**Exhibit 10.2**

 

CONFIDENTIALTREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT.  THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTEDAND ARE DENOTED BY [***].  THECONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES ANDEXCHANGE COMMISSION.

 

 

**ASSET PURCHASE AGREEMENTBY AND AMONGSTEWART & STEVENSON SERVICES, INC.,CERTAIN SUBSIDIARIESOFSTEWART & STEVENSON SERVICES, INC.ANDHUSHANG ANSARYDATED AS OF OCTOBER 24, 2005**

 

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**TABLE OF CONTENTS**

 
| ** ** | ** **                                 | **Page**                                                         |
|------------|--------------------------------------------|------------------------------------------------------------------|
|       |                                       |                                                             |
| 1.         | Definitions and Usage                      | 1                                                                |
|       |                                       |                                                             |   |
|       | 1.1                                        | DEFINITIONS                                                      | 1 |
|       |                                       |                                                             |   |
|       | 1.2                                        | USAGE                                                            | 12 |
|       |                                       |                                                             |   |
| 2.         | Sale and Transfer of  Assets; Closing      | 13                                                               |
|       |                                       |                                                             |   |
|       | 2.1                                        | ASSETS TO BE SOLD                                                | 14 |
|       |                                       |                                                             |   |
|       | 2.2                                        | EXCLUDED ASSETS                                                  | 15 |
|       |                                       |                                                             |   |
|       | 2.3                                        | CONSIDERATION                                                    | 17 |
|       |                                       |                                                             |   |
|       | 2.4                                        | LIABILITIES                                                      | 17 |
|       |                                       |                                                             |   |
|       | 2.5                                        | PRORATIONS OF CERTAIN  PROPERTY TAXES                            | 19 |
|       |                                       |                                                             |   |
|       | 2.6                                        | SALES AND TRANSFER TAXES;  RECORDING FEES                        | 19 |
|       |                                       |                                                             |   |
|       | 2.7                                        | ALLOCATION                                                       | 19 |
|       |                                       |                                                             |   |
|       | 2.8                                        | CLOSING                                                          | 20 |
|       |                                       |                                                             |   |
|       | 2.9                                        | CLOSING OBLIGATIONS                                              | 20 |
|       |                                       |                                                             |   |
|       | 2.10                                       | ADJUSTMENT AMOUNT AND  PAYMENT                                   | 22 |
|       |                                       |                                                             |   |
|       | 2.11                                       | ADJUSTMENT PROCEDURE                                             | 23 |
|       |                                       |                                                             |   |
|       | 2.12                                       | PURCHASED SUBSIDIARIES                                           | 24 |
|       |                                       |                                                             |   |
|       | [***]                                      |                                                             |   |
|       |                                       |                                                             |   |
| 3.         | Representations and  Warranties of Sellers | 26                                                               |
|       |                                       |                                                             |   |
|       | 3.1                                        | ORGANIZATION AND GOOD  STANDING                                  | 26 |
|       |                                       |                                                             |   |
|       | 3.2                                        | ENFORCEABILITY; AUTHORITY;  NO CONFLICT                          | 26 |
|       |                                       |                                                             |   |
|       | 3.3                                        | FINANCIAL STATEMENTS                                             | 27 |
|       |                                       |                                                             |   |
|       | 3.4                                        | BOOKS AND RECORDS                                                | 28 |
|       |                                       |                                                             |   |
|       | 3.5                                        | CONDITION AND SUFFICIENCY  OF ASSETS                             | 28 |
|       |                                       |                                                             |   |
|       | 3.6                                        | DESCRIPTION OF BUSINESS  PROPERTY                                | 28 |
|       |                                       |                                                             |   |
|       | 3.7                                        | TITLE TO ASSETS;  ENCUMBRANCES                                   | 29 |
|       |                                       |                                                             |   |
|       | 3.8                                        | ACCOUNTS RECEIVABLE                                              | 30 |
|       |                                       |                                                             |   |
|       | 3.9                                        | INVENTORIES                                                      | 30 |
|       |                                       |                                                             |   |
|       | 3.10                                       | INTENTIONALLY DELETED                                            | 30 |
|       |                                       |                                                             |   |
|       | 3.11                                       | TAXES                                                            | 30 |
|       |                                       |                                                             |   |
|       | 3.12                                       | LABOR MATTERS; COMPLIANCE                                        | 31 |
|       |                                       |                                                             |   |
|       | 3.13                                       | EMPLOYEE BENEFITS                                                | 32 |
|       |                                       |                                                             |   |
|       | 3.14                                       | COMPLIANCE WITH LEGAL  REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS | 33 |
|       |                                       |                                                             |   |
|       | 3.15                                       | LEGAL PROCEEDINGS; ORDERS                                        | 34 |

 

i

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| ** ** | ** **                                                | **Page**                                                |
|------------|-----------------------------------------------------------|---------------------------------------------------------|
|       |                                                      |                                                    |
|       | 3.16                                                      | ABSENCE OF CERTAIN CHANGES  AND EVENTS                  | 35 |
|       |                                                      |                                                    |   |
|       | 3.17                                                      | CONTRACTS; NO DEFAULTS                                  | 36 |
|       |                                                      |                                                    |   |
|       | 3.18                                                      | INSURANCE                                               | 38 |
|       |                                                      |                                                    |   |
|       | 3.19                                                      | ENVIRONMENTAL MATTERS                                   | 39 |
|       |                                                      |                                                    |   |
|       | 3.20                                                      | INTELLECTUAL PROPERTY                                   | 40 |
|       |                                                      |                                                    |   |
|       | 3.21                                                      | RELATED PARTY TRANSACTIONS                              | 41 |
|       |                                                      |                                                    |   |
|       | 3.22                                                      | BROKERS OR FINDERS                                      | 41 |
|       |                                                      |                                                    |   |
|       | 3.23                                                      | LETTERS OF CREDIT                                       | 41 |
|       |                                                      |                                                    |   |
|       | 3.24                                                      | PURCHASED SUBSIDIARIES                                  | 41 |
|       |                                                      |                                                    |   |
| 4.         | Representations and  Warranties of Buyer and Buyer Entity | 42                                                      |
|       |                                                      |                                                    |   |
|       | 4.1                                                       | ORGANIZATION AND GOOD  STANDING                         | 42 |
|       |                                                      |                                                    |   |
|       | 4.2                                                       | ENFORCEABILITY; AUTHORITY;  NO CONFLICT                 | 42 |
|       |                                                      |                                                    |   |
|       | 4.3                                                       | CERTAIN PROCEEDINGS                                     | 44 |
|       |                                                      |                                                    |   |
|       | 4.4                                                       | INVESTIGATION                                           | 44 |
|       |                                                      |                                                    |   |
|       | 4.5                                                       | BROKERS OR FINDERS                                      | 44 |
|       |                                                      |                                                    |   |
| 5.         | Covenants of Buyer and  Sellers Prior to Closing          | 44                                                      |
|       |                                                      |                                                    |   |
|       | 5.1                                                       | REQUIRED APPROVALS                                      | 44 |
|       |                                                      |                                                    |   |
|       | 5.2                                                       | NOTIFICATION                                            | 45 |
|       |                                                      |                                                    |   |
|       | 5.3                                                       | COMMERCIALLY REASONABLE  EFFORTS                        | 45 |
|       |                                                      |                                                    |   |
|       | 5.4                                                       | BULK SALES LAWS                                         | 45 |
|       |                                                      |                                                    |   |
|       | 5.5                                                       | LETTERS OF CREDIT                                       | 45 |
|       |                                                      |                                                    |   |
|       | 5.6                                                       | UPDATING                                                | 46 |
|       |                                                      |                                                    |   |
| 6.         | Covenants of Sellers Prior  to Closing                    | 46                                                      |
|       |                                                      |                                                    |   |
|       | 6.1                                                       | ACCESS AND INVESTIGATION                                | 46 |
|       |                                                      |                                                    |   |
|       | 6.2                                                       | OPERATION OF THE BUSINESS                               | 47 |
|       |                                                      |                                                    |   |
|       | 6.3                                                       | NEGATIVE COVENANT                                       | 49 |
|       |                                                      |                                                    |   |
|       | 6.4                                                       | CURRENT EVIDENCE OF TITLE                               | 49 |
|       |                                                      |                                                    |   |
|       | 6.5                                                       | LOUISIANA FACILITIES                                    | 51 |
|       |                                                      |                                                    |   |
| 7.         | Conditions Precedent to  Buyer’s Obligation to Close | 51                                                      |
|       |                                                      |                                                    |   |
|       | 7.1                                                       | ACCURACY OF  REPRESENTATIONS; SELLERS’ PERFORMANCE | 51 |
|       |                                                      |                                                    |   |
|       | 7.2                                                       | HSR ACT                                                 | 52 |
|       |                                                      |                                                    |   |
|       | 7.3                                                       | ADDITIONAL DOCUMENTS                                    | 52 |

 

ii

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| ** ** | ** **                                                      | **Page**                                               |
|------------|-----------------------------------------------------------------|--------------------------------------------------------|
|       |                                                            |                                                   |
|       | 7.4                                                             | NO PROCEEDINGS                                         | 52 |
|       |                                                            |                                                   |   |
|       | 7.5                                                             | NO CONFLICT                                            | 53 |
|       |                                                            |                                                   |   |
| 8.         | Conditions Precedent to  each Seller’s Obligation to Close | 53                                                     |
|       |                                                            |                                                   |   |
|       | 8.1                                                             | ACCURACY OF  REPRESENTATIONS; BUYER’S PERFORMANCE | 53 |
|       |                                                            |                                                   |   |
|       | 8.2                                                             | HSR ACT                                                | 53 |
|       |                                                            |                                                   |   |
|       | 8.3                                                             | ADDITIONAL DOCUMENTS                                   | 53 |
|       |                                                            |                                                   |   |
|       | 8.4                                                             | NO PROCEEDINGS                                         | 54 |
|       |                                                            |                                                   |   |
|       | 8.5                                                             | NO CONFLICT                                            | 54 |
|       |                                                            |                                                   |   |
| 9.         | Termination                                                     | 54                                                     |
|       |                                                            |                                                   |   |
|       | 9.1                                                             | TERMINATION EVENTS                                     | 54 |
|       |                                                            |                                                   |   |
|       | 9.2                                                             | EFFECT OF TERMINATION                                  | 55 |
|       |                                                            |                                                   |   |
| 10.        | Additional Covenants                                            | 55                                                     |
|       |                                                            |                                                   |   |
|       | 10.1                                                            | EMPLOYEES AND EMPLOYEE  BENEFITS                       | 55 |
|       |                                                            |                                                   |   |
|       | 10.2                                                            | NONSOLICITATION                                        | 57 |
|       |                                                            |                                                   |   |
|       | 10.3                                                            | CUSTOMER AND OTHER  BUSINESS RELATIONSHIPS             | 57 |
|       |                                                            |                                                   |   |
|       | 10.4                                                            | RETENTION OF AND ACCESS TO  RECORDS                    | 57 |
|       |                                                            |                                                   |   |
|       | 10.5                                                            | FURTHER ASSURANCES                                     | 58 |
|       |                                                            |                                                   |   |
|       | 10.6                                                            | INTENTIONALLY DELETED                                  | 58 |
|       |                                                            |                                                   |   |
|       | 10.7                                                            | PROVISIONS RELATING TO  CERTAIN ASSETS                 | 58 |
|       |                                                            |                                                   |   |
|       | 10.8                                                            | SUPPORT                                                | 59 |
|       |                                                            |                                                   |   |
| 11.        | Indemnification; Remedies                                       | 61                                                     |
|       |                                                            |                                                   |   |
|       | 11.1                                                            | SURVIVAL                                               | 61 |
|       |                                                            |                                                   |   |
|       | 11.2                                                            | INDEMNIFICATION AND  REIMBURSEMENT BY SELLERS          | 61 |
|       |                                                            |                                                   |   |
|       | 11.3                                                            | INDEMNIFICATION AND  REIMBURSEMENT BY BUYER            | 62 |
|       |                                                            |                                                   |   |
|       | 11.4                                                            | LIMITATIONS RELATED TO  ENVIRONMENTAL MATTERS          | 63 |
|       |                                                            |                                                   |   |
|       | 11.5                                                            | LIMITATIONS ON AMOUNT —  SELLERS                  | 63 |
|       |                                                            |                                                   |   |
|       | 11.6                                                            | LIMITATIONS ON AMOUNT —  BUYER                    | 63 |
|       |                                                            |                                                   |   |
|       | 11.7                                                            | TIME LIMITATIONS                                       | 64 |
|       |                                                            |                                                   |   |
|       | 11.8                                                            | PROCEDURE                                              | 64 |
|       |                                                            |                                                   |   |
|       | 11.9                                                            | PAYMENT                                                | 66 |
|       |                                                            |                                                   |   |
|       | 11.10                                                           | NO SET-OFF                                             | 66 |
|       |                                                            |                                                   |   |
|       | 11.11                                                           | INSURANCE                                              | 66 |

 

iii

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| ** ** | ** **         | **Page**                                           |
|------------|--------------------|----------------------------------------------------|
|       |               |                                               |
|       | 11.12              | NO DUPLICATION                                     | 67 |
|       |               |                                               |   |
|       | 11.13              | REMEDIES                                           | 67 |
|       |               |                                               |   |
|       | 11.14              | NO SPECIAL DAMAGES                                 | 67 |
|       |               |                                               |   |
|       | 11.15              | EXPRESS NEGLIGENCE                                 | 67 |
|       |               |                                               |   |
| 12.        | Confidentiality    | 68                                                 |
|       |               |                                               |   |
|       | 12.1               | DEFINITION OF CONFIDENTIAL  INFORMATION            | 68 |
|       |               |                                               |   |
|       | 12.2               | RESTRICTED USE OF  CONFIDENTIAL INFORMATION        | 69 |
|       |               |                                               |   |
|       | 12.3               | EXCEPTIONS                                         | 69 |
|       |               |                                               |   |
|       | 12.4               | LEGAL PROCEEDINGS                                  | 70 |
|       |               |                                               |   |
|       | 12.5               | RETURN OR DESTRUCTION OF  CONFIDENTIAL INFORMATION | 70 |
|       |               |                                               |   |
|       | 12.6               | ATTORNEY-CLIENT PRIVILEGE                          | 70 |
|       |               |                                               |   |
| 13.        | General Provisions | 71                                                 |
|       |               |                                               |   |
|       | 13.1               | EXPENSES                                           | 71 |
|       |               |                                               |   |
|       | 13.2               | PUBLIC ANNOUNCEMENTS                               | 71 |
|       |               |                                               |   |
|       | 13.3               | NOTICES                                            | 71 |
|       |               |                                               |   |
|       | 13.4               | DISPUTE RESOLUTION                                 | 72 |
|       |               |                                               |   |
|       | 13.5               | ENFORCEMENT OF AGREEMENT                           | 73 |
|       |               |                                               |   |
|       | 13.6               | WAIVER; REMEDIES  CUMULATIVE                       | 73 |
|       |               |                                               |   |
|       | 13.7               | ENTIRE AGREEMENT AND  MODIFICATION                 | 74 |
|       |               |                                               |   |
|       | 13.8               | ASSIGNMENTS, SUCCESSORS  AND NO THIRD PARTY RIGHTS | 74 |
|       |               |                                               |   |
|       | 13.9               | SEVERABILITY                                       | 74 |
|       |               |                                               |   |
|       | 13.10              | CONSTRUCTION                                       | 74 |
|       |               |                                               |   |
|       | 13.11              | TIME OF ESSENCE                                    | 75 |
|       |               |                                               |   |
|       | 13.12              | GOVERNING LAW                                      | 75 |
|       |               |                                               |   |
|       | 13.13              | EXECUTION OF AGREEMENT                             | 75 |

 

iv

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| Exhibits                              |
|---------------------------------------|
| Exhibit 2.9(a)(i)                     |   | Form of Bill of Sale,  Assignment and Assumption Agreement |
| Exhibit 2.9(a)(iii)                   |   | Form of Assignment and  Assumption of Lease |
| Exhibit 2.9(a)(iv)                    |   | Form of Assignment of  Registered Intellectual Property |
| Exhibit 2.9(a)(xiii)                  |   | Form of Confirmation of  Closing |
|                                  |   |   |
|                                  |   |   |
| Sections  of Seller Disclosure Letter |
| Section 1.1(A)                        |   | IT Employees |
| Section 1.1(B)                        |   | Knowledge |
| Section 1.1(C)                        |   | Purchased Subsidiaries |
| Section 2.1(j)                        |   | Internet Domain Names |
| Section 2.1(l)                        |   | Certain Information  Technology Assets |
| Section 2.1(m)                        |   | Bank Accounts with Money  to be Transferred |
| Section 2.2(c)                        |   | Excluded Deposits, Prepaid  Expenses, Claims for Refunds and Rights to Offset |
| Section 2.2(e)                        |   | Excluded Seller Contracts |
| Section 2.2(o)                        |   | Excluded Claims Against  Third Parties |
| Section 2.2(p)                        |   | Excluded Business Property |
| Section 2.2(q)                        |   | Other Excluded Assets |
| Section 2.4(a)(vi)                    |   | Other Assumed Liabilities |
| Section 2.9(a)(xvi)                   |   | Resignations |
| Section 2.13(a)                       |   | [***] |
| Section 3.2(b)                        |   | Conflict |
| Section 3.2(c)                        |   | Notices or Consents |
| Section 3.3                           |   | Financial Statements |
| Section 3.5(a)                        |   | Assets With an Original  Cost in Excess of $10,000 |
| Section 3.5(b)                        |   | Leased Assets with Monthly  Payments in Excess of $2,500 |
| Section 3.5(c)                        |   | Sufficiency of Assets |
| Section 3.5(d)                        |   | Condition of Assets |
| Section 3.6                           |   | Description of Business  Property |
| Section 3.7(a)(1)                     |   | Real Estate Encumbrances |
| Section 3.7(a)(2)                     |   | Permitted Real Estate  Encumbrances |
| Section  3.7(c)(1)                    |   | Non-Real  Estate Encumbrances |
| Section 3.7(c)(2)                     |   | Permitted Non-Real Estate  Encumbrances |
| Section 3.8                           |   | Accounts Receivable as of  September 3, 2005 |
| Section 3.9                           |   | Inventories |
| Section 3.11                          |   | Taxes |
| Section 3.12(a)                       |   | Labor Disputes; Compliance |
| Section 3.12(b)                       |   | Compensation of Affected  Employees and Purchased Subsidiary Employees |
| Section 3.13(a)                       |   | Seller Benefit Plans |
| Section 3.13(b)                       |   | ERISA Matters |
| Section 3.13(d)                       |   | Purchased Subsidiary Plans |
| Section 3.14(a)                       |   | Compliance with Legal  Requirements |
| Section 3.14(b)                       |   | Governmental  Authorizations |
| Section 3.15(a)                       |   | Legal Proceedings |
| Section 3.15(b)                       |   | Orders |

 

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| Section 3.15(c)                      |   | Compliance with Orders                                       |
|--------------------------------------|--------|--------------------------------------------------------------|
| Section 3.16                         |   | Certain Changes and Events                                   |
| Section 3.17(a)                      |   | List of Certain Seller  Contracts                            |
| Section 3.17(b)                      |   | Enforceability of Certain  Seller Contracts                  |
| Section 3.17(c)                      |   | Compliance with Certain  Seller Contracts                    |
| Section 3.17(d)                      |   | Warranty Claims                                              |
| Section 3.18(a)                      |   | List of Insurance Policies                                   |
| Section 3.18(c)                      |   | Self Insurance; Third  Party Insurance Arrangements          |
| Section 3.18(d)                      |   | Loss Experience                                              |
| Section 3.19                         |   | Environmental Matters                                        |
| Section 3.20(a)(i)                   |   | Owned Intellectual  Property                                 |
| Section 3.20(a)(ii)                  |   | Intellectual Property  Encumbrances                          |
| Section 3.20(b)(ii)                  |   | Licenses                                                     |
| Section 3.21                         |   | Related Party Transactions                                   |
| Section 3.23                         |   | Letters of Credit                                            |
| Section 3.24(b)                      |   | Outstanding Equity  Securities of the Purchased Subsidiaries |
| Section 3.24(d)                      |   | Undisclosed Liabilities of  Purchased Subsidiaries           |
| Section 3.24(e)                      |   | Purchased Subsidiaries’  Bank Account Information       |
| Section 6.1(b)                       |   | Phase II ESAs                                                |
| Section 7.3(d)                       |   | OEM Consents                                                 |
|                                 |   |                                                         |
|                                 |   |                                                         |
| Sections of Buyer  Disclosure Letter |
| Section 1.1                          |   | Knowledge                                                    |
| Section 4.2(c)                       |   | Conflicts                                                    |
| Section 4.2(d)                       |   | Notices or Consents                                          |
|                                 |   |                                                         |

 

----

 

**ASSET PURCHASE AGREEMENT**

 

This Asset PurchaseAgreement (“Agreement”) is dated October 24, 2005, by and among Hushang Ansary(“Buyer”), Stewart & Stevenson Services, Inc., a Texas corporation (“Parent”),and the Subsidiaries (as defined below) of Parent that are signatories to thisAgreement (together with Parent, “Sellers” and each, a “Seller”).

 

**RECITALS**

** **

Sellers desire to sell, andBuyer desires to purchase, substantially all of the assets constituting theBusiness (as defined below), and Buyer is willing to assume certain obligationsof Sellers relating to the Business, for the consideration and on the terms setforth in this Agreement.

 

The parties, intending to belegally bound, agree as follows:

 

# 1.                                       Definitions and Usage

#  

## 1.1                                 DEFINITIONS

##  

For purposes of thisAgreement, the following terms and variations thereof have the meaningsspecified or referred to in this Section 1.1:

 

“Accounts Receivable” — (a)all trade accounts receivable and other rights to payment (including progresspayments) from customers of Sellers and the Purchased Subsidiaries related tothe Business and the full benefit of all security for such accounts or rightsto payment, including all trade accounts receivable representing amountsreceivable in respect of goods shipped or products sold or services rendered tocustomers of each Seller and Purchased Subsidiary, (b) all other accounts ornotes receivable of each Seller and Purchased Subsidiary related to theBusiness and the full benefit of all security for such accounts or notes and(c) any claim, remedy or other right of any Seller or Purchased Subsidiaryrelated to any of the foregoing.

 

“Adjustment Amount” — asdefined in Section 2.10.

 

“Affected Employees” — allemployees of Sellers employed principally in connection with the Business,including the IT Employees, persons on vacation, approved leave of absence,sick leave, family medical leave under the Family and Medical Leave Act, orshort-term disability leave; and excluding persons on long-term disabilityleave under a long-term disability plan maintained by any Seller and thePurchased Subsidiary Employees.

 

“Affiliate” — means, withrespect to any Person, any other Person directly or indirectly controlling,controlled by or under common control with such Person, and in the case of anynatural Person shall include all relatives and immediate family members of suchfirst Person.  For purposes of thisdefinition, a Person shall be deemed to control another Person if such firstPerson directly or indirectly owns or holds fifty percent (50%) or more of theownership interests in such other Person.

 

1

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“Agreed AccountingPrinciples” — GAAP, applying the policies and procedures on a consistent basis,and as modified by the exceptions to GAAP, as set forth on Section 3.3 of theSeller Disclosure Letter.

 

“Agreement” — as defined inthe first paragraph of this Agreement.

 

“Assets” — as defined inSection 2.1.

 

“Assumed Seller Contracts” —as defined in Section 3.17(c)(i).

 

“Assumed Liabilities” — asdefined in Section 2.4(a).

 

“ASTM” means the AmericanSociety for Testing and Materials.

 

“ASTM Standards” means thethen-current, published, applicable ASTM guidelines relating to thecharacteristics referenced.

 

“Bids” — as defined inSection 2.1(e).

 

“Bill of Sale, Assignmentand Assumption Agreement” — as defined in Section 2.9(a)(i).

 

“Bulk Sales Laws” — asdefined in Section 5.4.

 

“Business” — as defined inSection 2.1; provided, that for the avoidance of doubt the term “Business”excludes the DES Business, the TVS Business and the EPD Business.

 

“Business Day” — any dayother than, Saturday, Sunday or any other day on which banks in Houston, Texasare authorized or required to be closed.

 

“Business IntellectualProperty” — as defined in Section 3.20(a).

 

“Business Property” — asdefined in Section 3.6.

 

“Business Records” — asdefined in Section 2.1(g).

 

“Buyer” — as defined in thefirst paragraph of this Agreement.

 

“Buyer Contact” — as definedin Section 12.2(a).

 

“Buyer Disclosure Letter” —the disclosure letter delivered by Buyer to Sellers concurrently with theexecution and delivery of this Agreement, as amended pursuant to the terms ofthis Agreement.

 

“Buyer Entity” — the Persondirectly or indirectly controlled by Buyer that assumes this Agreement pursuantto Section 13.8.

 

“Buyer Group” — as definedin Section 6.1.

 

“Buyer Indemnitees” — asdefined in Section 11.2.

 

2

----

 

“California Receivables” —as defined in Section 10.8(d).

 

“Closing” — as defined inSection 2.8.

 

“Closing Balance Sheet” — asdefined in Section 2.11(a).

 

“Closing Date” — the date onwhich the Closing actually takes place.

 

“Closing Net Asset Value” —as defined in Section 2.11(a).

 

“Closing Payment” — a cashamount equal to the Estimated Closing Net Asset Value of the Business on theClosing Date minus [***].

 

“Closing Physical InventoryCount” — as defined in Section 2.11(b).

 

“COBRA” — the ConsolidatedOmnibus Budget Reconciliation Act of 1985, as amended.

 

“Code” — the InternalRevenue Code of 1986, as amended.

 

“Confidential Information” —as defined in Section 12.1(a).

 

“Confirmation of Closing” —as defined in Section 2.9(a)(xiii).

 

“Consent” — any approval,consent, ratification, waiver or other authorization.

 

“Contemplated Transactions”— all of the transactions contemplated by this Agreement.

 

“Contract” — any agreement,contract, Lease, commitment or other undertaking or arrangement.

 

“Customer PerformanceAssurance” — any guaranty, cash, letter of credit or other property of any kindor nature deposited as or otherwise constituting collateral security for theperformance by any party (other than a Seller or a Purchased Subsidiary) to anySeller Contract.

 

“Damages” — as defined inSection 11.2.

 

“DES Business” — all of anySeller’s and its Affiliates’ right, title, and interest in and to all of suchSeller’s or its Affiliate’s property and assets belonging to such Seller or anyof its Affiliates and all Liabilities of any Seller and its Affiliates that ineach case relate to the business conducted by the former DistributedEnergy Solutions segment of Parent that has been classified as a discontinuedoperation in Parent’s publicly disclosed consolidated financial statementsand which is separately managed from the Business.  The DES Business includes (i) themanufacturing, packaging and marketing of reciprocating diesel and natural gasengine generator sets, including the engineering, procurement and constructionactivities related thereto, (ii) the completion of construction projects and(iii) the satisfaction of customer warranty obligations and operations andmaintenance obligations of this discontinued operation.

 

“Disclosing Party” — asdefined in Section 12.1(a).

 

3

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“Dispute” — as defined inSection 13.4.

 

“Effective Time” — the timeon the Closing Date specified in the Confirmation of Closing.

 

“Election Period” — asdefined in Section 11.8(c).

 

“Encumbrance” — any charge,claim, condition, equitable interest, lien, option, pledge, security interest,mortgage, right of way, easement, encroachment, servitude, right of firstoption, right of first refusal or similar restriction, including anyrestriction on use, voting (in the case of any security or equity interest),transfer, receipt of income or exercise of any other attribute of ownership.

 

“Environment” — soil, landsurface or subsurface strata, surface waters (including navigable waters andocean waters under the authority of the United States or any state thereof),groundwaters, drinking water supply, stream sediments, ambient air, plant andanimal life and any other environmental medium or natural resource.

 

“Environmental Condition” —any pollution, contamination, degradation, damage or injury caused by, relatedto, arising from, or in connection with the generation, handling, use,treatment, storage, transportation, disposal, discharge, Release or emission ofany “Hazardous Materials.”

 

“Environmental Consultant” —as defined in Section 6.1(b).

 

“Environmental Laws” — allapplicable laws, regulations, enforceable requirements that have the effect oflaw, orders, decrees, judgments, injunctions, permits, licenses, approvals,consents or authorizations issued, promulgated or entered into by anyGovernmental Body, or any common law theories or provisions, pertaining to theprotection of human health or the Environment, including but not limited to theComprehensive Environmental Response, Compensation, and Liability Act, asamended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 9601et seq. (“CERCLA”), the Solid Waste Disposal Act, as amended by the ResourceConservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”), the FederalWater Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. §1251 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic SubstancesControl Act, 15 U.S.C. § 2601 et seq., the Occupational Safety and Health Act,29 U.S.C. §651  et seq. and the standardpromulgated thereunder by the Occupational Safety and Health Administration,and any similar state or local statutes, in each case where such laws are ineffect on or prior to the Closing Date.

 

“Environmental Liabilities”— any and all liabilities, responsibilities, claims, suits, losses, costs(including remedial, removal, response, abatement, clean-up, investigative, ormonitoring costs and any other related costs and expenses), other causes ofaction, damages, settlements, expenses, charges, assessments, liens, penalties,fines, pre-judgment and post-judgment interest, attorneys’ fees and other legalfees: (i) pursuant to any agreement, Order, notice (including notices ofviolation or noncompliance), or responsibility, directive (including directivesembodied in Environmental Laws), injunction, judgment, or similar documents(including settlements), arising out of or in connection with any EnvironmentalLaws, or (ii) pursuant to any claim by a Governmental Body or other Person forpersonal injury, property damage, damage to natural resources, remediation, orpayment or reimbursement of response costs incurred or expended by theGovernmental Body or other Person pursuant to Environmental Laws.

 

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“Environmental MaterialAdverse Effect” shall mean any Environmental Liabilities that are reasonablyexpected to exceed $100,000 per occurrence or series of related occurrences, or$500,000 in the aggregate.

 

“EPD Business” — the EngineeredProducts Division of Parent, including (i) the design, manufacturing, serviceand sale of equipment for coiled tubing, acidizing, fracturing, pumping(including nitrogen pumping equipment), railcar movers, silicon controlledrectifiers and switchgear equipment, and other related well servicing productsand equipment, (ii) contract manufacturing of seismic equipment, (iii) theHybrid Bus Business, (iv) the Snow Blower Business, and (v) the furnishing ofadvisory, consulting and aftermarket activities related to any of theforegoing.

 

“ERISA” — the EmployeeRetirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate”  — any other entity that, together with anySeller or, prior to the Closing, any Purchased Subsidiary, would be treated asa single employer under Section 414 of the Code or Section 4001(a) or (b) ofERISA.

 

“Estimated Closing BalanceSheet” — an estimated balance sheet of the Business as of the Closing Dateprepared in good faith by Sellers applying the Agreed Accounting Principles, inform and substance as mutually and reasonably agreed to by Sellers and Buyer.

 

“Estimated Closing Net AssetValue” — the Net Asset Value calculated from the Estimated Closing BalanceSheet.

 

“Exchange Act” — theSecurities Exchange Act of 1934.

 

“Excluded Assets” — asdefined in Section 2.2.

 

“Facilities” — any realproperty, leasehold or other interest in real property currently owned oroperated by any Seller and comprising part of the Assets, or currently owned oroperated by any Purchased Subsidiary, including the Tangible Personal Propertyused or operated by Sellers and the Purchased Subsidiaries at the respectivelocations or the Business Properties specified in Section 3.6.

 

“Financial Statements” — asdefined in Section 3.3.

 

“Freightliner Indebtedness”— all indebtedness and obligations of Sellers or SSTH in connection with thatcertain floor plan financing arrangement evidenced by that certain (i)Promissory Note in the original principal amount of up to $3,000,000 datedDecember 16, 2004, executed by SSTH and payable to the order of Southwest Bankof Texas N.A. (now named Amegy Bank National Association), a national bankingassociation (“SWBT”), (ii) Pledge and Security Agreement between SSTH and SWBTdated as of December 16, 2004, (iii) Arbitration Agreement between SSTH andSWBT dated as of December 16, 2004 and (iv) First Modification Agreement datedas of December 21, 2004 between SSTH and SWBT.

 

“GAAP” — generally acceptedaccounting principles for financial reporting in the United States.

 

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“Governmental Authorization”— any Consent, license, registration or permit issued, granted, given orotherwise made available by or under the authority of any Governmental Body orpursuant to any Legal Requirement, which consent, license, registration orpermit is used in the operation of the Business or necessary for theconsummation of the Contemplated Transactions.

 

“Governmental Body” — any:

 

(a)                                  nation, state, county, city, town, borough,village, district or other jurisdiction;

 

(b)                                 federal, state, local, municipal, foreign orother government;

 

(c)                                  governmental, quasi-governmental orregulatory authority of any nature (including any agency, branch, department,board, commission, court, tribunal or other entity exercising governmental,quasi-governmental or regulatory powers); or

 

(d)                                 body exercising, or entitled to exercise, anyadministrative, executive, judicial, legislative, police, regulatory or taxingauthority or power.

 

 “happening or manifested” — refers to theactual time at which the circumstance, condition, occurrence, event, physicalaccident or injury giving rise to a Liability occurs (regardless of when theproduct design, manufacture, distribution or sale or related service occurs).

 

“Hazardous Material” — anysubstance, material or waste that is regulated by any Governmental Body underEnvironmental Laws, including any material, substance or waste which is definedas a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremelyhazardous waste,” “restricted hazardous waste” or “toxic substance” under anyprovision of Environmental Law, and including petroleum, petroleum products andbyproducts, friable asbestos or asbestos-containing material, urea formaldehydeand polychlorinated biphenyls.

 

“HSR Act” — theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“Hybrid Bus Business” — thatbusiness of Parent and any of its Subsidiaries arising out of, relating to orassociated with hybrid electro motivation for wheeled vehicles.

 

 “Indemnitee” — as defined in Section 11.8(a).

 

“Indemnitor” — as defined inSection 11.8(a).

 

“Independent Accountants” —KPMG LLP, or if KPMG LLP is not independent in the reasonable determination ofBuyer or Parent, then an independent auditing firm of nationally or regionallyrecognized standing selected by the mutual agreement of Buyer and Parent within15 days of the date on which the Independent Accountants are proposed to beginserving or, if Buyer and Parent are unable to agree within such period, anindependent auditing firm of nationally or regionally recognized standingselected jointly by two other such firms, one of which shall be specified byBuyer and one of which shall be specified by Parent, within 15 days after theexpiration of such period.

 

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“Initial Balance Sheet” — asdefined in Section 3.3.

 

“Initial Net Asset Value” — [***],which is the excess of total assets over current liabilities of the Business asreflected on the Initial Balance Sheet.

 

“Intellectual Property” —(a) all inventions (whether patentable or unpatentable and whether or notreduced to practice), all improvements thereto, and all patents, patentapplications, and patent and invention disclosures, together with allreissuances, continuations, continuations-in-part, divisionals, revisions,extensions, and reexaminations thereof, (b) all trademarks, service marks,slogans, trade dress, logos, icons, designs, trade designation, trade names,and corporate names all registered or unregistered, together with alltranslations, adaptations, derivations, and combinations thereof and includingall goodwill associated therewith, and all applications, registrations andrenewals in connection therewith, (c) all copyrightable works, all copyrights,and all applications, registrations and renewals in connection therewith, (d)all mask works and all applications, registrations and renewals in connectiontherewith, (e) all trade secrets and confidential information (including ideas,research and development, know-how, formulas, compositions, manufacturing andproduction processes and techniques, technical data, designs, drawings,specifications, customer and supplier lists, pricing and cost information, andbusiness and marketing plans and proposals), (f) all Software (including dataand related documentation), (g) all other proprietary rights, includinginternet web sites and internet domain names and (h) all copies and tangibleembodiments thereof (in whatever form or medium).

 

“Intellectual PropertyLicenses” — as defined in Section 3.20(b).

 

“Inventories” — allinventories of Sellers and the Purchased Subsidiaries related to or used in theoperation of the Business, wherever located, including all finished goods, workin process, raw materials, spare parts and all other materials and supplies tobe used or consumed by Sellers or the Purchased Subsidiaries in the productionof finished goods for the Business.

 

“IRS” — the United StatesInternal Revenue Service and, to the extent relevant, the United StatesDepartment of the Treasury.

 

“IT Employees” — each of theindividuals named in Section 1.1(A) of the Seller Disclosure Letter.

 

“Knowledge” — with respectto Sellers, Sellers will be deemed to have Knowledge of a particular fact orother matter if any individual named in Section 1.1(B) of the Seller DisclosureLetter is actually aware of that fact or matter; and with respect to Buyer,Buyer will be deemed to have Knowledge of a particular fact or other matter ifany individual named in Section 1.1 of the Buyer Disclosure Letter is actuallyaware of that fact or matter.

 

“Lease” — any Real PropertyLease or any lease or rental agreement, license, right to use or installmentand conditional sale agreement to which any Seller or Purchased Subsidiary is aparty used in the operation of the Business and any other Seller Contractpertaining to the leasing or use of any Tangible Personal Property.

 

“Legal Requirement” — anyfederal, state or municipal law, ordinance, regulation, statute or treaty.

 

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“Liability” — with respectto any Person, any liability or obligation of such Person of any kind,character or description, whether known or unknown, absolute or contingent,reserved or unreserved, accrued or unaccrued, disputed or undisputed,liquidated or unliquidated, secured or unsecured, joint or several, due or tobecome due, vested or unvested, executory, determined, determinable orotherwise, and whether or not the same is required to be accrued on thefinancial statements of such Person.

 

“Licensed Marks” — asdefined in Section 2.13(a).

 

“Net Asset Value” — theexcess of total assets over current liabilities of the Business, as reflectedon the Initial Balance Sheet or on the Closing Balance Sheet, as required bythe context; provided, that, for this purpose the net asset valueof the assets and liabilities of the Purchased Subsidiaries shall be usedrather than the net asset value of Outstanding Equity Securities and all inter-companyaccounts of the Purchased Subsidiaries shall be excluded.

 

“Non-Real EstateEncumbrances” — as defined in Section 3.7(c).

 

“Notice of Dispute” — asdefined in Section 13.4.

 

“Order” — any order,injunction, judgment, decree, ruling, assessment or arbitration award of anyGovernmental Body or arbitrator.

 

“Outstanding EquitySecurities” — all outstanding equity securities of the Purchased Subsidiaries,including all options, warrants or other rights to acquire any such equitysecurities.

 

“Owned Intellectual Property”— as defined in Section 3.20(a).

 

“Owned Property” — asdefined in Section 3.6.

 

“Parent” — as defined in thefirst paragraph of this Agreement.

 

“Permitted Encumbrances” —as defined in Section 3.7(c).

 

“Permitted Non-Real EstateEncumbrances” — as defined in Section 3.7(c)

 

“Permitted Real EstateEncumbrances” — as defined in Section 3.7(a).

 

“Person” — an individual,partnership, corporation, business trust, limited liability company, limitedliability partnership, joint stock company, trust, unincorporated association,joint venture or other entity or a Governmental Body.

 

“Phase I ESA” — as definedin Section 6.1(b).

 

“Phase II ESA” — as definedin Section 6.1(b).

 

“Pre-Closing Property Taxes”— as defined in Section 2.5.

 

“Proceeding” — any action,arbitration, audit, hearing, investigation, litigation or suit (whether civil,criminal, administrative, judicial or investigative, whether public or private)

 

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commenced,brought, conducted or heard by or before, or otherwise involving, anyGovernmental Body or arbitrator.

 

“Purchase Price” — asdefined in Section 2.3.

 

“Purchased Subsidiary” —each of the Subsidiaries of Parent listed in Section 1.1(C) of the SellerDisclosure Letter.

 

“Purchased Subsidiary Plan” —any Seller Benefit Plan that is sponsored, maintained, or contributed to,solely by a Purchased Subsidiary or Purchased Subsidiaries, and any accruedvacation or sick pay liabilities relating to current or former Purchased SubsidiaryEmployees.

 

“Purchased SubsidiaryEmployees” — all employees of the Purchased Subsidiaries.

 

“Real Estate Encumbrances” —as defined in Section 3.7(a).

 

“Real Property Lease” — asdefined in Section 3.6.

 

“Receivables Payment” — asdefined in Section 10.8(d).

 

“Receiving Party” — asdefined in Section 12.1(a).

 

“Record” — information thatis inscribed on a tangible medium or that is stored in an electronic or othermedium and is retrievable in perceivable form.

 

“Registered IntellectualProperty”  — all Business IntellectualProperty, whether owned by a Seller, a Purchased Subsidiary or owned by a ThirdParty who has granted a right of any sort with respect to such IntellectualProperty to a Seller or a Purchased Subsidiary, that is: (i) a patent or patentapplication, (ii) an application or a registration for a trademark, servicemark, trade dress, trade name, logo, icon, design, trade designation, slogan,corporate name or internet web site or internet domain name, or (iii) acopyright registration or application.

 

“Related Person” — withrespect to a specified Person:

 

(a)                                  any Person that directly or indirectlycontrols, is directly or indirectly controlled by or is directly or indirectlyunder common control with such specified Person of such specified Person;

 

(b)                                 any Person that holds a Material Interest insuch specified Person;

 

(c)                                  each Person that serves as a director,officer, partner, executor or trustee of such specified Person (or in a similarcapacity);

 

(d)                                 any Person in which such specified Personholds a Material Interest; and

 

(e)                                  any Person with respect to which suchspecified Person serves as a general partner or a trustee (or in a similarcapacity).

 

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For purposes of thisAgreement, (a) “control” (including “controlling,” “controlled by,” and “undercommon control with”) means the possession, direct or indirect, of the power todirect or cause the direction of the management and policies of a Person,whether through the ownership of voting securities, by contract or otherwise,and shall be construed as such term is used in the rules promulgated under theSecurities Act; and (b) “Material Interest” means direct or indirect beneficialownership (as defined in Rule 13d-3 under the Exchange Act) of votingsecurities or other voting interests representing at least twenty percent (20%)of the outstanding voting power of a Person or equity securities or otherequity interests representing at least twenty percent (20%) of the outstandingequity securities or equity interests in a Person.

 

“Release” — any release,spill, emission, leaking, pumping, pouring, dumping, emptying, injection,deposit, disposal, discharge, dispersal, leaching or migration on or into theEnvironment.

 

“Remedial Action” or “Remediate”— all actions required under applicable Environmental Laws or the provisions ofa Lease that are necessary to: (a) investigate, study, assess, measure, cleanup, remove, treat or in any other way address the Release, or minimize thefurther Release, of any Hazardous Materials, including use of monitoring andnatural attenuation; (b) prevent the Release of any Hazardous Material wheresuch action is required under applicable Environmental Laws; (c) performpre-remedial studies and investigations or post-remedial monitoring and care;or (d) bring all Facilities that are Assets and the operations conductedthereon into compliance with Environmental Laws; provided, however, in no eventshall this be deemed to include the cleanup, investigation, study, assessment,measurement, removal, or treatment of any Hazardous Materials that aredetermined by the relevant Governmental Body to be present innaturally-occurring levels for that location, or in any concentration inlandfills, landfarms, or other disposal areas that are permitted or authorizedpursuant to any applicable Environmental Law.

 

“Representative” — withrespect to a particular Person, any director, officer, manager, employee,agent, consultant, advisor, accountant, financial advisor, legal counsel orother representative of that Person.

 

“Representative Party” — asdefined in Section 9.1(a).

 

“Restrictive Covenants” — asdefined in Section 11.13(a).

 

“Retained Liabilities” — asdefined in Section 2.4(b).

 

“Securities Act” — theSecurities Act of 1933, as amended.

 

“Seller” or “Sellers” — asdefined in the first paragraph of this Agreement.

 

“Seller Benefit Plans” — all(i) employee welfare benefit plans or employee pension benefit plans as definedin sections 3(1) and 3(2) of ERISA, including plans, programs or arrangementsthat provide retirement income or result in deferrals of income by employeesfor periods extending to their terminations of employment or beyond, and plansthat provide medical, surgical or hospital care benefits or benefits in theevent of sickness, accident, disability, death or unemployment and (ii) otheremployee benefit agreements or arrangements that are not ERISA plans, includingany deferred compensation plans, incentive plans, bonus plans or arrangements,stock option plans, stock purchase plans, stock award plans, golden parachuteagreements, severance pay plans,

 

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dependentcare plans, cafeteria plans, employee assistance programs, scholarshipprograms, retention incentive agreements, vacation policies and, or othersimilar plans, agreement or arrangements that (a) are maintained by any Seller,any ERISA Affiliate or any of its Related Persons for the benefit of AffectedEmployees or Purchased Subsidiary Employees, (b) have been approved by anySeller, any ERISA Affiliate or any of its Related Persons but are not yeteffective for the benefit of Affected Employees, Purchased Subsidiary Employeesor their respective beneficiaries, or (c) were previously maintained by anySeller, any ERISA Affiliate or any of its Related Persons for the benefit ofthe Affected Employees, Purchased Subsidiary Employees or their respectivebeneficiaries and with respect to which, in each case, any Seller, any ERISAAffiliate or any of its Related Persons may have any liability, contingent orotherwise.  However, “Seller BenefitPlans” shall not include any agreements between any Seller and any AffectedEmployees pursuant to which such Seller has agreed to pay Affected Employeesany compensation in consideration of their services rendered in connection withthe sale of the Assets or the Business (“Transaction Bonuses”).

 

“Seller Contact” — asdefined in Section 12.2(a).

 

“Seller Contract” — anyContract related primarily to or used in the operation of the Business (a)under which any Seller or Purchased Subsidiary has or may acquire any rights orbenefits; (b) under which any Seller or Purchased Subsidiary has or may becomesubject to any obligation or liability; or (c) by which any Seller or PurchasedSubsidiary or any of the Assets may become bound.  The term Seller Contract includes anyCustomer Performance Assurance.

 

“Seller Disclosure Letter” —the disclosure letter delivered by Sellers to Buyer concurrently with theexecution and delivery of this Agreement, as amended pursuant to the terms ofthis Agreement.

 

“Seller Indemnitees” — asdefined in Section 11.3.

 

“Snow Blower Business” —that business of Parent or any of its Subsidiaries arising out of, relating toor associated with snow removal equipment.

 

“Software” — all computersoftware and subsequent versions thereof, including source code, object,executable or binary code, objects, comments, screens, user interfaces, reportformats, templates, menus, buttons and icons and all files, data, materials,manuals, design notes and other items and documentation related thereto orassociated therewith.

 

“SSTH” — Stewart &Stevenson Truck Holdings, Inc., a Delaware corporation.

 

“Subcontract” — as definedin Section 2.9(a)(viii).

 

“Sublease Agreement” — asdefined in Section 2.9(b)(iv).

 

“Subsidiary” — with respectto any Person (the “Owner”), any corporation or other Person of whichsecurities or other interests having the power to elect a majority of thatcorporation’s or other Person’s board of directors or similar governing body,or otherwise having the power to direct the business and policies of thatcorporation or other Person (other than securities or other

 

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interestshaving such power only upon the happening of a contingency that has notoccurred), are held by the Owner or one or more of its Subsidiaries.

 

“Survival Period” — asdefined in Section 11.7.

 

“Tangible Personal Property”— all machinery, equipment (including machinery and equipment held for rentalto Third Parties), tools, furniture, office equipment, computer hardware,supplies, materials, vehicles and other items of tangible personal property(other than Inventories) of every kind owned or leased by any Seller orPurchased Subsidiary and used in the operation of the Business, together withany express or implied warranty by the manufacturers or sellers or lessors ofany item or component part thereof and all maintenance records and otherdocuments relating thereto.

 

“Tax” — any federal, state,local or foreign income, gross receipts, license, payroll, employment, excise,severance, stamp, occupation, premium, property, environmental, windfallprofit, customs, vehicle, airplane, boat, vessel or other title orregistration, capital stock, franchise, employees’ income withholding,withholding, social security, unemployment, disability, real property, personalproperty, sales, use, transfer, value added, alternative, add-on minimum andother tax, fee, assessment, levy, tariff, charge or duty of any kindwhatsoever, whether computed on a separate or consolidated, unitary or combinedbasis or in any other manner and including any interest, penalty, addition oradditional amount thereon imposed, assessed or collected by or under the authorityof any Governmental Body or payable under any tax-sharing agreement or anyother Contract.

 

“Tax Return” — any return(including any information return), report, statement, schedule, notice, form,declaration, claim for refund or other document or information filed with orsubmitted to, or required to be filed with or submitted to, any GovernmentalBody in connection with the determination, assessment, collection or payment ofany Tax or in connection with the administration, implementation or enforcementof or compliance with any Legal Requirement relating to any Tax.

 

“Third Party” — a Personthat is not a party to this Agreement.

 

“Third Party Claim” — anyclaim against any Indemnitee by a Third Party that could give rise to a rightof indemnification under this Agreement.

 

“Transaction Agreements” —as defined in Section 11.13(a).

 

“Transaction Bonuses” — asdefined in the last sentence of the definition of Seller Benefit Plans.

 

“Transferred Employee” — asdefined in Section 10.1(a).

 

“Transition ServicesAgreement” — as defined in Section 2.9(a)(vii).

 

“TVS Business” — theTactical Vehicle Systems division of Parent that is reported in Parent’spublicly disclosed consolidated financial statements as the Tactical VehicleSystems Segment.

 

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## 1.2                                 USAGE

##  

### (a)                                  Interpretation. In this Agreement, unless aclear contrary intention appears:

###  

#### (i)                                     the singular number includes the pluralnumber and vice versa;

####  

#### (ii)                                  reference to any Person includes such Person’ssuccessors and assigns but, if applicable, only if such successors and assignsare not prohibited by this Agreement, and reference to a Person in a particularcapacity excludes such Person in any other capacity or individually;

####  

#### (iii)                               reference to any gender includes each othergender;

####  

#### (iv)                              reference to any agreement, document orinstrument means such agreement, document or instrument as amended or modifiedand in effect from time to time in accordance with the terms thereof;

####  

#### (v)                                 reference to any Legal Requirement means,unless expressly indicated otherwise, such Legal Requirement as amended,modified, codified, replaced or reenacted, in whole or in part, and in effectfrom time to time, including rules and regulations promulgated thereunder, andreference to any section or other provision of any Legal Requirement means,unless expressly indicated otherwise, that provision of such Legal Requirementfrom time to time in effect and constituting the substantive amendment,modification, codification, replacement or reenactment of such section or otherprovision;

####  

#### (vi)                              “hereunder,” “hereof,” “hereto,” and words ofsimilar import shall be deemed references to this Agreement as a whole and notto any particular Article, Section or other provision hereof;

####  

#### (vii)                           “including” (and with correlative meaning “include”)means including without limiting the generality of any description precedingsuch term;

####  

#### (viii)                        “or” is used in the inclusive sense of “and/or”;

####  

#### (ix)                                with respect to the determination of anyperiod of time, “from” means “from and including” and “to” means “to butexcluding”; and

####  

#### (x)                                   references to documents, instruments oragreements shall be deemed to refer as well to all addenda, exhibits, schedulesor amendments thereto.

####  

### (b)                                 Accounting Terms and Determinations. Unlessotherwise specified herein, all accounting terms used herein shall beinterpreted and all accounting determinations hereunder shall be made inaccordance with GAAP.

###  

### (c)                                  Legal Representation of the Parties. ThisAgreement was negotiated by the parties with the benefit of legalrepresentation, and any rule of construction or interpretation

 

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### otherwise requiring thisAgreement to be construed or interpreted against any party shall not apply toany construction or interpretation hereof.

###  

# 2.                                       Sale and Transfer of Assets; Closing

#  

## 2.1                                 ASSETS TO BE SOLD

##  

Upon the terms and subjectto the conditions set forth in this Agreement, at the Closing and effective asof the Effective Time, each Seller shall sell, convey, assign, transfer, anddeliver to Buyer, and Buyer shall purchase and acquire from such Seller, freeand clear of any Encumbrances other than Permitted Encumbrances, all of suchSeller’s right, title, and interest in and to all of the following:

 

### (a)                                  all Real Property Leases and Owned Propertydescribed in Section 3.6 of the Seller Disclosure Letter;

###  

### (b)                                 all Tangible Personal Property, includingthose items described in Section 3.5(a) of the Seller Disclosure Letter;

###  

### (c)                                  all Inventories;

###  

### (d)                                 all Accounts Receivable;

###  

### (e)                                  all Seller Contracts, including those listedin Section 3.17(a) of the Seller Disclosure Letter, and all outstanding offersor solicitations made by or to any Seller or any Purchased Subsidiary to enterinto any Seller Contract (“Bids”), other than Seller Contracts or Bidsdescribed in Section 2.2(e);

###  

### (f)                                    all Governmental Authorizations related to orused in the operation of the Business and all pending applications therefor orrenewals thereof, including those listed in Section 3.14(b) of the SellerDisclosure Letter, in each case to the extent permitted by applicable LegalRequirement and otherwise transferable to Buyer;

###  

### (g)                                 the data and Records of each Seller andPurchased Subsidiary related primarily to or used in the operation of theBusiness and located at a Business Property, including client and customerlists and Records, referral sources, research and development reports andRecords, production reports and Records, service and warranty Records,equipment logs, operating guides and manuals, engineering design drawings ownedby the Business, financial and accounting Records, creative materials,advertising materials, promotional materials, studies, reports, correspondence,files relating to the preparation, prosecution, registration, enforcement ordefense of any Business Intellectual Property and other similar documents andRecords (“Business Records”).  Inaddition, to the extent any such data or Records are not located at a BusinessProperty, copies of any particular data or Records following reasonable requesttherefor, and, subject to Legal Requirements, copies of all personnel Records;

###  

### (h)                                 all of the intangible rights and property ofSellers and the Purchased Subsidiaries that relate exclusively to the operationof the Business, including any such goodwill and Business IntellectualProperty, as well as the right to sue, at law or in equity, or otherwise

 

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### recover damages for any andall infringements, misappropriations or dilutions of any Business IntellectualProperty;

###  

### (i)                                     all rights of Sellers and the PurchasedSubsidiaries relating to deposits and prepaid expenses, claims for refunds andrights to offset in respect thereof, in each case related to or used in theoperation of the Business, that are not listed in Section 2.2(c) of the SellerDisclosure Letter and that are not excluded under Section 2.2(h);

###  

### (j)                                     all rights in internet domain names used,reserved or owned by any Seller or its Affiliates that are expressly set forthin Section 2.1(j) of the Seller Disclosure Letter;

###  

### (k)                                  the Outstanding Equity Securities;

###  

### (l)                                     the assets listed or described in Section2.1(l) of the Seller Disclosure Letter;

###  

### (m)                               all petty cash funds of Sellers held at aBusiness Property and all cash in the bank accounts listed in Section 2.1(m) ofthe Seller Disclosure Letter; and

###  

### (n)                                 all of such Seller’s other property andassets, real, personal, or mixed, tangible and intangible, of every kind anddescription, wherever located, belonging to such Seller and which relateprimarily to or are used primarily****in theoperation of the business currently conducted by the Power Products Division ofSellers that is reported in Parent’s publicly disclosed consolidated financialstatements as the Power Products Segment, including the Power Products Segment’ssale and rental of various industrial equipment; sale of components,replacement parts, accessories and other materials supplied by independentmanufacturers; provision of in-shop and on-site repair services for industrial,transportation, marine, construction, power generation and material handlingequipment; fabrication, marketing and packaging of engine-driven equipment; andthe business of the Purchased Subsidiaries; as well as any goodwill associatedtherewith (but excluding the Excluded Assets) (collectively, the “Business”).

###  

All of the property andassets to be transferred to Buyer hereunder are herein referred to collectivelyas the “Assets.”

 

## 2.2                                 EXCLUDED ASSETS

##  

Notwithstanding anything tothe contrary contained in Section 2.1 or elsewhere in this Agreement, thefollowing assets of Sellers (collectively, the “Excluded Assets”) are not partof the sale and purchase contemplated hereunder, are excluded from the Assetsand shall remain the property of Sellers after the Closing:

 

### (a)                                  all cash, cash equivalents, securities, moneyon deposit with banks, certificates of deposit and similar instruments andshort-term investments, other than as provided for in Section 2.1(m);

###  

### (b)                                 all minute books, stock Records and corporateseals other than those of any Purchased Subsidiary;

 

15

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### (c)                                  those rights relating to deposits and prepaidexpenses and claims for refunds and rights to offset in respect thereof listedin Section 2.2(c) of the Seller Disclosure Letter;

###  

### (d)                                 all insurance policies and rights thereunderand all insurance benefits, including rights and proceeds, arising from orrelating to the Assets and the Assumed Liabilities prior to the Effective Time;

###  

### (e)                                  all Seller Contracts and other Contractslisted in Section 2.2(e) of the Seller Disclosure Letter;

###  

### (f)                                    all personnel Records and other Records thatany Seller is required by Legal Requirement to retain in its possession;

###  

### (g)                                 all data and Records that do not constituteBusiness Records;

###  

### (h)                                 all deposits or claims for refund or creditof Taxes and other governmental charges of whatever nature to the extentrelating to periods prior to the Effective Time, except to the extent reflectedon the Closing Balance Sheet;

###  

### (i)                                     all rights in connection with and assets ofthe Seller Benefit Plans;

###  

### (j)                                     all Governmental Authorizations that are nottransferable;

###  

### (k)                                  all rights of Sellers under this Agreement,the Bill of Sale, Assignment and Assumption Agreement and the other TransactionAgreements;

###  

### (l)                                     except to the extent set forth in Section3.20(a)(i) of the Seller Disclosure Letter and except for the licensed rightsgranted pursuant to Section 2.13, each Seller’s and Purchased Subsidiary’sright, title and interest in or to any patent, patent applications, corporatenames, assumed fictional business names, trade names, registered andunregistered trademarks, service marks, applications, logos, icons or designs,including any trade designation that comprise or are similar to “Stewart &Stevenson,” the Stewart & Stevenson logo or any derivative or abbreviationthereof;

###  

### (m)                               each right in internet web sites and internetdomain names other than the internet domain names expressly set forth inSection 2.1(j) of the Seller Disclosure Letter;

###  

### (n)                                 accounts, notes or debts owed to the Businessfrom, or by the Business to, a Related Person of any Seller prior to theEffective Time;

###  

### (o)                                 all claims of any Seller against ThirdParties relating to the Business or the Assets, whether choate or inchoate,known or unknown, contingent or noncontingent, listed in Section 2.2(o) of theSeller Disclosure Letter, except to the extent such claims relate to AssumedLiabilities;

###  

### (p)                                 all real property and interests in realproperty other than the Business Property, including, without limitation, thereal property and interests in real property identified

 

16

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### on Section 2.2(p) of theSeller Disclosure Letter and all other tangible personal property located onsuch premises; provided that this Section 2.2(p) shall not limit Buyer’s rightto receive copies of certain data or Records pursuant to Section 2.1(g); and

###  

### (q)                                 all other assets not used in the Business,including, for the avoidance of doubt, the TVS Business and the EPD Business,as well as the DES Business and any other business reported as discontinuedoperations in the Parent’s publicly disclosed consolidated financial statementsdated January 31, 2005 and any other property, assets and rights designated inSection 2.2(q) of the Seller Disclosure Letter.

###  

## 2.3                                 CONSIDERATION

##  

The consideration for theAssets (the “Purchase Price”) will be (i) the Closing Payment, (ii) plus orminus the Adjustment Amount, (iii) plus the assumption of the AssumedLiabilities. In accordance with Section 2.9(b), at the Closing, the ClosingPayment shall be delivered by Buyer to Sellers by wire transfer of immediatelyavailable funds.  The balance of the PurchasePrice shall be satisfied by the execution and delivery of the Bill of Sale,Assignment and Assumption Agreement, and the Adjustment Amount shall be paid inaccordance with Section 2.10.

 

## 2.4                                 LIABILITIES

##  

### (a)                                  Assumed Liabilities. On the Closing Date, buteffective as of the Effective Time, Buyer shall assume and agree to dischargethe Liabilities reflected on the Closing Balance Sheet that are unpaid as ofthe Effective Time and the following Liabilities of Sellers (the “AssumedLiabilities”):

###  

#### (i)                                     any Liability (other than a liability to aRelated Person of any Seller) to any of Sellers’ customers incurred by suchSeller in the ordinary course of the Business for Bids outstanding as of theEffective Time;

####  

#### (ii)                                  any Liability to any Seller’s customers underwarranties implied by law and any warranty agreements and indemnities given byany Seller to its customers prior to the Effective Time in connection with theBusiness;

####  

#### (iii)                               any Liability arising out of or relating toany circumstance, condition, occurrence or event first happening or manifestedat or after the Effective Time and arising out of or relating to (A) productsof the Business designed, manufactured, distributed or sold or servicesprovided prior to the Effective Time or (B) the Business or any action orinaction thereof or related thereto or to the Assets after the Closing Date,except in the case of clause (B), to the extent such Liability is a RetainedLiability;

####  

#### (iv)                              except for the Liabilities covered bysubparagraphs (ii) and (iii) above, any Liability to be performed or dischargedat or after the Effective Time under contract or law as to any Seller Contractentered into (A) prior to the date of this Agreement, and assigned pursuant toSection 2.1(e), or (B) after the date hereof in accordance with Section 6.2;

 

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#### (v)                                 any Liability of any Seller arising out of orrelating to the Freightliner Indebtedness; and

####  

#### (vi)                              any Liability of any Seller expresslydescribed in Section 2.4(a)(vi) of the Seller Disclosure Letter.

####  

### (b)                                 Retained Liabilities. The RetainedLiabilities shall remain the sole responsibility of and shall be retained,paid, performed and discharged solely by Sellers. “Retained Liabilities” shallmean every Liability of Sellers, disclosed or undisclosed, other than theAssumed Liabilities, including:

###  

#### (i)                                     all Liabilities,claims, damages or losses for or related to (A) Taxes imposed on the Assets,the Business or the Purchased Subsidiaries, or the ownership or operationsthereof, accruing or imposed with respect to periods or operations prior to theClosing, including but not limited to Liabilities, claims, damages or losses(i) resulting from failure to timely file Tax Returns in respect of, or pay,such Taxes (except for any Tax Returns required to be filed by a PurchasedSubsidiary after the Closing Date, which shall be the responsibility of theBuyer), or (ii) in the nature of interest or penalties and (B) Taxes relatingto or caused by any Liability of a Purchased Subsidiary accruing or imposedwith respect to periods or operations prior to the Closing to the extent suchLiability exceeds the reserve for such Taxes on the Closing Balance Sheet, (w)as a transferee or successor, (x) by contract or (y) otherwise;

####  

#### (ii)                                  any Liability under any Contract or Bid notassumed by Buyer under Section 2.4(a);

####  

#### (iii)                               any Liability arising out of or relating toany circumstance, condition, occurrence or event first happening or manifestedprior to the Effective Time and arising out of or relating to the products ofthe Business designed, manufactured, distributed or sold or services renderedprior to the Effective Time, including any Liability arising out of anyProceeding (including the obligation to handle such Proceeding) relatingthereto;

####  

#### (iv)                              any Liability under or relating to the SellerBenefit Plans (other than Purchased Subsidiary Plans), any Liabilities accruingunder Purchased Subsidiary Plans prior to the Closing, and any Liabilityrelating to payroll, sick leave, workers’ compensation or unemployment benefitsfor any of Seller’s employees;

####  

#### (v)                                 any Environmental Liabilities of the Businessarising out of or relating to any circumstance, condition, occurrence or eventhappening or manifested prior to the Effective Time;

####  

#### (vi)                              any Liability under any Transaction Bonuses orany employment, severance, retention or termination agreement with any employeeof or relating to the employment of any individual by any Seller or any of itsRelated Persons (other than employment by a Purchased Subsidiary after Closing),including, but not limited to, sponsorship of any Seller Benefit Plan (otherthan Liabilities accruing under a Purchased Subsidiary Plan after Closing);

 

18

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#### (vii)                           any Liability of any Seller to any RelatedPerson of such Seller;

####  

#### (viii)                        any Liability to indemnify, reimburse oradvance amounts to any officer, director or employee of any Seller to theextent not reflected as a liability on the Closing Balance Sheet;

####  

#### (ix)                                any Liability of any Seller under thisAgreement or any other document executed in connection with the ContemplatedTransactions; and

####  

#### (x)                                   any Liability of any Seller caused by suchSeller’s ownership of the Assets or operation of Business, or such Seller’sacts or omissions occurring prior to or after the Effective Time, includingwithout limitation any liability related to or arising out of the mattersdescribed in Section 3.14(a) of the Seller Disclosure Letter.

####  

## 2.5                                 PRORATIONS OF CERTAIN PROPERTY TAXES

##  

Any general real or personalproperty Tax assessed against or pertaining to the Assets for the Tax periodthat includes the Closing Date shall be prorated between Buyer and Sellers asof the Closing Date in accordance with this Section 2.5.  To determine Sellers’ liability for any realand personal property Taxes for the period ending as of the Closing Date (the “Pre-ClosingProperty Taxes”), the total amount of such Taxes allocable to Sellers shall bethe product of (i) such Tax for the entirety of the Tax period including theClosing Date, multiplied by (ii) a fraction, the numerator of which is thenumber of days in such Tax period prior to the Closing Date, and thedenominator of which is the total number of days in the Tax period, and thebalance of such Taxes shall be allocable to Buyer.  For purposes of the Initial Balance Sheet,the Estimated Closing Balance Sheet, and, if necessary, the Closing BalanceSheet, an estimate of the Pre-Closing Property Taxes shall be based on theimmediately preceding Tax period assessment. When the actual amount of real or personal property Taxes estimatedunder this Section 2.5 is known, Buyer shall promptly advise Sellers of theproportionate share of actual real or personal property Taxes which constitutePre-Closing Property Taxes and furnish Sellers with reasonably supportingdocuments evidencing the actual amount of such Taxes.  If the estimate of Pre-Closing Property Taxesmade pursuant to this Section 2.5 was less than the actual Pre-Closing PropertyTaxes and such deficiency is not taken into account in the Adjustment Amount,Sellers shall pay in cash to Buyer such deficiency within thirty (30) days ofreceipt of such notice and reasonably supporting documents, and if suchestimate was more than the actual Pre-Closing Property Taxes and such increaseis not taken into account in the Adjustment Amount, Buyer shall, at the timesuch notice is given (which shall be no later than thirty (30) days from Buyer’sreceipt of documentation evidencing the actual amount of real and personalproperty Taxes for the Tax period including the Closing Date), refund suchexcess in cash to Sellers.  Any disputesrelated to the allocation of real and personal property Taxes under thisSection 2.5 shall be resolved by the Independent Accountants in accordance withthe procedure prescribed for disputes relating to the calculation of ClosingNet Asset Value under Section 2.11.

 

## 2.6                                 SALES AND TRANSFER TAXES; RECORDING FEES

##  

All sales and use, motorvehicle sales and use, transfer, mortgage, recording, documentary or similarTaxes, if any, payable in connection with the sale, conveyances, assignments,transfers

 

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anddeliveries to be made to Buyer hereunder shall be borne fifty percent (50%) byBuyer and fifty percent (50%) by Sellers.  Buyer and Sellers shall work together in goodfaith to minimize any such Taxes.  Buyerand Sellers shall each promptly pay any such Taxes directly to the GovernmentalBody assessing them and shall join in the execution of any necessary TaxReturns.  In the event that either Buyeror any Seller is audited in connection with such Taxes, the party being auditedwill notify the other parties of such audit and will not object to the otherparties’ appearance in the audit.  Buyeragrees to assist with any such audit and provide Sellers with sufficient accessto customers in order to obtain either reimbursements for such Taxes or anapplicable exemption certificate.

 

## 2.7                                 ALLOCATION

##  

Buyer and Sellers shall haveagreed upon the allocation of the Purchase Price among the Assets in accordancewith Section 1060 of the Code and the Treasury Regulations promulgatedthereunder (as well as any similar provision of state, local or foreign law, asappropriate), and a draft of IRS Form 8594 shall be delivered at Closing (the “AllocationSchedule”).  The Allocation Scheduleshall be binding upon Buyer and Sellers. Buyer and Sellers and their Affiliates agree to amend the AllocationSchedule as necessary to reflect the Adjustment Amount, and a final AllocationSchedule (the “Final Allocation Schedule”) shall be prepared by Buyer andSellers on a basis consistent with the Allocation Schedule within thirty (30)days following the final determination of the Adjustment Amount under Section2.11.  Buyer and Sellers and theirAffiliates shall report, act, and file all Tax Returns (including, but notlimited to, IRS Form 8594) in all respects and for all purposes consistent withthe Final Allocation Schedule.  Buyer andSellers shall each timely and properly prepare, execute, file and deliver allsuch documents, forms, and other information as either Buyer or Sellers may reasonablyrequest in preparing the Allocation Schedule or the Final AllocationSchedule.  Neither Buyer nor Sellersshall take any position (whether in audits, Tax Returns or otherwise) that isinconsistent with the Final Allocation Schedule unless required to do so by anyapplicable Legal Requirement.

 

## 2.8                                 CLOSING

##  

Unless this Agreement shallhave been terminated pursuant to Section 9.1, the purchase and sale providedfor in this Agreement (the “Closing”) shall take place as promptly as practicalfollowing the satisfaction or waiver (subject to applicable Legal Requirement)of all conditions (other than those conditions which by their nature are to besatisfied at Closing, but subject to the fulfillment or waiver of thoseconditions) set forth in Articles 7 and 8 (and, in any event not more than tenBusiness Days following the satisfaction or waiver of all such conditions), atthe offices of Sellers’ counsel at 1301 McKinney, Suite 5100, Houston, Texas,unless Buyer and Sellers otherwise agree. The parties will use commercially reasonable efforts to cause theClosing to take place within sixty (60) days of the date hereof.

 

## 2.9                                 CLOSING OBLIGATIONS

##  

In addition to any otherdocuments to be delivered under other provisions of this Agreement, at theClosing:

 

### (a)                                  Sellers shall deliver to Buyer:

 

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#### (i)                                     a bill of sale, assignment and assumptionagreement with respect to the assignment of the Assets to Buyer and theassumption of the Assumed Liabilities by Buyer in the form of Exhibit 2.9(a)(i)(the “Bill of Sale, Assignment and Assumption Agreement”) executed by Sellers;

####  

#### (ii)                                  for each interest in Owned Property that ispart of the Assets, a recordable deed with special warranty of title or suchother appropriate document or instrument of transfer, subject to the PermittedReal Estate Encumbrances, as the case may require, each in form and substancereasonably satisfactory to Buyer and its counsel and executed by the applicableSeller;

####  

#### (iii)                               for each interest in property subject to aReal Property Lease that is part of the Assets, an Assignment and Assumption ofLease in the form of Exhibit 2.9(a)(iii) executed by the applicable Seller;

####  

#### (iv)                              assignments of all Registered IntellectualProperty that is part of the Assets in the form of Exhibit 2.9(a)(iv) executedby the applicable Seller;

####  

#### (v)                                 such other deeds, bills of sale, assignments,documents (including the estimates of transfer tax obligations of Buyer basedon the Allocation Schedule, which shall, subject to the provisions of Section2.6, be paid by Buyer to Sellers at Closing) and other instruments of transferand conveyance of the Assets as may reasonably be requested by Buyer, each inform and substance reasonably satisfactory to Buyer, its legal counsel and itstitle insurer (in the case of the Owned Property) and executed by theapplicable Seller;

####  

#### (vi)                              the Estimated Closing Balance Sheet;

####  

#### (vii)                           the Transition Services Agreement in form andsubstance agreed to by the Parties (the “Transition Services Agreement”);

####  

#### (viii)                        one or more subcontracts in form andsubstance reasonably satisfactory to Sellers and Buyer covering each of theSeller Contracts that is subject to the provisions of Section 10.7(c), executedby each applicable Seller and, if necessary, one or more of its Affiliates(each, a “Subcontract”);

####  

#### (ix)                                the certificate required by Section 7.1;

####  

#### (x)                                   certificates representing the OutstandingEquity Securities, registered in the name of Buyer or duly endorsed fortransfer to Buyer any other documents that are necessary to transfer to the Buyergood and valid title to the Outstanding Equity Securities, with any necessarytransfer tax stamps affixed or accompanied by evidence that all stock transfertaxes have been paid;

####  

#### (xi)                                copies of resolutions or equivalentinstruments duly adopted by the governing body of each Seller and, if required,the partners or members of such Seller, authorizing and approving the executionand delivery of this Agreement and the consummation of the ContemplatedTransactions, certified as true and in full force and

 

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#### effect as of the Closing Date by theappropriate officers, partners or other representatives of such Seller;

####  

#### (xii)                             certificates of incumbency or evidence ofappropriate power of attorney for the respective directors or officers of eachSeller executing the Agreement and other Transaction Agreements;

####  

#### (xiii)                          the Confirmation of Closing in the form ofExhibit 2.9(a)(xiii) executed by Parent (the “Confirmation of Closing”);

####  

#### (xiv)                         copies of all Consents which have beenobtained by Sellers in connection with the Contemplated Transactions;

####  

#### (xv)                            a certificate signed by each Seller statingthat such Seller is not a “foreign person” as defined in Section 1445 of theCode and that no Purchased Subsidiary is a United States real property holdingcorporation; and

####  

#### (xvi)                         written resignations of those directors andofficers of the Purchased Subsidiaries listed on Section 2.9(a) of the SellerDisclosure Letter.

####  

### (b)                                 Buyer shall deliver to Sellers:

###  

#### (i)                                     the Closing Payment by wire transfer ofimmediately available funds to an account specified by Sellers in a writingdelivered to Buyer at least three (3) Business Days prior to the Closing Date;

####  

#### (ii)                                  the Bill of Sale, Assignment and AssumptionAgreement executed by Buyer;

####  

#### (iii)                               the sales tax exemption certificatesdescribed in Section 2.6, each in form and substance reasonably satisfactory toSellers and their legal counsel and executed by Buyer;

####  

#### (iv)                              the Sublease Agreement in form and substanceagreed to by the Parties (the “Sublease Agreement”);

####  

#### (v)                                 the Transition Services Agreement executed byBuyer;

####  

#### (vi)                              each Subcontract executed by Buyer;

####  

#### (vii)                           the certificate required by Section 8.1;

####  

#### (viii)                        a certificate of the Secretary of Buyercertifying, as complete and accurate as of the Closing, attached copies of theCertificate of Incorporation and bylaws of Buyer as in effect on the datethereof and certifying and attaching all requisite resolutions or actions ofBuyer’s board of directors approving the execution and delivery of thisAgreement and the consummation of the Contemplated Transactions and certifying

 

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#### to the incumbency and signatures of theofficers of Buyer executing this Agreement and any other document relating tothe Contemplated Transactions; and

####  

#### (ix)                                the Confirmation of Closing executed byBuyer.

####  

## 2.10                           ADJUSTMENT AMOUNT AND PAYMENT

##  

The “Adjustment Amount” willbe equal to the amount determined by subtracting the Closing Net Asset Valuefrom the Estimated Closing Net Asset Value. If the Estimated Closing Net AssetValue exceeds the Closing Net Asset Value, the Adjustment Amount shall be paidby wire transfer of immediately available funds by Sellers to an accountspecified by Buyer. If the Closing Net Asset Value exceeds the EstimatedClosing Net Asset Value, the Adjustment Amount shall be paid by wire transferof immediately available funds by Buyer to an account specified by Sellers.Within five (5) business days after the calculation of the Closing Net AssetValue becomes binding and conclusive on the parties pursuant to Section 2.11,Sellers or Buyer, as the case may be, shall make the wire transfer paymentprovided for in this Section 2.10.  Forthe purposes of this Section 2.10, the “Estimated Closing Net Asset Value” willequal the amount of the Estimated Closing Net Asset Value that was paid atClosing.

 

## 2.11                           ADJUSTMENT PROCEDURE

##  

### (a)                                  Buyer shall prepare a Closing Balance Sheet (“ClosingBalance Sheet”) of the Business as of the Closing Date applying the AgreedAccounting Principles.  Buyer shall thendetermine the Net Asset Value as of the Effective Time (the “Closing Net AssetValue”) based upon the Closing Balance Sheet. Buyer shall deliver the Closing Balance Sheet and its determination ofthe Closing Net Asset Value to Sellers within forty-five (45) days followingthe Closing Date.  The Closing BalanceSheet (i) will not account for or reflect in any manner any assets that do notconstitute Assets and (ii) will account for and reflect all Assumed Liabilitiesthat are required to be accounted for or reflected on such Closing BalanceSheet applying the Agreed Accounting Principles.  Sellers and their independent auditors andother Representatives shall have the right to review and verify the ClosingBalance Sheet and determination of the Closing Net Asset Value when receivedand Buyer shall provide Sellers with access to all (i) work papers and writtenprocedures used to prepare the Closing Balance Sheet and the determination ofClosing Net Asset Value and (ii) books and Records and personnel to the extentnecessary to enable Sellers and their independent auditors and otherRepresentatives to conduct a full review of the Closing Balance Sheet and forthem to fully evaluate Buyer’s calculation of the Closing Net Asset Value.  By way of clarification and amplificationwith respect to Buyer’s preparation of the Closing Balance Sheet (and to ensurethat it is prepared on the same basis and applying the Agreed AccountingPrinciples as was done by Sellers in preparing the Initial Balance Sheet),special mention is made of, and Buyer (A) understands and accepts as bindingwith respect to its preparation of the Closing Balance Sheet the Sellers’judgments as to valuation and reserve matters pertaining to such accounts inthe Initial Balance Sheet, (B) accepts and agrees with Sellers’ application ofthe Agreed Accounting Principles including the valuations of current assets inrespect thereof, and (C) will not contest or otherwise propose any change tothe reserves established in connection with any Asset and valuation thereof inthe Initial Balance Sheet except to the extent that any further reserves as tosuch Asset and valuation thereof are clearly required

 

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### by application of the AgreedAccounting Principles as a result of the passage of time or changes inconditions, facts or circumstances since the date of the Initial Balance Sheet.

###  

### (b)                                 For purposes of the Closing Balance Sheet, noearlier than sixty (60) days prior to the Closing Date, Parent shall conduct aphysical inventory of the Inventory and shall perform the related physicalinventory reconciliation as to the Inventory as of the Closing Date, based on afull physical count (the “Closing Physical Inventory Count”).  Buyer and each party’s independent auditorsand other Representatives shall have the right to observe the Closing PhysicalInventory Count taken by Parent pursuant to the preceding sentence.  The Closing Physical Inventory Count taken inaccordance with this Section 2.11(b) shall be the sole physical inventory countused in the preparation of the Closing Balance Sheet, and neither Buyer norSellers (nor the Independent Accountants to the extent hereinafter providedfor) shall be required to, and none of them shall, except as provided below inconnection with a dispute as to inventory reconciliation, use any physicalinventory count other than the Closing Physical Inventory Count for purposes ofpreparing the Closing Balance Sheet (or in the case of the IndependentAccountants for resolving any dispute with respect thereto).  The parties agree that any dispute betweenthe parties arising in the course of the physical inventory count shall beresolved by the parties, acting in good faith, immediately upon the disputearising, including, to the extent necessary, asking the senior Representativesof each party present to review the dispute and resolve it by reasonable meanstaken in good faith.  Any dispute betweenthe parties arising in connection with the physical inventory reconciliationcontemplated above shall likewise be resolved, to the extent reasonablypossible, at the time of the reconciliation activities in the same manner aswith respect to resolving a dispute in the physical inventory count as providedabove.  Should, however, such efforts notresult in a resolution of such dispute as to inventory reconciliation, then, assoon after the failure of such resolution as to inventory reconciliation as ispracticable, there shall be undertaken a physical inventory recount as to theinventory affected by the dispute as to which the foregoing procedures fordispute resolution shall be applied. Either party may, at its sole expense, ask the Independent Accountantsto observe any such physical inventory recount following an inventoryreconciliation dispute, which Independent Accountants shall thereafter, if theyso observe such physical inventory recount, have complete and final authorityto resolve finally any dispute arising by reason of the physical recount or thereconciliation following thereafter.

###  

### (c)                                  If within thirty (30) days following deliveryof the Closing Balance Sheet and the Closing Net Asset Value calculationSellers have not given Buyer written notice of their objection as to the ClosingNet Asset Value calculation (which notice shall state the basis of Sellers’objection), then the Closing Net Asset Value calculated by Buyer shall bebinding and conclusive on the parties and be used in computing the AdjustmentAmount.

###  

### (d)                                 If Sellers duly give Buyer such notice ofobjection, and if Sellers and Buyer fail to resolve the issues outstanding withrespect to the Closing Balance Sheet and the calculation of the Closing NetAsset Value within thirty (30) days of Buyer’s receipt of Sellers’ objectionnotice, Sellers and Buyer shall submit the issues remaining in dispute to theIndependent Accountants, for resolution applying the Agreed AccountingPrinciples.  If issues are submitted tothe Independent Accountants for resolution, (i) Sellers and Buyer shall furnishor cause to be furnished to the Independent Accountants such work papers andother documents and information relating to the disputed issues as theIndependent Accountants may request and are available to

 

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thatparty or its agents and shall be afforded the opportunity to present to theIndependent Accountants any material relating to the disputed issues and todiscuss the issues with the Independent Accountants; (ii) the determination bythe Independent Accountants, as set forth in a reasonably detailed notice to bedelivered to both Parent and Buyer within forty-five (45) days of thesubmission to the Independent Accountants of the issues remaining in dispute,shall be final, binding and conclusive on the parties and shall be used in thecalculation of the Closing Net Asset Value; and (iii) Sellers and Buyer willeach bear fifty percent (50%) of the fees and costs of the IndependentAccountants for such determination.  Inconnection with the retention of the Independent Accountants, Sellers and Buyeragree that they will enter into a customary engagement agreement therewith,including appropriate provision for joint and several indemnity of suchIndependent Accountants as to their services and conclusions.

###  

## 2.12                           PURCHASED SUBSIDIARIES

##  

Notwithstanding any otherprovision of this Agreement, other than Sections 2.2(g), 2.2(h), 2.2(l), 2.2(m),and 2.4(b)(i), it is understood that Buyer is purchasing the Outstanding EquitySecurities, and as such (a) Buyer shall not be required to purchase or assumeany of the assets or liabilities of the Purchased Subsidiaries, (b) the assetsand liabilities of each Purchased Subsidiary shall remain the assets andobligations of such Purchased Subsidiary, (c) the assets and liabilities of thePurchased Subsidiaries shall not be deemed to be Excluded Assets or RetainedLiabilities, respectively and (d) the Purchased Subsidiary Employees on the dayimmediately prior to the Closing Date shall remain employees of the PurchasedSubsidiaries at and immediately after the Effective Time.

 

### [***]

###  

# 3.                                       Representations and Warranties of Sellers

#  

As of the date hereof,Sellers, jointly and severally, represent and warrant to Buyer as follows:

 

## 3.1                                 ORGANIZATION AND GOOD STANDING

##  

Each Seller is dulyorganized, validly existing and in good standing under the laws of itsjurisdiction of organization or incorporation, as the case may be.  Each Seller has the requisite power andauthority to own, operate and lease its properties and assets and to carry onits business in the places and in the manner currently conducted.  Each Seller is duly qualified to do businessas a foreign corporation or other entity, as applicable, and, to the extentapplicable, is in good standing under the laws of each state or otherjurisdiction in which either the ownership or use of the properties owned orused by it, or the nature of the activities conducted by it, requires suchqualification, except where the failure to do so would not have a materialadverse effect on such Seller or the Business.

 

## 3.2                                 ENFORCEABILITY; AUTHORITY; NO CONFLICT

##  

### (a)                                  Each Seller and each Purchased Subsidiary hasall requisite corporate or other power and authority to enter into thisAgreement and the documents to be delivered by such Seller at the Closing andto perform its obligations hereunder and thereunder, including the

 

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### ContemplatedTransactions.  This Agreement has beenduly executed and delivered by each Seller and constitutes a legal, valid andbinding obligation of each Seller, enforceable against each such Seller inaccordance with its terms, except as enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or similar laws fromtime to time in effect that affect creditors’ rights generally and by legal andequitable limitations on the availability of specific remedies. This Agreementand the Contemplated Transactions have been duly authorized by all necessaryaction by each Seller’s board of directors or other governing body, asapplicable.  No further corporate, othergoverning body or shareholder action is necessary on the part of Sellers toexecute and deliver this Agreement or to consummate the ContemplatedTransactions.

###  

### (b)                                 Except as set forth in Section 3.2(b) of theSeller Disclosure Letter, neither the execution and delivery of this Agreementnor the consummation or performance of any of the Contemplated Transactionswill, directly or indirectly (with or without notice or lapse of time):

###  

#### (i)                                     Conflict with or violate the constituentdocuments of any Seller or Purchased Subsidiary;

####  

#### (ii)                                  Conflict with, result in a breach, violationor termination of any provision of, constitute a default under or give rise toany right of termination, cancellation or acceleration, or loss of any right orbenefit or both, under any Seller Contract;

####  

#### (iii)                               Result in an acceleration or increase of anyindebtedness or other amounts due with respect to the Business or the Assets;

####  

#### (iv)                              Result in the imposition or creation of anyEncumbrance (other than a Permitted Encumbrance) upon or with respect to any ofthe Assets or any of the Outstanding Equity Securities; or

####  

#### (v)                                 To the Knowledge of Sellers, contravene,conflict with or result in a violation or breach of any GovernmentalAuthorization, Legal Requirement or Order applicable to Sellers, the PurchasedSubsidiaries, the Business or the Assets or to which Sellers, the PurchasedSubsidiaries, the Business or any of the Assets may be subject.

####  

### (c)                                  Except as set forth in Section 3.2(c) of theSeller Disclosure Letter, no Seller or Purchased Subsidiary is required to giveany notice to or obtain any Consent or Governmental Authorization from any (i)Third Party under any Seller Contract with a current value in excess of$25,000, (ii) any original equipment manufacturer or other vendor of Inventory,(iii) any lessor under a Real Property Lease or (iv) any Governmental Body inconnection with the execution and delivery of this Agreement or the consummationor performance of any of the Contemplated Transactions, other than (i) thosenotices and Consents and Governmental Authorizations that have been obtainedand are in full force and effect at the Effective Time, (ii) those notices andConsents required under the Seller Contracts not required to be disclosed inSection 3.17(a) of the Seller Disclosure Letter, and (iii) such notices andconsents as may be required under foreign laws. Notwithstanding anything herein to the contrary, the list of Consents setforth in Section 3.2(c) of the Seller Disclosure Letter that relate to SellerContracts only relate to those Seller Contracts set forth in Section 3.17(a) ofthe Seller Disclosure Letter.

 

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## 3.3                                 FINANCIAL STATEMENTS

##  

Set forth in Section 3.3 ofthe Seller Disclosure Letter is an unaudited balance sheet of the Business asof September 3, 2005 (the “Initial Balance Sheet”) and a related unauditedstatement of income of the Business for the seven month period then ended(collectively, the “Financial Statements”). The Financial Statements fairly present in all material respects thefinancial condition and results of operations of the Business as of and for theseven month period ended on the balance sheet date, in accordance with theAgreed Accounting Principles.  TheFinancial Statements do not account for or reflect in any manner any assetsthat do not constitute Assets.  The FinancialStatements account for and reflect all Assumed Liabilities that are required tobe accounted for or reflected on such Financial Statements applying the AgreedAccounting Principles.  The FinancialStatements reflect the consistent application of the accounting principlesapplied in the financial statements of the Business as included in theconsolidated financial statements of Parent, except as disclosed in the notesto the Financial Statements and except as set forth in Section 3.3 of theSeller Disclosure Letter.  The FinancialStatements have been prepared from and are in accordance with the accountingRecords of Sellers and the Purchased Subsidiaries.

 

## 3.4                                 BOOKS AND RECORDS

##  

The Business Records ofSellers and the Purchased Subsidiaries, all of which have been made availableto Buyer, are complete and correct and represent actual, bona fide transactionsand have been maintained in accordance with sound business practices.

 

## 3.5                                 CONDITION AND SUFFICIENCY OF ASSETS

##  

### (a)                                  Section 3.5(a) of the Seller DisclosureLetter lists all Assets consisting of machinery, equipment, vehicles, furnitureor other Tangible Personal Property owned by any Seller or Purchased Subsidiaryhaving an original cost in excess of $10,000 and the location thereof as wellas all locations in the United States (other than Texas) where any Assets(including any inventory and inventory on consignment) are located, regardlessof their original cost.

###  

### (b)                                 Section 3.5(b) of the Seller DisclosureLetter lists all Assets consisting of property and assets (other than theBusiness Properties) used in the Business that are leased by any Seller orPurchased Subsidiary and that involve payments by such Seller or PurchasedSubsidiary in excess of $2,500 per month.

###  

### (c)                                  Except as specifically enumerated in Section3.5(c) of the Seller Disclosure Letter, the Assets constitute all of theassets, tangible and intangible, of any nature whatsoever, necessary to operatethe Business immediately after the Closing in substantially the same manner inwhich it is presently operated by Sellers and the Purchased Subsidiaries.

###  

### (d)                                 Except as set forth on Section 3.5(d) of theSellers Disclosure Letter, all equipment, vehicles, furniture and otherTangible Personal Property comprising part of the Assets or owned or leased byany of the Purchased Subsidiaries, currently used in the operation of theBusiness and having a net book value as of the Effective Time of $5,000 ormore, and all real and Tangible Personal Property leased by any of the Sellersor Purchased Subsidiaries, currently used in the operation of the Business andhaving a fair market value as of the Effective Time of $5,000 or more, are ingood operating condition and repair (subject to normal wear and tear) and whentransferred will be adequate for the operation of the Business, and none ofsuch assets are in need

 

27

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### of maintenance or repairsexcept for ordinary, routine maintenance and repairs consistent with pastpractice.

###  

## 3.6                                 DESCRIPTION OF BUSINESS PROPERTY

##  

### (a)                                  Section 3.6 of the Seller Disclosure Lettersets forth a complete list of (i) all real property and interests in realproperty owned in fee by any Seller or Purchased Subsidiary and that are usedin the operation of the Business (individually, an “Owned Property” andcollectively, the “Owned Properties”), (ii) all real property and interests inreal property leased by any Seller or Purchased Subsidiary and that are used inthe operation of the Business (individually, a “Real Property Lease” and thereal properties specified in such leases, together with the Owned Properties,being referred to herein individually as a “Business Property” and collectivelyas the “Business Properties”) as lessee or lessor.  The Business Properties constitute allinterests in real property currently used or currently held for use in theoperation of the Business.  Sellers havedelivered or otherwise made available to Purchaser true, correct and completecopies of (i) all deeds, title policies, title reports and surveys in Sellers’or the Purchased Subsidiaries’ possession for the Owned Properties and (ii) theReal Property Leases, together with all amendments, modifications orsupplements, if any, thereto.

###  

### (b)                                 To Sellers’ Knowledge, the use of theBusiness Properties for the various purposes for which they are presently beingused is permitted as of right under all applicable zoning legal requirementsand is not subject to “permitted nonconforming” use or structureclassifications.  All improvements are incompliance in all material respects with all applicable Legal Requirements,including those pertaining to zoning, building and the disabled.  No part of any improvement encroaches on anyreal property not included in the applicable Business Property, and there areno buildings, structures, fixtures or other improvements primarily situated onadjoining property which encroach on any part of the land, except as would nothave a material adverse effect on the Business. To Sellers’ Knowledge, the land for each Owned Property abuts on and hasdirect vehicular access to a public road or has access to a public road via apermanent, irrevocable, appurtenant easement benefiting such land andcomprising a part of the Owned Property, is supplied with public orquasi-public utilities and other services appropriate for the operation of theFacilities located thereon and is not located within any flood plain or areasubject to wetlands regulation or any similar restriction.  To Sellers’ Knowledge, there is no existingor proposed plan to modify or realign any street or highway or any existing orproposed eminent domain proceeding that would result in the taking of all orany part of any Facility or that would prevent or hinder the continued use ofany Facility as heretofore used in the conduct of the Business.

###  

## 3.7                                 TITLE TO ASSETS; ENCUMBRANCES

##  

### (a)                                  The applicable Seller or Purchased Subsidiaryowns good title to the Owned Property free and clear of any Encumbrances, otherthan:

###  

#### (i)                                     liens for Taxes for the current tax yearwhich are not yet due and payable; and

 

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#### (ii)                                  those described in Section 3.7(a)(1) of theSeller Disclosure Letter (“Real Estate Encumbrances”).

####  

At Closing, the BusinessProperty described in Section 3.6 of the Seller Disclosure Letter andcomprising part of the Assets shall be free and clear of all Encumbrances otherthan (i) those Real Estate Encumbrances identified in Section 3.7(a)(2) of theSeller Disclosure Letter and (ii) such additional Encumbrances as shall notmaterially and adversely affect Buyer’s ownership, use and enjoyment of theBusiness Property in the manner in which such Business Property was used andenjoyed in the conduct of the Business prior to the Closing Date (collectively,“Permitted Real Estate Encumbrances”).

 

### (b)                                 The applicable Seller or Purchased Subsidiaryhas a valid and subsisting leasehold interest in the real estate in the RealProperty Leases described in Section 3.6 of the Seller Disclosure Letter.  No Seller or Purchased Subsidiary is indefault of any material covenant to be performed by such Seller or PurchasedSubsidiary under the Real Property Leases. To Sellers’ Knowledge no landlord under real property Leases is indefault of any material covenant to be performed by such landlord.  To Seller’s Knowledge no event has occurredwhich with passage of time and notice would constitute a default under a RealProperty Lease.

###  

### (c)                                  Sellers or Purchased Subsidiaries own goodand transferable title to all of the Tangible Personal Property free and clearof any Encumbrances other than those described in Section 3.7(c)(1) of theSeller Disclosure Letter (“Non-Real Estate Encumbrances”).  At Closing, all such Tangible PersonalProperty shall be free and clear of all Encumbrances other than (i) thoseNon-Real Estate Encumbrances identified in Section 3.7(c)(2) of the SellerDisclosure Letter, (ii) Encumbrances or other rights of Governmental Bodies orother Persons in respect of property or assets delivered by any Seller orPurchased Subsidiary for repair, maintenance or other improvements and (iii)rights of Third Parties to use and possess all machinery and equipment held forrental to Third Parties pursuant to leases or rental agreements relatingthereto (“Permitted Non-Real Estate Encumbrances” and, together with thePermitted Real Estate Encumbrances, “Permitted Encumbrances”).

###  

## 3.8                                 ACCOUNTS RECEIVABLE

##  

All Accounts Receivable thatare reflected on the Initial Balance Sheet or that will be reflected on theClosing Balance Sheet represent or will represent valid obligations arisingfrom sales actually made or services actually performed by Sellers or thePurchased Subsidiaries in the ordinary course of the Business consistent withpast practices, and Section 3.8 of the Seller Disclosure Letter contains acomplete and accurate list thereof as of September 3, 2005, which list setsforth the aging of each such Account Receivable.  To Sellers’ Knowledge, there is no contest,claim, defense or right of setoff, other than those in the ordinary course ofthe Business consistent with past practices, under any Seller Contract with anyaccount debtor of an Account Receivable relating to the amount or validity ofsuch Account Receivable.  All AccountsReceivable relate solely to the sale of goods or services to customers ofSellers and Purchased Subsidiaries, none of which are Related Persons of anySeller or any Purchased Subsidiary.

 

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## 3.9                                 INVENTORIES

##  

Except as set forth onSection 3.9 of the Seller Disclosure Letter, all items included in theInventories consist of a quality and quantity consistent in all materialrespects with past practices and reasonable future expectations, except forobsolete items, slow moving items and items of below standard quality, all ofwhich have been written off or written down to net realizable value in theInitial Balance Sheet in accordance with the Agreed Accounting Principles.  Inventories on hand that were purchased afterthe date of the Initial Balance Sheet were purchased in the ordinary course ofthe Business consistent with past practices or reasonable future expectationsat a cost generally not exceeding market prices prevailing at the time ofpurchase.

 

## 3.10                           INTENTIONALLY DELETED

##  

## 3.11                           TAXES

##  

### (a)                                  Except as set forth in Section 3.11(a) of theSeller Disclosure Letter, each of the Sellers and the Purchased Subsidiarieshas filed or will file when due all Tax Returns required to be filed withrespect to the Business or the Assets. All such Tax Returns were, or will be, correct and complete in allmaterial respects.  All Taxes owed byeach of the Purchased Subsidiaries and each of the Sellers (whether or notshown on any Tax Return) with respect to the Business and the Assets have been,or will be when due, fully paid.  Thereare no Encumbrances on any of the Assets that arose in connection with anyfailure (or alleged failure) to pay any Tax. No deficiency or adjustment in respect of any Tax that might result inan Encumbrance on any of the Assets remains unpaid and no Proceeding is pendingor, to any of the Sellers’ Knowledge, threatened with respect to any Taxeswhose assessment might result in an Encumbrance on any of the Assets.

###  

### (b)                                 There is no Tax sharing agreement, Taxallocation agreement, tax indemnity obligation or similar written or unwrittenagreement, arrangement, understanding or practice with respect to Taxes(including any advance pricing agreement, closing agreement or otherarrangement relating to Taxes) that will require any payment by any Seller orPurchased Subsidiary as a result of the sale of the Business.

###  

## 3.12                           LABOR MATTERS; COMPLIANCE

##  

### (a)                                  Except as set forth in Section 3.12(a) of theSeller Disclosure Letter,

###  

#### (i)                                     no Seller or Purchased Subsidiary is a partyto or bound by any collective bargaining agreement with regard to the AffectedEmployees or the Purchased Subsidiary Employees;

####  

#### (ii)                                  each Seller and Purchased Subsidiary and itsRelated Persons are in substantial compliance with all Legal Requirementsapplicable to the Affected Employees or the Purchased Subsidiary Employees withregard to employment and employment practices, terms and conditions ofemployment, wages, and occupational safety and health laws; and are not engagedin any unfair labor or unfair employment practices;

####  

#### (iii)                               there is no unfair labor practice charge orcomplaint against any Seller or Purchased Subsidiary or any of its RelatedPersons involving or related to Affected Employees or Purchased SubsidiaryEmployees pending (with service of process

 

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#### having been made, or written notice ofinvestigation or inquiry having been served, on such Seller or PurchasedSubsidiary or any of its Related Persons), or to Sellers’ Knowledge, threatenedbefore the National Labor Relations Board or any analogous state or localagency or any court and no charge, complaint or grievance is pending or, toSellers’ Knowledge, threatened to be filed;

####  

#### (iv)                              for the past five years, no Seller orPurchased Subsidiary has experienced any labor strike or other material labordispute, slowdown, stoppage or lock-out with regard to the Business;

####  

#### (v)                                 there is no labor strike or other materiallabor dispute, slowdown, stoppage or lock-out pending, or to Sellers’Knowledge, threatened against any Seller or Purchased Subsidiary involving theAffected Employees or the Purchased Subsidiary Employees; and

####  

#### (vi)                              no union certification or decertificationpetition has been filed (with service of process having been made on any Selleror Purchased Subsidiary or any of its Related Persons), or to Sellers’Knowledge, threatened, that relates to Affected Employees or the PurchasedSubsidiary Employees and no union authorization campaign has been conducted, ineach case, within the past 18 months.

####  

### (b)                                 Sellers have delivered to Buyer a list of allAffected Employees and Purchased Subsidiary Employees, the rate of allcompensation payable to each such employee in any and all capacities, includingany compensation that will be payable to each such employee in any and allcapacities other than the then current accrual of regular payroll compensation,except in each case for any Transaction Bonuses.  Except as set forth in Section 3.12(b) of theSeller Disclosure Letter, any of the Affected Employees or the PurchasedSubsidiary Employees can be dismissed immediately for any reason or no reasonwithout notice and without further liability, subject to applicable laws, rulesand regulations relating to employment discrimination.  Except as set forth in Section 3.12(b) of theSeller Disclosure Letter, to Sellers’ Knowledge, none of the Affected Employeesor the Purchased Subsidiary Employees intend to terminate their employmentrelationship with the Business.

###  

## 3.13                           EMPLOYEE BENEFITS

##  

(a)                                  Section 3.13(a) of the Seller DisclosureLetter contains a list of all Seller Benefit Plans.  Sellers have made available for review byBuyer copies of all Seller Benefit Plans (including all related trusts, fundingarrangements, most recent valuation reports and most recent annual reports).

 

(b)                                 No “pension plan” as defined in section 3(2)of ERISA that is maintained or contributed to by any Seller, PurchasedSubsidiary or any ERISA Affiliate or with respect to which any Seller,Purchased Subsidiary or an ERISA Affiliate may have any liability (i) has anaccumulated funding deficiency as defined in section 302 of ERISA and section412 of the Code, whether or not waived; (ii) no waiver of minimum fundingstandards has been requested or granted by the IRS; and (iii) no Encumbrance infavor of any Seller Benefit Plan, the IRS or the Pension Benefit GuarantyCorporation exists or has been threatened. Except as set forth in

 

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Section 3.13(b) of the Seller Disclosure Letter, none of the Sellers,Purchased Subsidiaries or the ERISA Affiliates contributes to, has anyobligation to contribute to, or has any liability under or with respect to any “multiemployerplan,” as defined in Section 3(37) of ERISA. No material “reportable event,” within the meaning of Section 4043 ofERISA, for which the thirty-day reporting requirement has not been waived, andno event described in Sections 4062 or 4063 of ERISA, has occurred inconnection with any Seller Benefit Plan of the Sellers, Purchased Subsidiariesor the ERISA Affiliates.  None of theSellers, Purchased Subsidiaries or the ERISA Affiliates have (1) engaged in, oris a successor or parent corporation to an entity that has engaged in, atransaction described in Sections 4069 or 4212(c) of ERISA or (2) except as setforth in Section 3.13(b) of the Seller Disclosure Letter, incurred any liabilityor potential liability under Title IV of ERISA arising in connection with thetermination of, or a complete or partial withdrawal from, any plan covered orpreviously covered by Title IV of ERISA.

 

### (c)                                  No Seller, Purchased Subsidiary or any ERISAAffiliate has incurred any withdrawal liability under Section 4201 of ERISAthat could result in any liability to Buyer or Encumbrance on any of theAssets.  The requirements of COBRA havebeen met with respect to each such Seller Benefit Plan which is an “employeewelfare benefit plan,” as defined in Section 3(1) of ERISA, subject to COBRA.

###  

### (d)                                 Except as set forth on Section 3.13(d)of the Sellers Disclosure Letter, none of the Seller Benefit Plans is or hasbeen sponsored, maintained, approved by or contributed to solely by a PurchasedSubsidiary.

###  

## 3.14                           COMPLIANCE WITH LEGAL REQUIREMENTS;GOVERNMENTAL AUTHORIZATIONS

##  

### (a)                                  Except as set forth in Section 3.14(a) of theSeller Disclosure Letter:

###  

#### (i)                                     Sellers and the Purchased Subsidiaries havecomplied with all Legal Requirements applicable to the conduct and operation ofthe Business and the ownership or use of any of the Assets;

####  

#### (ii)                                  With regard to the Business and the Assets,to Sellers’ Knowledge, no event has occurred or circumstance exists that (withor without notice or lapse of time) would be reasonably expected to constituteor result in a violation by any Seller or Purchased Subsidiary of, or a failureon the part of any Seller or Purchased Subsidiary to comply with, any LegalRequirement relating to the Business or the Assets; and

####  

#### (iii)                               No Seller or Purchased Subsidiary hasreceived, at any time since January 31, 2003, any notice from any GovernmentalBody regarding any actual, alleged or potential violation of, or failure tocomply with, any Legal Requirement with respect to the Business or any of theAssets.

####  

### (b)                                 Section 3.14(b) of the Seller DisclosureLetter contains a list of each material Governmental Authorization that is heldby any Seller or Purchased Subsidiary relating to or used in the operation ofthe Business or the Assets.  EachGovernmental Authorization listed in Section 3.14(b) of the Seller DisclosureLetter is in full force and effect. Except as set forth in Section 3.14(b) ofthe Seller Disclosure Letter:

 

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#### (i)                                     Each Seller and Purchased Subsidiary is incompliance in all material respects with all of the terms and requirements ofeach Governmental Authorization identified in Section 3.14(b) of the SellerDisclosure Letter;

####  

#### (ii)                                  To Sellers’ Knowledge, no event has occurredor circumstance exists that will (with or without notice or lapse of time) (A)constitute or result directly or indirectly in a violation of or a failure tocomply with any term or requirement of any Governmental Authorization listed orrequired to be listed in Section 3.14(b) of the Seller Disclosure Letter or (B)result directly or indirectly in the revocation, withdrawal, suspension,cancellation or termination of, or any modification to, any GovernmentalAuthorization listed or required to be listed in Section 3.14(b) of the SellerDisclosure Letter;

####  

#### (iii)                               No Seller or Purchased Subsidiary hasreceived, at any time since January 31, 2003, any notice from any GovernmentalBody regarding (A) any actual, alleged, possible or potential violation of orfailure to comply with any term or requirement of any GovernmentalAuthorization or (B) any actual, proposed, possible or potential revocation,withdrawal, suspension, cancellation, termination of or modification to any GovernmentalAuthorization; and

####  

#### (iv)                              all applications required to have been filedfor the renewal of the Governmental Authorizations listed in Section 3.14(b) ofthe Seller Disclosure Letter have been duly filed on a timely basis with theappropriate Governmental Bodies, and all other filings required to have beenmade with respect to such Governmental Authorizations have been duly made on atimely basis with the appropriate Governmental Bodies.

####  

### (c)                                  The Governmental Authorizations listed inSection 3.14(b) of the Seller Disclosure Letter collectively constitute all ofthe Governmental Authorizations necessary to permit each Seller and PurchasedSubsidiary to lawfully conduct and operate the Business in the manner in whichit currently conducts and operates such Business and to permit each Seller andPurchased Subsidiary to own and use the Assets in the manner in which itcurrently owns and uses such Assets.

###  

## 3.15                           LEGAL PROCEEDINGS; ORDERS

##  

### (a)                                  Except as set forth in Section 3.15(a) of theSeller Disclosure Letter, there is no pending or, to Sellers’ Knowledge,threatened Proceeding:

###  

#### (i)                                     by or against any Seller or PurchasedSubsidiary that relates to or would reasonably be expected to affect theBusiness or the Assets in a materially adverse manner; or

####  

#### (ii)                                  that challenges, or that may have the effectof preventing, delaying, making illegal or otherwise interfering with, any ofthe Contemplated Transactions.

####  

Except as set forth inSection 3.15(a) of the Seller Disclosure Letter, to Sellers’ Knowledge, noevent has occurred or circumstance exists that is reasonably likely to giverise to or serve as a basis for the commencement of any such Proceeding.

 

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### (b)                                 Except as set forth in Section 3.15(b) of theSeller Disclosure Letter, since January 31, 2003:

###  

#### (i)                                     there has been no Order to which anyPurchased Subsidiary, the Business or any of the Assets is subject; and

####  

#### (ii)                                  to Sellers’ Knowledge, no Affected Employeeor Purchased Subsidiary Employee is subject to any Order that prohibits suchAffected Employee or Purchased Subsidiary Employee from engaging in orcontinuing any conduct, activity or practice relating to the Business.

####  

### (c)                                  Except as set forth in Section 3.15(c) of theSeller Disclosure Letter:

###  

#### (i)                                     each Seller and Purchased Subsidiary is incompliance with all of the terms and requirements of each Order to which it orany of the Assets is or has been subject;

####  

#### (ii)                                  no event has occurred or circumstance existsthat is reasonably likely to constitute or result in (with or without notice orlapse of time) a violation of or failure to comply with any term or requirementof any Order to which any Seller (with respect to the Business), PurchasedSubsidiary or any of the Assets is subject; and

####  

#### (iii)                               no Seller or Purchased Subsidiary hasreceived, at any time since January 31, 2003, any notice from any GovernmentalBody regarding any actual, alleged or potential violation of, or failure tocomply with, any term or requirement of any Order to which such Seller (withrespect to the Business), such Purchased Subsidiary or any of the Assets is orhas been subject.

####  

## 3.16                           ABSENCE OF CERTAIN CHANGES AND EVENTS

##  

Except as set forth inSection 3.16 of the Seller Disclosure Letter or as otherwise permitted by thisAgreement, since January 31, 2005, each Seller and Purchased Subsidiary hasconducted the Business only in the ordinary course of the Business consistentwith past practices or reasonable future expectations and there has not beenany:

 

### (a)                                  payment (except in the ordinary course of theBusiness consistent with past practices) or increase by any Seller or PurchasedSubsidiary of any bonuses, salaries or other compensation to any employee ofthe Business or entry into any employment, severance or similar Seller Contractwith any employee of the Business;

###  

### (b)                                 damage, destruction, theft or loss affectingthe Assets, except in the ordinary course of business and except to the extentthat any Asset damaged, destroyed, stolen or lost has been replaced orrepaired;

###  

### (c)                                  entry into, termination of or receipt ofnotice of termination of (i) any license, distributorship, dealer, salesrepresentative, joint venture, credit or similar Seller Contract to which anySeller is a party used in the operation of the Business or Assets other than inthe

 

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### ordinary course of business,or (ii) any Seller Contract described in Section 3.17(a) other than in theordinary course of business;

###  

### (d)                                 sale, lease or other disposition of any Assetor property of any Seller or Purchased Subsidiary (including the BusinessIntellectual Property Assets) or the creation of any Encumbrance (other than aPermitted Encumbrance) on any Asset in excess of $50,000 in the aggregate, ineach case other than in the ordinary course of business;

###  

### (e)                                  cancellation or waiver of any claims orrights relating to the Business or the Assets having an aggregate value inexcess of $100,000;

###  

### (f)                                    notification by any significant customer orsupplier of the Business whose business with the Business in the last twelve(12) months exceeds $100,000 of an intention to discontinue or materiallychange the terms of its overall relationship with the Business;

###  

### (g)                                 material change in the accounting methodsused by any Seller or Purchased Subsidiary, which relates to the Business orthe Assets; or

###  

### (h)                                 Contract entered into by any Seller orPurchased Subsidiary to do any of the foregoing.

###  

## 3.17                           CONTRACTS; NO DEFAULTS

##  

### (a)                                  No Seller Contract that is in effect as ofthe date of this Agreement and is described in clauses (i)-(xiv) of thefollowing sentence contains obligations that, if performed by Sellers, wouldresult in a material adverse effect on the Business or (ii), insofar as can bereasonably foreseen by Sellers, deny Buyer in any material respect the expectedbenefits of the Contemplated Transactions.   As of the Closing Date and exceptas set forth in Section 2.2(e) of the Seller Disclosure Letter, Section 3.17(a)of the Seller Disclosure Letter will contain an accurate and complete list, andSellers will have made available to Buyer accurate and complete copies, of:

###  

#### (i)                                     each Seller Contract that involvesperformance of services or delivery of goods or materials by any Seller orPurchased Subsidiary of an amount of value in excess of $100,000;

####  

#### (ii)                                  each Seller Contract that involvesperformance of services or delivery of goods or materials to any Seller orPurchased Subsidiary of an amount of value in excess of $100,000;

####  

#### (iii)                               each Seller Contract that was not enteredinto in the ordinary course of the Business consistent with past practices andthat (A) involves an amount of value or expenditures or receipts of any Selleror Purchased Subsidiary in excess of $100,000, or (B) has a remaining term ofmore than one (1) year, and is not subject to termination without penalty;

####  

#### (iv)                              each Seller Contract affecting the ownershipof, leasing of, title to, use of or any leasehold or other interest in any realor personal property (except personal

 

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#### property leases and installment andconditional sales agreements having a value per item or aggregate payments ofless than $75,000 and with a term of less than one year);

####  

#### (v)                                 each Seller Contract with any labor union orother employee representative of a group of employees relating to wages, hoursand other conditions of employment;

####  

#### (vi)                              each Seller Contract (however named)involving a sharing of profits, losses, costs or liabilities by any Seller orPurchased Subsidiary with any other Person;

####  

#### (vii)                           each Seller Contract containing covenantsthat restrict any Seller’s or Purchased Subsidiary’s business activity or limitthe freedom of such Seller or Purchased Subsidiary to engage in any line ofbusiness or to compete with any Person;

####  

#### (viii)                        each Seller Contract providing for paymentsto or by any Person based on sales, purchases or profits, other than directpayments for goods;

####  

#### (ix)                                each power of attorney of any Seller orPurchased Subsidiary relating to the Business or the Assets that is currently effectiveand outstanding;

####  

#### (x)                                   each Seller Contract for capital expendituresin excess of $100,000;

####  

#### (xi)                                each Seller Contract not denominated in U.S.dollars;

####  

#### (xii)                             each written warranty, guaranty and/or othersimilar undertaking with respect to contractual performance extended by anySeller or Purchased Subsidiary with respect to the Business other than in theordinary course of the Business consistent with past practices;

####  

#### (xiii)                          each Bid that involves the performance ofservices or delivery of goods or materials by any Seller of an amount of valuein excess of $100,000; and

####  

#### (xiv)                         each amendment, supplement and modification(whether oral or written) in respect of any of the foregoing.

####  

### (b)                                 Except as set forth in Section 3.17(b) of theSeller Disclosure Letter:

###  

#### (i)                                     each Seller Contract or Bid identified orrequired to be identified in Section 3.17(a) of the Seller Disclosure Letter orwhich is to be assumed by Buyer under this Agreement is in full force andeffect and is valid, binding and enforceable in accordance with its terms; and

####  

#### (ii)                                  each Seller Contract or Bid identified orrequired to be identified in Section 3.17(a) of the Seller Disclosure Letter orwhich is being assumed by Buyer under this Agreement is assignable ortransferable to Buyer without the Consent of any other Person except asdisclosed in or pursuant to Section 3.2(c).

 

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### (c)                                  Except as set forth in Section 3.17(c) of theSeller Disclosure Letter:

###  

#### (i)                                     each Seller and Purchased Subsidiary is incompliance with all applicable terms and requirements of each Seller Contractwhich is being assumed by Buyer or to which any Purchased Subsidiary is a party(the “Assumed Seller Contracts”);

####  

#### (ii)                                  no Seller or Purchased Subsidiary hasreleased any of its rights under an Assumed Seller Contract;

####  

#### (iii)                               to Sellers’ Knowledge, each other Person thathas or had any obligation or liability under any Assumed Seller Contract is incompliance with all applicable terms and requirements of such Assumed SellerContract;

####  

#### (iv)                              to Sellers’ Knowledge, no event has occurredor circumstance exists that (with or without notice or lapse of time) wouldreasonably be expected to contravene, conflict with or result in a breach of,or give any Seller, Purchased Subsidiary or other Person the right to declare adefault or exercise any remedy under, or to accelerate the maturity orperformance of, or payment under, or to cancel, terminate or modify, anyAssumed Seller Contract; and

####  

#### (v)                                 to Sellers’ Knowledge, no event has occurredor circumstance exists under or by virtue of any Contract that (with or withoutnotice or lapse of time) would cause the creation of any Encumbrance (otherthan a Permitted Encumbrance) affecting any of the Assets.

####  

### (d)                                 Section 3.17(d) of the Seller DisclosureLetter will, as promptly as possible, but no later than ten (10) days after thedate hereof, set forth a list of all warranty claims of customers of theBusiness asserted in writing (including by facsimile or electronic mail)against any Seller or Purchased Subsidiary in respect of which the necessaryrepairs or replacement have not been completed.

###  

### (e)                                  Each of the Seller Contracts or Bids havebeen entered into or issued in the ordinary course of business consistent withpast practice.

###  

## 3.18                           INSURANCE

##  

### (a)                                  Section 3.18(a) of the Seller DisclosureLetter sets forth a list of all policies of fire, casualty, liability,burglary, fidelity, workers’ compensation and other forms of insurance held byeach Seller and Purchased Subsidiary that are material to the Business andmaterial details regarding each, including limits of liability, deductibles andself insurance retentions.

###  

### (b)                                 All premiums due and payable for theinsurance listed in Section 3.18(a) of the Seller Disclosure Letter have been dulypaid, and such policies or extensions or renewals thereof in such amounts willbe outstanding and duly in full force without interruption until the ClosingDate.

###  

### (c)                                  Section 3.18(c) of the Seller DisclosureLetter describes, with respect to the Business or Assets as of the date of thisAgreement, by year, for the current policy year and each

 

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### of the two (2) preceding policy years (i) anyself-insurance arrangement by or affecting any Seller or Purchased Subsidiary,including any reserves established thereunder, and (ii) all obligations of anySeller or Purchased Subsidiary to provide insurance coverage to Third Parties(for example, under Leases or service agreements) and identifies the policyunder which such coverage is provided.

###  

### (d)                                 Section 3.18(d) of the Seller DisclosureLetter sets forth as of the date of this Agreement, by year, for the currentpolicy year and each of the two (2) preceding policy years with respect to theBusiness or Assets:

###  

#### (i)                                     a summary of the loss experience under eachpolicy of insurance;

####  

#### (ii)                                  a statement describing each claim under apolicy of insurance for an amount in excess of $100,000, which sets forth:

####  

##### (A)                              the name of the claimant;

#####  

##### (B)                                a description of the policy by insurer, typeof insurance and period of coverage; and

#####  

##### (C)                                the amount and a brief description of theclaim; and

#####  

#### (iii)                               a statement describing the loss experiencefor all claims that were self-insured, including the number and aggregate costof such claims.

####  

## 3.19                           ENVIRONMENTAL MATTERS

##  

### (a)                                  Except as set forth in Section 3.19 of theSeller Disclosure Letter or except as would not have an Environmental MaterialAdverse Effect, each Seller and Purchased Subsidiary is in compliance in allrespects with all applicable limitations, restrictions, conditions, standards,prohibitions, requirements and obligations of all Environmental Laws applicableto the Business.

###  

### (b)                                 Except as set forth in Section 3.19 of theSeller Disclosure Letter or except as would not have an Environmental MaterialAdverse Effect, there are no Environmental Liabilities pending or, to Sellers’Knowledge, threatened by any Person or before any court or any otherGovernmental Body directed against any Seller or Purchased Subsidiary or theBusiness that pertain or relate to (i) any obligations of any Seller orPurchased Subsidiary under any applicable Environmental Law, (ii) violations byany Seller or Purchased Subsidiary of any Environmental Law, (iii) personalinjury, property, or natural resources damages claims relating to a Release ofHazardous Materials, or (iv) response, removal, or remedial costs under CERCLA,RCRA or any similar state laws.

###  

### (c)                                  Except as set forth in Section 3.19 of theSeller Disclosure Letter or except as would not have an Environmental MaterialAdverse Effect, all environmental permits required under applicableEnvironmental Laws that are necessary for the lawful operation of the Businessby any Seller or Purchased Subsidiary have been obtained and are in full forceand effect and there is no basis for revocation or suspension of any suchenvironmental permits.

 

38

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### (d)                                 Except as set forth in Section 3.19 of theSeller Disclosure Letter or except as would not have an Environmental MaterialAdverse Effect, no portion of any Business Property is listed on the NationalPriorities List or the Comprehensive Environmental Response, Compensation, andLiability Information System list under CERCLA, or any similar ranking or listingunder any state law.

###  

### (e)                                  Except as set forth in Section 3.19 of theSeller Disclosure Letter or except as would not have an Environmental MaterialAdverse Effect, no Seller or Purchased Subsidiary has disposed or Released anyHazardous Materials on, at, or under any Business Property other than incompliance with applicable Environmental Laws, and to Sellers’ Knowledge thereare no Environmental Conditions on, at, or underlying any Facility other thansuch Environmental Conditions that do not require Remedial Action.

###  

### (f)                                    Except as set forth in Section 3.19 of theSeller Disclosure Letter, there are no written notices of violation,non-compliance, or similar notifications relating to Environmental Liabilitiescurrently pending or, to Sellers’ Knowledge, threatened, relating or pertainingto the Business or any Facility that would reasonably be expected to have anEnvironmental Material Adverse Effect.

###  

## 3.20                           INTELLECTUAL PROPERTY

##  

### (a)                                  All Intellectual Property, including theIntellectual Property Licenses, that relates exclusively to the Business (the “BusinessIntellectual Property”) and that constitutes Registered Intellectual Propertyis set forth in Section 3.20(a)(i) of the Seller Disclosure Letter (the “OwnedIntellectual Property”).  Except as setforth in Section 3.20(a)(ii) of the Seller Disclosure Letter, Sellers orPurchased Subsidiaries own, free and clear from all Encumbrances (other thanimmaterial Encumbrances) or otherwise possesses legally enforceable rights toall of the Business Intellectual Property.

###  

### (b)                                 Section 3.20(b)(i) of the Seller DisclosureLetter sets forth, with respect to the Business, a complete list of alllicenses (i) pursuant to which the use by any Person of Intellectual Propertyis permitted by any Seller or Purchased Subsidiary, or (ii) pursuant to whichthe use by any Seller or Purchased Subsidiary of the Intellectual Property of aThird Party is permitted by any Person (other than commercial software)(collectively, the “Intellectual Property Licenses”).  The Intellectual Property Licenses are infull force and effect.

###  

### (c)                                  Except as set forth in Section 3.20(a)(ii) ofthe Seller Disclosure Letter, there are no claims of infringement,misappropriation or other violation of the Intellectual Property rights of aThird Party that are pending or, to Seller’ Knowledge, will occur as a resultof the continued operation of the Business as presently conducted.

###  

### (d)                                 To Sellers’ Knowledge, no BusinessIntellectual Property is being infringed or misappropriated by a ThirdParty.  There is no material claim ordemand of any Third Party, or any Proceeding which is pending (with service ofprocess having been served on any Seller or Purchased Subsidiary) or, toSellers’ Knowledge, any basis for or threat of any material claim or demand that(i) challenges the ownership rights in respect of any Owned IntellectualProperty, (ii)

 

39

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### challenges the validity, enforceability orinventorship of the Business Intellectual Property or (iii) claims that anydefault exists under any Intellectual Property License.

###  

### (e)                                  To Sellers’ Knowledge, all of the OwnedIntellectual Property (i) is enforceable and valid; (ii) has not beencancelled, expired or abandoned; and (iii) has been duly prepared, filed, prosecuted,registered and, as applicable, maintained, including without limitation withrespect to all duties of candor owed to the United States Patent and TrademarkOffice and any foreign patent office.  ToSellers’ Knowledge, none of the Business Intellectual Property that constitutesRegistered Intellectual Property is the subject of any reissue, reexamination,interference, opposition, cancellation, or similar proceeding.

###  

### (f)                                    The Assets include all of the IntellectualProperty used in the Business other than any Intellectual Property which isused only incidentally in the Business and other than any Intellectual Propertyincluded in the Excluded Assets.

###  

## 3.21                           RELATED PARTY TRANSACTIONS

##  

Except as set forth inSection 3.21 of the Seller Disclosure Letter, none of the Sellers, PurchasedSubsidiaries or any of their respective Related Persons, nor, to Sellers’Knowledge, any current director, officer or employee of any Seller, anyPurchased Subsidiary or any of their Related Persons, (a) has any direct or indirectinterest (other than owning two percent (2%) or less of the equity interests ofa publicly traded entity without any control of management) (i) in, or is adirector, officer or employee of, any Person that is a client, customer,supplier, lessor, lessee, debtor, creditor or competitor of the Business, or(ii) in any material property, asset or right which is owned or used by anySeller or Purchased Subsidiary in the conduct of the Business, or (b) is aparty to any agreement or transaction with any Seller or Purchased Subsidiaryrelating to the Business.

 

## 3.22                           BROKERS OR FINDERS

##  

Except for Merrill Lynch& Co.,****no Seller or Purchased Subsidiary hasused any broker or finder in connection with the transactions described in thisAgreement, and neither Buyer nor any of its Related Persons shall have anyliability or otherwise suffer or incur any loss or expense as a result of or inconnection with any brokerage or finder’s fee or other commission of any Personretained by any Seller or Purchased Subsidiary or any of their Related Personsin connection with the Contemplated Transactions.

 

## 3.23                           LETTERS OF CREDIT

##  

Section 3.23 of the SellerDisclosure Letter contains all guaranties, letters of credit or other similarperformance assurances of the Business that benefit the customers or suppliersof the Business.

 

## 3.24                           PURCHASED SUBSIDIARIES

##  

### (a)                                  Each of the Purchased Subsidiaries is dulyorganized, validly existing and, to the extent applicable, in good standingunder the laws of its jurisdiction of organization or incorporation, as thecase may be.  Each of the PurchasedSubsidiaries has the requisite power and

 

40

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### authority to own, operateand lease its properties and assets and to carry on its business in the placesand in the manner currently conducted. Each of the Purchased Subsidiaries is qualified to do business as aforeign corporation or other entity, as applicable, and, to the extentapplicable, is in good standing of the laws of each state or other jurisdictionin which either the ownership or use of the properties owned or used by it, orthe nature of the activities conducted by it, requires such qualification,except where the failure to do so would not have a material adverse effect onsuch Purchased Subsidiary or the Business.

###  

### (b)                                 Section 3.24(b) of the Seller DisclosureLetter sets forth all the authorized and outstanding Outstanding EquitySecurities.  All of such outstandingsecurities are owned by the Sellers or another Purchased Subsidiary as setforth on Section 3.24(b) of the Seller Disclosure Letter and no rights topurchase any equity securities of any Purchased Subsidiary exist except asdisclosed in Section 3.24(b) of the Seller Disclosure Letter.  None of the Purchased Subsidiaries has any obligationor commitment, contingent or otherwise, to issue any equity securities.  All of the Outstanding Equity Securities areduly authorized, validly issued, fully paid and nonassessable and have beenissued in compliance with all applicable laws. There are no agreements, commitments or contracts relating to the sale,transfer or voting of any Outstanding Equity Securities).  Except as disclosed in Section 3.24 of theSeller Disclosure Letter, all of the Outstanding Equity Securities may befreely transferred by Sellers to Buyer pursuant to this Agreement withoutrestriction.

###  

### (c)                                  The Sellers have good and marketable title tothe Outstanding Equity Securities of the Purchased Subsidiaries organized inthe United States, free and clear of all Encumbrances.  To Sellers’ Knowledge, the Sellers have goodand marketable title to the Outstanding Equity Securities of the PurchasedSubsidiaries organized outside the United States, free and clear of allEncumbrances.  Upon the consummation ofthe Contemplated Transactions, the Buyer will acquire good and valid title tothe Outstanding Equity Securities, free and clear of all Encumbrances.

###  

### (d)                                 No Purchased Company has any Liabilities(whether accrued, absolute, contingent, unliquidated or otherwise, whether dueor to become due, whether known or unknown, regardless of when asserted)arising out of transactions or events entered into prior to the date of thisAgreement, or any action or inaction, or any state of facts existing, withrespect to or based upon transactions or events occurring prior to the date ofthis Agreement, except Liabilities reflected in the Financial Statements or asotherwise set forth on Section 3.24(d) of the Seller Disclosure Letter.

###  

### (e)                                  Section 3.24(e) of the Seller DisclosureLetter sets forth a true and complete list of the name and address of each bankwith which each Purchased Subsidiary has an account or safe deposit box and thename of each Person authorized to draw thereon or have access thereto and thename of each Person holding a power of attorney on behalf of such PurchasedSubsidiary.

###  

# 4.                                       Representations and Warranties of Buyer andBuyer Entity

#  

Buyer (with respect tohimself) and Buyer Entity (with respect to itself) represent and warrant toSellers as follows:

 

41

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## 4.1                                 ORGANIZATION AND GOOD STANDING

##  

As of the Closing Date,Buyer Entity is an entity duly organized, validly existing and in good standingunder the laws of the State of Delaware, with full power and authority to own,operate and lease its properties and assets and to carry on its business in theplaces and in the manner currently conducted.

 

## 4.2                                 ENFORCEABILITY; AUTHORITY; NO CONFLICT

##  

### (a)                                  As of the date hereof, Buyer has allrequisite power and authority to enter into this Agreement and the documents,to the extent required by this Agreement, to be delivered by Buyer at theClosing and to perform his obligations hereunder and thereunder, including theContemplated Transactions.  ThisAgreement has been duly executed and delivered by Buyer and constitutes alegal, valid and binding obligation of Buyer, enforceable against Buyer inaccordance with its terms, except as enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or similar lawsfrom time to time in effect that affect creditors’ rights generally and bylegal and equitable limitations on the availability of specific remedies. Nofurther action is necessary on the part of Buyer to execute and deliver thisAgreement or to consummate the Contemplated Transactions.

###  

### (b)                                 As of the Closing Date, Buyer Entity has allrequisite power and authority to assume Buyer’s obligations under thisAgreement and to enter into the documents to be delivered by it at the Closingand to perform its obligations hereunder and thereunder, including theContemplated Transactions.  ThisAgreement has been duly executed and delivered by Buyer Entity and constitutesa legal, valid and binding obligation of Buyer Entity, enforceable againstBuyer Entity in accordance with its terms, except as enforceability may belimited by applicable bankruptcy, insolvency, reorganization, moratorium orsimilar laws from time to time in effect that affect creditors’ rightsgenerally and by legal and equitable limitations on the availability ofspecific remedies. As of the Closing Date, this Agreement and the ContemplatedTransactions have been duly authorized by all necessary action by Buyer Entity’sboard of directors or comparable governing body.  No further corporate, shareholder or similaraction is necessary on the part of Buyer Entity to execute and deliver thisAgreement or to consummate the Contemplated Transactions.

###  

### (c)                                  Except as set forth in Section 4.2(c) of theBuyer Disclosure Letter, neither the execution and delivery of this Agreementnor the consummation or performance of any of the Contemplated Transactionswill, directly or indirectly (with or without notice or lapse of time):

###  

#### (i)                                     Conflict with or violate the constituentdocuments of Buyer Entity as of the Closing Date;

####  

#### (ii)                                  Conflict with, constitute a breach, violationor termination of any provision of, or give rise to any right of termination,cancellation or acceleration, or loss of any right or benefit or both, underany material Contract to which Buyer, Buyer Entity or any of their respectiveAffiliates is a party or to which any of them is bound; or

####  

#### (iii)                               To Buyer’s Knowledge, contravene, conflictwith or result in a violation or breach of any Governmental Authorization,Legal Requirement or Order

 

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#### applicable to Buyer or, as of the ClosingDate, Buyer Entity or to which Buyer or, as of the Closing Date, Buyer Entitymay be subject.

####  

### (d)                                 Except as set forth in Section 4.2(d) of theBuyer Disclosure Letter, neither Buyer nor Buyer Entity is required to give anynotice to or obtain any Consent from any Person in connection with theexecution and delivery of this Agreement or the consummation or performance ofany of the Contemplated Transactions.

###  

### (e)                                  As of the Closing Date, Buyer Entity hasassumed all of the obligations of Buyer under this Agreement, subject to theterms of Section 13.8.  Buyer Entity iscontrolled directly or indirectly by Buyer.

###  

## 4.3                                 CERTAIN PROCEEDINGS

##  

There is no pending or, toBuyer’s Knowledge, threatened Proceeding that challenges, or that may have theeffect of preventing, delaying, making illegal or otherwise interfering with,any of the Contemplated Transactions.  ToBuyer’s Knowledge, no event has occurred or circumstance exists that isreasonably likely to give rise to or serve as a basis for the commencement ofany such Proceeding.

 

## 4.4                                 INVESTIGATION

##  

Buyer and,as of the Closing Date, Buyer Entity have conducted their own independentreview and analysis of the Business, operations, assets (includinginventories), liabilities, results of operations, financial condition,software, technology, Business Intellectual Property and prospects of theBusiness and acknowledges that it has been provided access to the personnel,properties, premises and records of the Business for such purpose.  In connection with Buyer’s and Buyer Entity’srespective investigation of the Business, Buyer and Buyer Entity have receivedcertain projections, forecasts, plans and other forward-looking informationwith respect to the Business and acknowledges that there are uncertaintiesinherent in attempting to make such projections, forecasts and plans, thatBuyer and Buyer Entity are familiar with such uncertainties and that Buyer andBuyer Entity are taking full responsibility for making their own evaluation ofthe adequacy and accuracy of all projections, forecasts, plans and otherforward-looking information so furnished to it (including the reasonableness ofthe assumptions underlying such projections, forecasts, plans and otherforward-looking information).  Inentering into or, in the case of Buyer Entity, assuming Buyer’s obligationsunder, this Agreement, each of Buyer and, as of the Closing Date, Buyer Entityacknowledges that each such Person has received offering and other marketingmaterials, but that each such Person is a sophisticated and experienced buyerin transactions similar to the Contemplated Transactions and has relied solelyupon its own investigation and analysis and the specific representations andwarranties of Sellers set forth in this Agreement.

 

## 4.5                                 BROKERS OR FINDERS

##  

NeitherBuyer nor, as of the Closing Date, Buyer Entity has used any broker or finderin connection with the transactions described in this Agreement, and neitherSeller nor any of its Related Persons shall have any liability or otherwisesuffer or incur any loss or expense as a result of or in connection with anybrokerage or finder’s fee or other commission of any Person retained

 

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by Buyer, Buyer Entity or any of their respective RelatedPersons in connection with the Contemplated Transactions.

 

# 5.                                       Covenants of Buyer and Sellers Prior toClosing

#  

## 5.1                                 REQUIRED APPROVALS

##  

### (a)                                  Subject to the terms and conditions of this Agreement,the parties hereto agree to use all reasonable efforts to take, or cause to betaken, all action and to do, or cause to be done, all things necessary, properor advisable under Legal Requirements to consummate and make effective theContemplated Transactions, including cooperating fully with the other parties,including by provision of information and making of all necessary filings inconnection with, among other things, the HSR Act.  The parties hereto shall cooperate to causeto be filed as promptly as practicable, but no later than ten calendar days,following the execution of this Agreement, with the Federal Trade Commissionand the Department of Justice the notification and report form required underthe HSR Act for the Contemplated Transactions and to seek early termination ofthe waiting period thereunder, and shall use reasonable efforts to provide anysupplemental information that may be reasonably requested in connection withthose filings (it being understood that the filing fee shall be borne byBuyer).

###  

### (b)                                 Buyer and Sellers shall make as promptly aspracticable following the date of this Agreement the other notificationsrequired in connection with this Agreement and the Contemplated Transactions,and shall use commercially reasonable efforts to obtain the Consents of allThird Parties required in connection with the consummation of the ContemplatedTransactions.  Subject to LegalRequirements, Buyer and Sellers shall coordinate and cooperate in exchanginginformation and assistance in connection with obtaining Consents of ThirdParties and making all filings or notifications necessary to transfer anyGovernmental Authorizations to Buyer, or in connection with any applicationsfor new Governmental Authorizations relating to or used in the operation of theBusiness.

###  

## 5.2                                 NOTIFICATION

##  

Between the date of thisAgreement and the Closing, Buyer shall give prompt notice to Sellers, andSellers shall give prompt notice to Buyer, of (i) the occurrence, ornon-occurrence, of any event the occurrence, or non-occurrence, of which wouldbe reasonably likely to cause (x) any representation or warranty of such partycontained in this Agreement to be untrue or inaccurate or (y) any covenant,condition or agreement of such party contained in this Agreement not to becomplied with or satisfied; or (ii) the failure by it to comply with or satisfyin any material respect any covenant, condition or agreement to be compliedwith or satisfied by it under this Agreement.

 

## 5.3                                 COMMERCIALLY REASONABLE EFFORTS

##  

Buyer and Sellers shall usetheir commercially reasonable efforts to cause the conditions in Articles 7 and8 to be satisfied.

 

44

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## 5.4                                 BULK SALES LAWS

##  

Buyer and Sellers herebywaive compliance with the bulk-transfer provisions of the Uniform CommercialCode (or any similar law) (“Bulk Sales Laws”) in connection with theContemplated Transactions.

 

## 5.5                                 LETTERS OF CREDIT

##  

From and after the Closing,to the extent that any guaranty, letter of credit or other performanceassurance set forth in Section 3.23 of the Seller Disclosure Letter is drawnupon or otherwise results in any Liability to Sellers, Buyer shall promptlyreimburse Sellers following the receipt of an invoice therefor; provided, thatBuyer shall make such reimbursement no later than ten (10) Business Daysfollowing receipt of such invoice.  Allamounts due under this Section 5.5 that are not paid on or before the due dateshall bear interest at the rate of ten percent (10%) per annum.  Buyer shall not have any right to setoff anyamounts due and payable to Sellers under this Section 5.5 against any otherpayments to be made pursuant to this Agreement or otherwise.  Nothing in this Section 5.5 shall be deemedto affect Buyer’s rights under Article 11.

 

## 5.6                                 UPDATING

##  

Sellers may from time totime notify Buyer of any changes or additions to the Seller Disclosure Letterand Buyer may from time to time notify Sellers of any changes or additions tothe Buyer Disclosure Letter by the delivery of amendments or supplementsthereto, if any, as of a reasonably current date prior to the Closing, but eachparty shall in any event at least once not earlier than ten (10) Business Daysor later than three (3) Business Days prior thereto so notify the other party;provided, however, that such delivery shall not affect any rights of Buyerunder this Agreement, unless the updated disclosure would cause Buyer to havethe right of termination under Section 9.1(b) and Buyer does not exercise suchright of termination under Section 9.1(b) and the Closing occurs, in which caseany such supplement or supplements shall be deemed to become a part of theSeller Disclosure Letter as of the date of this Agreement.

 

# 6.                                       Covenants of Sellers Prior to Closing

#  

## 6.1                                 ACCESS AND INVESTIGATION

##  

### (a)                                  Between the date of this Agreement and theClosing Date, and upon reasonable advance notice received from Buyer, eachSeller shall (i) afford Buyer and its Representatives (collectively, “BuyerGroup”) reasonable access, during regular business hours, to Sellers’ and thePurchased Subsidiaries’ personnel, properties, Seller Contracts, GovernmentalAuthorizations, books and Records and other documents and data related to the Businessand Assets, such rights of access to be exercised in a manner that does notunreasonably interfere with the operations of Sellers; (ii) furnish Buyer Groupwith copies of all such Seller Contracts, Governmental Authorizations, booksand Records and other existing documents and data related to the Business andAssets as Buyer may reasonably request; (iii) furnish Buyer Group with suchadditional financial, operating and other relevant data and informationregarding the Business and Assets as Buyer may reasonably request; and (iv)otherwise cooperate and assist, to the extent reasonably requested by Buyer,with Buyer’s investigation of the properties, assets and financial conditionrelated to the Business and Assets. In addition, subject to Section 6.1(b),Buyer shall have the right to have any Facility and Tangible Personal Propertyinspected by Buyer Group, at

 

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### Buyer’s sole cost andexpense, for purposes of determining the physical condition and legalcharacteristics of any Facility and Tangible Personal Property.

###  

### (b)                                 Sellers have retained HBC Terracon as theirenvironmental consultant (hereinafter the “Environmental Consultant”) toconduct Phase I Site Assessments (“Phase I ESA”) on the Facilities and surfaceor subsurface investigation or invasive or destructive sampling (hereinafter a “PhaseII ESA”) on the Facilities listed in Section 6.1(b) of the Seller DisclosureLetter, such Phase I ESAs and Phase II ESAs to be in accordance with ASTM Standards.  Buyer agrees that the only Phase II ESAs tobe conducted shall be on the Facilities listed in Section 6.1(b) of the SellerDisclosure Letter, unless Sellers, in their sole discretion, determineotherwise.  Sellers will bear the costsof the Phase I ESAs and the Phase II ESAs. Sellers will provide Buyer with a copy of all Phase I ESAs and Phase IIESAs prepared by the Environmental Consultant in connection with thistransaction.  Each Seller, Buyer and eachofficer, employee, Representative, consultant, and adviser of Buyer shall havethe right to be present during any environmental assessment of the Assets, andshall comply with the conditions set forth in this Section 6.1.  Buyer shall maintain, and shall cause itsofficers, employees, Representatives, consultants and advisors to maintain, allinformation obtained by Buyer pursuant to any environmental assessment or otherdue diligence activity as strictly confidential, unless disclosure of any factsdiscovered through such environmental assessment is required under anyEnvironmental Laws.  In the event thatany necessary disclosures under applicable Environmental Laws are required withrespect to matters discovered by any environmental assessment conducted by, foror on behalf of Buyer, Buyer agrees that Sellers shall be the responsibleparties for disclosing such matters to the appropriate Governmental Bodies,unless Buyer is required by applicable Environmental Laws to make suchdisclosure, in which case Buyer shall so notify Sellers and (x) allow Sellers areasonable time to make such disclosure if such disclosure may be delegated or(y) consult with Sellers regarding such disclosure if such disclosure may notbe delegated.

###  

### (c)                                  Subject to Sections 6.1(a) and (b) and uponreasonable prior notice, Sellers shall permit Buyer Group to consult withSellers’ employees during reasonable business hours (including 7:00 a.m. to6:00 p.m., Monday through Friday) and to conduct, at Buyer’s sole risk andexpense, any other visual inspections of the Facilities and to examine theenvironmental records at such Facilities. Sellers shall also coordinate with Buyer to allow site visits andinspections at the field sites on Saturdays to the reasonable extent suchaccess can be made available.  Buyeragrees to protect, defend, indemnify and hold the Seller Indemnitees harmlessfrom and against any and all Liabilities occurring on or to the Facilitiescaused by the acts or omissions of Buyer Group or any Person (other than theEnvironmental Consultant) acting on Buyer’s behalf in connection with any duediligence, including any site visits and environmental sampling.  Buyer Group agrees to comply fully with allrules, regulations and instructions issued by Sellers (to the extent reasonablenotice thereof has been given to Buyer Group) regarding Buyer’s actions whileupon, entering or leaving any Facility, including any insurance requirementsthat the Seller may impose on contractors authorized to perform work on anyproperty owned or operated by Seller.

 

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## 6.2                                 OPERATION OF THE BUSINESS

##  

Between the date of thisAgreement and the Closing, with respect to the Business and Assets, unlessBuyer otherwise consents in writing, each Seller shall, and shall cause eachPurchased Subsidiary to:

 

### (a)                                  conduct the Business only in the ordinarycourse of the Business consistent with past practices or reasonable futureexpectations;

###  

### (b)                                 without making any commitment on Buyer’sbehalf, use its commercially reasonable efforts to, in all material respects,preserve intact the current Business organization, keep available the servicesof its employees and agents and maintain its relations and goodwill withsuppliers, customers, landlords, creditors, employees, agents and others havingbusiness relationships with it;

###  

### (c)                                  except for cause, make no material changes inmanagement personnel of the Business;

###  

### (d)                                 not hire any management personnel of theBusiness, make any changes to any Seller Benefit Plan affecting the AffectedEmployees, or increase the wages, salaries or benefits of any Affected Employeeor Purchased Subsidiary Employee, other than in the ordinary course of businessor pursuant to Legal Requirement;

###  

### (e)                                  maintain the Assets in a state of repair andcondition that complies with Legal Requirements, is consistent with therequirements and normal conduct of the Business and consistent with the recentnormal and routine maintenance schedule performed by Sellers;

###  

### (f)                                    use its commercially reasonable efforts tokeep in full force and effect, without amendment, all material rights relatingto the Business;

###  

### (g)                                 comply with all Legal Requirements and useits commercially reasonable efforts to comply with all contractual obligationsapplicable to the operations of the Business;

###  

### (h)                                 continue in full force and effect theinsurance coverage under the policies set forth in Section 3.18(a) of theSeller Disclosure Letter or substantially equivalent policies;

###  

### (i)                                     not enter into a Seller Contract or Biddescribed in Section 3.17(a) or relating to Business Intellectual Propertyother than in the ordinary course of business;

###  

### (j)                                     not dispose of or permit to lapse any rightsto the use of any Business Intellectual Property or permit any GovernmentalAuthorization to expire except to the extent Sellers have used their reasonablecommercial efforts to have such Governmental Authorization renewed;

###  

### (k)                                  maintain all books and Records of Sellers andthe Purchased Subsidiaries relating to the Business in the ordinary course ofthe Business consistent with past practices;

###  

### (l)                                     with respect to any Purchased Subsidiary,amend its constituent documents or take any other action (including redeemingor issuing equity interests) affecting any Seller’s or Purchased Subsidiary’sownership rights in another Purchased Subsidiary;

 

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### (m)                               with respect to any Purchased Subsidiary,form, dissolve or liquidate any Subsidiaries;

###  

### (n)                                 with respect to any Purchased Subsidiary,adopt, amend, renew or terminate (or give notice of termination of) a SellerBenefit Plan; and

###  

### (o)                                 with respect to any Purchased Subsidiary,vary any terms of any of its insurance policies or knowingly take any actionwhich may invalidate such policies or take out any additional or replacementpolicies other than renewals; and

###  

### (p)                                 with respect to any Purchased Subsidiary,make a Tax election, amend a Tax Return, settle a Tax claim or assessment,surrender a right to claim a Tax refund, change any method of Tax accounting orconsent to an extension or waiver of the limitation period applying to a Taxwith respect to it, its assets, or the Business.

###  

## 6.3                                 NEGATIVE COVENANT

##  

Except as otherwiseexpressly permitted herein, between the date of this Agreement and the ClosingDate, each Seller shall not, and shall not permit any Purchased Subsidiary to,without the prior written Consent of Buyer, (a) take any affirmative action, orfail to take any reasonable action within its control, as a result of which anyof the changes or events listed in Section 3.16 would occur or be reasonablylikely to occur; or (b) make any modification to any material Seller Contractor Governmental Authorization outside the ordinary course of business.

 

## 6.4                                 CURRENT EVIDENCE OF TITLE

##  

### (a)                                  As soon as is reasonably possible, Sellersshall furnish to Buyer for each parcel, tract or subdivided land lot of OwnedProperty:

###  

#### (i)                                     from Stewart Title Company and its Affiliates(the “Title Insurer”):

####  

##### (A)                              title insurance policy commitments issued bythe Title Insurer to insure title to all Owned Property in the amount of thatportion of the Purchase Price allocated to the Owned Property, as specified inthe Allocation Schedule, covering such Owned Property, naming Buyer as theproposed insured and having an effective date after the date of this Agreement,wherein the Title Insurer shall agree to issue an ALTA 1992 (or, in the case ofOwned Property located in Texas, a TLTA) form owner’s policy of title insurance(each a “Title Commitment”); and

#####  

##### (B)                                complete and legible copies of all recordeddocuments listed as Schedule B-1 matters to be terminated or satisfied in orderto issue the policy described in the Title Commitment or as special ScheduleB-2 exceptions thereunder (the “Recorded Documents”); and

#####  

#### (ii)                                  a survey of the Owned Property made after thedate of this Agreement by a land surveyor licensed by the state in which theOwned Property is located and bearing a certificate, signed and sealed by thesurveyor, certifying to Buyer and the Title Insurer that:

 

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##### (A)                              such survey was made in accordance with “MinimumStandard Detail Requirements for ALTA/ACSM Land Title Surveys,” jointlyestablished and adopted by ALTA and ACSM in 1999, and includes Items 1 (unlessthe inclusion of such item for a survey plat would cause a necessity to replatthe property with the appropriate governmental authorities), 2-4, 6, 7(a),7(b)(1), 7(c), 8-11(a) and 13 of Table A thereof; and

#####  

##### (B)                                such survey reflects the locations of allbuilding lines, easements and areas affected by any recorded documentsaffecting such Owned Property as disclosed in the Title Commitment (identifiedby issuer, commitment number, and an effective date after the date hereof) aswell as any encroachments onto the Owned Property or by the Improvements ontoany easement area or adjoining property (each a “Survey”); and

#####  

#### (iii)                               complete and current searches in the name ofSellers and other appropriate parties of all Uniform Commercial Code FinancingStatements records maintained by the Secretary of State of the states in whichany Seller is incorporated, the state in which any Seller maintains itsprincipal place of business, each state in which a Facility is located, eachjurisdiction in which a filing would be required in order to perfect a securityinterest in the Assets, the clerk or recorder of deeds (or other governmentaloffice where real property documents are filed for recording) of each county inwhich any Facility is located and wherever else Sellers or Buyer, based uponits investigation, is aware that a Uniform Commercial Code Financing Statementrelating to any of the Assets has been filed, together with such releases,termination statements and other documents as may be necessary to providereasonable evidence that all items of intangible personal property, TangiblePersonal Property and fixtures to be sold under this Agreement are free andclear of Encumbrances, other than as permitted under this Agreement.

####  

### (b)                                 Each Title Commitment shall include the TitleInsurer’s requirements for issuing its title policy, which requirements shallbe met by Sellers on or before the date of Closing (including thoserequirements that must be met by releasing or satisfying monetary Encumbrances,but excluding Encumbrances that will remain after Closing and thoserequirements that are to be met solely by Buyer).

###  

### (c)                                  If any of the following shall occur(collectively, a “Title Objection”):

###  

#### (i)                                     any Title Commitment or other evidence oftitle or search of the appropriate real estate records discloses that any partyother than Seller has title to the insured estate covered by the TitleCommitment;

####  

#### (ii)                                  any title exception is disclosed in ScheduleB to any Title Commitment that is not one of the Permitted Real EstateEncumbrances or one that Sellers specify when delivering the Title Commitmentto Buyer as one that Sellers will cause to be deleted from the Title Commitmentconcurrently with the Closing, including (A) any exceptions that pertain toEncumbrances securing any loans that do not constitute an Assumed Liability and(B) any exceptions that Buyer reasonably believes could materially andadversely affect Buyer’s use and enjoyment of the Owned Property describedtherein

 

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#### in the manner in which such Owned Propertywas used and enjoyed in the conduct of the Business prior to Closing; or

####  

#### (iii)                               any Survey discloses any matter that Buyerreasonably believes could materially and adversely affect Buyer’s use andenjoyment of the Owned Property described therein in the manner in which suchOwned Property was used and enjoyed in the conduct of the Business prior toClosing, then Buyer shall notify Parent in writing (“Buyer’s Notice”) of suchmatters within ten (10) business days after receiving all of the TitleCommitment, Survey and copies of Recorded Documents for the Facility coveredthereby.

####  

### (d)                                 Sellers shall use commercially reasonableefforts to cure each Title Objection and take all steps required by the TitleInsurer to eliminate each Title Objection as an exception to the TitleCommitment. Any Title Objection that the Title Company is willing to insureover on terms acceptable to Sellers and Buyer is herein referred to as an “InsuredException.” The Insured Exceptions, together with any title exception ormatters disclosed by the Survey not objected to by Buyer in the manneraforesaid shall be deemed to be acceptable to Buyer.  Notwithstanding the foregoing, Sellers maynotify Buyer in writing that Sellers are not prepared to undertake efforts tocure any or all such Title Objections as are specified in such notice, in whichcase Buyer shall be entitled to terminate this Agreement pursuant to Section9.2(f) by written notice thereof to Sellers delivered within five Business Daysof the date of its receipt of Sellers’ notice, whereupon this Agreement shallterminate without further liability to Sellers or Buyer.  If Buyer does not elect to terminate thisAgreement within such period, then all such uncured Title Objections shall bedeemed to be acceptable to Buyer.

###  

### (e)                                  Buyer shall pay all premiums due under thetitle policies contemplated by this Section 6.4.  Sellers shall pay for the Surveys.

###  

## 6.5                                 LOUISIANA FACILITIES

##  

Sellers shall repair andrestore the Facilities located in Louisiana (at 1400 and 1401 Destrehan Avenue)and, to the extent such repair and restoration is not completed before theClosing, the cost of to complete such repair and restoration shall be accruedas a Liability on the Closing Balance Sheet.

 

# 7.                                       Conditions Precedent to Buyer’s Obligation toClose

#  

Buyer’s obligation topurchase the Assets and to take the other actions required to be taken by Buyerat the Closing is subject to the satisfaction, at or prior to the Closing, ofeach of the following conditions (any of which may be waived by Buyer, in wholeor in part):

 

## 7.1                                 ACCURACY OF REPRESENTATIONS; SELLERS’PERFORMANCE

##  

The representations andwarranties of each Seller set forth in this Agreement will be, if qualified bymateriality, true and correct in all respects, and if not so qualified, shallbe true and correct in all material respects (without giving effect to anysupplement to the Seller Disclosure Letter not approved in writing by Buyerother than the supplement contemplated by the second sentence of Section3.17(d)), as of the Closing Date as though made on and as of the Closing Date

 

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(exceptto the extent such representations and warranties speak as of an earlierdate).  Each of the agreements andcovenants of Sellers to be performed and complied with by Sellers pursuant tothis Agreement prior to or as of the Closing Date will have been duly performedand complied with in all material respects. Each Seller shall have delivered to Buyer a certificate signed by one ofits duly authorized officers, dated the Closing Date, certifying, as of suchdate, (i) that all representations and warranties (individually andcollectively) of Sellers in Article 3 are, if qualified by materiality, trueand correct in all respects, and if not so qualified, true and correct in allmaterial respects and (ii) that Sellers have performed and complied in allmaterial respects with all covenants and agreements (individually andcollectively) contained in this Agreement required to be performed and compliedwith by them at or prior to the Closing Date.

 

## 7.2                                 HSR ACT

##  

The waiting period under theHSR Act shall have expired or been terminated.

 

## 7.3                                 ADDITIONAL DOCUMENTS

##  

Each Seller shall havecaused the documents and instruments required by Section 2.9(a) and the followingdocuments to be delivered (or tendered subject only to Closing) to Buyer:

 

### (a)                                  Releases of all Encumbrances on the Assets,other than Permitted Encumbrances, including releases of each mortgage ofrecord and reconveyances of each deed of trust with respect to each parcel ofOwned Property included in the Assets;

###  

### (b)                                 Buyer shall have received a certificate(i) of non-foreign status in the form prescribed by United StatesTreasury Regulation § 1.1445-2(b)(2)(iv) with respect to each Seller and(ii) that no Purchased Subsidiary is a United States real property holdingcorporation;

###  

### (c)                                  all balances owed between any Affiliate orRelated Person of a Purchased Subsidiary, on the one hand, and a PurchasedSubsidiary, on the other hand, shall be canceled without any payment of fundsand all agreements, whether written, or otherwise, that are solely between anyAffiliate or Related Person of a Purchased Subsidiary, on the one hand, and aPurchase Subsidiary, on the other hand, shall have been terminated and of nofurther effect without any further action or liability on the part of suchPurchased Subsidiary or Buyer;

###  

### (d)                                 Consents, in form and substance reasonablysatisfactory to Buyer, from the Persons listed in Section 7.3(d) of the SellerDisclosure Letter; and

###  

### (e)                                  Such other documents as Buyer may reasonablyrequest for the purpose of:

###  

#### (i)                                     evidencing the accuracy of any Seller’srepresentations and warranties;

####  

#### (ii)                                  evidencing the performance by any Seller of,or the compliance by any Seller with, any covenant or obligation required to beperformed or complied with by such Seller; or

 

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#### (iii)                               evidencing the satisfaction of any conditionreferred to in this Article 7.

####  

## 7.4                                 NO PROCEEDINGS

##  

There shall not be anyProceeding pending or threatened against any Seller (other than by or at thedirection of Buyer or any of its Affiliates) or Buyer or against any RelatedPerson of any such party (a) involving any challenge to, or seeking Damages orother relief in connection with, any of the Contemplated Transactions or (b)that may have the effect of preventing, delaying, making illegal, imposinglimitations or conditions on or otherwise interfering with any of theContemplated Transactions.

 

## 7.5                                 NO CONFLICT

##  

Neither the consummation northe performance of any of the Contemplated Transactions will, directly orindirectly (with or without notice or lapse of time), contravene or conflictwith or result in a violation of or cause Buyer or any Related Person of Buyerto suffer any material adverse consequence under (a) any applicable LegalRequirement or Order or (b) any Legal Requirement or Order that has beenpublished, introduced or otherwise proposed by or before any Governmental Body,excluding Bulk Sales Laws.

 

# 8.                                       Conditions Precedent to each Seller’sObligation to Close

#  

Each Seller’s obligation tosell the Assets and to take the other actions required to be taken by suchSeller at the Closing is subject to the satisfaction, at or prior to theClosing, of each of the following conditions (any of which may be waived bysuch Seller in whole or in part):

 

## 8.1                                 ACCURACY OF REPRESENTATIONS; BUYER’SPERFORMANCE

##  

The representations andwarranties of Buyer set forth in this Agreement will be, if qualified bymateriality, true and correct in all respects, and if not so qualified, shallbe true and correct in all material respects (without giving effect to anysupplement to the Buyer Disclosure Letter not approved in writing by Seller),as of the Closing Date as though made on and as of the Closing Date (except tothe extent such representations and warranties speak as of an earlierdate).  Each of the agreements andcovenants of Buyer to be performed and complied with by Buyer pursuant to thisAgreement prior to or as of the Closing Date will have been duly performed andcomplied with in all material respects. Buyer shall have delivered to Sellers a certificate signed by one of itsduly authorized officers, dated the Closing Date, certifying, as of such date(i) that all representations and warranties (individually and collectively) ofBuyer are, if qualified by materiality, true and correct in all respects, andif not so qualified, true and correct in all material respects and (ii) Buyerhas performed and complied in all material respects with all covenants andagreements (individually and collectively) contained in this Agreement requiredto be performed and complied with by it at or prior to the Closing Date.

 

## 8.2                                 HSR ACT

##  

The waiting period under theHSR Act shall have expired or been terminated.

 

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## 8.3                                 ADDITIONAL DOCUMENTS

##  

Buyer shall have caused thedocuments and instruments required by Section 2.9(b) and the followingdocuments to be delivered (or tendered subject only to Closing) to each Seller:

 

### (a)                                  Such other documents as any Seller mayreasonably request for the purpose of:

###  

#### (i)                                     evidencing the accuracy of any of Buyer’srepresentations and warranties;

####  

#### (ii)                                  evidencing the performance by Buyer of, orthe compliance by Buyer with, any covenant or obligation required to beperformed or complied with by Buyer; or

####  

#### (iii)                               evidencing the satisfaction of any conditionreferred to in this Article 8.

####  

## 8.4                                 NO PROCEEDINGS

##  

There shall not be anyProceeding pending or threatened against any Seller or Buyer (other than by orat the direction of Sellers and their Affiliates) or against any Related Personof such Seller (a) involving any challenge to, or seeking Damages or otherrelief in connection with, any of the Contemplated Transactions or (b) that mayhave the effect of preventing, delaying, making illegal, imposing limitationsor conditions on or otherwise interfering with any of the ContemplatedTransactions.

 

## 8.5                                 NO CONFLICT

##  

Neither the consummation northe performance of any of the Contemplated Transactions will, directly orindirectly (with or without notice or lapse of time), contravene or conflictwith or result in a violation of or cause any Seller or any Related Person ofsuch Seller to suffer any material adverse consequence under (a) any applicableLegal Requirement or Order or (b) any Legal Requirement or Order that has beenpublished, introduced or otherwise proposed by or before any Governmental Body,excluding Bulk Sales Laws.

 

# 9.                                       Termination

#  

## 9.1                                 TERMINATION EVENTS

##  

By notice given prior to orat the Closing, subject to Section 9.2, this Agreement may be terminated asfollows:

 

### (a)                                  by mutual written agreement of Buyer andParent (each, a “Representative Party”);

###  

### (b)                                 by either Representative Party (provided thatneither the terminating Representative Party nor any of its Affiliates is thenin material breach of any representation,

 

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### warranty, covenant or otheragreement contained in this Agreement) in the event of a material breach by theother Representative Party or a party Affiliated with the other RepresentativeParty of any representation or warranty contained in this Agreement whichcannot be or has not been cured within thirty (30) days after the giving ofwritten notice to other Representative Party of such breach and which breach isreasonably likely, in the opinion of the terminating Representative Party, topermit such Representative Party to refuse to consummate the transactionscontemplated by this Agreement in accordance with the terms hereof;

###  

### (c)                                  by either Representative Party (provided thatneither the terminating Representative Party nor any of its Affiliates is thenin material breach of any representation, warranty, covenant, or otheragreement contained in this Agreement) in the event of a material breach by theother Representative Party or a party Affiliated with the other RepresentativeParty of any covenant or agreement contained in this Agreement which cannot beor has not been cured within ten (10) days after the giving of written noticeto other Representative Party of such breach and which breach is reasonablylikely, in the opinion of the terminating Representative Party, to permit suchRepresentative Party to refuse to consummate the transactions contemplated bythis Agreement in accordance with the terms hereof;

###  

### (d)                                 by either Representative Party in the event(i) any Consent of any Governmental Body required for consummation of thetransactions contemplated hereby shall have been denied by final nonappealableaction of such authority or if any action taken by such authority is notappealed within the time limit for appeal or (ii) the consummation of suchtransactions shall have been permanently restrained, enjoined or otherwiseprohibited by force of law;

###  

### (e)                                  by either Representative Party in the eventthat the Closing shall not have been consummated by January 31, 2006; providedthat the failure to consummate the transactions contemplated hereby on orbefore such date shall not have been caused by any breach of this Agreement bythe Representative Party electing to terminate pursuant to this Section 9.1(e)or an Affiliate of such Representative Party; or

###  

### (f)                                    by Buyer as provided in Section 6.4(d).

###  

## 9.2                                 EFFECT OF TERMINATION

##  

Each party’s right oftermination under Section 9.1 is in addition to any other rights it may haveunder this Agreement or otherwise, and the exercise of such right oftermination will not be an election of remedies. If this Agreement isterminated pursuant to Section 9.1, all obligations of the parties under thisAgreement will terminate, except that the obligations of the parties in thisSection 9.2, Sections 13.1 (Expenses), 13.2 (Public Announcements), 13.3(Notices), 13.4 (Dispute Resolution), and Articles 11 (Indemnification;Remedies) and 12 (Confidentiality) will survive, provided, however, that, ifthis Agreement is terminated because of a breach of this Agreement by thenonterminating party or because one or more of the conditions to theterminating party’s obligations under this Agreement is not satisfied as aresult of the nonterminating party’s failure to comply with its obligationsunder this Agreement, the terminating party’s right to pursue all legalremedies available under this Agreement will survive such terminationunimpaired.

 

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# 10.                                 Additional Covenants

#  

## 10.1                           EMPLOYEES AND EMPLOYEE BENEFITS

##  

(a)                                  As of the Closing Date, Sellers shallterminate the employment of all of the Affected Employees (other than those whoare on short-term disability leave).  Assoon as practicable after the date of this Agreement, Buyer shall offeremployment, effective as of the Effective Time, to all persons who are or willbe Affected Employees on the day immediately preceding the Closing Date (otherthan those on short-term disability leave). Each Affected Employee who accepts any such offer of employment shall bereferred to in this Agreement as a “Transferred Employee.”  The offer of employment, including wages,salaries and benefits, shall be, in the aggregate, substantially comparable,but excluding for this purpose Transaction Bonuses, with the terms andconditions under which the Transferred Employees were employed immediatelybefore the Closing Date.  Any AffectedEmployee who is on short-term disability leave as of the Closing Date shallremain employed by Sellers through the Affected Employee’s short-termdisability leave; provided, however, that if he or she recovers from his or herdisability within the period of his or her short-term disability leave or thesix-month period following the Closing Date (whichever is shorter), Buyer shallat that time make an offer of employment to him or her on the same employmentterms and conditions as are applicable to similarly situated TransferredEmployees, subject to the proviso above.

 

(b)                                 Sellers shall be responsible for the paymentof all wages and other remuneration accruing to any Affected Employee prior tothe time any such Affected Employee became a Transferred Employee except to theextent the liability therefor is reflected as a liability on the ClosingBalance Sheet.

 

(c)                                  Sellers shall be liable for all claims madeby Affected Employees and their beneficiaries under and all other liabilitiesof the Seller Benefit Plans.

 

(d)                                 Coverage for Transferred Employees under all “employeewelfare benefit plans,” as defined in Section 3(1) of ERISA, maintained bySellers shall cease as of the Effective Time. Sellers shall be solely responsible for any continuation coveragerequired by COBRA for those Affected Employees of Sellers who are notTransferred Employees.  Buyer shall waiveall pre-existing conditions, limitations or exclusions and waiting periods forthe Transferred Employees under all employee welfare benefit plans and fringebenefit programs of Buyer, including vacation, bonus and other incentiveprograms maintained by Buyer.

 

(e)                                  Sellers shall retain all assets in thepension and retirement funds of Sellers, and shall distribute pension andretirement benefits that the Transferred Employees shall become entitled toreceive from Sellers in accordance with the applicable plan document and theTransferred Employees’ elections, as applicable; provided, however,that effective as of the Effective Time, to the extent required by Legal Requirement,Sellers shall amend the Stewart & Stevenson Services, Inc. Defined BenefitPension Plan and any other Seller Benefit Plan that is a “pension plan,” asdefined in Section 3(2) of ERISA, to provide that each Transferred Employee’sbenefit that has accrued as of the Closing Date is fully vested andnonforfeitable as of the Closing Date.

 

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(f)                                    Effective as of the Closing Date (or as toemployees on short-term disability leave on the Closing Date, as of the date ofemployment by Buyer), Buyer shall take such actions as are necessary to grantpast service credit for all the Transferred Employees for purposes ofdetermining vesting, eligibility and benefit accruals under all Buyer’semployee benefit programs in which Transferred Employees are eligible toparticipate, including employee retirement plans, severance, vacation, bonus,incentive compensation and employee welfare benefit plans of Buyer equal tothat which such Transferred Employees were credited with by Sellers as of theClosing Date for service with Sellers and their current and former ERISAAffiliates, but excluding benefit accruals for Buyer’s defined benefit pensionand post-retirement medical benefit plans.

 

(g)                                 With respect to events following the Closing,Buyer shall be responsible for sending timely and appropriate notices to allTransferred Employees required under all applicable Legal Requirements relatingto plant or facility closings or otherwise regulating the termination of employees.  To the extent that any liability is incurredunder any such Legal Requirements based on Buyer’s failure to comply withSection 10.1(a) or Buyer’s actions after the Closing, Buyer will be solely andexclusively responsible for all obligations and liabilities incurred under suchLegal Requirements relating to the Contemplated Transactions.

 

(h)                                 Sellers shall make available to Buyer recordswhich provide information regarding employees’ names, Social Security numbers,dates of hire by Sellers, date of birth, number of hours worked each calendaryear, attendance and salary histories for all Transferred Employees.  Sellers shall not provide records to theextent prohibited by any applicable Legal Requirement, including the HealthInsurance Portability and Accountability Act of 1996.

 

## 10.2                           NONSOLICITATION

##  

### (a)                                  Until the date three (3) years after theClosing Date, no Seller shall (and each Seller shall cause its Affiliates notto), without the prior written consent of Buyer, directly or indirectly,knowingly hire, retain or attempt to hire or retain any employee or contractemployee of Buyer or interfere with the relationship or prospective employmentrelationship between Buyer and any Affected Employee or between Buyer and anyPurchased Subsidiary Employee, or any of Buyer’s employees or contractemployees; provided, however, that such Seller shall not be prohibited fromhiring, retaining or attempting to hire or retain any person who responds to ageneral solicitation or advertisement.

###  

### (b)                                 Until the date three (3) years after theClosing Date, Buyer shall not (and Buyer shall cause its Affiliates not to),without the prior written consent of Sellers, directly or indirectly, knowinglyhire, retain or attempt to hire or retain any employee or contract employee ofany Seller or interfere with the relationship between any Seller and any of itsemployees or contract employees; provided, however, that Buyer shall not beprohibited from hiring, retaining or attempting to hire or retain any personwho responds to a general solicitation or advertisement.

###  

## 10.3                           CUSTOMER AND OTHER BUSINESS RELATIONSHIPS

##  

For a period of ninety (90)days after the Closing, each Seller will cooperate with Buyer on a commerciallyreasonable basis at Buyer’s sole cost in its efforts to continue and maintainfor the

 

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benefitof Buyer those business relationships of such Seller or of any PurchasedSubsidiary existing prior to the Closing and relating to the Business after theClosing, including relationships with lessors, employees, regulatoryauthorities, licensors, customers, suppliers and others.

 

## 10.4                           RETENTION OF AND ACCESS TO RECORDS

##  

### (a)                                  For the greater of five years from theClosing Date and any period as may be required by any statute, regulation orGovernmental Body or any then pending litigation, Buyer shall maintain in thesame manner that it currently maintains its business records and files thebusiness records and files of Sellers that are transferred to Buyer inconnection herewith, and in anticipation of, or preparation for, existing orfuture Proceeding or any Tax audit in which Sellers or any of its Affiliates isinvolved and which is related to the Business or the Assets, permit Sellers andtheir Representatives reasonable access to such records and files duringregular business hours and upon reasonable notice at Buyer’s principal placesof business or at any location where the records are stored; provided, however,that (i) any access shall be had or done in a manner so as not to interferewith the normal conduct of the Business and (ii) Buyer shall not be required toprovide access to any confidential record or records, the disclosure of whichwould violate any governmental statute or regulation or applicableconfidentiality agreement with any Person. Buyer shall notify Parent in writing at least ten days prior to anydestruction of such transferred records and files prior to the end of theperiod referenced in the preceding sentence, and at Parent’s option, deliversuch records and files to Parent.

###  

### (b)                                 Upon reasonable request therefor by Buyer,Sellers shall deliver to Buyer copies of any original Business Records notdelivered to Buyer at the Closing as promptly as reasonably possible at Sellers’sole cost and expense.  Further, for aperiod of five (5) years from the Closing, Sellers (i) shall maintain, andshall cause their Affiliates to maintain, at Sellers’ sole cost and expense,those Business Records not delivered to Buyer at the Closing and (b) shall not(and shall cause each of its Affiliates not to) destroy any such BusinessRecords without first notifying Buyer in writing at least 30 days in advance ofsuch destruction and giving Buyer the opportunity to take possession of suchBusiness Records.

###  

## 10.5                           FURTHER ASSURANCES

##  

The parties shall cooperatereasonably with each other and with their respective Representatives inconnection with any steps required to be taken as part of their respectiveobligations under this Agreement, and shall (a) furnish upon request to each othersuch further information; (b) execute and deliver to each other such otherdocuments; and (c) do such other acts and things, all as the other party mayreasonably request for the purpose of carrying out the intent of this Agreementand the Contemplated Transactions.

 

10.6                           INTENTIONALLY DELETED

 

## 10.7                           PROVISIONS RELATING TO CERTAIN ASSETS

##  

### (a)                                  To the extent that a Seller Contract orGovernmental Authorization is not capable of being sold, assigned, transferred,subcontracted or conveyed without the approval, consent or waiver of the issuerthereof or the other party thereto, or any Third Party (including aGovernmental Body), and such approval, consent or waiver has not been obtainedprior to the

 

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### Closing, or if such sale,assignment, transfer or conveyance or attempted sale, assignment, transfer orconveyance would constitute a breach thereof or a violation of any LegalRequirement, neither this Agreement nor any other Transaction Agreement shallconstitute a sale, assignment, transfer or conveyance thereof, or an attemptedsale, assignment, transfer or conveyance thereof.

###  

### (b)                                 Anything in this Agreement to the contrarynotwithstanding, a Seller is not obligated to sell, assign, transfer or conveyto Buyer any of its rights or obligations in or to any of the Seller Contractsor Governmental Authorizations without first obtaining all necessary approvals,consents or waivers; provided, however, that the foregoing shall not limitSellers’ liability for a breach of Section 3.14 or Section 5.1.  Buyer and Sellers shall cooperate with eachother to obtain all approvals, consents or waivers necessary to convey to Buyereach such Seller Contract or Governmental Authorization, as soon aspracticable; provided, however, that neither such Seller nor Buyer shall beobligated to offer or pay any consideration or concession therefor to the ThirdParty from whom such approval, consent or waiver is requested.  Other than the Consents set forth on Exhibit7, the failure by any Seller to obtain any such approval, consent or waivernecessary to convey any Seller Contract or Governmental Authorization to Buyershall not affect the obligations of the parties to close hereunder; providedthat such Seller uses commercially reasonable efforts to cause the economicbenefit of each Seller Contract to be furnished to Buyer.

###  

### (c)                                  To the extent any of the approvals, consentsor waivers necessary to convey any Seller Contract or GovernmentalAuthorization to Buyer have not been obtained by any Seller as of the Closingor to the extent any Seller Contract or Governmental Authorization cannot betransferred to Buyer by the Closing, then Buyer and such Seller shall enterinto a Subcontract with respect to any such Seller Contract, and such Sellershall, during the remaining term of such Seller Contract or GovernmentalAuthorization, use commercially reasonable efforts, to (i) at the request ofBuyer, cooperate with Buyer to obtain the consent of any such Third Party;provided, however, that neither such Seller nor Buyer shall be obligated tooffer or pay any consideration to any Person, (ii) at the request of Buyer,cooperate with Buyer in any reasonable and lawful arrangements designed toprovide the benefits of such Seller Contract or Governmental Authorization toBuyer, (iii) as it pertains to Seller Contracts, enforce, at the request ofBuyer and at the expense and for the account of Buyer, any rights of suchSeller arising from such Seller Contract against the issuer thereof or theother party or parties thereto (including the rights to elect to terminate anysuch Seller Contract in accordance with the terms thereof upon the request ofBuyer); and (iv) as it pertains to Governmental Authorization, at the requestand expense of Buyer, apply for any necessary renewals or extensionsthereof.  To the extent that any Sellerenters into lawful arrangements satisfactory to Buyer in its sole discretiondesigned to provide the benefits of any such Seller Contract or GovernmentalAuthorization to Buyer as set forth in clauses (i) through (iv) above, suchSeller Contract or Governmental Authorization shall be deemed to have beenconveyed to Buyer for the purposes of this Agreement.

###  

## 10.8                           SUPPORT

##  

### (a)                                  From and after the Closing, in the event andfor so long as any Seller actively is contesting or defending against anyaction, suit, proceeding, hearing, investigation, charge, complaint, claim, ordemand in connection with (i) any transaction contemplated under this Agreementor (ii) any fact, situation, circumstances, status, condition, activity,practice, plan,

 

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### occurrence, event, incident,action, failure to act, or transaction relating to the Business (including anymatter disclosed in Section 3.15(a), (b) or (c) of the Seller DisclosureLetter) or to the DES Business (including during such period prior to Closing),Buyer will cooperate reasonably with Sellers and Sellers’ counsel in thecontest or defense, make available their personnel, and provide such testimonyand access to their books and records as shall be reasonably requested inconnection with the contest or defense, all at the reasonable out-of-pocketexpense of Sellers (unless Sellers are entitled to indemnification thereforhereunder).  This Section 10.8(a) is notintended to alter applicable discovery procedures in connection with anylitigation between or among the parties hereto.

###  

### (b)                                 Without limiting Section 10.8(a), and inrecognition of the fact that Sellers are retaining the operations andobligations of the DES Business, and will continue to defend at Sellers’ costthe DES Business and pre-Closing Business related litigation and pre-ClosingProceedings, Buyer agrees that it will, after the Effective Time, cooperatewith Sellers to the fullest extent necessary (subject to Section 10.8(c)) toenable Sellers to satisfy the DES Business obligations, carry out the DESBusiness operations and defend the DES Business and Business related litigationand Proceedings.  Specifically, withoutlimitation, Buyer agrees that (i) it will assist Sellers in the defense of DESBusiness and pre-Closing Business related litigation and pre-ClosingProceedings, (ii) that it will assist Sellers, through Buyer’s power productsdistribution activities, in dealing with suppliers of equipment and servicesnecessary for Sellers to carry out the DES Business related obligations,including assisting Sellers in obtaining equipment on the same terms as towhich Sellers could acquire equipment at present (but subject to a mutuallyagreed price), and (iii) that it will assist Sellers in obtaining technicalsupport and other support from suppliers regarding solutions for DES Businesscontract related issues on existing projects. Buyer’s obligation to cooperate will not require it to provide directfinancial support to Sellers but will, in general, be limited to the reasonablecommitment of Buyer’s personnel to assist Sellers in the above regards and toprovide access to books and Records and necessary or appropriate personnel,which personnel shall in all respects cooperate with Sellers in suchmatters.  Sellers will continue to winddown all activities of the DES Business, and, in that regard, Buyer will useits reasonable best efforts to offer employment (on terms similar to thoseoffered to other Affected Employees) to current DES Business personnel upon thecompletion of their activities on behalf of Sellers.  Nothing in this Section 10.8(b) shallobligate Sellers to purchase equipment or contract for services from Buyer or anyother Person.

###  

### (c)                                  In consideration of Buyer’s services toSellers pursuant to this Section 10.8, Sellers shall

###  

#### (i)                                     reimburse Buyer for all reasonableout-of-pocket expenses incurred by Buyer in connection therewith;

####  

#### (ii)                                  compensate Buyer at its standard rates fortime and materials provided to Sellers or at their request to the extentcovered by such standard rates; and

####  

#### (iii)                               compensate Buyer at such reasonable rates asBuyer may establish from time to time for other services provided to Sellers orat their request.

 

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### (d)                                 From the Closing Date until sixty (60) daysthereafter and as reasonably requested by Parent, Buyer shall provide supportto Sellers in the collection of the accounts receivable that were generated bythe operations of Parent’s Power Products Division in California and that havebeen sold to a Third Party (the “California Receivables”), and Buyer shall useits good faith efforts to collect such California Receivables consistent with theefforts it and its Affiliates use to collect their own billed accountsreceivable; provided, that such support and efforts shall not require Buyer toinitiate or otherwise pursue litigation. Upon request from Parent, Buyer also shall send Parent a reportregarding the status of the support efforts regarding the CaliforniaReceivables with sufficient detail as reasonably requested by Parent.  To the extent any funds are paid to Buyer andare reasonably designated by the debtor to be applied to any CaliforniaReceivable (a “Receivables Payment”), Buyer shall (i) remit such ReceivablesPayment to Parent by wire transfer to an account designated by Parent and (ii)send to Parent copies of all receipts evidencing receipt of each ReceivablesPayment from the debtor, in each case within fifteen (15) days after the end ofthe month in which such funds were received. Buyer shall not compromise, discharge, settle, transfer or assign any ofthe California Receivables, in part or in whole, without the prior writtenconsent of Parent.  Buyer shall fullycooperate with and shall provide Sellers with any and all documents andinformation, including photocopies, invoices, access to records and personnel,reasonably requested by Sellers in connection with Sellers’ collection of anyCalifornia Receivables.  In considerationof Buyer’s services to Sellers pursuant to this Section 10.8(d), Sellers shallreimburse Buyer for any reasonable out-of-pocket third party costs incurred byBuyer in connection with its support under this Section 10.8(d).

###  

### (e)                                  From and after Closing, Buyer will cooperatereasonably with Sellers and Sellers’ counsel, make available their personnel,assist in preparing and making filings, and provide such access to their booksand records as shall be reasonably requested in connection with the closing,termination, de-registration or other activities associated with Sellers’closing of the foreign branches or offices of the Business that are registeredor otherwise held in the name of or on behalf of any Seller or its Affiliates.

###  

# 11.                                 Indemnification; Remedies

#  

## 11.1                           SURVIVAL

##  

All representations,warranties, covenants and obligations in this Agreement, the Seller DisclosureLetter, the amendment(s) or supplement(s) to the Seller Disclosure Letter, theBuyer Disclosure Letter, the certificates delivered pursuant to Section 2.9 andany other certificate or document delivered pursuant to this Agreement shallsurvive the Closing and the consummation of the Contemplated Transactions,subject to Section 11.7. Except as otherwise provided in this Agreement, thewaiver of any condition based upon the accuracy of any representation orwarranty, or on the performance of or compliance with any covenant orobligation, will not affect the right to indemnification, reimbursement orother remedy based upon such representations, warranties, covenants andobligations.

 

## 11.2                           INDEMNIFICATION AND REIMBURSEMENT BY SELLERS

##  

Sellers will jointly andseverally indemnify, defend and hold harmless Buyer, and its Representatives,shareholders, subsidiaries and Related Persons (collectively, the “Buyer

 

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Indemnitees”),and will reimburse Buyer Indemnitees for any loss, Liability, claim, damage,expense (including costs of investigation and defense and reasonable attorneys’fees and expenses), whether or not involving a Third Party Claim (collectively,“Damages”) arising from or in connection with:

 

### (a)                                  any breach of any representation or warrantymade by such Seller in (i) this Agreement, (ii) the Seller Disclosure Letter,(iii) the amendment(s) or supplement(s) to the Seller Disclosure Letter, (iv)the certificate delivered pursuant to Section 2.9(a)(ix), (v) any transferinstrument or (vi) any other certificate, document, writing or instrumentdelivered by such Seller pursuant to this Agreement;

###  

### (b)                                 any breach of any covenant or obligation ofsuch Seller in this Agreement or in any other certificate, document, writing orinstrument delivered by such Seller pursuant to this Agreement;

###  

### (c)                                  if the Closing occurs, any Liability arisingout of the ownership or operation of the Assets prior to the Effective Time,except to the extent such Liability arises out of or relates to an AssumedLiability and, subject to Section 3.24(d), except for any Liability of aPurchased Subsidiary other than pre-closing Taxes described in Section 2.4(b)(i);

###  

### (d)                                 if the Closing occurs, any brokerage orfinder’s fees or commissions or similar payments based upon any agreement orunderstanding made, or alleged to have been made, by any Person with suchSeller (or any Person acting on such Seller’s behalf) in connection with any ofthe Contemplated Transactions;

###  

### (e)                                  if the Closing occurs, (i) any Seller BenefitPlan other than a Purchased Subsidiary Plan, and (ii) any pre-Closing Liabilityunder any Purchased Subsidiary Plan; or

###  

### (f)                                    if the Closing occurs, any RetainedLiabilities.

###  

## 11.3                           INDEMNIFICATION AND REIMBURSEMENT BY BUYER

##  

Buyer will indemnify, defendand hold harmless Sellers, and their Representatives, shareholders,subsidiaries and Related Persons (collectively, the “Seller Indemnitees”), andwill reimburse Seller Indemnitees for any Damages arising from or in connectionwith:

 

### (a)                                  any breach of any representation or warrantymade by Buyer or Buyer Entity in (i) this Agreement, (ii) Buyer DisclosureLetter, (iii) the amendment(s) or supplement(s) to the Buyer Disclosure Letter,(iv) the certificate delivered pursuant to Section 2.9(b)(viii), (v) anytransfer instrument or (vi) any other certificate, document, writing orinstrument delivered by Buyer pursuant to this Agreement;

###  

### (b)                                 any breach of any covenant or obligation ofBuyer in this Agreement or in any other certificate, document, writing orinstrument delivered by Buyer pursuant to this Agreement;

 

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### (c)                                  if the Closing occurs, any Liability arisingout of the ownership or operation of the Business or Assets following theEffective Time except to the extent such Liability constitutes a RetainedLiability;

###  

### (d)                                 if the Closing occurs, any brokerage orfinder’s fees or commissions or similar payments based upon any agreement orunderstanding made, or alleged to have been made, by any Person with Buyer (orany Person acting on Buyer’s behalf) in connection with any of the ContemplatedTransactions;

###  

### (e)                                  if the Closing occurs, any AssumedLiabilities;

###  

### (f)                                    if the Closing occurs, except with respect toany Proceeding arising out of or relating to the Liabilities retained pursuantto Section 2.4(b)(iii), any Liability arising out of any Proceeding (includingthe obligation to handle such Proceeding) commenced after the Effective Timeand arising out of or relating to any occurrence or event happening at or afterthe Effective Time; or

###  

### (g)                                 if the Closing occurs, any Tax benefitreflected on a post-Closing Tax Return which is attributable to a period priorto Closing to the extent not reflected on the Closing Balance Sheet.

 

## 11.4                           LIMITATIONS RELATED TO ENVIRONMENTAL MATTERS

##  

(a)                                  Notwithstanding the provisions of Section11.2, Sellers shall not be required to pay any amount to Remediate any BusinessProperty (i) not required to obtain from the state environmental agency inwhich such Business Property is located at “no further action” letter,certificate of completion, or similar document indicating that no furtheraction (including (x) monitoring and (y) operation and maintenance of anyinstalled engineering controls and/or containment measures, such as a cap) isrequired.  Buyer may be required toconsent to (i) deed restrictions or restrictive covenants and/or(ii) institutional controls, including but not limited to limitations onthe use of ground water, restrictions to industrial use of such BusinessProperty, use of asphalt or other solid surfaces as caps, fencing, andconstruction or use of above-ground buildings and structures; provided,however, that such restrictions or institutional controls shall notunreasonably interfere in Buyer’s business or impose unreasonable costs onBuyer or limit the use of such Business Property in the Business as currentlyconducted; or (ii) in excess of the cost of commercially reasonable andcost effective measures (including industry-standard risk-based correctiveaction measures), determined in Buyer’s reasonable judgment, unless any Leaserequires a more stringent level of (higher level of) remedial action.  Buyer will not accelerate any remedial actionexcept to the extent a commercially reasonable responsible party would do so,unless appropriate to mitigate harm or damage to any third party or theEnvironment or otherwise.

 

(b)                                 Buyer shall keep reasonable, accurate recordsof the actual, out-of-pocket costs Buyer expends related to any EnvironmentalClaim.  Buyer’s records will reasonablyshow which Facility the costs are related to and why the costs wereexpended.  Buyer will deliver suchrecords to Sellers upon Sellers’ request and will otherwise cooperate withSellers so that Sellers can reasonably understand and analyze the cost expendedrelating to any Environmental Claim or potential indemnification request andwhy such costs were incurred.

 

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## 11.5                           LIMITATIONS ON AMOUNT — SELLERS

##  

From and after the Closing,Sellers shall have no liability (for indemnification or otherwise) with respectto claims under Section 11.2(a) until the total of all Damages with respect tosuch matters exceeds [***] in the aggregate and then only for the amount bywhich such Damages exceed [***]; provided, however, that in noevent shall Sellers’ aggregate liability (for indemnification or otherwise)with respect to claims under Section 11.2(a) exceed [***].  Notwithstanding anything to the contraryherein, the limitations set forth in this Section 11.5 will not apply if theClosing does not occur or to a breach of any representation or warranty setforth in Section 3.1, 3.2, 3.7, 3.11 or 3.22. Costs expended in conducting the Phase I ESAs and the Phase II ESAsunder this Agreement will not be included as Damages subject to the deductibleunder this Section 11.5.

 

## 11.6                           LIMITATIONS ON AMOUNT — BUYER

##  

From and after Closing,Buyer shall have no liability (for indemnification or otherwise) with respectto claims under Section 11.3(a) until the total of all Damages with respect tosuch matters exceeds [***] in the aggregate and then only for the amount bywhich such Damages exceed [***]; provided, however, that in noevent shall Buyer’s aggregate liability (for indemnification or otherwise) withrespect to claims under Section 11.3(a) exceed [***].  Notwithstanding anything to the contraryherein, the limitations set forth in this Section 11.6 will not apply if theClosing does not occur or to a breach of any representation or warranty setforth in Section 4.1, 4.2 or 4.6.

 

## 11.7                           TIME LIMITATIONS

##  

The several representationsand warranties of the parties to this Agreement shall survive the Closing Datefor a period of eighteen (18) months from the Closing Date; provided, that the(a) the representations and warranties set forth in Sections 3.1, 3.2, 3.22,4.1, 4.2 and 4.6 shall survive the Closing Date without limitation, (b) Section3.11 and Section 3.13 shall survive for 180 days following the expiration ofany statutes of limitation under applicable law and (c) Section 3.19 shallsurvive for five years from the Closing Date (the period during which therepresentations and warranties shall survive being referred to herein withrespect to such representations and warranties as the “Survival Period”), andshall be effective with respect to any inaccuracy therein or breach thereof(and a claim for indemnification under this Article 11 may be made thereon) ifa written notice asserting the claim and specifying the factual basis of theclaim in reasonable detail to the extent then known by the notifying partyshall have been given within the Survival Period with respect to suchmatter.  Any claim for indemnificationmade during the Survival Period shall be valid and the representations andwarranties relating thereto shall remain in effect for purposes of suchindemnification notwithstanding such claim may not be resolved within theSurvival Period.  The agreements andcovenants set forth herein shall survive without limitation.

 

## 11.8                           PROCEDURE

##  

All claims forindemnification under this Article 11 shall be asserted and resolved asfollows:

 

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### (a)                                  A Person entitled to indemnification underSection 11.2 or 11.3 (an “Indemnitee”), promptly after it becomes aware offacts giving rise to a right of indemnification under this Agreement, shallgive written notice thereof to the Person obligated to indemnify under suchsection (an “Indemnitor”), stating the amount of the Damages, if known, andmethod of computation thereof, all with reasonable particularity, and statingwith particularity the nature of the matter and basis of the claim forindemnity under this Agreement.  Forpurposes of this Section 11.8(a), receipt by a party of written notice of anydemand, assertion, claim, action or proceeding (judicial, administrative orotherwise) by or from any Person other than a party to this Agreement thatgives rise to Damages on behalf of the party shall constitute the awareness offacts giving rise to a right of indemnification by it under this Agreement andshall require prompt notice of the receipt of such matter as provided in thefirst sentence of this Section 11.8(a). Failure to provide the notice shall not affect the right of theIndemnitee to indemnification except to the extent the Indemnitor is materiallyprejudiced by the Indemnitee’s failure to give such notice.

###  

### (b)                                 If an Indemnitee should have Damages againstany Indemnitor hereunder that does not involve a Third Party Claim, theIndemnitee shall provide the Indemnitor a written notice with respect to theDamages.  If the Indemnitor does notnotify the Indemnitee within 30 calendar days from its receipt of the writtennotice of Damages that the Indemnitor disputes the Damages, the Damagesspecified by the Indemnitee in the claim notice shall be deemed a liability ofthe Indemnitor hereunder.  If theIndemnitor has timely disputed the Damages as provided above, such disputeshall be resolved subject to the provisions of this Agreement.

###  

### (c)                                  If an Indemnitee shall have a Third PartyClaim asserted against it, the Indemnitee shall provide the Indemnitor writtennotice of the Damages relating to the Third Party Claim (a “Third Party ClaimNotice”).  Within 15 Business Daysfollowing receipt by an Indemnitor of a Third Party Claim Notice (the “ElectionPeriod”), the Indemnitor shall advise the Indemnitee in writing (i) whether theIndemnitor disputes its potential liability to the Indemnitee under thisArticle 11 with respect to the Third Party Claim and (ii) whether theIndemnitor elects, at its sole cost and expense, to defend the Indemniteeagainst such Third Party Claim.

###  

### (d)                                 If the Indemnitor notifies the Indemniteewithin the Election Period of its election to assume the defense of the ThirdParty Claim in accordance with Section 11.8(c) above, the Indemnitor shall havethe obligation to defend, at its sole cost and expense, the Third Party Claimby all appropriate proceedings, which proceedings shall be prosecuteddiligently by the Indemnitor to a final conclusion or settled at the discretionof the Indemnitor in accordance with this Section 11.8(d); provided, that theIndemnitor shall not settle or compromise any such Third Party Claim withoutthe prior consent of the Indemnitee (which consent shall not be unreasonablywithheld, conditioned or delayed) unless (i) the terms of such compromise orsettlement require no more than the payment of money (i.e. such settlement orcompromise shall not require the admission of wrongdoing by the Indemnitee,impose any obligations upon the Indemnitee or deprive the Indemnitee of anyrights), (ii) the full amount of such monetary settlement or compromise will bepaid by the Indemnitor, and (iii) the Indemnitee receives as part of suchsettlement or compromise a legal, binding and enforceable unconditionalsatisfaction and/or release from any and all further actions or liabilitiesrelating to the subject matter of the Third Party Claim.  The Indemnitor shall have full control ofsuch defense and proceedings, including, subject to the preceding sentence, anycompromise or settlement thereof.  TheIndemnitee is

 

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### hereby authorized to file,during the Election Period, any motion, answer or other pleadings that theIndemnitee shall, in good faith, deem necessary or appropriate to protect itsinterest or those of the Indemnitor and not prejudicial to the Indemnitor (itbeing understood and agreed that if the Indemnitee takes any such action thatis prejudicial and conclusively causes a final adjudication adverse to theIndemnitor, the Indemnitor shall be relieved of its obligations hereunder withrespect to the Third Party Claim to the extent so adjudicated).  If requested by the Indemnitor, theIndemnitee agrees, at the sole cost and expense of the Indemnitor, to cooperatewith the Indemnitor and its counsel in contesting any Third Party Claims,including by making of any related counterclaim against the Person assertingthe Third Party Claim or any cross-complaint against any Person.  The Indemnitee shall have the right toparticipate in, but not control, any defense or settlement of any Third PartyClaim controlled by the Indemnitor pursuant to this Section 11.8(d), and shallbear its own costs and expenses with respect to any such participation.

###  

### (e)                                  If an Indemnitor fails to notify anIndemnitee within the Election Period that the Indemnitor elects to defend theIndemnitee pursuant to Section 11.8(c) or if the Indemnitor fails to diligentlydefend or settle the Third Party Claim or to prosecute any appropriatecounterclaim against the Person making the Third Party Claim or anycross-complaint against any Person, or if the Indemnitee reasonably objects tosuch election on the grounds that counsel for such Indemnitee cannot representboth the Indemnitor and the Indemnitee because such representation would bereasonably likely to result in a conflict of interest, then the Indemniteeshall have the right but not the obligation to defend, at the sole cost andexpense of the Indemnitor (but only if the Indemnitee actually is entitled toindemnification hereunder), the Third Party Claim by such proceedings deemedreasonably appropriate by the Indemnitee and its counsel.  The Indemnitee shall have full control ofsuch defense and proceedings, including any compromise or settlement of theThird Party Claim; provided, that the Indemnitee shall not enter into anycompromise or settlement of such Third Party Claim without the Indemnitor’sconsent, which shall not be unreasonably withheld or delayed.  If requested by the Indemnitee, theIndemnitor shall, at the sole cost and expense of the Indemnitor, cooperatewith the Indemnitee and its counsel in contesting any Third Party Claim thatthe Indemnitee is contesting, or, if appropriate and related to the Third PartyClaim in question, in making any counterclaim against the Person asserting theThird Party Claim or any cross-complaint against any Person.  Notwithstanding the foregoing in this Section11.8(e), if the Indemnitor has delivered a written notice to the Indemnitee tothe effect that the Indemnitor disputes its potential liability to theIndemnitee under this Article 11 and if such dispute is resolved in favor ofthe Indemnitor, the Indemnitor shall not be required to bear the costs andexpenses of the Indemnitee’s defense pursuant to this Article 11 or of the Indemnitor’sparticipation therein at the Indemnitee’s request, and the Indemnitee shallreimburse the Indemnitor in full for all reasonable costs and expenses of theIndemnitor in connection with the Third Party Claim, excluding, however, anylitigation with respect to its indemnity obligation hereunder.  The Indemnitor shall have the right toparticipate in, but not control, any defense or settlement controlled by theIndemnitee pursuant to this Section 11.8(e), and the Indemnitor shall bear itsown costs and expenses with respect to any such participation.

###  

## 11.9                           PAYMENT

##  

### (a)                                  Payments of all amounts owing by anIndemnitor as a result of a Third Party Claim shall be made within fiveBusiness Days after the earlier of (i) the settlement of the

 

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### Third Party Claim and (ii)the expiration of the period of appeal of a final adjudication of the ThirdParty Claim.  Payments of all amountsowing by an Indemnitor other than as a result of a Third Party Claim shall be madewithin five Business Days after the later of (i) 30 days after the expirationof the Election Period or (ii) if contested through dispute resolutionproceedings, the expiration of the period for appeal of a final adjudication ofthe Indemnitor’s liability to the Indemnitee under this Agreement.  Notwithstanding the foregoing, if theIndemnitor has not contested its indemnity obligations hereunder and has notelected to assume the defense of a Third Party Claim, the Indemnitor shallreimburse (promptly after the receipt of each invoice therefor) the Indemniteefor the reasonable and documented out-of-pocket costs and expenses incurred bythe Indemnitee in contesting the Third Party Claim.

###  

## 11.10                     NO SET-OFF

##  

Neither Buyer nor any Sellershall have any right to setoff any Damages against any payments to be made byeither of them pursuant to this Agreement, any other Transaction Agreement orotherwise.

 

## 11.11                     INSURANCE

##  

The Indemnitor shall besubrogated to the rights of the Indemnitee in respect of any insurance relatingto Damages to the extent of any indemnification payments made hereunder forsuch Damages.

 

## 11.12                     NO DUPLICATION

##  

Any Liability forindemnification hereunder shall be determined without duplication of recoveryby reason of the state of facts giving rise to such Liability constituting abreach of more than one representation, warranty, covenant or agreement.

 

## 11.13                     REMEDIES

##  

### (a)                                  The parties agree that, except as provided inSection 13.5, the sole and exclusive remedy of any party hereto or theirrespective Affiliates with respect to this Agreement and in any other agreementdelivered by any Seller or Buyer in connection with the ContemplatedTransactions (collectively, the “Transaction Agreements”) or any other claimsrelating to the Business, the events giving rise to this Agreement and theother Transaction Agreements and the Contemplated Transactions shall be limitedto the termination provisions set forth in Article 9 and the indemnificationprovisions set forth in this Article 11, provided that this limitationshall not apply in the event of fraud; and provided further that if anIndemnitor shall breach or threaten to commit a breach of any of itsrestrictive covenants set forth in this Agreement or any other TransactionAgreement (the “Restrictive Covenants”), any Indemnitee shall have the right inaddition to, and not in lieu of, any other rights and remedies available tosuch Indemnitee, under law or in equity, to have the Restrictive Covenantsspecifically enforced by any court, including the right to seek entry againstsuch Indemnitor, any of its Affiliates and any shareholder, officer, director,employee of each of the foregoing of restraining orders and injunctions(preliminary, mandatory, temporary and permanent) against violations, threatenedor actual, and whether or not then continuing, of the Restrictive Covenants, itbeing acknowledged and agreed that money damages will not provide suchIndemnitee an adequate remedy.

 

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### (b)                                 The parties hereto intend that, even thoughindemnification and other obligations appear in various sections and articlesof this Agreement, the indemnification procedures and limitations contained inthis Article 11 shall apply to all indemnity and other obligations of theparties under this Agreement, except to the extent expressly excluded in thisArticle 11.

###  

## 11.14                     NO SPECIAL DAMAGES

##  

IN NO EVENT SHALL ANY PARTYBE LIABLE UNDER THIS ARTICLE 11 OR OTHERWISE IN RESPECT OF THIS AGREEMENT FOREXEMPLARY, SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIALDAMAGES EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO ANUNAFFILIATED THIRD PARTY IN CONNECTION WITH A THIRD PARTY CLAIM, IN WHICH EVENTSUCH DAMAGES SHALL BE RECOVERABLE.

 

## 11.15                     EXPRESS NEGLIGENCE

##  

THE INDEMNITIES SET FORTH INTHIS ARTICLE 11 ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES INACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXASEXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISELIMIT INDEMNITIES BECAUSE OF THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE,CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THEINDEMNIFIED PARTIES.

 

# 12.                                 Confidentiality

#  

## 12.1                           DEFINITION OF CONFIDENTIAL INFORMATION

##  

### (a)                                  As used in this Article 12, the term “ConfidentialInformation” includes any and all of the following information of any Seller orBuyer that has been or may hereafter be disclosed in any form, whether inwriting, orally, electronically or otherwise, or otherwise made available byobservation, inspection or otherwise by either party (Buyer on the one hand orSellers on the other hand) or its Representatives (collectively, a “DisclosingParty”) to the other party or its Representatives (collectively, a “ReceivingParty”):

###  

#### (i)                                     all information that is a trade secret underapplicable trade secret or other law;

####  

#### (ii)                                  all information concerning productspecifications, data, know-how, formulae, compositions, processes, designs,sketches, photographs, graphs, drawings, samples, inventions and ideas, past,current and planned research and development, current and planned manufacturingor distribution methods and processes, customer lists, current and anticipatedcustomer requirements, price lists, market studies, business plans, computerhardware, Software and database technologies, systems, structures andarchitectures;

 

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#### (iii)                               all information concerning the business andaffairs of the Disclosing Party (which includes historical and currentfinancial statements, financial projections and budgets, tax returns andaccountants’ materials, historical, current and projected sales, capitalspending budgets and plans, business plans, strategic plans, marketing andadvertising plans, publications, client and customer lists and files,contracts, the names and backgrounds of key personnel and personnel trainingtechniques and materials, however documented), and all information obtainedfrom review of the Disclosing Party’s documents or property or discussions withthe Disclosing Party regardless of the form of the communication; and

####  

#### (iv)                              all notes, analyses, compilations, studies,summaries and other material prepared by the Receiving Party to the extentcontaining or based, in whole or in part, upon any information included in theforegoing.

####  

### (b)                                 Any trade secrets of a Disclosing Party shallalso be entitled to all of the protections and benefits under applicable tradesecret law and any other applicable law. If any information that a DisclosingParty deems to be a trade secret is found by a court of competent jurisdictionnot to be a trade secret for purposes of this Article 12, such informationshall still be considered Confidential Information of that Disclosing Party forpurposes of this Article 12 to the extent included within the definition.  In the case of trade secrets, each DisclosingParty, hereby waives any requirement that the other party submit proof of theeconomic value of any trade secret or post a bond or other security.

###  

## 12.2                           RESTRICTED USE OF CONFIDENTIAL INFORMATION

##  

### (a)                                  Each Receiving Party acknowledges theconfidential and proprietary nature of the Confidential Information of theDisclosing Party and agrees that such Confidential Information (i) shall bekept confidential by the Receiving Party; (ii) shall not be used for any reasonor purpose other than to evaluate and consummate the Contemplated Transactions;and (iii) without limiting the foregoing, shall not be disclosed by theReceiving Party to any Person, except in each case as otherwise expresslypermitted by the terms of this Agreement or with the prior written consent ofan authorized Representative of Sellers with respect to ConfidentialInformation of Sellers (each, a “Seller Contact”) or an authorizedRepresentative of Buyer with respect to Confidential Information of Buyer(each, a “Buyer Contact”). Each of Buyer and Sellers shall disclose theConfidential Information of the other party only to its Representatives whorequire such material for the purpose of evaluating the ContemplatedTransactions and are informed by Buyer or Sellers, as the case may be, of theobligations of this Article 12 with respect to such information.  Each of Buyer and Sellers shall (A) enforcethe terms of this Article 12 as to its respective Representatives; (B) takesuch action to the extent necessary to cause its Representatives to comply withthe terms and conditions of this Article 12; and (C) be responsible and liablefor any breach of the provisions of this Article 12 by it or itsRepresentatives.

###  

### (b)                                 Unless and until this Agreement isterminated, Sellers shall maintain as confidential any Confidential Information(including for this purpose any information of Sellers of the type referred toin Sections 12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer) ofSellers relating to any of the Assets or the Assumed Liabilities.Notwithstanding the preceding sentence, Sellers may use any ConfidentialInformation of Sellers before the Closing in the

 

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### ordinary course of theBusiness consistent with past practices in connection with the transactionspermitted by Section 6.2.

###  

### (c)                                  From and after the Closing, the provisions ofSection 12.2(a) above shall not apply to or restrict in any manner Buyer’s useof any Confidential Information of Sellers relating solely to any of the Assetsor the Assumed Liabilities and not to any Excluded Asset or Assumed Liability.

###  

## 12.3                           EXCEPTIONS

##  

Sections 12.2(a) and (b) donot apply to that part of the Confidential Information of a Disclosing Partythat a Receiving Party demonstrates (a) was, is or becomes generally availableto the public other than as a result of a breach by the Receiving Party or itsRepresentatives of this Article 12 or the confidentiality agreement enteredinto between Buyer and Parent; (b) was or is developed by the Receiving Partyindependently of and without reference to any Confidential Information of theDisclosing Party; or (c) was, is or becomes available to the Receiving Party ona nonconfidential basis from a Third Party not bound by a confidentialityagreement or any legal, fiduciary or other obligation restricting disclosure.Sellers shall not disclose any Confidential Information of Sellers relating toany of the Assets or the Assumed Liabilities in reliance on the exceptions inclauses (b) or (c) above.

 

## 12.4                           LEGAL PROCEEDINGS

##  

If a Receiving Party becomescompelled in any Proceeding or is requested by a Governmental Body havingregulatory jurisdiction over the Contemplated Transactions to make anydisclosure that is prohibited or otherwise constrained by this Article 12, thatReceiving Party shall provide the Disclosing Party with prompt notice of suchcompulsion or request so that it may seek an appropriate protective order orother appropriate remedy or waive compliance with the provisions of thisArticle 12. In the absence of a protective order or other remedy, the ReceivingParty may disclose that portion (and only that portion) of the Confidential Informationof the Disclosing Party that, based upon advice of the Receiving Party’scounsel, the Receiving Party is legally compelled to disclose or that has beenrequested by such Governmental Body, provided, however, that theReceiving Party shall use reasonable efforts to obtain reliable assurance thatconfidential treatment will be accorded by any Person to whom any ConfidentialInformation is so disclosed. The provisions of this Section 12.4 do not applyto any Proceedings between the parties to this Agreement.  Notwithstanding anything to the contrary inthis Article 12 or elsewhere in this Agreement, any Seller may disclose anyConfidential Information to the extent it reasonably believes such disclosureis required to comply with the requirements of any applicable LegalRequirement, including the rules and regulations of the New York StockExchange.

 

## 12.5                           RETURN OR DESTRUCTION OF CONFIDENTIALINFORMATION

##  

If this Agreement isterminated, each Receiving Party shall (a) destroy all Confidential Informationof the Disclosing Party prepared or generated by the Receiving Party withoutretaining a copy of any such material; (b) promptly deliver to the DisclosingParty all other Confidential Information of the Disclosing Party, together withall copies thereof, in the possession, custody or control of the ReceivingParty or, alternatively, with the written consent of a Seller Contact or a

 

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BuyerContact (whichever represents the Disclosing Party) destroy all suchConfidential Information; and (c) certify all such destruction in writing tothe Disclosing Party, provided, however, that the Receiving Partymay retain a list that contains general descriptions of the information it hasreturned or destroyed to facilitate the resolution of any controversies afterthe Disclosing Party’s Confidential Information is returned.

 

## 12.6                           ATTORNEY-CLIENT PRIVILEGE

##  

The Disclosing Party is notwaiving, and will not be deemed to have waived or diminished, any of itsattorney work product protections, attorney-client privileges or similarprotections and privileges as a result of disclosing its ConfidentialInformation (including Confidential Information related to pending orthreatened litigation) to the Receiving Party, regardless of whether theDisclosing Party has asserted, or is or may be entitled to assert, suchprivileges and protections. The parties (a) share a common legal and commercialinterest in all of the Disclosing Party’s Confidential Information that issubject to such privileges and protections; (b) are or may become jointdefendants in Proceedings to which the Disclosing Party’s ConfidentialInformation covered by such protections and privileges relates; (c) intend thatsuch privileges and protections remain intact should either party becomesubject to any actual or threatened Proceeding to which the Disclosing Party’sConfidential Information covered by such protections and privileges relates;and (d) intend that after the Closing the Receiving Party shall have the rightto assert such protections and privileges. No Receiving Party shall admit,claim or contend, in Proceedings involving either party or otherwise, that anyDisclosing Party waived any of its attorney work-product protections,attorney-client privileges or similar protections and privileges with respectto any information, documents or other material not disclosed to a ReceivingParty due to the Disclosing Party disclosing its Confidential Information(including Confidential Information related to pending or threatenedlitigation) to the Receiving Party.

 

# 13.                                 General Provisions

#  

## 13.1                           EXPENSES

##  

Except as otherwise providedin this Agreement, each party to this Agreement will bear its respective feesand expenses incurred in connection with the preparation, negotiation,execution and performance of this Agreement and the Contemplated Transactions,including all fees and expenses of its Representatives.  Buyer will pay all HSR Act filing fees. Ifthis Agreement is terminated, the obligation of each party to pay its own feesand expenses will be subject to any rights of such party arising from a breachof this Agreement by another party.

 

## 13.2                           PUBLIC ANNOUNCEMENTS

##  

Except as may be required tocomply with the requirements of any applicable Legal Requirement or the rulesand regulations of any stock exchange or national market system upon which thesecurities of any Seller or Buyer are listed, no party will issue any pressrelease or other public announcement relating to the subject matter of thisAgreement or the Contemplated Transactions without the prior approval (whichapproval will not be unreasonably withheld or delayed) of the other party; provided,however, that, after the Closing, any Seller or Buyer will be entitledto issue any such press release or make any such other public announcementwithout

 

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obtainingsuch prior approval if it has previously provided a copy of the press releaseor other public announcement to the other party for a reasonable period of timefor review and comment.

 

## 13.3                           NOTICES

##  

All notices, Consents,waivers and other communications required or permitted by this Agreement shallbe in writing and shall be deemed given to a party when (a) delivered to theappropriate address by hand or by nationally recognized overnight courierservice (costs prepaid); (b) sent by facsimile with confirmation oftransmission by the transmitting equipment; or (c) received or rejected by theaddressee, if sent by certified mail, return receipt requested, in each case tothe following addresses, facsimile numbers and marked to the attention of theperson (by name or title) designated below (or to such other address orfacsimile number or person as a party may designate by notice to the otherparties):

 

Parentor any other Seller:                                                       Stewart & Stevenson Services, Inc.2707 North Loop West, Suite 800Houston, Texas 77008Attention: General CounselFacsimile: (713) 868-2130Confirm:   (713) 868-7700

 

witha mandatory copy to:                                                     Fulbright & Jaworski L.L.P.1301 McKinney, Suite 5100Houston, Texas 77010-3095Attention: Charles H. Still, Esq.Facsimile: (713) 651-5246Confirm:   (713) 651-5151

 

Buyer:                                                                                                                                                             c/o Parman Capital Group, LLCAttention: Hushang Ansary1000 Louisiana, Suite 5900Houston, Texas 77002Facsimile:  713-659-3137Confirm:  713-650-0071

 

witha mandatory copy to:                                                     Jones DayAttention: William F. Henze II222 East 41st StreetNew York, NY 10017Facsimile: 212-755-7306Confirm: 212-326-3939

 

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## 13.4                           DISPUTE RESOLUTION

##  

In the event of any disputeor controversy (except for any dispute or controversy arising out of (i) theallocation of related and personal property Taxes that is to be resolved inaccordance with Section 2.5 or (ii) the calculation of Closing Net Asset Valuethat is to be resolved in accordance with Section 2.11) arising out of orrelating to this Agreement, or any matter relating hereto or the ContemplatedTransactions (the “Dispute”), the parties shall first try to resolve thedispute by mutual agreement.  If theparties are unable to resolve the Dispute by entering into a written settlementagreement within 30 days following a party’s delivery of a written notice of aDispute, setting forth in reasonable detail the circumstances and basis for theDispute (“Notice of Dispute”), the Dispute shall be determined by bindingarbitration in accordance with the rules for commercial arbitration of theAmerican Arbitration Association then in effect (subject to any contraryprovision in this Agreement).  Judgmentupon the award shall be final and may be entered in any court havingjurisdiction thereof.  The place ofarbitration shall be Houston, Texas.  Thearbitrators shall determine the arbitrability of any and all Disputes arisingout of or related to this Agreement, including the existence, validity, andscope of this agreement to arbitrate. The arbitrator(s) shall be qualified by education, experience, ortraining to decide the matters in the Dispute. The arbitrator(s) shall apply any statutes of limitations applicableunder Texas law to the claims and defenses asserted in the Dispute Delivery ofthe Notice of Dispute shall toll the running of any applicable statutes oflimitations.  Notwithstanding theforegoing, in the event that a Dispute requires emergency relief before thematter may be resolved pursuant to the arbitration provisions provided herein,the provisions of this Section 13.4 shall not prohibit an action for injunctiveor other forms of ancillary relief or a writ of mandamus filed in connectionwith such Dispute; provided, however, the arbitration provisions providedherein shall still govern the resolution of the Dispute.

 

All negotiations and anyarbitration relating to a Dispute, including any Notice of Dispute, settlement,arbitral award, decision, or order, documents exchanged or produced, and anybriefs or other documents prepared for the arbitration, are confidential andmay not be disclosed by any party, their employees, officers, directors,counsel, consultants, and expert witnesses, except to the extent necessary toenforce any settlement agreement or arbitration award, to enforce rights of aparty, as required by law or regulation, or for a bona fide business purpose,such as disclosure to accountants, shareholders, or third-party purchasers;provided, however, that breach of this confidentiality provision shall not voidany settlement or award.

 

## 13.5                           ENFORCEMENT OF AGREEMENT

##  

### (a)                                  Each Seller acknowledges and agrees thatBuyer would be irreparably damaged if any of the provisions of this Agreementare not performed in accordance with their specific terms and that any breachof this Agreement by such Seller could not be adequately compensated in allcases by monetary damages alone. Accordingly, in addition to any other right orremedy to which Buyer may be entitled, at law or in equity, it shall beentitled to enforce any provision of this Agreement by a decree of specificperformance and to temporary, preliminary and permanent injunctive relief toprevent breaches or threatened breaches of any of the provisions of thisAgreement, without posting any bond or other undertaking.

###  

### (b)                                 Buyer acknowledges and agrees that Sellerswould be irreparably damaged if any of the provisions of this Agreement are notperformed in accordance with their specific terms and that any breach of thisAgreement by Buyer could not be adequately compensated in all

 

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### cases by monetary damagesalone. Accordingly, in addition to any other right or remedy to which anySeller may be entitled, at law or in equity, it shall be entitled to enforceany provision of this Agreement by a decree of specific performance and totemporary, preliminary and permanent injunctive relief to prevent breaches orthreatened breaches of any of the provisions of this Agreement, without postingany bond or other undertaking.

###  

## 13.6                           WAIVER; REMEDIES CUMULATIVE

##  

The rights and remedies ofthe parties to this Agreement are cumulative and not alternative. Neither anyfailure nor any delay by any party in exercising any right, power or privilegeunder this Agreement or any of the documents referred to in this Agreement willoperate as a waiver of such right, power or privilege, and no single or partialexercise of any such right, power or privilege will preclude any other orfurther exercise of such right, power or privilege or the exercise of any otherright, power or privilege. To the maximum extent permitted by applicable law,(a) no claim or right arising out of this Agreement or any of the documentsreferred to in this Agreement can be discharged by one party, in whole or inpart, by a waiver or renunciation of the claim or right unless in writingsigned by the other party; (b) no waiver that may be given by a party will beapplicable except in the specific instance for which it is given; and (c) nonotice to or demand on one party will be deemed to be a waiver of anyobligation of that party or of the right of the party giving such notice ordemand to take further action without notice or demand as provided in thisAgreement or the documents referred to in this Agreement.

 

## 13.7                           ENTIRE AGREEMENT AND MODIFICATION

##  

This Agreement supersedesall prior agreements, whether written or oral, between the parties with respectto its subject matter (including any letter of intent, exclusivity agreementand any confidentiality agreement between Buyer and any one or more of theSellers) and constitutes (along with the Seller Disclosure Letter, the BuyerDisclosure Letter, the Exhibits and other documents delivered pursuant to thisAgreement) a complete and exclusive statement of the terms of the agreementbetween the parties with respect to its subject matter.  Except as otherwise provided in Section 5.6of this Agreement and the second sentence of Section 3.17(d), none of thisAgreement, the Seller Disclosure Letter or the Buyer Disclosure Letter may beamended, supplemented, or otherwise modified except by a written agreementexecuted by the party to be charged with the amendment.

 

## 13.8                           ASSIGNMENTS, SUCCESSORS AND NO THIRD PARTYRIGHTS

##  

No party may assign any ofits rights or delegate any of its obligations under this Agreement without theprior written consent of the other parties; provided, however that Buyer mayassign its rights or delegate its obligations hereunder to any Person that isdirectly or indirectly controlled by him, and upon the later of any suchAssignment or the payment of the Purchase Price (including the AdjustmentAmount) be released from all obligations under this Agreement.  Subject to the preceding sentence, thisAgreement will apply to, be binding in all respects upon and inure to thebenefit of the successors and permitted assigns of the parties.  Except such rights as shall inure to asuccessor or permitted assignee pursuant to this Section 13.8, nothingexpressed or referred to in this Agreement will be construed to give any Personother than the parties to this Agreement any legal or equitable right, remedyor claim under or with respect to this Agreement or any provision

 

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ofthis Agreement, including, with respect to any Transferred Employee or legalrepresentative thereof, any right to employment for any specified period or ofany nature or kind whatsoever.

 

## 13.9                           SEVERABILITY

##  

If any provision of thisAgreement is held invalid or unenforceable by any court of competentjurisdiction, the other provisions of this Agreement will remain in full forceand effect. Any provision of this Agreement held invalid or unenforceable onlyin part or degree will remain in full force and effect to the extent not heldinvalid or unenforceable.

 

## 13.10                     CONSTRUCTION

##  

The headings of Articles andSections in this Agreement are provided for convenience only and will notaffect its construction or interpretation. All references to “Articles,” and “Sections”refer to the corresponding Articles and Sections of this Agreement, the SellerDisclosure Letter and the Buyer Disclosure Letter.

 

## 13.11                     TIME OF ESSENCE

##  

With regard to all dates andtime periods set forth or referred to in this Agreement, time is of theessence.

 

## 13.12                     GOVERNING LAW

##  

Except as set forth in thenext sentence, this Agreement will be governed by and construed under, and anyDispute determined in accordance with, the laws of the State of Texas withoutregard to conflicts-of-laws principles that would require the application ofany other law.

 

## 13.13                     EXECUTION OF AGREEMENT

##  

This Agreement may beexecuted in one or more counterparts, each of which will be deemed to be anoriginal copy of this Agreement and all of which, when taken together, will bedeemed to constitute one and the same agreement. The exchange of copies of thisAgreement and of signature pages by facsimile transmission shall constituteeffective execution and delivery of this Agreement as to the parties and may beused in lieu of the original Agreement for all purposes. Signatures of theparties transmitted by facsimile shall be deemed to be their originalsignatures for all purposes.

 

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IN WITNESS WHEREOF, theparties have executed this Agreement as of the date first written above.

 
|   | **Hushang  Ansary**                                |
|--------|----------------------------------------------------|
|   |                                               |
|   |                                               |
|   | By                                                 |  /s/ Hushang Ansary |   |
|   |                                               |
|   |                                               |
|   | **Stewart  & Stevenson Services, Inc.**        |
|   |                                               |
|   |                                               |
|   | By                                                 |  /s/ Max L. Lukens |   |
|   | Name: Max L. Lukens                                |
|   | Title: President and Chief  Executive Officer      |
|   |                                               |
|   |                                               |
|   | **IPSC  Co. Inc.**                                 |
|   | ** **                                         |
|   |                                               |
|   | By                                                 |  /s/ Carl B. King |   |
|   | Name: Carl B. King                                 |
|   | Title: Vice President and  Secretary               |
|   |                                               |
|   |                                               |
|   | **Stewart  & Stevenson Holdings, Inc.**        |
|   | ** **                                         |
|   |                                               |
|   | By                                                 |  /s/ Don Mueller |   |
|   | Name: Don Mueller                                  |
|   | Title: President                                   |
|   |                                               |
|   |                                               |
|   | **Stewart  & Stevenson De Las Americas, Inc.** |
|   | ** **                                         |
|   |                                               |
|   | By                                                 |  /s/ Carl B. King |   |
|   | Name: Carl B. King                                 |
|   | Title: Vice President and  Secretary               |
|   |                                               |
|   |                                               |
|   | **Stewart  & Stevenson International, Inc.**   |
|   | ** **                                         |
|   |                                               |
|   | By                                                 |  /s/ Carl B. King |   |
|   | Name: Carl B. King                                 |
|   | Title: Vice President and  Secretary               |

 

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|   | **Stewart  & Stevenson Power, Inc.**  |
|--------|-------------------------------------------|
|   | ** **                                |
|   |                                      |
|   | By                                        |  /s/ Carl B. King |   |
|   | Name: Carl B. King                        |
|   | Title:  Vice President and Secretary |
|   |                                      |
|   |                                      |
|   | **S&S  Trust**                        |
|   | ** **                                |
|   |                                      |
|   | By                                        |  /s/ Don Mueller |   |
|   | Name: Don Mueller                         |
|   | Title: President                          |

 

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Schedulesare omitted in accordance with Item 601(b)(2) of Regulation S-K. Schedules willbe provided by the Company to the Securities and Exchange Commission uponrequest.

 

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