**Exhibit 10.33****STOCK PURCHASE AGREEMENT**     This Stock Purchase Agreement (“Agreement”) is made as of December 20, 2005, by and between**Allis-Chalmers Energy Inc.**, a Delaware corporation (“Buyer”) and **Joe Van Matre**, an individualresident in Lafayette, Louisiana (“Seller”).**R E C I T A L S**     Seller desires to sell, and Buyer desires to purchase, all of the issued and outstandingshares (“Shares”) of capital stock of Specialty Rental Tools Inc., a Louisiana corporation(“Company”), for the consideration and on the terms set forth in this Agreement.**AGREEMENT**     The parties, intending to be legally bound, agree as follows:**1.****DEFINITIONS**     For purposes of this Agreement, the following terms have the meanings specified or referred toin this Section 1:**“Applicable Contract”**—any Contract (a) under which Company has or mayacquire any rights, (b) under which Company has or may become subject to anyobligation or liability, or (c) by which Company or any of the assets owned or usedby it is or may become bound.**“Balance Sheet”**—as defined in Section 3.4.**“Best Efforts”**—the efforts that a prudent Person desirous of achieving aresult would use in similar circumstances to ensure that such result is achieved asexpeditiously as possible; provided, however, that an obligation to use BestEfforts under this Agreement does not require the Person subject to that obligationto take actions that would result in a materially adverse change in the benefits tosuch Person of this Agreement and the Contemplated Transactions.**“Breach”**—a “Breach” of a representation, warranty, covenant, obligation, orother provision of this Agreement or any instrument delivered pursuant to thisAgreement will be deemed to have occurred if there is or has been (a) any inaccuracyin or breach of, or any failure to perform or comply with, such representation,warranty, covenant, obligation, or other provision, or (b) any valid claim (by anyPerson) or other occurrence or circumstance that is or was inconsistent with suchrepresentation, warranty, covenant, obligation, or other provision, and the term“Breach” means any such inaccuracy, breach, failure, claim, occurrence, orcircumstance.
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**“Breakup Fee”**—as defined in Section 7.8.**“Buyer”**—as defined in the first paragraph of this Agreement.**“Closing”**—as defined in Section 2.3.**“Closing Date”**—the date and time as of which the Closing actually takesplace.**“Code”**—the Internal Revenue Code of 1986, as amended.**“Company”**—as defined in the Recitals of this Agreement.**“Consent”**—any approval, consent, ratification, waiver, or otherauthorization (including any Governmental Authorization).**“Contemplated Transactions”**—all of the transactions contemplated by thisAgreement, including:     (a) the sale of the Shares by Seller to Buyer;     (b) the execution, delivery, and performance of the Employment Agreement, LeaseAgreement and the Seller’s Release;     (c) the performance by Buyer and Seller of their respective covenants andobligations under this Agreement; and     (d) Buyer’s acquisition and ownership of the Shares and exercise of controlover the Company.**“Contract”**—any agreement, contract, obligation, promise, or undertaking(whether written or oral and whether express or implied) that is legally binding.**“Contribution”**—as defined in Section 2.7.**“Damages”**—as defined in Section 10.2.**“Disclosure Letter”**—the disclosure letter delivered by Seller to Buyerconcurrently with the execution and delivery of this Agreement.**“Employment Agreement”**—as defined in Section 2.4(a)(iii).**“Encumbrance”**—any charge, claim, community property interest, condition,equitable interest, lien, option, pledge, security interest, right of first refusal,or restriction of any kind, including any restriction on use, voting, transfer,receipt of income, or exercise of any other attribute of ownership.
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**“Environment”**—soil, land surface or subsurface strata, surface waters(including navigable waters, ocean waters, streams, ponds, drainage basins, andwetlands), groundwaters, drinking water supply, stream sediments, ambient air(including indoor air), plant and animal life, and any other environmental medium ornatural resource.**“Environmental, Health, and Safety Liabilities”**—any cost, damages, expense,liability, obligation, or other responsibility arising from or under EnvironmentalLaw or Occupational Safety and Health Law and consisting of or relating to:(a) any environmental, health, or safety matters or conditions (includingon-site or off-site contamination, occupational safety and health, andregulation of chemical substances or products);(b) fines, penalties, judgments, awards, settlements, legal oradministrative proceedings, damages, losses, claims, demands and response,investigative, remedial, or inspection costs and expenses arising underEnvironmental Law or Occupational Safety and Health Law;(c) financial responsibility under Environmental Law or Occupational Safetyand Health Law for cleanup costs or corrective action, including anyinvestigation, cleanup, removal, containment, or other remediation orresponse actions (“Cleanup”) required by applicable Environmental Law orOccupational Safety and Health Law (whether or not such Cleanup has beenrequired or requested by any Governmental Body or any other Person) and forany natural resource damages; or(d) any other compliance, corrective, investigative, or remedial measuresrequired under Environmental Law or Occupational Safety and Health Law.The terms “removal,” “remedial,” and “response action,” include the types ofactivities covered by the United States Comprehensive Environmental Response,Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., as amended (“CERCLA”).**“Environmental Law”**—any Legal Requirement that requires or relates to:(a) advising appropriate authorities, employees, and the public of intendedor actual releases of pollutants or hazardous substances or materials,violations of discharge limits, or other prohibitions and of thecommencements of activities, such as resource extraction or construction,that could have significant impact on the Environment;(b) preventing or reducing to acceptable levels the release of pollutants orhazardous substances or materials into the Environment;
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(c) reducing the quantities, preventing the release, or minimizing thehazardous characteristics of wastes that are generated;(d) assuring that products are designed, formulated, packaged, and used sothat they do not present unreasonable risks to human health or theEnvironment when used or disposed of;(e) protecting resources, species, or ecological amenities;(f) reducing to acceptable levels the risks inherent in the transportationof hazardous substances, pollutants, oil, or other potentially harmfulsubstances;(g) cleaning up pollutants that have been released, preventing the threat ofrelease, or paying the costs of such clean up or prevention; or(h) making responsible parties pay private parties, or groups of them, fordamages done to their health or the Environment, or permittingself-appointed representatives of the public interest to recover forinjuries done to public assets.**“ERISA”**—the Employee Retirement Income Security Act of 1974 or anysuccessor law, and regulations and rules issued pursuant to that Act or anysuccessor law.**“Facilities”**—any real property, leaseholds, or other interests currently orformerly owned or operated by the Company and any buildings, plants, structures, orequipment (including motor vehicles, tank cars, and rolling stock) currently orformerly owned or operated by the Company.**“GAAP”**—generally accepted United States accounting principles, applied on abasis consistent with the basis on which the Balance Sheet and the other financialstatements referred to in Section 3.4(b) were prepared.**“Governmental Authorization”**—any approval, consent, license, permit,waiver, or other authorization issued, granted, given, or otherwise made availableby or under the authority of any Governmental Body or pursuant to any LegalRequirement.**“Governmental Body”**—any:(a) nation, state, county, city, town, village, district, or otherjurisdiction of any nature;(b) federal, state, local, municipal, foreign, or other government;
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(c) governmental or quasi-governmental authority of any nature (includingany governmental agency, branch, department, official, or entity and anycourt or other tribunal);(d) multi-national organization or body; or(e) body exercising, or entitled to exercise, any administrative, executive,judicial, legislative, police, regulatory, or taxing authority or power ofany nature.**“Hazardous Activity”**—the distribution, generation, handling, importing,management, manufacturing, processing, production, refinement, Release, storage,transfer, transportation, treatment, or use (including any withdrawal or other useof groundwater) of Hazardous Materials in, on, under, about, or from the Facilitiesor any part thereof into the Environment, and any other act, business, operation, orthing that increases the danger, or risk of danger, or poses an unreasonable risk ofharm to persons or property on or off the Facilities, or that may affect the valueof the Facilities or the Company.**“Hazardous Materials”**—any waste or other substance that is listed, defined,designated, or classified as, or otherwise determined to be, hazardous, radioactive,or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law,including any admixture or solution thereof, and specifically including petroleumand all derivatives thereof or synthetic substitutes therefor and asbestos orasbestos-containing materials.**“HSR Act”**—the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or anysuccessor law, and regulations and rules issued pursuant to that Act or anysuccessor law.**“Intellectual Property Assets”** —as defined in Section 3.22.**“Interim Balance Sheet”**—as defined in Section 3.4.**“IRC”**—the Internal Revenue Code of 1986 or any successor law, andregulations issued by the IRS pursuant to the Internal Revenue Code or any successorlaw.**“IRS”**—the United States Internal Revenue Service or any successor agency,and, to the extent relevant, the United States Department of the Treasury.**“Knowledge”**—an individual will be deemed to have “Knowledge” of aparticular fact or other matter if such individual is actually aware of such fact orother matter.;A Person (other than an individual) will be deemed to have “Knowledge” of aparticular fact or other matter if any individual who is serving, or who has at anytime
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served, as a director, officer, partner, executor, or trustee of such Person (or inany similar capacity) has, or at any time had, Knowledge of such fact or othermatter.**“Lease Agreement”—**as defined in Section 2.4(a)(v).**“Legal Requirement”**—any federal, state, local, municipal, foreign,international, multinational, or other administrative order, constitution, law,ordinance, principle of common law, regulation, statute, or treaty.**“Make Whole Amount”**—as defined in Section 2.6**“Occupational Safety and Health Law”**—any Legal Requirement designed toprovide safe and healthful working conditions and to reduce occupational safety andhealth hazards, and any program, whether governmental or private (including thosepromulgated or sponsored by industry associations and insurance companies), designedto provide safe and healthful working conditions.**“Order”**—any award, decision, injunction, judgment, order, ruling, subpoena,or verdict entered, issued, made, or rendered by any court, administrative agency,or other Governmental Body or by any arbitrator.**“Ordinary Course of Business”**—an action taken by a Person will be deemed tohave been taken in the “Ordinary Course of Business” only if:(a) such action is consistent with the past practices of such Person and istaken in the ordinary course of the normal day-to-day operations of suchPerson;(b) such action is not required to be authorized by the board of directorsof such Person (or by any Person or group of Persons exercising similarauthority); and(c) such action is similar in nature and magnitude to actions customarilytaken, without any authorization by the board of directors (or by any Personor group of Persons exercising similar authority), in the ordinary course ofthe normal day-to-day operations of other Persons that are in the same lineof business as such Person.**“Organizational Documents”**—(a) the articles or certificate of incorporationand the bylaws of a corporation; (b) the partnership agreement and any statement ofpartnership of a general partnership; (c) the limited partnership agreement and thecertificate of limited partnership of a limited partnership; (d) any charter orsimilar document adopted or filed in connection with the creation, formation, ororganization of a Person; and (e) any amendment to any of the foregoing.
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**“Person”**—any individual, corporation (including any non-profitcorporation), general or limited partnership, limited liability company, jointventure, estate, trust, association, organization, labor union, or other entity orGovernmental Body.**“Plan”**—as defined in Section 3.13.**“Proceeding”**—any action, arbitration, audit, hearing, investigation,litigation, or suit (whether civil, criminal, administrative, investigative, orinformal) commenced, brought, conducted, or heard by or before, or otherwiseinvolving, any Governmental Body or arbitrator.**“Related Person”**—with respect to a particular individual:(a) each other member of such individual’s Family;(b) any Person that is directly or indirectly controlled by such individualor one or more members of such individual’s Family;(c) any Person in which such individual or members of such individual’sFamily hold (individually or in the aggregate) a Material Interest; and(d) any Person with respect to which such individual or one or more membersof such individual’s Family serves as a director, officer, partner,executor, or trustee (or in a similar capacity).With respect to a specified Person other than an individual:(a) any Person that directly or indirectly controls, is directly orindirectly controlled by, or is directly or indirectly under common controlwith such specified Person;(b) any Person that holds a Material Interest in such specified Person;(c) each Person that serves as a director, officer, partner, executor, ortrustee of such specified Person (or in a similar capacity);(d) any Person in which such specified Person holds a Material Interest;(e) any Person with respect to which such specified Person serves as ageneral partner or a trustee (or in a similar capacity); and(f) any Related Person of any individual described in clause (b) or (c).For purposes of this definition, (a) the “Family” of an individual includes (i) theindividual, (ii) the individual’s spouse, (iii) any other natural person who isrelated to
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the individual or the individual’s spouse within the second degree, and (iv) anyother natural person who resides with such individual, and (b) “Material Interest”means direct or indirect beneficial ownership (as defined in Rule 13d-3 under theSecurities Exchange Act of 1934) of voting securities or other voting interestsrepresenting at least 10% of the outstanding voting power of a Person or equitysecurities or other equity interests representing at least 10% of the outstandingequity securities or equity interests in a Person.**“Release”**—any spilling, leaking, emitting, discharging, depositing,escaping, leaching, dumping, or other releasing into the Environment, whetherintentional or unintentional.**“Representative”**—with respect to a particular Person, any director,officer, employee, agent, consultant, advisor, or other representative of suchPerson, including legal counsel, accountants, and financial advisors.**“Section ****338(h)(10)****Elections”**—as defined in Section 2.5.**“Securities Act”**—the Securities Act of 1933 or any successor law, andregulations and rules issued pursuant to that Act or any successor law.**“Seller”**—as defined in the first paragraph of this Agreement.**“Seller’s Release”**—as defined in Section 2.4.**“Shares”**—as defined in the Recitals of this Agreement.**“Subsidiary”**—with respect to any Person (the “Owner”), any corporation orother Person of which securities or other interests having the power to elect amajority of that corporation’s or other Person’s board of directors or similargoverning body, or otherwise having the power to direct the business and policies ofthat corporation or other Person (other than securities or other interests havingsuch power only upon the happening of a contingency that has not occurred) are heldby the Owner or one or more of its Subsidiaries; when used without reference to aparticular Person, “Subsidiary” means a Subsidiary of the Company.**“Tax”**—any income, gross receipts, license, payroll, employment, excise,severance, stamp, occupation, premium, property, environmental, windfall profit,customs, vehicle, airplane, boat, vessel or other title or registration, capitalstock, franchise, employees’ income withholding, foreign or domestic withholding,social security, unemployment, disability, real property, personal property, sales,use, transfer, value added, alternative, add-on minimum and other tax, fee,assessment, levy, tariff, charge or duty of any kind whatsoever and any interest,penalty, addition or additional amount thereon imposed, assessed or collected by orunder the authority of
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any Governmental Body or payable under any tax-sharing agreement or any otherContract.**“Tax Return”**—any return (including any information return), report,statement, schedule, notice, form, or other document or information filed with orsubmitted to, or required to be filed with or submitted to, any Governmental Body inconnection with the determination, assessment, collection, or payment of any Tax orin connection with the administration, implementation, or enforcement of orcompliance with any Legal Requirement relating to any Tax.**“Threat of Release”**—a substantial likelihood of a Release that may requireaction in order to prevent or mitigate damage to the Environment that may resultfrom such Release.**“Threatened”**—a claim, Proceeding, dispute, action, or other matter will bedeemed to have been “Threatened” if any demand or statement has been made (orally orin writing) or any notice has been given (orally or in writing), or if any otherevent has occurred or any other circumstances exist, that would lead a prudentPerson to conclude that such a claim, Proceeding, dispute, action, or other matteris likely to be asserted, commenced, taken, or otherwise pursued in the future.**2.****SALE AND TRANSFER OF SHARES; CLOSING****2.1****SHARES**            Subject to the terms and conditions of this Agreement, at the Closing, Seller will sell andtransfer the Shares to Buyer, and Buyer will purchase the Shares from Seller.**2.2****PURCHASE PRICE**            The purchase price (the “Purchase Price”) for the Shares will be $83,600,000 which includesthe Make Whole Amount which represents additional Purchase Price.**2.3****CLOSING**            The purchase and sale (the “Closing”) provided for in this Agreement will take place at theoffices of Buyer at 5075 Westheimer, Suite 890, Houston, Texas 77056 at 10:00 a.m. (local time) onthe earliest date following January 2, 2006, and when all the conditions precedent of Seller andBuyer as described in Sections 7 and 8 of this Agreement have been satisfied or at such other timeand place as the parties may agree. Subject to the provisions of Section 9, failure to consummatethe purchase and sale provided for in this Agreement on the date and time and at the placedetermined pursuant to this Section 2.3 will not result in the termination of this Agreement andwill not relieve any party of any obligation under this Agreement.
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**2.4****CLOSING OBLIGATIONS**            At the Closing:            (a) Seller will deliver to Buyer:(i) certificates representing the Shares, duly endorsed (or accompanied byduly executed stock powers) for transfer to Buyer;(ii) release in the form of Exhibit 2.4(a)(ii) executed by Seller(collectively, “Seller’s Release”);(iii) employment agreement in the form of Exhibit 2.4(a)(iii), executed bySeller (“Employment Agreement”);(iv) a certificate executed by Seller representing and warranting to Buyerthat each of Seller’s representations and warranties in this Agreement wasaccurate in all respects as of the date of this Agreement and is accurate inall respects as of the Closing Date as if made on the Closing Date (givingfull effect to any supplements to the Disclosure Letter that were deliveredby Seller to Buyer prior to the Closing Date in accordance with Section5.5);(v) a lease agreement in the form of Exhibit 2.4(a)(v) executed by Seller onthe real property and buildings operated by the Company in Broussard,Louisiana (“Lease Agreement”); and(vi) an affidavit stating that the Seller’s United States taxpayeridentification number and that the Seller is not a foreign person pursuantto Section 1445(b)(2) of the Code.            (b) Buyer will deliver to Seller:(i) the amount of $83,600,000 by wire transfer to an account specified bySeller;(ii) a certificate executed by Buyer representing and warranting to Sellerthat each of Buyer’s representations in this Agreement was accurate in allrespects as of the date of this Agreement and is accurate in all respects asof the Closing Date as if made on the Closing Date**;**(iii)the Employment Agreement executed by Buyer; and(iv)the Lease Agreement executed by the Company.
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**2.5****SECTION 338 (h)(10) ELECTION**            If Buyer decides in its sole discretion to make a Section 338(h)(10) Election pursuant to theCode with respect to the sale and purchase of Shares under this Agreement, Seller and Buyer agreeto join in making the election under Section 338(h)(10) (and any corresponding elections understate, local or foreign tax law) (collectively, the “Section 338(h)(10) Elections”) with respect tothe purchase and sale of the Shares of the Company to Buyer.**2.6****ADDITIONAL PURCHASE PRICE FOR 3****38(h)(10)****ELECTIONS**            In making the Section 338(h)(10) Elections, Buyer will include in payment to Seller an amountof $6,000,000 as additional Purchase Price (“Make Whole Amount”). The Make Whole Amount representsincremental Taxes payable by Seller as a result of the Section 338(h)(10) Elections and additionalTaxes payable by Seller as a result of consideration paid to Seller for such incremental Taxespayable. The Make Whole Amount shall be treated as additional Purchase Price by both Seller andBuyer in accordance with Section 5.9(d). Following the Section 338(h)(10) Elections, in the eventthat the Make Whole Amount is less than the incremental Taxes incurred by Seller as a result of theSection 338(h)(10) Elections, then Buyer will pay to Seller within ten days followingdetermination, such additional incremental Taxes (and additional Taxes as a result of considerationpaid). Following the Section 338(h)(10) Elections, in the event that the Make Whole Amount is morethan the incremental Taxes payable by Seller (and additional Taxes as a result of considerationpaid) as a result of the Section 338(h)(10) Elections, then Seller shall pay to Buyer thedifference in such amount and the Make Whole Amount within ten days of such determination.**2.7****CONTRIBUTION TO COMPANY**            As additional consideration for this Agreement, Buyer and Seller have agreed that, at Closing,Buyer shall contribute to the Company $12,400,000 less an amount equal to Company’s cash on hand onthe Closing Date (“Contribution”) for the payment on the Closing Date by the Company of bonuses andcommissions to certain employees and non-employees of the Company. The Contribution by Buyertogether with the cash of the Company on hand on the Closing Date shall be used exclusively for thepayment by the Company of said bonuses and commissions in such amounts, the total of which shallnot exceed $12,400,000, and to the individuals selected by Seller in his sole discretion**.****3.****REPRESENTATIONS AND WARRANTIES OF SELLER**Seller represents and warrants to Buyer as follows:**3.1****ORGANIZATION AND GOOD STANDING**            (a) Part 3.1 of the Disclosure Letter contains a complete and accurate list for the Company ofits name, its jurisdiction of incorporation, other jurisdictions in which it is authorized to dobusiness, and its capitalization (including the identity of each stockholder and the number ofshares held by each). The Company is a corporation duly organized, validly existing, and in goodstanding
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under the laws of its jurisdiction of incorporation, with full corporate power and authorityto conduct its business as it is now being conducted, to own or use the properties and assets thatit purports to own or use, and to perform all its obligations under Applicable Contracts. TheCompany is duly qualified to do business as a foreign corporation and is in good standing under thelaws of each state or other jurisdiction in which either the ownership or use of the propertiesowned or used by it, or the nature of the activities conducted by it, requires such qualification.            (b) Seller has delivered to Buyer copies of the Organizational Documents of the Company, ascurrently in effect.**3.2****AUTHORITY; NO CONFLICT**          (a) This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceableagainst Seller in accordance with its terms. Upon the execution and delivery by Seller of theEmployment Agreement and the Seller’s Release (collectively, the “Seller’s Closing Documents”), theSeller’ Closing Documents will constitute the legal, valid, and binding obligations of Seller,enforceable against Seller in accordance with their respective terms. Seller has the absolute andunrestricted right, power, authority, and capacity to execute and deliver this Agreement and theSeller’s Closing Documents and to perform their obligations under this Agreement and the Seller’sClosing Documents.          (b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the execution anddelivery of this Agreement nor the consummation or performance of any of the ContemplatedTransactions will, directly or indirectly (with or without notice or lapse of time):     (i) contravene, conflict with, or result in a violation of (A) any provision ofthe Organizational Documents of the Company, or (B) any resolution adopted by theboard of directors or the stockholders of the Company;     (ii) contravene, conflict with, or result in a violation of, or give anyGovernmental Body or other Person the right to challenge any of the ContemplatedTransactions or to exercise any remedy or obtain any relief under, any LegalRequirement or any Order to which the Company or Seller, or any of the assets ownedor used by the Company, may be subject;     (iii) contravene, conflict with, or result in a violation of any of the termsor requirements of, or give any Governmental Body the right to revoke, withdraw,suspend, cancel, terminate, or modify, any Governmental Authorization that is heldby the Company or that otherwise relates to the business of, or any of the assetsowned or used by the Company;     (iv) cause Buyer or the Company to become subject to, or to become liable forthe payment of, any Tax other than as a result of the Company no longer being aSubchapter S corporation;
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     (v) cause any of the assets owned by the Company to be reassessed or revaluedby any taxing authority or other Governmental Body;     (vi) contravene, conflict with, or result in a violation or breach of anyprovision of, or give any Person the right to declare a default or exercise anyremedy under, or to accelerate the maturity or performance of, or to cancel,terminate, or modify, any Applicable Contract; or     (vii) result in the imposition or creation of any Encumbrance upon or withrespect to any of the assets owned or used by the Company.Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller or the Company is or willbe required to give any notice to or obtain any Consent from any Person in connection with theexecution and delivery of this Agreement or the consummation or performance of any of theContemplated Transactions.**3.3****CAPITALIZATION**               The authorized equity securities of the Company consist of 10,000 shares of common stock, nopar value, of which 225 shares are issued and outstanding and constitute the Shares. Seller is andwill be on the Closing Date the record and beneficial owner and holder of all the Shares, free andclear of all Encumbrances. No legend or other reference to any purported Encumbrance appears uponany certificate representing equity securities of Company. All of the outstanding equity securitiesof the Company have been duly authorized and validly issued and are fully paid and nonassessable.There are no Contracts relating to the issuance, sale, or transfer of any equity securities orother securities of the Company. None of the outstanding equity securities or other securities ofthe Company was issued in violation of the Securities Act or any other Legal Requirement. TheCompany does not own, or have any Contract to acquire, any equity securities or other securities ofany Person or any direct or indirect equity or ownership interest in any other business.**3.4****FINANCIAL STATEMENTS**               Seller has delivered to Buyer: (a) audited consolidated balance sheets of the Company as atDecember 31 in each of the years 2002 through 2003, and the related audited consolidated statementsof income, changes in stockholders’ equity, and cash flow for each of the fiscal years then ended,together with the report thereon of UHY Mann Frankfort Stein & Lipp, independent certified publicaccountants, (b) an audited consolidated balance sheet of the Company as at December 31, 2004(including the notes thereto, the “Balance Sheet”), and the related consolidated statements ofincome, changes in stockholders’ equity, and cash flow for the fiscal year then ended, togetherwith the report thereon of UHY Mann Frankfort & Stein, independent certified public accountants,and (c) an audited consolidated balance sheet of the Company as at September 30, 2005 (the “InterimBalance Sheet”) and the related audited consolidated statements of income, changes in stockholders’equity, and cash flow for the 9 months then ended, including in each case the notes theretotogether with the report thereon of UHY Mann Frankfort Stein & Lipp, independent certified public
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accountants. Such financial statements and notes fairly present the financial condition andthe results of operations, changes in stockholders’ equity, and cash flow of the Company as at therespective dates of and for the periods referred to in such financial statements, all in accordancewith GAAP, subject, in the case of interim financial statements, to normal recurring year-endadjustments (the effect of which will not, individually or in the aggregate, be materially adverse)and the absence of notes (that, if presented, would not differ materially from those included inthe Balance Sheet); the financial statements referred to in this Section 3.4 reflect the consistentapplication of such accounting principles throughout the periods involved. No financial statementsof any Person other than the Company are required by GAAP to be included in the consolidatedfinancial statements of the Company.**3.5****BOOKS AND RECORDS**               The books of account, minute books, stock record books, and other records of the Company, allof which have been made available to Buyer, are complete and correct and have been maintained inaccordance with sound business practices and the requirements of Section 13(b)(2) of the SecuritiesExchange Act of 1934, as amended (regardless of whether or not the Company is subject to thatSection), including the maintenance of an adequate system of internal controls. The minute books ofthe Company contain accurate and complete records of all meetings held of, and corporate actiontaken by, the stockholders, the Boards of Directors, and committees of the Boards of Directors ofthe Company, and no meeting of any such stockholders, Board of Directors, or committee has beenheld for which minutes have not been prepared and are not contained in such minute books. At theClosing, all of those books and records will be in the possession of the Company.**3.6****TITLE TO PROPERTIES; ENCUMBRANCES**               Part 3.6 of the Disclosure Letter contains a complete and accurate list of all real property,leaseholds, or other interests therein owned by Company. The Company owns (with good and marketabletitle in the case of real property, subject only to the matters permitted by the followingsentence) all the properties and assets (whether real, personal, or mixed and whether tangible orintangible) that they purport to own, including all of the properties and assets reflected in theBalance Sheet and the Interim Balance Sheet (except for assets held under capitalized leasesdisclosed or not required to be disclosed in Part 3.6 of the Disclosure Letter and personalproperty sold since the date of the Balance Sheet and the Interim Balance Sheet, as the case maybe, in the Ordinary Course of Business), and all of the properties and assets purchased orotherwise acquired by the Company since the date of the Balance Sheet (except for personal propertyacquired and sold since the date of the Balance Sheet in the Ordinary Course of Business andconsistent with past practice). All material properties and assets reflected in the Balance Sheetand the Interim Balance Sheet are free and clear of all Encumbrances and are not, in the case ofreal property, subject to any rights of way, building use restrictions, exceptions, variances,reservations, or limitations of any nature except, with respect to all such properties and assets,(a) mortgages or security interests shown on the Balance Sheet or the Interim Balance Sheet assecuring specified liabilities or obligations, with respect to which no default (or event that,with notice or lapse of time or both, would constitute a default) exists, (b) mortgages or securityinterests incurred in connection with the purchase of
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property or assets after the date of the Interim Balance Sheet (such mortgages and securityinterests being limited to the property or assets so acquired), with respect to which no default(or event that, with notice or lapse of time or both, would constitute a default) exists, (c) liensfor current taxes not yet due, and (d) with respect to real property, (i) minor imperfections oftitle, if any, none of which is substantial in amount, materially detracts from the value orimpairs the use of the property subject thereto, or impairs the operations of the Company, and (ii)zoning laws and other land use restrictions that do not impair the present or anticipated use ofthe property subject thereto. All buildings, plants, and structures owned or leased by the Companyin Broussard, Louisiana lie wholly within the boundaries of the real property leased by the Companyin Broussard, Louisiana and do not encroach upon the real property of, or otherwise conflict withthe real property rights of, any other Person.**3.7****CONDITION AND SUFFICIENCY OF ASSETS**               The buildings, plants, structures, and equipment of the Company are structurally sound, are ingood operating condition and repair, and are adequate for the uses to which they are being put, andnone of such buildings, plants, structures, or equipment is in need of maintenance or repairsexcept for ordinary, routine maintenance and repairs that are not material in nature or cost. Thebuilding, plants, structures, and equipment of the Company are sufficient for the continued conductof the Company’s businesses after the Closing in substantially the same manner as conducted priorto the Closing.**3.8****ACCOUNTS RECEIVABLE**               All accounts receivable of the Company that are reflected on the Balance Sheet or the InterimBalance Sheet or on the accounting records of the Company as of the Closing Date (collectively, the“Accounts Receivable”) represent or will represent valid obligations arising from sales actuallymade or services actually performed in the Ordinary Course of Business. Unless paid prior to theClosing Date, the Accounts Receivable are or will be as of the Closing Date current and collectiblenet of the respective reserves shown on the Balance Sheet or the Interim Balance Sheet or on theaccounting records of the Company as of the Closing Date (which reserves are adequate andcalculated consistent with past practice and, in the case of the reserve as of the Closing Date,will not represent a greater percentage of the Accounts Receivable as of the Closing Date than thereserve reflected in the Interim Balance Sheet represented of the Accounts Receivable reflectedtherein and will not represent a material adverse change in the composition of such AccountsReceivable in terms of aging). Subject to such reserves, each of the Accounts Receivable either hasbeen or will be collected in full, without any set-off, within ninety days after the day on whichit first becomes due and payable. There is no contest, claim, or right of set-off, other thanreturns in the Ordinary Course of Business, under any Contract with any obligor of an AccountsReceivable relating to the amount or validity of such Accounts Receivable. Part 3.8 of theDisclosure Letter contains a complete and accurate list of all Accounts Receivable as of the dateof the Interim Balance Sheet, which list sets forth the aging of such Accounts Receivable.
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**3.9****INVENTORY**               All inventory of the Company, whether or not reflected in the Balance Sheet or the InterimBalance Sheet, consists of a quality and quantity usable and salable in the Ordinary Course ofBusiness, except for obsolete items and items of below-standard quality, all of which have beenwritten off or written down to net realizable value in the Balance Sheet or the Interim BalanceSheet or on the accounting records of the Company as of the Closing Date, as the case may be. Allinventories not written off have been priced at the lower of cost or market on a first in, firstout basis. The quantities of each item of inventory (whether raw materials, work-in-process, orfinished goods) are not excessive, but are reasonable in the present circumstances of the Company.**3.10****NO UNDISCLOSED LIABILITIES**               Except as set forth in Part 3.10 of the Disclosure Letter, the Company has no liabilities orobligations of any nature (whether known or unknown and whether absolute, accrued, contingent, orotherwise) except for liabilities or obligations reflected or reserved against in the Balance Sheetor the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Businesssince the respective dates thereof.**3.11****TAXES**               (a) The Company has filed properly or timely caused to be filed all Tax Returns that are orwere required to be filed by or with respect to it, either separately or as a member of a group ofcorporations, pursuant to applicable Legal Requirements. Seller has delivered or made available toBuyer copies of, and Part 3.11 of the Disclosure Letter contains a complete and accurate list of,all such Tax Returns filed since 2001. The Seller and the Company have timely paid or will pay, ormade provision for the payment of, all Taxes with respect to the Company in respect of periods orportions thereof beginning prior to and ending on or prior to the Closing Date, or pursuant to anyassessment received by Seller or the Company, except such Taxes, if any, as are listed in Part 3.11of the Disclosure Letter and are being contested in good faith and as to which adequate reserves(determined in accordance with GAAP) have been provided in the Balance Sheet and the InterimBalance Sheet. No item of income or gain reported by the Company for financial accounting purposesin any pre-Closing period is required to be included in taxable income of the Company for apost-Closing period.               (b) The United States federal and state income Tax Returns of the Company subject to suchTaxes have been audited by the IRS or relevant state tax authorities or are closed by theapplicable statute of limitations for all taxable years through 2001. Part 3.11 of the DisclosureLetter contains a complete and accurate list of all audits of all such Tax Returns, including areasonably detailed description of the nature and outcome of each audit. All deficiencies proposedas a result of such audits have been paid, reserved against, settled, or, as described in Part 3.11of the Disclosure Letter, are being contested in good faith by appropriate proceedings. Part 3.11of the Disclosure Letter describes all adjustments to the Tax Returns filed by the Company or anygroup of corporations including the Company for all taxable years since 2001, and the resultingdeficiencies proposed by the IRS. Except as described in Part 3.11 of the Disclosure Letter,neither Seller or the
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Company has given or been requested to give waivers or extensions (or is or would be subjectto a waiver or extension given by any other Person) of any statute of limitations relating to thepayment of Taxes of the Company or for which the Company may be liable.               (c) The charges, accruals, and reserves with respect to Taxes on the respective books of theCompany are adequate (determined in accordance with GAAP) and are at least equal to the Company’sliability for Taxes. There exists no proposed tax assessment against the Company except asdisclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to theapplication of Section 341(f)(2) of the Code has been filed with respect to any property or assetsheld, acquired, or to be acquired by the Company. All Taxes that the Company is or was required byLegal Requirements to withhold or collect have been duly withheld or collected and, to the extentrequired, have been paid to the proper Governmental Body or other Person.               (d) All Tax Returns filed by (or that include on a consolidated basis) the Company are true,correct, and complete. There is no tax sharing agreement that will require any payment by theCompany after the date of this Agreement. During the consistency period (as defined in Section338(h)(4) of the Code with respect to the sale of the Shares to Buyer), the Company or targetaffiliate (as defined in Section 338(h)(6) of the Code with respect to the sale of the Shares toBuyer) has not sold or will sell any property or assets to Buyer or to any member of the affiliatedgroup (as defined in Section 338(h)(5) of the Code) that includes Buyer. Part 3.11 of theDisclosure Letter lists all such target affiliates.               (e) The Company is an S corporation as defined in the Code Section 1361 and has been treatedin a similar manner for purposes of the income tax laws for all states in which it has been subjectto taxation where such treatment is legally available, and the Company is not and has not beensubject to either the built-in gains tax under Code Section 1374 or the passive income tax underCode Section 1375. Part 3.11(e) of the Disclosure Letter lists all the states and localities withrespect to which the Company is required to file any corporate income or franchise tax returns andsets forth whether the Company is treated as the equivalent of an S corporation by or with respectto each such state or locality. The Company has properly filed Tax Returns with and paid anddischarged any liabilities for Taxes in any states or localities in which it is subject to Tax.Neither Seller or the Company knows or has reason to believe, after consultation with tax counsel,that the Buyer’s acquisition of the Company’s capital stock pursuant to this Agreement would notqualify as a “qualified stock purchase” within the meaning of Section 338 of the Code and theTreasury Regulations thereunder, as to which an election properly may be made under Section338(h)(10). The Company has no operations or activities outside of the United States.               (f) Seller and the Company have disclosed on their federal income Tax Returns all positionstaken therein that could give rise to a substantial understatement of federal income Tax within themeaning of Code Section 6662.               (g) The disallowance of a deduction under Code Section 162(m) for employee remuneration willnot apply to any amount paid or payable by Seller under any contractual arrangement currently ineffect.
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**3.12****NO MATERIAL ADVERSE CHANGE**               Since the date of the Balance Sheet, there has not been any material adverse change in thebusiness, operations, properties, prospects, assets, or condition of Company, and no event hasoccurred or circumstance exists that may result in such a material adverse change.**3.13****EMPLOYEE BENEFITS**               The Seller has delivered to the Buyer a true, correct and complete list (which is set forth onPart 3.13 of the Disclosure Letter) of all employee benefit plans of the Company, including allwritten employment agreements and all other agreements or arrangements that could obligate theCompany or any affiliate of the Company to make any severance, change-of-control or other, similarpayments and all deferred compensation agreements, together with true, correct and complete copiesof such plans, agreements and any trusts related thereto, and classifications of employees coveredthereby. Except for the employee benefit plans, if any, described on Part 3.13 of the DisclosureLetter, the Company does not sponsor, maintain or contribute to any plan program, fund orarrangement that constitutes an “employee pension benefit plan,” and the Company does not have anyobligation to contribute to or accrue or pay any benefits under any deferred compensation orretirement funding arrangement on behalf of any employee or employees (such as, for example, andwithout limitation, any individual retirement account or annuity, any “excess benefit plan” (withinthe meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended“ERISA”) or any non-qualified deferred compensation arrangement). For the purposes of thisAgreement, the term “employee pension benefit plan” shall have the same meaning as is given thatterm in Section 3(2) of ERISA. The Company has not sponsored, maintained or contributed to anyemployee pension benefit plan, nor is the Company required to contribute to any retirement planpursuant to the provisions of any collective bargaining agreement establishing the terms andconditions of employment of any of the Company’s employees, other than the plans set forth on Part3.13 of the Disclosure Letter. The Company is not now, nor as a result of its past activities canit reasonably be expected to become, liable to the Pension Benefit Guaranty Corporation (other thanfor premium payments) or to any multi employer employee pension benefit plan under the provisionsof Title IV of ERISA. All employee benefit plans listed in Part 3.13 of the Disclosure Letter andthe administration thereof are in substantial compliance with their terms and all applicableprovisions of ERISA and the regulations issued thereunder, as well as with all other applicablefederal, state and local statutes, ordinances and regulations. All accrued contributionobligations of the Company or any subsidiary with respect to any plan listed in Part 3.13 of theDisclosure Letter have either been fulfilled in their entirety or are fully reflected on theUnaudited Balance Sheets of the Company.               Compliance with the Code and ERISA. All employee benefit plans listed in Part 3.13of the Disclosure Letter that are intended to qualify under Section 401(a) of the Code (the“Qualified Plans”) are, and have been so qualified and have been determined by the Internal RevenueService to be so qualified, and copies of such determination letters are included as part ofPart 3.13 of the Disclosure Letter. To the Seller’s Knowledge, except as disclosed in Part 3.13 of theDisclosure Letter, all reports and other documents required to be filed with any governmentalagency or distributed to plan participants or beneficiaries (including, but not limited to,actuarial reports, audits or Returns) have been timely filed ordistributed, and copies thereof are included as part of
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Part 3.13 of the Disclosure Letter.No plan listed in Part 3.13 of the Disclosure Letter, or the Company has engaged in any transactionprohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. To theSellers’ Knowledge, no employee benefit plan listed in Part 3.13 of the Disclosure Letter hasincurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section302(1) of ERISA; and the Company has not incurred (i) any liability for excise tax or penaltypayable to the Internal Revenue Service, or (ii) any liability to the Pension Benefit GuarantyCorporation (other than for premium payments). In addition:          (i) there have been no terminations or discontinuance of contributions to anyQualified Plan without notice to and approval by the Internal Revenue Service;          (ii) no plan listed in Part 3.13 of the Disclosure Letter that is subject tothe provisions of Title IV of ERISA has been terminated;          (iii) there have been no “reportable events” (as that phrase is defined inSection 4043 of ERISA) with respect to employee benefit plans listed in Part 3.13 tothe Disclosure Letter;          (v) the Company has not incurred liability under Section 4062 of ERISA; and          (vi) no circumstances exist pursuant to which the Company could reasonably beexpected to have any direct or indirect liability whatsoever (including, but notlimited to, any liability to any multi employer plan or the Pension Benefit GuarantyCorporation under Title IV of ERISA or to the Internal Revenue Service for anyexcise tax or penalty, or being subject to any statutory Lien to secure payment ofany such liability) with respect to any plan now or heretofore maintained orcontributed to by any entity other than the Company that is, or at any time was, amember of a “controlled group” (as defined in Section 412(n)(6)(B) of the Code) thatincludes the Company (“Controlled Group”).The transactions contemplated by this Agreement together with any amounts paid or payable by theCompany or any member of the Controlled Group have not resulted in and will not result in paymentsto “disqualified individuals” (as defined in Section 280G(c) of the Code) of the Company or anymember of the Controlled Group which, individually or in the aggregate will constitute “excessparachute payments” (as defined in Section 280G(b) of the Code) resulting in the imposition of theexcise tax under Section 4999 of the Code or the disallowance of deductions under Section 280G ofthe Code.**3.14****COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS**          (a) Except as set forth in Part 3.14 of the Disclosure Letter:
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          (i) the Company is, and at all times since January 1, 2005, has been, in fullcompliance with each Legal Requirement that is or was applicable to it or to theconduct or operation of its business or the ownership or use of any of its assets;          (ii) no event has occurred or circumstance exists that (with or without noticeor lapse of time) (A) may constitute or result in a violation by the Company of, ora failure on the part of the Company to comply with, any Legal Requirement, or (B)may give rise to any obligation on the part of the Company to undertake, or to bearall or any portion of the cost of, any remedial action of any nature; and          (iii) the Company has not received, at any time since January 1, 2005, anynotice or other communication (whether oral or written) from any Governmental Bodyor any other Person regarding (A) any actual, alleged, possible, or potentialviolation of, or failure to comply with, any Legal Requirement, or (B) any actual,alleged, possible, or potential obligation on the part of the Company to undertake,or to bear all or any portion of the cost of, any remedial action of any nature.          (b) Part 3.14 of the Disclosure Letter contains a complete and accurate list of eachGovernmental Authorization that is held by the Company or that otherwise relates to the businessof, or to any of the assets owned or used by, the Company. Each Governmental Authorization listedor required to be listed in Part 3.14 of the Disclosure Letter is valid and in full force andeffect. Except as set forth in Part 3.14 of the Disclosure Letter:     (i) the Company is, and at all times since January 1, 2005, has been, in fullcompliance with all of the terms and requirements of each Governmental Authorizationidentified or required to be identified in Part 3.14 of the Disclosure Letter;     (ii) no event has occurred or circumstance exists that may (with or withoutnotice or lapse of time) (A) constitute or result directly or indirectly in aviolation of or a failure to comply with any term or requirement of any GovernmentalAuthorization listed or required to be listed in Part 3.14 of the 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 Part 3.14 of the Disclosure Letter;     (iii) the Company has not received, at any time since January 1, 2005 anynotice or other communication (whether oral or written) from any Governmental Bodyor any other Person regarding (A) any actual, alleged, possible, or potentialviolation of or failure 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 anyGovernmental Authorization; and
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     (iv) all applications required to have been filed for the renewal of theGovernmental Authorizations listed or required to be listed in Part 3.14 of theDisclosure Letter have been duly filed on a timely basis with the appropriateGovernmental Bodies, and all other filings required to have been made with respectto such Governmental Authorizations have been duly made on a timely basis with theappropriate Governmental Bodies.The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter collectivelyconstitute all of the Governmental Authorizations necessary to permit the Company to lawfullyconduct and operate its business in the manner it currently conduct and operates such business andto permit the Company to owns and use its assets in the manner in which they currently owns and usesuch assets.**3.15****LEGAL PROCEEDINGS; ORDERS**               (a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no pending Proceeding:          (i) that has been commenced by or against the Company or that otherwise relatesto or may affect the business of, or any of the assets owned or used by, theCompany; or          (ii) that challenges, or that may have the effect of preventing, delaying,making illegal, or otherwise interfering with, any of the Contemplated Transactions.To the Knowledge of Seller and the Company, (1) no such Proceeding has been Threatened, and (2) noevent has occurred or circumstance exists that may give rise to or serve as a basis for thecommencement of any such Proceeding. Seller has delivered to Buyer copies of all pleadings,correspondence, and other documents relating to each Proceeding listed in Part 3.15 of theDisclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter will not have amaterial adverse effect on the business, operations, assets, condition, or prospects of theCompany.               (b) Except as set forth in Part 3.15 of the Disclosure Letter:          (i) there is no Order to which any of the Company, or any of the assets ownedor used by the Company, is subject;          (ii) Seller is not subject to any Order that relates to the business of, or anyof the assets owned or used by, the Company; and          (iii) no officer, director, agent, or employee of the Company is subject to anyOrder that prohibits such officer, director, agent, or employee from engaging in orcontinuing any conduct, activity, or practice relating to the business of theCompany.               (c) Except as set forth in Part 3.15 of the Disclosure Letter:
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          (i) the Company is, and at all times since January 1, 2005 has been, in fullcompliance with all of the terms and requirements of each Order to which it, or anyof the assets owned or used by it, is or has been subject;          (ii) no event has occurred or circumstance exists that may constitute or resultin (with or without notice or lapse of time) a violation of or failure to complywith any term or requirement of any Order to which the Company, or any of the assetsowned or used by the Company, is subject; and          (iii) the Company has not received, at any time since January 1, 2005, anynotice or other communication (whether oral or written) from any Governmental Bodyor any other Person regarding any actual, alleged, possible, or potential violationof, or failure to comply with, any term or requirement of any Order to which theCompany, or any of the assets owned or used by the Company, is or has been subject.**3.16****ABSENCE OF CERTAIN CHANGES AND EVENTS**               Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the BalanceSheet, the Company has conducted its business only in the Ordinary Course of Business and there hasnot been any:               (a) change in the Company’s authorized or issued capital stock; grant of any stock option orright to purchase shares of capital stock of the Company; issuance of any security convertible intosuch capital stock; grant of any registration rights; purchase, redemption, retirement, or otheracquisition by the Company of any shares of any such capital stock; or declaration or payment ofany dividend or other distribution or payment in respect of shares of capital stock other thandistribution to Seller of all funds in Company’s short-term investment account in the amount of$8,270,000 plus earnings through Closing, which distribution Buyer expressly approves;               (b) amendment to the Organizational Documents of the Company;               (c) payment or increase by the Company of any bonuses, salaries, or other compensation to anystockholder, director, officer, or (except in the Ordinary Course of Business) employee or entryinto any employment, severance, or similar Contract with any director, officer, or employee;               (d) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus,deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan foror with any employees of the Company;               (e) damage to or destruction or loss of any asset or property of the Company, whether or notcovered by insurance, materially and adversely affecting the properties, assets, business,financial condition, or prospects of the Company, taken as a whole;
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               (f) entry into, termination of, or receipt of notice of termination of (i) any license,distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii)any Contract or transaction involving a total remaining commitment by or to Company of at least$100,000;               (g) sale (other than sales of inventory in the Ordinary Course of Business), lease, or otherdisposition of any asset or property of the Company or mortgage, pledge, or imposition of any lienor other encumbrance on any material asset or property of the Company, including the sale, lease,or other disposition of any of the Intellectual Property Assets;               (h) cancellation or waiver of any claims or rights with a value to the Company in excess of$100,000;               (i) material change in the accounting methods used by the Company; or               (j) agreement, whether oral or written, by the Company to do any of the foregoing.**3.17****CONTRACTS; NO DEFAULTS**               (a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate list, and Sellerhave delivered to Buyer true and complete copies, of:          (i) each Applicable Contract that involves performance of services or deliveryof goods or materials by the Company of an amount or value in excess of $100,000;          (ii) each Applicable Contract that involves performance of services or deliveryof goods or materials to the Company of an amount or value in excess of $100,000;          (iii) each Applicable Contract that was not entered into in the Ordinary Courseof Business and that involves expenditures or receipts of the Company in excess of$100,000;          (iv) each lease, rental or occupancy agreement, license, installment andconditional sale agreement, and other Applicable Contract affecting the ownershipof, leasing of, title to, use of, or any leasehold or other interest in, any real orpersonal property (except personal property leases and installment and conditionalsales agreements having a value per item or aggregate payments of less than $100,000and with terms of less than one year);          (v) each licensing agreement or other Applicable Contract with respect topatents, trademarks, copyrights, or other intellectual property, includingagreements
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with current or former employees, consultants, or contractors regarding theappropriation or the non-disclosure of any of the Intellectual Property Assets;          (vi) each collective bargaining agreement and other Applicable Contract to orwith any labor union or other employee representative of a group of employees;          (vii) each joint venture, partnership, and other Applicable Contract (howevernamed) involving a sharing of profits, losses, costs, or liabilities by the Companywith any other Person;          (viii) each Applicable Contract containing covenants that in any way purport torestrict the business activity of the Company or any Affiliate of the Company orlimit the freedom of the Company or any Affiliate of the Company to engage in anyline of business or to compete with any Person;          (ix) each Applicable Contract providing for payments to or by any Person basedon sales, purchases, or profits, other than direct payments for goods;          (x) each power of attorney that is currently effective and outstanding;          (xi) each Applicable Contract entered into other than in the Ordinary Course ofBusiness that contains or provides for an express undertaking by the Company to beresponsible for consequential damages;          (xii) each Applicable Contract for capital expenditures in excess of $100,000;          (xiii) each written warranty, guaranty, and or other similar undertaking withrespect to contractual performance extended by the Company other than in theOrdinary Course of Business; and          (xiv) each amendment, supplement, and modification (whether oral or written) inrespect of any of the foregoing.Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details concerning suchContracts, including the parties to the Contracts, the amount of the remaining commitment of theCompany under the Contracts, and the Company’s office where details relating to the Contracts arelocated.(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:          (i) neither Seller (and no Related Person of Seller) has or may acquire anyrights under, and neither Seller has or may become subject to any obligation orliability under, any Contract that relates to the business of, or any of the assetsowned or used by, the Company; and
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          (ii) no officer, director, agent, employee, consultant, or contractor of theCompany is bound by any Contract that purports to limit the ability of such officer,director, agent, employee, consultant, or contractor to (A) engage in or continueany conduct, activity, or practice relating to the business of the Company, or (B)assign to the Company or to any other Person any rights to any invention,improvement, or discovery.(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each Contract identified orrequired to be identified in Part 3.17(a) of the Disclosure Letter is in full force and effect andis valid and enforceable in accordance with its terms.(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:          (i) the Company is, and at all times since January 1, 2005, has been, in fullcompliance with all applicable terms and requirements of each Contract under whichthe Company has or had any obligation or liability or by which such Acquired Companyor any of the assets owned or used by the Company is or was bound;          (ii) each other Person that has or had any obligation or liability under anyContract under which the Company has or had any rights is, and at all times sinceJanuary 1, 2005, has been, in full compliance with all applicable terms andrequirements of such Contract;          (iii) no event has occurred or circumstance exists that (with or without noticeor lapse of time) may contravene, conflict with, or result in a violation or breachof, or give the Company or other Person the right to declare a default or exerciseany remedy under, or to accelerate the maturity or performance of, or to cancel,terminate, or modify, any Applicable Contract; and          (iv) the Company has not given to or received from any other Person, at anytime since January 1, 2005, any notice or other communication (whether oral orwritten) regarding any actual, alleged, possible, or potential violation or breachof, or default under, any Contract.               (e) There are no renegotiations of, attempts to renegotiate, or outstanding rights torenegotiate any material amounts paid or payable to the Company under current or completedContracts with any Person and, to the Knowledge of Seller and the Company, no such Person has madewritten demand for such renegotiation.               (f) The Contracts relating to the sale, design, manufacture, or provision of products orservices by the Company have been entered into in the Ordinary Course of Business and have beenentered into without the commission of any act alone or in concert with any other Person, or anyconsideration having been paid or promised, that is or would be in violation of any LegalRequirement.
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**3.18****INSURANCE**          (a) Seller has delivered to Buyer:          (i) true and complete copies of all policies of insurance to which Company is aparty or under which the Company, or any director of the Company, is or has beencovered at any time within the 5 years preceding the date of this Agreement;          (ii) true and complete copies of all pending applications for policies ofinsurance; and          (iii) any statement by the auditor of the Company’s financial statements withregard to the adequacy of such entity’s coverage or of the reserves for claims.          (b) Part 3.18(b) of the Disclosure Letter describes:          (i) any self-insurance arrangement by or affecting the Company, including anyreserves established thereunder;          (ii) any contract or arrangement, other than a policy of insurance, for thetransfer or sharing of any risk by the Company; and          (iii) all obligations of the Company to third parties with respect to insurance(including such obligations under leases and service agreements) and identifies thepolicy under which such coverage is provided.          (c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the current policy year andeach of the 3 preceding policy years:          (i) a summary of the loss experience under each policy;          (ii) a statement describing each claim under an insurance policy for an amountin excess of $50,000, which sets forth:               (A) the name of the claimant;               (B) a description of the policy by insurer, type of insurance, andperiod of coverage; and               (C) the amount and a brief description of the claim; and          (iii) a statement describing the loss experience for all claims that wereself-insured, including the number and aggregate cost of such claims.
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          (d) Except as set forth on Part 3.18(d) of the Disclosure Letter:          (i) All policies to which the Company is a party or that provide coverage toSeller, the Company, or any director or officer of the Company:               (A) are valid, outstanding, and enforceable;               (B) are issued by an insurer that is financially sound and reputable;               (C) taken together, provide adequate insurance coverage for the assetsand the operations of the Company for all risks to which the Company isnormally exposed;               (D) are sufficient for compliance with all Legal Requirements andContracts to which the Company is a party or by which any of them is bound;               (E) will continue in full force and effect following the consummationof the Contemplated Transactions; and               (F) do not provide for any retrospective premium adjustment or otherexperienced-based liability on the part of the Company.          (ii) Neither Seller or the Company has received (A) any refusal of coverage orany notice that a defense will be afforded with reservation of rights, or (B) anynotice of cancellation or any other indication that any insurance policy is nolonger in full force or effect or will not be renewed or that the issuer of anypolicy is not willing or able to perform its obligations thereunder.          (iii) The Company has paid all premiums due, and has otherwise performed all ofits respective obligations, under each policy to which the Company is a party orthat provides coverage to Company or director thereof.          (iv) The Company has given notice to the insurer of all claims that may beinsured thereby.**3.19****ENVIRONMENTAL MATTERS**               Except as set forth in Part 3.19 of the Disclosure Letter:               (a) The Company is, and at all times has been, in full compliance with, and has not been andis not in violation of or liable under, any Environmental Law. Neither Seller or the Company hasany basis to expect, nor has any of them or any other Person for whose conduct they are or may beheld to be responsible received, any actual or Threatened order, notice, or other communicationfrom (i) any Governmental Body or private citizen acting in the public interest, or
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(ii) the current or prior owner or operator of any Facilities, of any actual or potentialviolation or failure to comply with any Environmental Law, or of any actual or Threatenedobligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities withrespect to any of the Facilities or any other properties or assets (whether real, personal, ormixed) in which Seller or the Company has had an interest, or with respect to any property orFacility at or to which Hazardous Materials were generated, manufactured, refined, transferred,imported, used, or processed by Seller, the Company, or any other Person for whose conduct they areor may be held responsible, or from which Hazardous Materials have been transported, treated,stored, handled, transferred, disposed, recycled, or received.               (b) There are no pending or, to the Knowledge of Seller and the Company, Threatened claims,Encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, andSafety Liabilities or arising under or pursuant to any Environmental Law, with respect to oraffecting any of the Facilities or any other properties and assets (whether real, personal, ormixed) in which Seller or the Company has or had an interest.               (c) Neither Seller or the Company has Knowledge of any basis to expect, nor has any of them orany other Person for whose conduct they are or may be held responsible, received, any citation,directive, inquiry, notice, Order, summons, warning, or other communication that relates toHazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failureto comply with any Environmental Law, or of any alleged, actual, or potential obligation toundertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to anyof the Facilities or any other properties or assets (whether real, personal, or mixed) in whichSeller or the Company had an interest, or with respect to any property or facility to whichHazardous Materials generated, manufactured, refined, transferred, imported, used, or processed bySeller, the Company, or any other Person for whose conduct they are or may be held responsible,have been transported, treated, stored, handled, transferred, disposed, recycled, or received.               (d) Neither Seller or the Company, or any other Person for whose conduct they are or may beheld responsible, has any Environmental, Health, and Safety Liabilities with respect to theFacilities or to the Knowledge of Seller and the Company, with respect to any other properties andassets (whether real, personal, or mixed) in which Seller or the Company (or any predecessor), hasor had an interest, or at any property geologically or hydrologically adjoining the Facilities orany such other property or assets.               (e) There are no Hazardous Materials present on or in the Environment at the Facilities or atany geologically or hydrologically adjoining property, including any Hazardous Materials containedin barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whethermoveable or fixed) or other containers, either temporary or permanent, and deposited or located inland, water, sumps, or any other part of the Facilities or such adjoining property, or incorporatedinto any structure therein or thereon. Neither Seller, the Company, any other Person for whoseconduct they are or may be held responsible, or to the Knowledge of Seller and the Company, anyother Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted withrespect to the Facilities or any other properties or assets (whether real,
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personal, or mixed) in which Seller or the Company has or had an interest except in fullcompliance with all applicable Environmental Laws.               (f) There has been no Release or, to the Knowledge of Seller and the Company, Threat ofRelease, of any Hazardous Materials at or from the Facilities or at any other locations where anyHazardous Materials were generated, manufactured, refined, transferred, produced, imported, used,or processed from or by the Facilities, or from or by any other properties and assets (whetherreal, personal, or mixed) in which Seller or Company has or had an interest, or to the Knowledge ofSeller and the Company any geologically or hydrologically adjoining property, whether by Seller,the Company, or any other Person.               (g) Seller have delivered to Buyer true and complete copies and results of any reports,studies, analyses, tests, or monitoring possessed or initiated by Seller or the Company pertainingto Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerningcompliance by Seller, the Company, or any other Person for whose conduct they are or may be heldresponsible, with Environmental Laws.**3.20****EMPLOYEES**               (a) Part 3.20 of the Disclosure Letter contains a complete and accurate list of the followinginformation for each employee or director of the Company, including each employee on leave ofabsence or layoff status: employer; name; job title; current compensation paid or payable and anychange in compensation since January 1, 2005; vacation accrued; and service credited for purposesof vesting and eligibility to participate under the Company’s pension, retirement, profit-sharing,thrift-savings, deferred compensation, stock bonus, stock option, cash bonus, employee stockownership (including investment credit or payroll stock ownership), severance pay, insurance,medical, welfare, or vacation plan, other Employee Pension Benefit Plan or Employee Welfare BenefitPlan, or any other employee benefit plan or any Director Plan.               (b) No employee or director of the Company is a party to, or is otherwise bound by, anyagreement or arrangement, including any confidentiality, non-competition, or proprietary rightsagreement, between such employee or director and any other Person (“Proprietary Rights Agreement”)that in any way adversely affects or will affect (i) the performance of his duties as an employeeor director of the Company, or (ii) the ability of the Company to conduct its business, includingany Proprietary Rights Agreement with Seller or the Company by any such employee or director. ToSeller’s Knowledge, no director, officer, or other key employee of the Company intends to terminatehis employment with the Company.               (c) Part 3.20 of the Disclosure Letter also contains a complete and accurate list of thefollowing information for each retired employee or director of the Company, or their dependents,receiving benefits or scheduled to receive benefits in the future: name, pension benefit, pensionoption election, retiree medical insurance coverage, retiree life insurance coverage, and otherbenefits.
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     **3.21****LABOR RELATIONS; COMPLIANCE**          Since January 1, 2005, the Company has not been and is not a party to any collectivebargaining or other labor Contract. Since January 1, 2005, there has not been, there is notpresently pending or existing, and to Seller’s Knowledge there is not Threatened, (a) any strike,slowdown, picketing, work stoppage, or employee grievance process, (b) any Proceeding against oraffecting the Company relating to the alleged violation of any Legal Requirement pertaining tolabor relations or employment matters, including any charge or complaint filed by an employee orunion with the National Labor Relations Board, the Equal Employment Opportunity Commission, or anycomparable Governmental Body, organizational activity, or other labor or employment dispute againstor affecting any of the Company or its premises, or (c) any application for certification of acollective bargaining agent. No event has occurred or circumstance exists that could provide thebasis for any work stoppage or other labor dispute. There is no lockout of any employees by theCompany, and no such action is contemplated by the Company. The Company has complied in allrespects with all Legal Requirements relating to employment, equal employment opportunity,nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment ofsocial security and similar taxes, occupational safety and health, and plant closing. The Companyis not liable for the payment of any compensation, damages, taxes, fines, penalties, or otheramounts, however designated, for failure to comply with any of the foregoing Legal Requirements.     **3.22****INTELLECTUAL PROPERTY**          (a) Intellectual Property Assets—The term “Intellectual Property Assets”includes:     (i) the name “Specialty Rental Tools Inc.”, all fictional business names,trading names, registered and unregistered trademarks, service marks, andapplications (collectively, “Marks”);     (ii) all patents, patent applications, and inventions and discoveries that maybe patentable (collectively, “Patents”);     (iii) all copyrights in both published works and unpublished works(collectively, “Copyrights”);     (iv) all rights in mask works (collectively, “Rights in Mask Works”); and     (v) all know-how, trade secrets, confidential information, customer lists,software, technical information, data, process technology, plans, drawings, and blueprints (collectively, “Trade Secrets”); owned, used, or licensed by the Company aslicensee or licensor.          (b) Agreements—Part 3.22(b) of the Disclosure Letter contains a complete and accuratelist and summary description, including any royalties paid or received by the Company, of allContracts relating to the Intellectual Property Assets to which the Company is a party or by whichthe Company is bound, except for any license implied by the sale of a product and perpetual,paid-up
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licenses for commonly available software programs with a value of less than $1,000 underwhich the Company is the licensee. There are no outstanding and, to Seller’s Knowledge, noThreatened disputes or disagreements with respect to any such agreement.          (c) Know-How Necessary for the Business     (i) The Intellectual Property Assets are all those necessary for the operationof the Company’s businesses as they are currently conducted. The Company is theowner of all right, title, and interest in and to each of the Intellectual PropertyAssets, free and clear of all liens, security interests, charges, encumbrances,equities, and other adverse claims, and has the right to use without payment to athird party all of the Intellectual Property Assets.     (ii) Except as set forth in Part 3.22(c) of the Disclosure Letter, all formerand current employees of the Company have executed written Contracts with one ormore of the Company that assign to one or more of the Company all rights to anyinventions, improvements, discoveries, or information relating to the business ofthe Company. No employee of the Company has entered into any Contract that restrictsor limits in any way the scope or type of work in which the employee may be engagedor requires the employee to transfer, assign, or disclose information concerning hiswork to anyone other than one or more of the Company.          (d) Patents     (i) Part 3.22(d) of the Disclosure Letter contains a complete and accurate listand summary description of all Patents. One or more of the Company is the owner ofall right, title, and interest in and to each of the Patents, free and clear of allliens, security interests, charges, encumbrances, entities, and other adverseclaims.     (ii) All of the issued Patents are currently in compliance with formal legalrequirements (including payment of filing, examination, and maintenance fees andproofs of working or use), are valid and enforceable, and are not subject to anymaintenance fees or taxes or actions falling due within ninety days after theClosing Date.     (iii) No Patent has been or is now involved in any interference, reissue,reexamination, or opposition proceeding. To Seller’s Knowledge, there is nopotentially interfering patent or patent application of any third party.     (iv) To Seller’s Knowledge no Patent is infringed or has been challenged orthreatened in any way. To Seller’s Knowledge none of the products manufactured andsold, nor any process or know-how used, by the Company infringes or is alleged toinfringe any patent or other proprietary right of any other Person.
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     (v) All products made, used, or sold under the Patents have been marked withthe proper patent notice.          (e) Trademarks     (i) Part 3.22(e) of Disclosure Letter contains a complete and accurate list andsummary description of all Marks. The Company is the owner of all right, title, andinterest in and to each of the Marks, free and clear of all liens, securityinterests, charges, encumbrances, equities, and other adverse claims.     (ii) All Marks that have been registered with the United States Patent andTrademark Office are currently in compliance with all formal legal requirements(including the timely post-registration filing of affidavits of use andincontestability and renewal applications), are valid and enforceable, and are notsubject to any maintenance fees or taxes or actions falling due within ninety daysafter the Closing Date.     (iii) No Mark has been or is now involved in any opposition, invalidation, orcancellation and, to Seller’s Knowledge, no such action is Threatened with therespect to any of the Marks.     (iv) To Seller’s Knowledge, there is no potentially interfering trademark ortrademark application of any third party.     (v) To Seller’s Knowledge no Mark is infringed or has been challenged orthreatened in any way. To Seller’s Knowledge none of the Marks used by the Companyinfringes or is alleged to infringe any trade name, trademark, or service mark ofany third party.     (vi) All products and materials containing a Mark bear the proper federalregistration notice where permitted by law.          (f) Copyrights     (i) Part 3.22(f) of the Disclosure Letter contains a complete and accurate listand summary description of all Copyrights. The Company is the owner of all right,title, and interest in and to each of the Copyrights, free and clear of all liens,security interests, charges, encumbrances, equities, and other adverse claims.     (ii) All the Copyrights have been registered and are currently in compliancewith formal legal requirements, are valid and enforceable, and are not subject toany maintenance fees or taxes or actions falling due within ninety days after thedate of Closing.
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     (iii) To Seller’s Knowledge, no Copyright is infringed or has been challengedor threatened in any way. To Seller’s Knowledge none of the subject matter of anyof the Copyrights infringes or is alleged to infringe any copyright of any thirdparty or is a derivative work based on the work of a third party.     (iv) All works encompassed by the Copyrights have been marked with the propercopyright notice.          (g) Trade Secrets     (i) With respect to each Trade Secret, the documentation relating to such TradeSecret is current, accurate, and sufficient in detail and content to identify andexplain it and to allow its full and proper use without reliance on the knowledge ormemory of any individual.     (ii) Seller and the Company have taken all reasonable precautions to protectthe secrecy, confidentiality, and value of their Trade Secrets.     (iii) The Company has good title and an absolute (but not necessarilyexclusive) right to use the Trade Secrets. The Trade Secrets are not part of thepublic knowledge or literature, and, to Seller’s Knowledge, have not been used,divulged, or appropriated either for the benefit of any Person (other than one ormore of the Company) or to the detriment of the Company. To Seller’s Knowledge, noTrade Secret is subject to any adverse claim or has been challenged or threatened inany way.     **3.23****CERTAIN PAYMENTS**          Since January 1, 2004, neither the Company nor any director or officer of the Company, nor toSeller’s Knowledge any agent, employee or any other Person associated with or acting for or onbehalf of the Company, has directly or indirectly (a) made any contribution, gift, bribe, rebate,payoff, influence payment, kickback, or other payment to any Person, private or public, regardlessof form, whether in money, property, or services (i) to obtain favorable treatment in securingbusiness, (ii) to pay for favorable treatment for business secured, (iii) to obtain specialconcessions or for special concessions already obtained, for or in respect of the Company or anyAffiliate of the Company, or (iv) in violation of any Legal Requirement, (b) established ormaintained any fund or asset that has not been recorded in the books and records of the Company.     **3.24****DISCLOSURE**          (a) No representation or warranty of Seller in this Agreement and no statement in theDisclosure Letter omits to state a material fact necessary to make the statements herein ortherein, in light of the circumstances in which they were made, not misleading.
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          (b) No notice given pursuant to Section 5.5 will contain any untrue statement or omit to statea material fact necessary to make the statements therein or in this Agreement, in light of thecircumstances in which they were made, not misleading.          (c) There is no fact known to either Seller that has specific application to either Seller orthe Company (other than general economic or industry conditions) and that materially adverselyaffects or, as far as Seller can reasonably foresee, materially threatens, the assets, business,prospects, financial condition, or results of operations of the Company (on a consolidated basis)that has not been set forth in this Agreement or the Disclosure Letter.     **3.25****RELATIONSHIPS WITH RELATED PERSONS**          Except as set forth in Part 3.25 of the Disclosure Letter, neither Seller nor any RelatedPerson of Seller or of the Company has, or since January 1, 2005, has had, any interest in anyproperty (whether real, personal, or mixed and whether tangible or intangible), used in orpertaining to the Company’s business. No Seller or any Related Person of Seller or of the Companyis, or since has owned (of record or as a beneficial owner) an equity interest or any otherfinancial or profit interest in, a Person that has (i) had business dealings or a materialfinancial interest in any transaction with the Company [other than business dealings ortransactions conducted in the Ordinary Course of Business with the Company at substantiallyprevailing market prices and on substantially prevailing market terms], or (ii) engaged incompetition with Company with respect to any line of the products or services of the Company (a“Competing Business”) in any market presently served by the Company except for less than twopercent of the outstanding capital stock of any Competing Business that is publicly traded on anyrecognized exchange or in the over-the-counter market. Except as set forth in Part 3.25 of theDisclosure Letter, neither Seller nor any Related Person of Seller or of the Company is a party toany Contract with, or has any claim or right against, the Company.     **3.26****BROKERS OR FINDERS**          Seller and their agents have incurred no obligation or liability, contingent or otherwise, forbrokerage or finders’ fees or agents’ commissions or other similar payment in connection with thisAgreement.**4.****REPRESENTATIONS AND WARRANTIES OF BUYER**     Buyer represents and warrants to Seller as follows:     **4.1****ORGANIZATION AND GOOD STANDING**          Buyer is a corporation duly organized, validly existing, and in good standing under the lawsof the State of Delaware.
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     **4.2****AUTHORITY; NO CONFLICT**          (a) This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceableagainst Buyer in accordance with its terms. Upon the execution and delivery by Buyer of theEmployment Agreement (collectively, the “Buyer’s Closing Documents”), the Buyer’s Closing Documentswill constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer inaccordance with their respective terms. Buyer has the absolute and unrestricted right, power, andauthority to execute and deliver this Agreement and the Buyer’s Closing Documents and to performits obligations under this Agreement and the Buyer’s Closing Documents.          (b) Except as set forth in Schedule 4.2, neither the execution and delivery of this Agreementby Buyer nor the consummation or performance of any of the Contemplated Transactions [by Buyer]will give any Person the right to prevent, delay, or otherwise interfere with any of theContemplated Transactions pursuant to:     (i) any provision of Buyer’s Organizational Documents;     (ii) any resolution adopted by the board of directors or the stockholders ofBuyer;     (iii) any Legal Requirement or Order to which Buyer may be subject; or     (iv) any Contract to which Buyer is a party or by which Buyer may be bound.Except as set forth in Schedule 4.2, Buyer is not and will not be required to obtain any Consentfrom any Person in connection with the execution and delivery of this Agreement or the consummationor performance of any of the Contemplated Transactions.     **4.3****INVESTMENT INTENT**          Buyer is acquiring the Shares for its own account and not with a view to their distributionwithin the meaning of Section 2(11) of the Securities Act.     **4.4****CERTAIN PROCEEDINGS**          There is no pending Proceeding that has been commenced against Buyer and that challenges, ormay have the effect of preventing, delaying, making illegal, or otherwise interfering with, any ofthe Contemplated Transactions. To Buyer’s Knowledge, no such Proceeding has been Threatened.     **4.5****BROKERS OR FINDERS**          Buyer and its officers and agents have incurred no obligation or liability, contingent orotherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in
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connection with this Agreement and will indemnify and hold Seller harmless from any such payment alleged to be dueby or through Buyer as a result of the action of Buyer or its officers or agents.**5.****COVENANTS OF SELLER PRIOR TO CLOSING DATE**     **5.1 ACCESS AND INVESTIGATION**          Between the date of this Agreement and the Closing Date, Seller will, and will cause theCompany and its Representatives to, (a) afford Buyer and its Representatives and prospectivelenders and their Representatives (collectively, “Buyer’s Advisors”) full and free access to theCompany’s personnel, properties (including subsurface testing), contracts, books and records, andother documents and data, (b) furnish Buyer and Buyer’s Advisors with copies of all such contracts,books and records, and other existing documents and data as Buyer may reasonably request, and (c)furnish Buyer and Buyer’s Advisors with such additional financial, operating, and other data andinformation as Buyer may reasonably request.     **5.2****OPERATION OF THE BUSINESSES OF THE COMPANY**          Between the date of this Agreement and through and including the Closing Date Seller or theCompany, as applicable, will:     (a) conduct the business of the Company only in the Ordinary Course of Business;     (b) use his Best Efforts to preserve intact the current business organization of the Company,keep available the services of the current officers, employees, and agents of the Company, andmaintain the relations and good will with suppliers, customers, landlords, creditors, employees,agents, and others having business relationships with the Company;     (c) confer with Buyer concerning operational matters of a material nature;     (d) otherwise report periodically to Buyer concerning the status of the business, operations,and finances of the Company;     (e) Company will pay off all bank debt to Iberia Bank or other notes payable up to a maximumof $3,600,000, excluding notes on vehicles;     (f) Company will make a profit sharing plan contribution for 2005, at Company’s expense, notto exceed $200,000 and, thereafter, terminate the plan;     (g) Company will pay the bonuses and commissions from the Contribution as described in Section2.7;     (h) Company will pay Tax resulting from the Company’s income and earnings (S corporation flowthrough) for 2005 and short-year 2006 of $5,400,000;
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     (i) Company will pay to Seller the short term investment account of the Company ofapproximately $8,270,000 plus accrued interest, provided, however, the Company shall not contributeany additional amounts to such account; and     (j) maintain the Accounts Receivable and accounts payable in the Ordinary Course of Businessand not allow any material adverse change in the Accounts Receivable or accounts payable.     **5.3****NEGATIVE COVENANT**          Except as otherwise expressly permitted by this Agreement, in particular Section 5.2, betweenthe date of this Agreement and the Closing Date, Seller will not, and will cause the Company notto, without the prior consent of Buyer, take any affirmative action, or fail to take any reasonableaction within their or its control, as a result of which any of the changes or events listed inSection 3.16 is likely to occur.     **5.4****REQUIRED APPROVALS**          As promptly as practicable after the date of this Agreement, Seller will, and will cause theCompany to, make all filings required by Legal Requirements to be made by them in order toconsummate the Contemplated Transactions (including all filings under the HSR Act). Between thedate of this Agreement and the Closing Date, Seller will, and will cause the Company to, (a)cooperate with Buyer with respect to all filings that Buyer elects to make or is required by LegalRequirements to make in connection with the Contemplated Transactions, and (b) cooperate with Buyerin obtaining all consents identified in Schedule 4.2 (including taking all actions requested byBuyer to cause early termination of any applicable waiting period under the HSR Act).     **5.5****NOTIFICATION**          Between the date of this Agreement and the Closing Date, the Seller will promptly notify Buyerin writing if Seller or the Company becomes aware of any fact or condition that causes orconstitutes a Breach of any of Seller’s representations and warranties as of the date of thisAgreement, or if Seller or the Company becomes aware of the occurrence after the date of thisAgreement of any fact or condition that would (except as expressly contemplated by this Agreement)cause or constitute a Breach of any such representation or warranty had such representation orwarranty been made as of the time of occurrence or discovery of such fact or condition. Should anysuch fact or condition require any change in the Disclosure Letter if the Disclosure Letter weredated the date of the occurrence or discovery of any such fact or condition, Seller will promptlydeliver to Buyer a supplement to the Disclosure Letter specifying such change. During the sameperiod, the Seller will promptly notify Buyer of the occurrence of any Breach of any covenant ofSeller in this Section 5 or of the occurrence of any event that may make the satisfaction of theconditions in Section 7 impossible or unlikely.
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     **5.6****PAYMENT OF INDEBTEDNESS BY RELATED PERSONS**          Except as expressly provided in this Agreement, Seller will cause all indebtedness owed to theCompany by Seller or any Related Person of Seller to be paid in full prior to Closing.     **5.7****NO NEGOTIATION**          Until such time, if any, as this Agreement is terminated pursuant to Section 9, Seller willnot, and will cause the Company and each of their Representatives not to, directly or indirectlysolicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provideany non-public information to, or consider the merits of any unsolicited inquiries or proposalsfrom, any Person (other than Buyer) relating to any transaction involving the sale of the businessor assets (other than in the Ordinary Course of Business) of the Company, or any of the capitalstock of the Company, or any merger, consolidation, business combination, or similar transactioninvolving the Company.     **5.8****BEST EFFORTS**          Between the date of this Agreement and the Closing Date, Seller and Buyer will use their BestEfforts to cause the conditions in Sections 7 and 8 to be satisfied.     **5.9****TAX MATTERS**          Seller will and will cause the Company to:     (a) **Post-Closing Tax Returns**. Cause all Taxes attributable to the Section 338(h)(10)Elections to be considered allocable to the taxable period or portion thereof ending on the ClosingDate and payable by Seller. To the extent permitted by applicable law, Seller shall include anyincome, gain, loss, deduction or other Tax items for such periods on his Tax Returns in a mannerconsistent with the Schedule K-1’s furnished to Seller with respect to the Company. The Buyershall prepare (or cause to be prepared) and file (or cause to be filed) each Tax Return required tobe filed by the Company after the Closing Date for a taxable period beginning after the ClosingDate.     (b) **Section ****338(h)(10)****Election**. Join with the Buyer in making Section 338(h)(10) Electionswith respect to the sale and purchase of the Shares under this Agreement, if the Buyer, in its solediscretion, decides to make such elections. The Seller and Buyer shall cooperate fully with eachother and make available to each other such Tax data and other information as may be reasonablyrequired by the Buyer in order to decide whether to make the Section 338(h)(10) Elections.     (c) **Preparation and filing of documents related to Section ****338(h)(10)****Elections**. If the Buyerdecides to make the Section 338(h)(10) Elections, the Buyer shall give the Seller notice of itsdecision to make the Section 338(h)(10) Elections, and the Parties shall cooperate fully with eachother and make available to each other such Tax data and other information as may be reasonablyrequired by the Buyer or the Seller in order to timely file, preserve or perfect the Section338(h)(10) Elections. Buyer shall be responsible for the preparation and filing of all forms and documents necessary for making orperfecting the
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Section 338(h)(10) Elections (collectively, “Section 338 Forms”). Buyer shallprovide the Section 338 Forms to the Seller for execution and shall advise the Seller in writing ofthose actions that Buyer reasonably considers necessary and appropriate for the Seller to take toeffect, preserve, or perfect timely the Section 338(h)(10) Elections. The Seller agrees to takesuch actions so reasonably advised by Buyer. The Sellers agree to execute and deliver to the Buyerthe Section 338 Forms provided by the Buyer for execution not later than ten (10) business daysafter any such forms are provided by Buyer for execution, and take timely such other actions as maybe necessary to effect, preserve, or perfect timely the Section 338(h)(10) Elections.          (d) **Purchase Price Allocation**. The parties agree that the consideration to be paid pursuantto Section 2.2 and Section 2.5 of this Agreement and other items properly includible in the deemedsales price of the assets of the Company pursuant to the Section 338(h)(10) Elections shall beallocated, for Tax purposes, among the assets of the Company in a manner consistent with theprovisions of Section 338 and Section 1060 of the Code and all regulations promulgated thereunder,and the Seller and Buyer shall fully cooperate in making the allocation of such consideration andother items properly included in the deemed sales price. The Buyer shall prepare IRS Form 8883 forinclusion with the federal income Tax Return of the Company ending on the Closing Date and anysimilar allocation required under state, local, or foreign law (collectively, “IRS Form 8883”).The Buyer shall permit the Seller’s representative to review and comment on IRS Form 8883. TheCompany, the Seller and the Buyer agree to report this transaction for federal Tax purposes as avalid election under Section 338(h)(10) and in accordance with IRS Form 8883 as ultimately filed,and shall not take any position or action inconsistent therewith upon examination of any TaxReturn, in any refund claim, in any litigation, investigation or otherwise; provided, however, thatif, in any audit of any Tax Return of the Seller, the Company or the Buyer by a Government Body,the fair market values are finally determined to be different from IRS Form 8883, as adjusted, theBuyer, the Company and the Seller may (but shall not be obligated to) take any position or actionconsistent with the fair market values as finally determined in such audit.          (e) **Tax Certificate.**Upon request, use reasonable efforts to obtain any certificate or otherdocuments from any Governmental Body or any other Person as may be necessary to mitigate, reduce oreliminate any Taxes that could be imposed pursuant to the Section 338(h)(10) Elections.**6.****COVENANTS OF BUYER PRIOR TO CLOSING DATE**     **6.1****APPROVALS OF GOVERNMENTAL BODIES**          As promptly as practicable after the date of this Agreement, Buyer will, and will cause eachof its Related Persons to, make all filings required by Legal Requirements to be made by them toconsummate the Contemplated Transactions (including all filings under the HSR Act). Between thedate of this Agreement and the Closing Date, Buyer will, and will cause each Related Person to,cooperate with Seller with respect to all filings that Seller are required by Legal Requirements tomake in connection with the Contemplated Transactions, and (ii) cooperate with Seller in obtaining
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all consents identified in Part 3.2 of the Disclosure Letter; provided that this Agreement will not require Buyer to dispose of or makeany change in any portion of its business or to incur any other burden to obtain a GovernmentalAuthorization.     **6.2****PAYMENT OF CERTAIN FEES AND EX****PENSES**          Buyer agrees to pay all fees and expenses associated with (i) compliance with the HSR Act,(ii) preparation of the Balance Sheet, the Interim Term Balance Sheet and other financialstatements and reports by UHY Mann Frankfort Stein & Lipp or others, (iii) any auditing or testingwork performed by UHY Mann Frankfort Stein and Lipp or others, (iv) any environmental testing andthe Phase I environmental report, and (v) the Section 338(h)(10) Elections and compliance therewithincluding legal and accounting fees of Seller related thereto.**7.****CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE**     Buyer’s obligation to purchase the Shares and to take the other actions required to be takenby Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of thefollowing conditions (any of which may be waived by Buyer, in whole or in part):     **7.1****ACCURACY OF REPRESENTATIONS**          (a) All of Seller’s representations and warranties in this Agreement (consideredcollectively), and each of these representations and warranties (considered individually), musthave been accurate in all material respects as of the date of this Agreement, and must be accuratein all material respects as of the Closing Date as if made on the Closing Date, without givingeffect to any supplement to the Disclosure Letter.          (b) Each of Seller’s representations and warranties in Sections 3.3, 3.4, 3.12, and 3.24 musthave been accurate in all respects as of the date of this Agreement, and must be accurate in allrespects as of the Closing Date as if made on the Closing Date, without giving effect to anysupplement to the Disclosure Letter.     **7.2****SELLER’ PERFORMANCE**          (a) All of the covenants and obligations that Seller are required to perform or to comply withpursuant to this Agreement at or prior to the Closing (considered collectively), and each of thesecovenants and obligations (considered individually), must have been duly performed and compliedwith in all material respects.          (b) Each document required to be delivered pursuant to Section 2.4 must have been delivered,and each of the other covenants and obligations in Sections 5.4 and 5.8 must have been performedand complied with in all respects.
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     **7.3****CONSENTS**          Each of the Consents identified in Part 3.2 of the Disclosure Letter, and each Consentidentified in Schedule 4.2, must have been obtained and must be in full force and effect.     **7.4****ADDITIONAL DOCUMENTS**          Each of the following documents must have been delivered to Buyer:          (a) an opinion of Perret Doise, A Professional Law Corporation, dated the Closing Date, in theform reasonably satisfactory to Buyer;          (b) estoppel certificate executed on behalf of Seller or JEVM, L.L.C. as to real propertyleased by the Company from Seller or JEVM, L.L.C., dated as of the Closing Date, each in the formof Exhibit 7.4(b); and          (c) such other documents as Buyer may reasonably request for the purpose of (i) enabling itscounsel to provide the opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of anyof Seller’s representations and warranties, (iii) evidencing the performance by Seller of, or thecompliance by Seller with, any covenant or obligation required to be performed or complied with bySeller, (iv) evidencing the satisfaction of any condition referred to in this Section 7, or (v)otherwise facilitating the consummation or performance of any of the Contemplated Transactions.     **7.5****NO PROCEEDINGS**          Since the date of this Agreement, there must not have been commenced or Threatened againstBuyer, or against any Person affiliated with Buyer, any Proceeding (a) involving any challenge to,or seeking damages or other relief in connection with, any of the Contemplated Transactions, or (b)that may have the effect of preventing, delaying, making illegal, or otherwise interfering with anyof the Contemplated Transactions.     **7.6****NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS**          There must not have been made or Threatened by any Person any claim asserting that such Person(a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficialownership of, any stock of, or any other voting, equity, or ownership interest in, any of theCompany, or (b) is entitled to all or any portion of the Purchase Price payable for the Shares.     **7.7****NO PROHIBITION**          Neither the consummation nor the performance of any of the Contemplated Transactions will,directly or indirectly (with or without notice or lapse of time), materially contravene, orconflict with, or result in a material violation of, or cause Buyer or any Person affiliated withBuyer to suffer any material adverse consequence under, (a) any applicable Legal
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Requirement or Order, or (b) any LegalRequirement or Order that has been published, introduced, or otherwise proposed by or before anyGovernmental Body.     **7.8****FINANCING**          Buyer shall have obtained on terms and conditions satisfactory to it all of the financingBuyer needs in order to consummate the Contemplated Transactions. In the event that Buyer isunable to obtain the necessary financing prior to January 31, 2006, then Buyer shall pay to Selleran amount equal to $1,500,000 in cash (“Breakup Fee”) by wire transfer of immediately availablefunds to an account designated by Seller, provided, however, that Seller shall not be entitled tothe Breakup Fee if Seller materially Breaches any provision of the Agreement or fails to satisfyany of the conditions in Section 7 of this Agreement and such Breach or failure is the cause ofBuyer’s inability to obtain financing. The Breakup Fee shall be the sole and exclusive remedy ofthe Seller in the event Buyer is unable to obtain financing and the parties have agreed that suchBreakup Fee shall constitute liquidation damages.**8.****CONDITIONS PRECEDENT TO SELLER’ OBLIGATION TO CLOSE**     Seller’ obligation to sell the Shares and to take the other actions required to be taken bySeller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of thefollowing conditions (any of which may be waived by Seller, in whole or in part):     **8.1****ACCURACY OF REPRESENTATIONS**          All of Buyer’s representations and warranties in this Agreement (considered collectively), andeach of these representations and warranties (considered individually), must have been accurate inall material respects as of the date of this Agreement and must be accurate in all materialrespects as of the Closing Date as if made on the Closing Date.     **8.2****BUYER’S PERFORMANCE**          (a) All of the covenants and obligations that Buyer is required to perform or to comply withpursuant to this Agreement at or prior to the Closing (considered collectively), and each ofthese covenants and obligations (considered individually), must have been performed and compliedwith in all material respects.          (b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuantto Section 2.4 and must have made the cash payments required to be made by Buyer pursuant toSections 2.4(b)(i) and 2.4(b)(ii).     **8.3****NO INJUNCTION**          There must not be in effect any Legal Requirement or any injunction or other Order that (a)prohibits the sale of the Shares by Seller to Buyer, and (b) has been adopted or issued, or hasotherwise become effective, since the date of this Agreement.
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     **8.4****ADDITIONAL DOCUMENTS**          Each of the following documents must be delivered to Seller:          (a) an opinion of General Counsel to Buyer, dated the Closing Date, in the form of Exhibit8.4(a);          (b) such other documents as Seller may reasonably request for the purpose of (i) enablingtheir counsel to provide the opinion referred to in Section 7.4(a), (ii) evidencing the accuracy ofany representation or warranty of Buyer, (iii) evidencing the performance by Buyer of, or thecompliance by Buyer with, any covenant or obligation required to be performed or complied with byBuyer, (ii) evidencing the satisfaction of any condition referred to in this Section 8, or (v)otherwise facilitating the consummation of any of the Contemplated Transactions.     **8.5****NO PROHIBITION**          Neither the consummation nor the performance of any of the Transactions will, directly orindirectly (with or without notice or lapse of time), materially contravene or conflict with, orresult in a material violation of, or cause Seller to suffer any material adverse consequenceunder, (a) any applicable Legal Requirement or Order, or (b) any Legal Requirement or Order thathas been published, introduced, or otherwise proposed by or before any Governmental Body.**9.****TERMINATION**     **9.1****TERMINATION EVENTS**          This Agreement may, by notice given prior to or at the Closing, be terminated:          (a) by either Buyer or Seller if a material Breach of any provision of this Agreement has beencommitted by the other party and such Breach has not been waived;          (b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied as of theClosing Date or if satisfaction of such a condition is or becomes impossible (other than throughthe failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waivedsuch condition on or before the Closing Date; or (ii) by Seller, if any of the conditions inSection 8 has not been satisfied of the Closing Date or if satisfaction of such a condition is orbecomes impossible (other than through the failure of Seller to comply with their obligations underthis Agreement) and Seller have not waived such condition on or before the Closing Date;          (c) by mutual consent of Buyer and Seller; or          (d) by either Buyer or Seller if the Closing has not occurred (other than through the failureof any party seeking to terminate this Agreement to comply fully with its obligations
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under thisAgreement) on or before January 31, 2006, or such later date as the parties may agree upon.     **9.2****EFFECT OF TERMINATION**          Each party’s right of termination under Section 9.1 is in addition to any other rights it mayhave under this Agreement or otherwise, and the exercise of a right of termination will not be anelection of remedies. If this Agreement is terminated pursuant to Section 9.1, all furtherobligations of the parties under this Agreement will terminate, except that the obligations inSections 11.1 and 11.3 will survive; provided, however, that if this Agreement is terminated by aparty because of the Breach of the Agreement by the other party or because one or more of theconditions to the terminating party’s obligations under this Agreement is not satisfied as a resultof the other party’s failure to comply with its obligations under this Agreement, the terminatingparty’s right to pursue all legal remedies will survive such termination unimpaired.**10.****INDEMNIFICATION; REMEDIES**     **10.1****SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE**          All representations, warranties, covenants, and obligations in this Agreement, the DisclosureLetter, the supplements to the Disclosure Letter, the certificate delivered pursuant to Section2.4(a)(iv), and any other certificate or document delivered pursuant to this Agreement will survivethe Closing. The right to indemnification, payment of Damages or other remedy based on suchrepresentations, warranties, covenants, and obligations will not be affected by any investigationconducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time,whether before or after the execution and delivery of this Agreement or the Closing Date, withrespect to the accuracy or inaccuracy of or compliance with, any such representation, warranty,covenant, or obligation. The waiver of any condition based on the accuracy of any representation orwarranty, or on the performance of or compliance with any covenant or obligation, will not affectthe right to indemnification, payment of Damages, or other remedy based on such representations,warranties, covenants, and obligations.     **10.2****INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER**          Subject to the limitations contained in Sections 10.5 and 10.6, Seller will indemnify and holdharmless Buyer, the Company, and their respective Representatives, stockholders, controllingpersons, and affiliates (collectively, the “Indemnified Persons”) for, and will pay to theIndemnified Persons the amount of, any loss, liability, claim, damage (including incidental andconsequential damages), expense (including costs of investigation and defense and reasonableattorneys’ fees) or diminution of value, whether or not involving a third-party claim(collectively, “Damages”), arising, directly or indirectly, from or in connection with:          (a) any Breach of any representation or warranty made by Seller in this Agreement (withoutgiving effect to any supplement to the Disclosure Letter, the Disclosure Letter,
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the supplements tothe Disclosure Letter, or any other certificate or document delivered by Seller pursuant to thisAgreement;          (b) any Breach of any representation or warranty made by Seller in this Agreement as if suchrepresentation or warranty were made on and as of the Closing Date without giving effect to anysupplement to the Disclosure Letter, other than any such Breach that is disclosed in a supplementto the Disclosure Letter and is expressly identified in the certificate delivered pursuant toSection 2.4(a)(iv) as having caused the condition specified in Section 7.1 not to be satisfied;          (c) any Breach by Seller of any covenant or obligation of Seller in this Agreement;          (d) any product shipped or manufactured by, or any services provided by, the Company prior tothe Closing Date;          (e) any matter disclosed in Part 3.15 of the Disclosure Letter; or          (f) any claim by any Person for brokerage or finder’s fees or commissions or similar paymentsbased upon any agreement or understanding alleged to have been made by any such Person with Selleror the Company (or any Person acting on their behalf) in connection with any of the ContemplatedTransactions.     **10.3****INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER— ENVIRONMENTALMATTERS**          In addition to the provisions of Section 10.2, and subject to the limitations set forth inSections 10.5 and 10.6, Seller will indemnify and hold harmless Buyer, the Company, and the otherIndemnified Persons for, and will pay to Buyer, the Company, and the other Indemnified Persons theamount of, any Damages (including costs of cleanup, containment, or other remediation) arising,directly or indirectly, from or in connection with:          (a) any Environmental, Health, and Safety Liabilities arising out of or relating to: (i) (A)the ownership, operation, or condition at any time on or prior to the Closing Date of theFacilities or any other properties and assets (whether real, personal, or mixed and whethertangible or intangible) in which Seller or the Company has or had an interest, or (B) any HazardousMaterials or other contaminants that were present on the Facilities at any time on or prior to theClosing Date; or (ii) (A) any Hazardous Materials or other contaminants, wherever located, thatwere, or were allegedly, generated, transported, stored, treated, Released, or otherwise handled bySeller or the Company or by any other Person for whose conduct they are or may be held responsibleat any time on or prior to the Closing Date, or (B) any Hazardous Activities that were, or wereallegedly, conducted by Seller or the Company or by any other Person for whose conduct they are ormay be held responsible; or
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          (b) any bodily injury (including illness, disability, and death, and regardless of when anysuch bodily injury occurred, was incurred, or manifested itself), personal injury, property damage(including trespass, nuisance, wrongful eviction, and deprivation of the use of real property), orother damage of or to any Person, including any employee or former employee of Seller or theCompany or any other Person for whose conduct they are or may be held responsible, in any wayarising from or allegedly arising from any Hazardous Activity conducted or allegedly conducted withrespect to the Facilities or the operation of the Company prior to the Closing Date, or fromHazardous Material that was (i) present or suspected to be present on or before the Closing Date onor at the Facilities (or present or suspected to be present on any other property, if suchHazardous Material emanated or allegedly emanated from any of the Facilities and was present orsuspected to be present on any of the Facilities on or prior to the Closing Date) or (ii) Releasedor allegedly Released by Seller or the Company or any other Person for whose conduct they are ormay be held responsible, at any time on or prior to the Closing Date.Buyer and Seller will be entitled to jointly control any Cleanup, any related Proceeding, and,except as provided in the following sentence, any other Proceeding with respect to which indemnitymay be sought under this Section 10.3. The procedure described in Section 10.8 will apply to anyclaim solely for monetary damages relating to a matter covered by this Section 10.3.     **10.4****INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER**          Subject to the limitations of Section 10.7, Buyer will indemnify and hold harmless Seller, andwill pay to Seller the amount of any Damages (including costs of cleanup, containment, or otherremediation) arising, directly or indirectly, from or in connection with:          (a) any Breach of any representation or warranty made by Buyer in this Agreement or in anycertificate delivered by Buyer pursuant to this Agreement;          (b) any Breach by Buyer of any covenant or obligation of Buyer in this Agreement;          (c) any claim by any Person for brokerage or finder’s fees or commissions or similar paymentsbased upon any agreement or understanding alleged to have been made by such Person with Buyer (orany Person acting on its behalf) in connection with any of the Contemplated Transactions;          (d) any Environmental, Health, and Safety Liabilities arising out of or relating to: (i) (A)the operation, or condition of the Facilities after the Closing Date, or (B) any HazardousMaterials or other contaminants that are present at the Facilities after the Closing Date; or (ii)(A) any Hazardous Materials or other contaminants, located on the Facilities, that are, or areallegedly, generated, transported, stored, treated, Released, or otherwise handled by Buyer or theCompany or by any other Person for whose conduct they are or may be held responsible at any timeafter the Closing Date, or (B) any Hazardous Activities that are, or are allegedly, conducted byBuyer or the Company at the Facilities or by any other Person for whose conduct they are or may beheld responsible after the Closing Date;
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          (e) any bodily injury (including illness, disability, and death, and regardless of when anysuch bodily injury (including illness, disability, and death, and regardless of when any suchbodily injury occurred, was incurred, or manifested itself), personal injury, property damage(including trespass, nuisance, wrongful eviction, and deprivation of the use of real property), orother damage of or to any Person, including any employee or former employee of Buyer or the Companyor any other Person for whose conduct they are or may be held responsible, in any way arising fromor allegedly arising from any Hazardous Activity conducted or allegedly conducted with respect tothe Facilities or the operation of the Company after the Closing Date, or from Hazardous Materialthat are (i) present or suspected to be present after the Closing Date on or at the Facilities (orpresent or suspected to be present on any other property, if such Hazardous Material emanated orallegedly emanated from the Facilities and are present or suspected to be present on any of theFacilities after the Closing Date) or (ii) Released or allegedly Released by Buyer or the Companyor any other Person for whose conduct they are or may be held responsible, at any time after theClosing Date.          The indemnification provided by Buyer to Seller in Sections 10.4(d) and (e) shall in no waynegate or relieve Seller from the indemnification provided to Buyer under Section 10.3 hereof forany matter of which Seller had Knowledge or which was caused by Seller or the Company prior to theClosing Date.     **10.5****TIME LIMITATIONS**          If the Closing occurs, Seller will have no liability (for indemnification or otherwise) withrespect to any representation or warranty, or covenant or obligation to be performed and compliedwith prior to the Closing Date, other than those in Sections 3.3, 3.11, 3.13, or 5.9 unless on orbefore January 2, 2008, Buyer notifies Seller of a claim specifying the factual basis of that claimin reasonable detail to the extent then known by Buyer; a claim with respect to Section 3.3, 3.11,3.13, or 5.9 or a claim for indemnification or reimbursement not based upon any representation orwarranty or any covenant or obligation to be performed and complied with prior to the Closing Date,may be made on or before January 15, 2011.          If the Closing occurs, Buyer will have no liability (for indemnification or otherwise) withrespect to any representation or warranty, or covenant or obligation to be performed and compliedwith prior to the Closing Date, unless on or before January 2, 2008, Seller notifies Buyer of aclaim specifying the factual basis of that claim in reasonable detail to the extent then known bySeller, provided, however, Buyer’s obligations to Seller under the Section 338(h)(10) Elections maybe made on or prior to January 15, 2011.     **10.6****LIMITATIONS ON AMOUNT—SELLER**          Seller will have no liability (for indemnification or otherwise) with respect to the mattersdescribed in clause (a), clause (b), to the extent relating to any failure to perform or complyprior to the Closing Date, clause (c), or clause (d) of Section 10.2 until the total of all Damageswith respect to such matters exceeds $150,000, and then, only for Damages in excess of $150,000.In no event shall the aggregate indemnification to be provided by Seller for claims under Section10.2(a)-
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(d) exceed the amount of $15,000,000, provided, however, with respect to claims resultingfrom any Breach of any representation or warranty set forth in Sections 3.3, 3.11, 3.13, or from any Breach of any covenant or warrantyin Section 5.9 hereof, the obligation of Seller to pay Damages under Section 10.2 shall be limitedto the amount of the Purchase Price in Section 2.2. However, this Section 10.6 will not apply toclaims of which Seller had Knowledge at any time prior to the date on which such representation andwarranty is made or any intentional breach by Seller of any covenant or obligation.     **10.7****LIMITATIONS ON AMOUNT—BUYER**          Buyer will have no liability (for indemnification or otherwise) with respect to the mattersdescribed in Section 10.4 until the total of all Damages with respect to such matters exceeds$150,000, and then, only for Damages in excess of $150,000. In no event shall the aggregateindemnification to be provided by Buyer pursuant to the matters described in Section 10.4 exceed$15,000,000. However, this Section 10.7 will not apply to any Breach of any of Buyer’srepresentations and warranties of which Buyer had Knowledge at any time prior to the date on whichsuch representation and warranty is made or any intentional Breach by Buyer of any covenant orobligation, and Buyer will be liable for all Damages with respect to such Breaches. The additionalPurchase Price due to Seller, if any, under Section 2.6 hereof shall not be subject to this Section10.7.     **10.8****PROCEDURE FOR INDEMNIFICATION—THIRD PARTY CLAIMS**          (a) Promptly after receipt by an indemnified party under Section 10.2, 10.4, or (to the extentprovided in the last sentence of Section 10.3) Section 10.3 of notice of the commencement of anyProceeding against it, such indemnified party will, if a claim is to be made against anindemnifying party under such Section, give notice to the indemnifying party of the commencement ofsuch claim, but the failure to notify the indemnifying party will not relieve the indemnifyingparty of any liability that it may have to any indemnified party, except to the extent that theindemnifying party demonstrates that the defense of such action is prejudiced by the indemnifyingparty’s failure to give such notice.          (b) If any Proceeding referred to in Section 10.8(a) is brought against an indemnified partyand it gives notice to the indemnifying party of the commencement of such Proceeding, theindemnifying party will, unless the claim involves Taxes, be entitled to participate in suchProceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party tosuch Proceeding and the indemnified party determines in good faith that joint representation wouldbe inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to theindemnified party of its financial capacity to defend such Proceeding and provide indemnificationwith respect to such Proceeding), to assume the defense of such Proceeding with counselsatisfactory to the indemnified party and, after notice from the indemnifying party to theindemnified party of its election to assume the defense of such Proceeding, the indemnifying partywill not, as long as it diligently conducts such defense, be liable to the indemnified party underthis Section 10 for any fees of other counsel or any other expenses with respect to the defense ofsuch Proceeding, in each case subsequently incurred by the indemnified party in connection with thedefense of such Proceeding, other than reasonable costs of investigation. If the indemnifying partyassumes the defense of a
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Proceeding, (i) it will be conclusively established for purposes of thisAgreement that the claims made in that Proceeding are within the scope of and subject toindemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnifiedparty’s consent unless (A) there is no finding or admission of any violation of Legal Requirementsor any violation of the rights of any Person and no effect on any other claims that may be madeagainst the indemnified party, and (B) the sole relief provided is monetary damages that are paidin full by the indemnifying party; and (iii) the indemnified party will have no liability withrespect to any compromise or settlement of such claims effected without its consent. If notice isgiven to an indemnifying party of the commencement of any Proceeding and the indemnifying partydoes not, within ten days after the indemnified party’s notice is given, give notice to theindemnified party of its election to assume the defense of such Proceeding, the indemnifying partywill be bound by any determination made in such Proceeding or any compromise or settlement effectedby the indemnified party.          (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that thereis a reasonable probability that a Proceeding may adversely affect it or its affiliates other thanas a result of monetary damages for which it would be entitled to indemnification under thisAgreement, the indemnified party may, by notice to the indemnifying party, assume the exclusiveright to defend, compromise, or settle such Proceeding, but the indemnifying party will not bebound by any determination of a Proceeding so defended or any compromise or settlement effectedwithout its consent (which may not be unreasonably withheld).          (d) Seller hereby consent to the non-exclusive jurisdiction of any court in which a Proceedingis brought against any Indemnified Person for purposes of any claim that an Indemnified Person mayhave under this Agreement with respect to such Proceeding or the matters alleged therein, and agreethat process may be served on Seller with respect to such a claim anywhere in the world.     **10.9****PROCEDURE FOR INDEMNIFICATION—OTHER CLAIMS**          A claim for indemnification for any matter not involving a third-party claim may be assertedby notice to the party from whom indemnification is sought.**11.****GENERAL PROVISIONS**     **11.1****EXPENSES**          Except as otherwise expressly provided in this Agreement, each party to this Agreement willbear its respective expenses incurred in connection with the preparation, execution, andperformance of this Agreement and the Contemplated Transactions, including all fees and expenses ofagents, representatives, counsel, and accountants. Buyer will pay all amounts payable to itsinvestment banker in connection with this Agreement and the Contemplated Transactions. Buyer willpay all of the HSR Act filing fee and all expenses associated therewith. Buyer and Seller will eachpay their own expenses related to the Contemplated Transaction. In the event of termination of
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this Agreement, the obligation of each party to pay its own expenses will be subject to any rightsof such party arising from a breach of this Agreement by another party.     **11.2****PUBLIC ANNOUNCEMENTS**          Any public announcement or similar publicity with respect to this Agreement or theContemplated Transactions will be issued, if at all, at such time and in such manner as Buyer andSeller mutually determines. Unless consented to by the other, in advance or required by LegalRequirements, prior to the Closing Seller and Buyer shall, and shall cause the Company to, keepthis Agreement strictly confidential and may not make any disclosure of this Agreement to anyPerson. Seller and Buyer will consult with each other concerning the means by which the Company’semployees, customers, and suppliers and others having dealings with the Company will be informed ofthe Contemplated Transactions, and Seller and Buyer will have the right to be present for any suchcommunication.     **11.3****CONFIDENTIALITY**          Between the date of this Agreement and the Closing Date, Buyer and Seller will maintain inconfidence, and will cause the directors, officers, employees, agents, and advisors of Buyer andthe Company to maintain in confidence, any written, oral, or other information obtained inconfidence from another party or the Company in connection with this Agreement or the ContemplatedTransactions, unless (a) such information is already known to such party or to others not bound bya duty of confidentiality or such information becomes publicly available through no fault of suchparty, (b) the use of such information is necessary or appropriate in making any filing orobtaining any consent or approval required for the consummation of the Contemplated Transactions,or (c) the furnishing or use of such information is required by [or necessary or appropriate inconnection with] legal proceedings.          If the Contemplated Transactions are not consummated, each party will return or destroy asmuch of such written information as the other party may reasonably request. Whether or not theClosing takes place, Seller waives, and will upon Buyer’s request cause the Company to waive, anycause of action, right, or claim arising out of the access of Buyer or its representatives to anytrade secrets or other confidential information of the Company except for the intentionalcompetitive misuse by Buyer of such trade secrets or confidential information.     **11.4****NOTICES**          All notices, consents, waivers, and other communications under this Agreement must be inwriting and will be deemed to have been duly given when (a) delivered by hand (with writtenconfirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), providedthat a copy is mailed by registered mail, return receipt requested, or (c) when received by theaddressee, if sent by a nationally recognized overnight delivery service (receipt requested), ineach case to the appropriate addresses and telecopier numbers set forth below (or to such otheraddresses and telecopier numbers as a party may designate by notice to the other parties):
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   **Seller:** Joe Van Matre  201 Rivergate Drive  Lafayette, LA 70508   **with a copy to:** Henry C. Perret, Jr.  Perret Doise, APLC  P. O. Drawer 3408  Lafayette, LA 70502  Facsimile: (337) 262-9001  Email: hperret@perretdoise.com     and to     James J. Adams  1030 Lafayette Street  Lafayette, LA 70501  Facsimile: (337) 234-0375  Email: fouadam@earthlink.net   **Buyer**: Allis-Chalmers Energy Inc.  5075 Westheimer, Suite 890  Houston, Texas 77056  Attention: Theodore F. Pound III  Facsimile: (713) 369-0555  Email: tpound@alchenergy.com     **11.5****JURISDICTION; SERVICE OF PROCESS**          Any action or proceeding seeking to enforce any provision of, or based on any right arisingout of, this Agreement may be brought against any of the parties in the courts of the State ofTexas, County of Harris, or, if it has or can acquire jurisdiction, in the United States DistrictCourt for the Southern District of Texas, and each of the parties consents to the jurisdiction ofsuch courts (and of the appropriate appellate courts) in any such action or proceeding and waivesany objection to venue laid therein. Process in any action or proceeding referred to in thepreceding sentence may be served on any party anywhere in the world.     **11.6****FURTHER ASSURANCES**          The parties agree (a) to furnish upon request to each other such further information, (b) toexecute and deliver to each other such other documents, and (c) to do such other acts and things,all as the other party may reasonably request for the purpose of carrying out the intent of thisAgreement and the documents referred to in this Agreement.     **11.7****WAIVER**
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          The rights and remedies of the parties to this Agreement are cumulative and not alternative.Neither the failure nor any delay by any party in exercising any right, power, or privilege underthis Agreement or the documents referred to in this Agreement will operate as a waiver of suchright, power, or privilege, and no single or partial exercise of any such right, power, orprivilege will preclude any other or further exercise of such right, power, or privilege or theexercise of any other right, power, or privilege. To the maximum extent permitted by applicablelaw, (a) no claim or right arising out of this Agreement or the documents referred to in thisAgreement can be discharged by one party, in whole or in part, by a waiver or renunciation of theclaim or right unless in writing signed by the other party; (b) no waiver that may be given by aparty will be applicable except in the specific instance for which it is given; and (c) no noticeto or demand on one party will be deemed to be a waiver of any obligation of such party or of theright of the party giving such notice or demand to take further action without notice or demand asprovided in this Agreement or the documents referred to in this Agreement.     **11.8****ENTIRE AGREEMENT AND MODIFICATION**          This Agreement supersedes all prior agreements between the parties with respect to its subjectmatter (including the Letter of Intent between Buyer and Seller dated September 21, 2005) andconstitutes (along with the documents referred to in this Agreement) a complete and exclusivestatement of the terms of the agreement between the parties with respect to its subject matter.This Agreement may not be amended except by a written agreement executed by the party to be chargedwith the amendment.     **11.9****DISCLOSURE LETTER**          In the event of any inconsistency between the statements in the body of this Agreement andthose in the Disclosure Letter (other than an exception expressly set forth as such in theDisclosure Letter with respect to a specifically identified representation or warranty), thestatements in the body of this Agreement will control.     **11.10****ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS**          Neither party may assign any of its rights under this Agreement without the prior consent ofthe other parties, except that Buyer may assign any of its rights under this Agreement to anySubsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding inall respects upon, and inure to the benefit of the successors and permitted assigns of the parties.Nothing expressed or referred to in this Agreement will be construed to give any Person other thanthe parties to this Agreement any legal or equitable right, remedy, or claim under or with respectto this Agreement or any provision of this Agreement. This Agreement and all of its provisions andconditions are for the sole and exclusive benefit of the parties to this Agreement and theirsuccessors and assigns.     **11.11****SEVERABILITY**
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          If any provision of this Agreement is held invalid or unenforceable by any court of competentjurisdiction, the other provisions of this Agreement will remain in full force and effect. Anyprovision of this Agreement held invalid or unenforceable only in part or degree will remain infull force and effect to the extent not held invalid or unenforceable.     **11.12****SECTION HEADINGS, CONSTRUCTION**          The headings of Sections in this Agreement are provided for convenience only and will notaffect its construction or interpretation. All references to “Section” or “Sections” refer to thecorresponding Section or Sections of this Agreement. All words used in this Agreement will beconstrued to be of such gender or number as the circumstances require. Unless otherwise expresslyprovided, the word “including” does not limit the preceding words or terms.     **11.13****TIME OF ESSENCE**          With regard to all dates and time periods set forth or referred to in this Agreement, time isof the essence.     **11.14****GOVERNING LAW**          This Agreement will be governed by the laws of the State of Texas without regard to conflictsof laws principles.     **11.15****COUNTERPARTS**          This Agreement may be executed in one or more counterparts, each of which will be deemed to bean original copy of this Agreement and all of which, when taken together, will be deemed toconstitute one and the same agreement.[Remainder of page intentionally left blank.]
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     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the datefirst written above.     **BUYER:** **ALLIS-CHALMERS ENERGY INC.,**  **a Delaware corporation**       By:       /s/ Munawar H. Hidayatallah       Munawar H. Hidayatallah    Chairman and Chief Executive Officer     **SELLER:** **JOE VAN MATRE**       /s/ Joe Van Matre   
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