 31, 2015, 2016 and 2017, and the related consolidated statements of operations, income (loss), shareholders’ equity and cash flow for the years then ended (the “Audited Financial Statements,” and, collectively with the Interim Financial Statements, the “Financial Statements”).  The Financial Statements (y) present fairly in all material respects the combined financial condition of the Companies and the results of their operations as of the respective dates thereof and for the periods covered thereby, and (z) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, subject, in the case of the Interim Financial Statements, to normal year-end adjustments (which adjustments were not, or are not expected to be, material in amount, individually or in the aggregate) and the absence of footnotes.  The Financial Statements do not contain any material items of a special or nonrecurring nature, except as expressly stated therein. Schedule 1.1-A sets forth the Net Working Capital as of May 6, 2017.

 

3.7           Undisclosed Liabilities.

 

(a)          Except as set forth on Schedule 3.7, none of the Companies has any material direct or indirect debts, obligations or liabilities of any nature, whether absolute, accrued, contingent, liquidated or otherwise, and whether due or to become due, asserted or unasserted (collectively, “Liabilities” that are required to be set forth on a balance sheet in accordance with GAAP except for: (i) Liabilities reflected in the Balance Sheet; and (ii) current Liabilities incurred in the ordinary course of business and consistent with past practice after the Balance Sheet Date which are not material to the Companies.

 

(b)          For purposes of this Agreement, “ordinary course” Liabilities include only liabilities and obligations incurred in the normal course of the Business (or the business of Buyer and its subsidiaries, as applicable) consistent in all material respects with past practice and amounts, and do not include any Liabilities under any agreement or otherwise that result from any breach or default (or event that with notice or lapse of time would constitute a breach or default), tort, infringement or violation of Law by a Company or Seller (or Buyer or any of its subsidiaries, as applicable).

 

3.8           Assets of Affiliates.  Except as set forth on Schedule 3.8, other than the Company Interests and the Purchased IP, no material tangible or intangible asset used in the Business is owned or leased by Seller or any Affiliates of Seller (other than a Purchased Entity or a direct or indirect subsidiary of a Purchased Entity).

 

3.9           Title to, Condition of, and Sufficiency of Assets.

 

(a)          Except as set forth on Schedule 3.9(a), (i) the Seller has good and marketable title to the Company Interests, the Purchased IP and the Contributed Assets free and clear of all Liens other than Permitted Liens, and (ii) each of the Purchased Entities has good and marketable title to all of the assets that it owns or purports to own, and each owns such assets free and clear of all Liens other than Permitted Liens.  Except as set forth on Schedule 3.9(a), the Company Interests, the Purchased IP, the Contributed Assets and the assets of the Purchased Entities, including any assets held under leases or licenses, in all material respects (a) to the extent the same constitute tangible assets, have been properly and regularly maintained in the ordinary course of business consistent with past practice; (b) constitute all material Assets used or held for use by the Companies in the conduct of the Business; and (c) are sufficient to permit the Purchased Entities to engage the Business in all material respects as it is presently conducted.

 

(b)          Other than as set forth on Schedule 3.9(b), Seller (i) owns no Assets related to the Business other than the Purchased Interests, the Purchased IP and the Contributed Assets, (ii) is not a party to any Contracts related to the Business, including any Material Contracts and any Benefit Plan or Multiemployer Plan, and (iii) does not employ any Persons who provide services to or otherwise conduct activities with regard to the Business.

 

3.10         Absence of Changes. Except as set forth on Schedule 3.10, since the date of the Balance Sheet, there has not been any:

 

(a)          Material Adverse Effect with respect to the Companies;

 

(b)          amendment of the Charter Documents of any Company;

 

(c)          split, combination or reclassification of any shares of the capital stock or membership interests of any of the Companies;

 

(d)          issuance, sale, pledge or other disposition of any Equity Interests of the Companies, or any change to the equity capital structure of any Company;

 

(e)          declaration or payment of any non-cash dividends or distributions on or in respect of any of the capital stock or membership interests or redemption, purchase or acquisition of the capital stock or membership interests (or any option, warrant, convertible security or similar instrument) of any Company;

 

(f)           change in any method of accounting or accounting practice, except as required by GAAP or applicable Law or as disclosed in the notes to the Financial Statements by any Company;

 

(g)          incurrence by any Company of any Company Indebtedness other than in the ordinary course of business consistent with past practices or assumption or guaranty by any Company of the indebtedness of any other Person (other than another Company);

 

(h)          sale, lease, transfer or other disposition of, or mortgage or pledge or imposition of any Lien (other than a Permitted Lien) on, any of the assets of the Companies, except sales of inventory in the ordinary course of business consistent with past practice;

 

(i)           material increase in the compensation of the Companies’ employees, other than (i) as required by any Laws or written agreements existing on the date of this Agreement, (ii) otherwise, in the ordinary course of business consistent with past practice or (iii) as specifically provided in this Agreement;

 

(j)           adoption, amendment or modification by a Company of any Benefit Plan except as contemplated by this Agreement or as required by Law;

 

(k)          acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets of, or by any other manner, any business or any Person or any division thereof, or the acquisition of any equity or debt interest in any Person, by a Company;

 

(l)           adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law by a Company;

 

(m)         material change in the operations or business of the Companies;

 

(n)          material revaluation of any of the Companies’ assets, including the material writing down or off of notes or accounts receivable or the material writing down of the of inventory;

 

(o)          except in accordance with the 2017 Budget, agreement to incur capital expenditures in excess of $1,000,000, individually or in the aggregate;

 

(p)          breach or default (or event that with notice or lapse of time would constitute a breach or default), termination or threatened termination under any Material Contract;

 

(q)          theft, condemnation or eminent domain proceeding, or any damage, destruction or casualty loss in excess of $100,000 affecting any asset of the Companies, whether or not covered by insurance;

 

(r)           action by the Companies other than in the ordinary course of business and consistent with past practice, to pay, discharge, settle or satisfy any claim or material Liability;

 

(s)          entry by a Company into any agreement which by its terms would require consent to the transactions contemplated by this Agreement by the other party or parties to such agreement (unless consent to the transactions contemplated by this Agreement is granted by the counterparty in writing at the time such agreement is entered into);

 

(t)           settlement or compromise by any Company of any pending Proceeding other than in the ordinary course of business consistent with past practice for Proceedings covered by insurance (subject to any deductible); or

 

(u)          any agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

3.11         Compliance with Applicable Laws. Except as set forth on Schedule 3.11, each Company is currently, and has at all times since January 1, 2012, been in compliance with all Laws applicable to it including (i) all Laws relating to zoning and land use, occupational health and safety, and employment and labor matters, (ii) applicable Export and Sanctions Laws, and (iii) applicable Anti-Boycott Laws.  None of the Companies, Seller, any shareholder, member, manager, director, officer, employee or agent of the Companies or any Affiliate or immediate family member of any of the foregoing has: (i) used any funds of the Companies for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any payment in violation of applicable Law to any foreign or domestic government official or employee or to any foreign or domestic political party or campaign or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; (or (iii) made any other payment in violation of applicable Law.

 

3.12         Permits.  The Companies own or possesses from each appropriate Governmental Authority all right, title and interest in and to all material permits, licenses, authorizations, approvals, quality certifications, franchises or rights (collectively, “Permits”) issued by any Governmental Authority necessary to lawful conduct of the Business, and have complied in all material respects with, and are not in default or in violation in any material respect of, any of the terms and conditions of such Permits.  Each of such Permits is described on Schedule 3.12.  Such Permits are in full force and effect and there are no Proceedings pending or, to the Knowledge of the Company, threatened that seek the revocation, cancellation, suspension or adverse modification thereof, and no loss or expiration of any such Permit is pending or, to the Knowledge of the Sellers, threatened, other than expiration in accordance with the terms thereof of Permits that may be renewed in the ordinary course of business without lapsing.

 

3.13         Absence of Litigation.  Except as set forth on Schedule 3.13, there is no Claim or Proceeding pending or, to Seller’s Knowledge, threatened against any Company by or before any arbitrator or Governmental Authority, nor are there any reviews or investigations relating to any Company pending or, to Seller’s Knowledge, threatened by or before any arbitrator or any Governmental Authority that is or would be material to the Companies.  None of the Companies is subject to or bound by any currently existing judgment, order, writ, injunction or decree that is material to the Companies.

 

3.14         Insurance.  The Companies maintain insurance in such amounts and covering such losses and risks as, in the Companies’ reasonable determination, is adequate to protect the Companies and the Business and is customary for companies engaged in similar businesses  in similar industries.  Except as set forth on Schedule 3.14, all policies relating to such insurance are in full force and effect.  No Company has received any written notice of default under any such policy or received written notice of any pending or threatened termination or cancellation, coverage limitation or reduction, or material premium increase with respect to any such policy.  Except as set forth on Schedule 3.14, no letters of credit have been posted and no Cash or Cash Equivalents have been restricted to support any reserves for insurance.

 

3.15         Property.

 

(a)          Set forth on Schedule 3.15(a) is the address and description of each parcel of real property owned in fee and used or held for use by a Company, and all buildings, structures, improvements, and fixtures thereon, together with all rights of way, easements, privileges and appurtenances pertaining or belonging thereto, including any right, title and interest of a Company in and to any street or other property adjoining any portion of such property.  A Purchased Entity holds good and marketable title to all such real property described in Schedule 3.15(a), free and clear of all Liens, except for Permitted Liens.

 

(b)          Set forth on Schedule 3.15(b) is a list of all leases for the Leased Real Property.  Each lease set forth on Schedule 3.15(b) is a legal, valid and binding obligation of such Purchased Entity.  A true and complete copy of each such lease and any amendment thereto has been made available to Buyer.  Except as set forth on Schedule 3.15(b), (i) no Purchased Entity is in material default under any lease set forth on Schedule 3.15(b), (ii) to Seller’s Knowledge, no landlord is in material default under any of the leases set forth on Schedule 3.15(b), and (iii) no event has occurred which constitutes a default or with lapse of time or giving of notice or both would constitute a material default under any of the leases set forth on Schedule 3.15(b).

 

3.16         Environmental Matters.  Except as set forth in Schedule 3.16:

 

(a)          The operations of the Companies are, and have been at all times since January 1, 2012, in compliance with Environmental Laws in all material respects and the operations of the Subsidiaries are, and have been at all times, in compliance with Environmental Laws in all material respects;

 

(b)          The Companies possess, and are and have been since January 1, 2012 in compliance in all material respects with, all material permits, licenses, registrations and authorizations required under Environmental Laws for their operations as presently conducted;

 

(c)          There are no pending or, to Seller’s Knowledge, threatened Claims asserted against the Companies pursuant to Environmental Laws, nor has any Company received any notice of violation or noncompliance, written request for information, order or demand or notice of enforcement from any Governmental Authority pursuant to Environmental Laws which remains uncorrected;

 

(d)          Since January 1, 2012, there has been no material Release, discharge or disposal of Hazardous Materials on, at, under or from the Real Property in violation of any Environmental Laws or in a manner that could give rise to a material remedial or corrective action obligation pursuant to Environmental Laws;

 

(e)          Since January 1, 2012, Seller has not transported or arranged for the transportation of Hazardous Materials to any location which to Seller’s Knowledge is listed on the National Priorities List or the Comprehensive Environmental Response, Compensation, and Liability Information System or any similar ranking or listing under any state law;

 

(f)          None of the Companies are currently operating or required to be operating the Assets of any Company under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, or corrective action decree, order or agreement issued by or entered into with a Governmental Authority under any Environmental Law;

 

(g)          None of the following exists on, at or under the real property listed on Schedule 3.15(a), or to Seller’s Knowledge, the Leased Real Property: (1) underground storage tanks, (2) friable asbestos or asbestos containing materials that are not in compliance with Environmental Laws, (3) materials or equipment containing any polychlorinated biphenyls, or (4) landfills, surface impoundments or disposal areas for Hazardous Materials that do not comply with Environmental Laws; and

 

(h)          Seller has made available for inspection by Buyer copies of all environmental assessment and audit reports and studies relating to the Real Property and the operations of the Companies that are in the possession of the Companies.

 

3.17        Taxes.  Except as set forth on Schedule 3.17:

 

(a)          All Tax Returns required to be filed by or with respect to any Company have been duly and timely filed in compliance in all respects with all applicable Law, and all such Tax Returns were complete and accurate in all material respects.  All Taxes (whether or not shown as due on any Tax Returns) payable by any Company have been timely paid in full.  All withholding Tax requirements imposed on any Company have been satisfied.

 

(b)          There is not in force any waiver or agreement for any extension of time of the statute of limitations or for the assessment or payment of any Tax by any Company.  No outstanding claim, assessment or deficiency in respect of Taxes has been asserted in writing against any Company by any Taxing Authority.  There is no Claim, audit, other examination, matter in controversy, proposed adjustment, refund litigation or other Proceeding pending against, or with respect to, any Company with regard to Taxes.

 

(c)          Except for Taxes not yet due and payable, (i) there are no Liens for unpaid Taxes upon any of the assets of any Company, and (ii) no claim for unpaid Taxes has been made in writing by any Taxing Authority that could give rise to any such Lien.

 

(d)          There is no existing Tax sharing allocation or similar Contract that may or will require any payment be made by or to any Company on or after the Closing Date, and no Company is liable for the Taxes of any other Person (other than another Company) by virtue of Treasury Regulation Section 1.1502-6, any similar provision of state, local or foreign applicable Law, by contract, as successor or transferee, or otherwise.

 

(e)          No Company will be required to include in income, or exclude any item of deduction from income, for any Tax period (or portion thereof) ending after the Closing Date as a result of any (i) adjustment under either Section 481(a) or 482 of the Code (or any corresponding or similar provision of federal, state, local or foreign Tax law) by reason of a change in method of accounting or otherwise for a Tax period ending on or prior to the Closing Date; (ii) “closing agreement” described in Section 7121 of the Code (or any corresponding or similar provision of federal, state, local, or foreign law) executed prior to the Closing; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; (iv) deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of federal, state, local or foreign Tax law) entered into or created prior to the Closing; (v) prepaid amount received on or prior to the Closing Date,(vi) the completed contract method of accounting or the long-term contract method of accounting, or any comparable provision of state or local, domestic or foreign, Tax Law applied to a contract entered into prior to the Closing; (vii) election under Section 108(i) of the Code made prior to the Closing; (viii) other transaction that has the effect of deferring income (including the cash method of accounting) or accelerating deductions, or otherwise shifting the basis of taxation from one period to another; or (ix) pursuant to Section 951 of the Code with respect to amounts earned on or before the Closing Date.

 

(f)           There are no Tax holidays or Tax incentives applicable to any Company.

 

(g)          S&S is, and will be immediately prior to the Closing, classified as a partnership for U.S. federal Tax purposes under Treasury Regulations §§ 301.7701-2 and 301.7701-3 (and state, local, and foreign Tax purposes where applicable) (a “Partnership”), and no election has been or will be filed, no action has been or will be taken, and no failure to act has occurred or will occur, in each case prior to the Closing, that would result in S&S being classified as an entity that is not a Partnership for U.S. federal Tax purposes (and state, local, and foreign Tax purposes where applicable).

 

(h)          Each Subsidiary is, and will be immediately prior to the Closing, disregarded as an entity separate from S&S for U.S. federal income Tax purposes under Treasury Regulations §§ 301.7701-2 and 301.7701-3 (and state, local, and foreign income Tax purposes where applicable) (a “Disregarded Entity”), and no election has been or will be filed, no action has been or will be taken, and no failure to act has occurred or will occur, in each case prior to the Closing, that would result in any Subsidiary being classified as an entity that is not a Disregarded Entity for U.S. federal income Tax purposes (and state, local, and foreign income Tax purposes where applicable).

 

(i)           No Claim has ever been made by a Taxing Authority in a jurisdiction where any Company does not file Tax Returns claiming that such Company is or may be subject to Taxes assessed by such jurisdiction.

 

(j)           No Company is or has been a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b), and no IRS Form 8886 has been filed with respect to any Company, and each Company has disclosed on each income Tax Return any reporting position taken on such Tax Return that, if not sustained, would be reasonably likely to give rise to a penalty for substantial understatement of federal income Tax under Section 6662 of the Code (or any similar provision of U.S. state, U.S. local or foreign income Tax Law).

 

(k)          No Company is a party to any agreement, contract, arrangement or plan, individually or in the aggregate, that has resulted, or could result upon the consummation of the transactions contemplated by this Agreement, in (A) the payment of “excess parachute payments” within the meaning of Section 280G of the Code, or (B) an obligation to indemnify, gross-up or otherwise compensate any Person, in whole or in part, for any excise Tax under Section 4999 of the Code that is imposed on such Person or any other Person.

 

3.18          Contracts.

 

(a)          Excluding insurance policies and fidelity bonds, Schedule 3.18(a) sets forth a list as of the date of this Agreement of the following Contracts to which a Company is a party or by which a Company or any of its assets is bound or obligated (collectively, the “Material Contracts”):

 

(i)       each Contract that is executory in whole or in part and that involves expenditures or receipts of a Company for goods or services that is not the product of arm’s length dealings or is otherwise outside of the ordinary course of business or is of an amount in excess of $100,000 after the date of this Agreement (excluding any orders for the sale or purchase of goods or services by the Companies, which are dealt with exclusively in Section 3.19 and excluding Contracts between the Companies);

 

(ii)      each lease, rental or occupancy Contract, installment and conditional Contract, and any other Contract, in each case, affecting the ownership of, leasing of, title to or use of any real property, in each case having a value in excess of $100,000;

 

(iii)     each Contract that requires a Company to make payments of more than $100,000 per annum;

 

(iv)     each Contract by which a Company will receive payments of more than $100,000 per annum;

 

(v)      each joint venture, partnership or any other material Contract involving a sharing of profits, losses, costs or liabilities;

 

(vi)    each Contract containing covenants that restrict or prohibit business activity or the freedom of a Company or any stockholder, employee, director, officer, member or manager of a Company, to engage in any line of business or to compete with any Person;

 

(vii)    each Contract with any present or former director, officer, independent contractor or employee of a Company pursuant to which such Company has any obligation or liability;

 

(viii)   each collective bargaining Contract and other Contract to or with any labor union or other employee representative of a group of employees;

 

(ix)     each power of attorney;

 

(x)      each sales agency, sales representative or distributor agreement or similar Contract;

 

(xi)     each Contract evidencing Company Indebtedness, whether secured or unsecured, including all loan agreements, line of credit agreements, indentures, mortgages, promissory notes, agreements concerning long and short-term debt, together with all security agreements or other lien documents related to or binding on the Assets of a Company;

 

(xii)    any license of material Intellectual Property that contemplates or involves the payment or delivery of Cash or other consideration to a third party in an amount or having a value in excess of $100,000 per year, or the termination of which would reasonably be expected to have a Material Adverse Effect; and

 

(xiii)   each Contract that is material to the Business or operation of the Companies or that the loss of which would result in a Material Adverse Effect for the Companies;

 

(b)          Buyer has been provided with copies of all Material Contracts.

 

(c)          Each of the Material Contracts is in full force and effect in all material respects and constitutes a legal, valid and binding obligation of the Company party thereto, and, to the Knowledge of the Seller, the counterparty thereto, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors’ rights generally and subject to general principles of equity.

 

(d)          The applicable Company has performed all of its obligations under every Material Contract to which it is a party, and there exists no breach or default (or event that with notice or lapse of time would constitute a breach or default) on the part of a Company or, to the Knowledge of the Sellers, on the part of any other Person under any Material Contract.  There has been no termination or notice of termination or default or, to the Knowledge of the Sellers, any threatened termination or notice of default under any Material Contract.  To the Knowledge of the Sellers, no party to a Material Contract intends to alter its relationship with the Companies, as applicable, as a result of or in connection with the acquisition contemplated by this Agreement.

 

3.19         Purchase Orders.  Schedule 3.19(a) sets forth a true and complete list as of the date of this Agreement of each current order for the sale of goods or services by the Companies in an amount in excess of $100,000.  Schedule 3.19(b) sets forth a true and complete list as of the date of this Agreement of each current order for the purchase of goods or services by the Companies (but excluding any such orders for which both parties are Companies) in an amount in excess of $100,000.  Each of the orders listed on Schedule 3.19(a) and 3.19(b) is in full force and effect in all material respects in accordance with its terms.

 

3.20         Customers.  Set forth on Schedule 3.20 is a complete list of the top ten customers of the Companies in terms of revenues for the twelve-month period ended March 31, 2017 (the “Material Customers”) and the years ended December 31, 2014, 2015 and 2016. None of the Material Customers has, in writing, threatened, or notified a Company or any Seller of any intention, to terminate or materially alter its relationship with a Company.  There has been no materially adverse change in the relationship of the Companies with any Material Customer, and there has been no material dispute with a Material Customer, in each case since December 31, 2014, other than discussions and negotiations with respect to pricing, term, equipment requirements and similar terms or provisions in the ordinary course of business.

 

3.21         Employees and Labor Matters.  Except as described on Schedule 3.21, with respect to all employees of the Companies:

 

(a)          no employee of any Company is represented by a union or other collective bargaining entity;

 

(b)          since January 1, 2012, there has not occurred, nor, to Seller’s Knowledge has there been threatened, a labor strike, request for representation, work stoppage, lockout, or organizational activity by any employee of the Companies;

 

(c)          the Company is, and since January 1, 2012 has been, in material compliance with each collective bargaining agreement to which it is a party or by which it is otherwise bound, and the Company is not delinquent in any contributions or other payments required to be made pursuant to any such collective bargaining agreement or pursuant to applicable Law;

 

(d)         since January 1, 2012 there has not been, there is not presently pending or existing, and to the Seller’s Knowledge, there is not threatened, (i) any charge or complaint filed by an employee, union or other labor organization with any labor relations board with respect to the Company or (ii) any employment-related grievances filed by a labor union regarding any employee of the Companies;

 

(e)          since January 1, 2012, Seller has not received written notice of any charges with respect to any employee of the Companies before any Governmental Authority responsible for the prevention of unlawful employment practices; and

 

(f)           since January 1, 2012, Seller has not received written notice of any material investigation by a Governmental Authority responsible for the enforcement of labor or employment regulations and, to Seller’s Knowledge, no such investigation has been threatened.

 

3.22         Employee Benefits.

 

(a)          Set forth on Schedule 3.22 is a true and complete list of all Benefit Plans, indicating each Benefit Plan that is intended to qualify for favorable income Tax treatment under Section 401(a) or 501(c)(9) of the Code or is governed by Section 409A of the Code.  Seller has made available to Buyer true, complete and correct copies of:

 

(i)       each Benefit Plan, including, without limitation, all amendments thereto and, if applicable, all related trust documents and funding instruments (including, without limitation, all insurance contracts);

 

(ii)      a complete description of each Benefit Plan which is not in writing;

 

(iii)     the three most recent annual reports on Form 5500, filed with the Internal Revenue Service with respect to each Benefit Plan (if any such report was required under ERISA or the Code);

 

(iv)     the most recent summary plan description for each Benefit Plan, together with the summaries of material modifications thereto, if any, required under ERISA;

 

(v)      all material correspondence, if any, sent to or received from any governmental agency in the last three years relating to a material Benefit Plan; and

 

(vi)     the most recent Internal Revenue Service determination letter (or other ruling or opinion letter indicating its Tax-qualified status) for each Benefit Plan that is intended to qualify for favorable income Tax treatment under Section 401(a) or 501(c)(9) of the Code.

 

(b)          Each Benefit Plan (and each related trust, insurance Contract, or fund) complies in form and in operation in all respects with the applicable requirements of ERISA, the Code, and other Laws.   Each Benefit Plan that is intended to satisfy Section 401 of the Code has obtained a favorable determination letter (or opinion letter, if applicable) as to its qualified status under the Code and, to the Seller’s Knowledge, no condition exists that could be reasonably expected to result in the revocation of any such letter.  Each Benefit Plan that is a “non-qualified deferred compensation plan” (as defined under Section 409A(d)(1) of the Code) has been operated and administered in compliance with Section 409A of the Code since January 1, 2005 or the date it was established, if later.

 

(c)          All premiums required to be paid, all benefits, expenses and other amounts due and payable, and all contributions, transfers, or payments required to be made to or under the Benefit Plans will have been paid, made, or accrued and are reflected in the most recent Financial Statements for all services on or prior to the Balance Sheet Date.

 

(d)          Except as set forth on Schedule 3.22, no Benefit Plan is or has ever been covered by Title IV of ERISA or subject to Section 412 of the Code nor has any Company or any of its ERISA Affiliates contributed to, or had an obligation to contribute to, within six years prior to the Closing Date, any “employee benefit plan” as defined in Section 3(3) of ERISA which is or has ever been covered by Title IV of ERISA or subject to Section 412 of the Code.

 

(e)          Except as set forth on Schedule 3.22(e), no Benefit Plan is or has ever been a Multiemployer Plan nor has any of the Company or any of its ERISA Affiliates contributed to, or had an obligation to contribute to, within six years prior to the Closing Date, any Multiemployer Plan.  With respect to the plans identified on Schedule 3.22(e): (i) all contributions required to be paid by the Company or its ERISA Affiliates have been timely paid; (ii) neither the Company nor any ERISA Affiliate has incurred any withdrawal liability under Title IV of ERISA which remains unsatisfied; (iii) a complete withdrawal from all such plans at the Effective Time would not result in any liability to the Company; (iv) no Claim has been initiated by the Pension Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee for any such plan; (v) no such plan has failed to satisfy the minimum funding standards of Section 302 of ERISA or Section 412 of the Code, respectively, or has applied for or obtained a waiver from the IRS of any minimum funding requirement or an extension of any amortization period under Section 412 of the Code or Sections 303 or 304 of ERISA; (vi) no such plan has been required to file information pursuant to Section 4010 of ERISA for the current or most recently completed fiscal year; and (vii) no “reportable event,” as defined in Section 4043 of ERISA, has occurred, or is reasonably expected to occur, with respect to any such plan.  Schedule 3.22(e) sets forth, for each plan identified thereon, the amount of potential withdrawal liability of the Companies and their ERISA Affiliates, calculated according to information made available pursuant to Sections 101(k) and 101(l) of ERISA, and identifies the specific obligor.  Nothing has occurred or is expected to occur that would materially increase the amount of total potential withdrawal liability of a specified obligor for any such plan over the amount shown on Schedule 3.22(e).

 

(f)           Except as set forth on Schedule 3.22, no Benefit Plan provides, or reflects or represents any liability of Sellers or the Companies to provide, retiree life insurance, retiree health or other retiree employee welfare benefits to any person for any reason, except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”) or other applicable Laws. Sellers have never represented, promised or contracted (whether in oral or written form) to provide retiree life insurance, retiree health or other retiree employee welfare benefit to any Person, except to the extent required by COBRA or similar provisions of applicable Laws.

 

(g)          Except as set forth on Schedule 3.22, no event has occurred and no condition exists with respect to the Benefit Plans that could subject any of the Companies, any Benefit Plan, or the Buyer to any Tax, fine, penalty or Liability under applicable Laws.  Other than routine claims for benefits, there are no proceedings pending against a Benefit Plan or against the assets of a Benefit Plan, and to the Knowledge of Sellers, (i) no such proceeding has been threatened orally or in writing, and (ii) no event has occurred and no circumstances exist that may give rise to or serve as a basis for the commencement of any such proceeding.

 

(h)          Each individual who is classified by the Companies as an independent contractor, consultant, or advisor has been properly classified for purposes of participation and benefit under each Benefit Plan.

 

(i)           Except as set forth on Schedule 3.22, each Benefit Plan can be unilaterally terminated or otherwise discontinued prior to the Closing in accordance with its terms without liability to the Companies, the Buyer or their respective Affiliates.

 

(j)           Except as set forth on Schedule 3.22, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby will:

 

(i)       result in any payment to be made by any of the Companies, including severance, unemployment compensation, golden parachute (as defined in Section 280(g) of the Code) or otherwise, becoming due to any employee, director or consultant of the Companies, or

 

(ii)      increase any benefits or accelerate vesting otherwise provided under any Benefit Plan.

 

3.23         Intellectual Property.

 

(a)          Set forth on Schedule 3.23(a) is a list of all U.S. and foreign patents and pending patent applications, registered trademarks, pending trademark applications, material unregistered marks, registered copyrights or applications for copyright registration and registered domain names (or applications therefor) owned by a Company (including the jurisdiction in which such registration issued or application was filed and the applicable registration or serial number, filing date and the current status of each such application).  Each such registration or issuance is valid and subsisting and is not subject to any outstanding order.  No Claim or Proceeding is pending or, to Seller’s Knowledge, threatened, which challenges the legality, validity, enforceability, use or ownership of such item.  The Companies own, free and clear of any Liens (other than Permitted Liens), or has the license or right to use, all material Intellectual Property currently used or  necessary to conduct its business as presently conducted.  Except as set forth on Schedule 3.23(a), no Company has granted any license or any rights in any material Intellectual Property to any Person.

 

(b)          The Purchased IP constitutes all of the Intellectual Property owned by the Seller.

 

3.24         Transactions with Affiliates.  Except as set forth on Schedule 3.24 and except for ordinary compensation paid or payable in the ordinary course of business and consistent with past practices to senior management, no Company is owed any amount from, owes any amount to, guarantees any amount owed by, has any Contracts with or has any commitments to any other Company, Affiliate, officer or director of a Company or any member of a family group of any of the foregoing; provided, however, that the foregoing does not include amounts owed by any Subsidiary to any other Subsidiary.  Except as set forth on Schedule 3.24, no officer, director or any Affiliate of a Company (except in his or her capacity as such) has any direct or indirect interest in (a) any property or Assets of a Company (except as an equity interest holder), or (b) any Person (other than the Company) which is a party to any Contract with such Company, other than the ownership of less than 3% of the equity securities of any entity publicly traded on any established securities exchange or quotation system.

 

3.25         Bank Accounts.  Schedule 3.25 sets forth a list of the names and locations of banks, trust companies and other financial institutions at which each Company maintains accounts of any nature or safe deposit boxes and lists the persons who are authorized to sign for or draw upon such accounts.

 

3.26         Securities Laws Matters.

 

(a)          Seller has such knowledge, skill and experience in business, financial and investment matters that Seller is capable of evaluating the merits and risks of an investment in ▇▇▇▇▇ Common Stock. With the assistance of its own professional advisors, to the extent that Seller has deemed appropriate, Seller has made its own legal, Tax, accounting and financial evaluation of the merits and risks of an investment in ▇▇▇▇▇ Common Stock.  Seller has considered the suitability of the Share Consideration as an investment in light of its own circumstances and financial condition and is able to bear the risks associated with an investment in the Share Consideration.

 

(b)          Seller is an “accredited investor” as defined in Rule 501(a) under the Securities Act.

 

(c)          Seller is acquiring the Share Consideration solely for its own beneficial account, for investment purposes, and not with a view to, or for resale in connection with, any distribution of the Share Consideration in a manner that would require registration under or violate the registration requirements of any state or federal securities Law.  Seller understands that the shares of ▇▇▇▇▇ Common Stock issued as Share Consideration have not been registered under the Securities Act or any state securities Laws by reason of specific exemptions under the provisions thereof which depend in part upon the investment intent of Seller and the other representations made by Seller in this Agreement.  Seller understands that Buyer is relying upon the representations and agreements contained in this Section 3.26 (and any supplemental information provided by Seller) for the purpose of determining whether this transaction meets the requirements for such exemptions.

 

(d)          Seller understands that the shares of ▇▇▇▇▇ Common Stock issued hereunder as Share Consideration are “restricted securities” under applicable federal securities laws and that the Securities Act and the rules of the U.S. Securities and Exchange Commission (the “SEC”) provide in substance that Seller may dispose of such shares only pursuant to an effective registration statement under the Securities Act or an exemption therefrom, and Seller understands that the Company has no obligation or present intention to register any of such shares.  Seller further understands that any certificates representing such shares will be imprinted with a legend in substantially the following form (and that similar restrictions will be noted in the transfer agent’s and registrar’s records for any such shares issued in book-entry form):