exv10w1






Exhibit 10.1




EXECUTION VERSION




 




MEMBERSHIP INTERESTS PURCHASE AGREEMENT




BY AND AMONG



NYTEX ENERGY HOLDINGS, INC.,



FRANCIS DRILLING FLUIDS, LTD.,



FRANCIS OAKS, L.L.C



AND



THE MEMBERS OF FRANCIS OAKS, L.L.C.



AS OF NOVEMBER __, 2010



 




 









 





EXECUTION VERSION



TABLE OF CONTENTS




	 	 	 	 	 

	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	1.1. Definitions
	 	 	1	 
	1.2. Other Definitions
	 	 	7	 
	 
	ARTICLE II PURCHASE AND SALE OF MEMBERSHIP INTERESTS
	 	 	8	 
	 
	2.1. Agreement to Sell and Purchase Membership Interests; Other Transactions
	 	 	8	 
	2.2. Closing
	 	 	8	 
	2.3. Company and Sellers Deliverables at Closing
	 	 	9	 
	2.4. Buyer Deliverables at Closing
	 	 	11	 
	2.5. Purchase Price Adjustment for Working Capital
	 	 	12	 
	2.6. Escrow Deposit
	 	 	13	 
	2.7. Seller Representative
	 	 	14	 
	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
	 	 	15	 
	 
	3.1. Organization and Corporate Power
	 	 	15	 
	3.2. Authorization of Transactions
	 	 	16	 
	3.3. Capitalization
	 	 	17	 
	3.4. Subsidiaries; Investments
	 	 	17	 
	3.5. Financial Statements
	 	 	17	 
	3.6. Absence of Undisclosed Liabilities
	 	 	18	 
	3.7. Absence of Certain Developments
	 	 	18	 
	3.8. Real Property and Personal Property; Title to Property
	 	 	20	 
	3.9. Taxes
	 	 	21	 
	3.10. Contracts and Commitments
	 	 	23	 
	3.11. Computer Software and Proprietary Rights
	 	 	25	 
	3.12. Litigation; Proceedings
	 	 	27	 
	3.13. Brokerage
	 	 	27	 
	3.14. Governmental Licenses and Permits
	 	 	27	 
	3.15. Employees
	 	 	28	 
	3.16. Employee Benefit Plans
	 	 	28	 
	3.17. Insurance
	 	 	29	 
	3.18. Officers and Directors; Bank Accounts
	 	 	30	 
	3.19. Affiliate Transactions
	 	 	30	 
	3.20. Compliance with Laws
	 	 	30	 
	3.21. Environmental Compliance
	 	 	30	 
	3.22. Indebtedness
	 	 	32	 
	3.23. Certifications
	 	 	32	 
	3.24. Customers
	 	 	33	 
	3.25. Suppliers
	 	 	33	 
	3.26. Title of Acquired Assets
	 	 	33	 






i









 





EXECUTION VERSION




	 	 	 	 	 

	3.27. Condition of Acquired Assets
	 	 	33	 
	3.28. Accounts Receivable
	 	 	33	 
	3.29. Full Disclosure
	 	 	34	 
	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLERS
	 	 	34	 
	 
	4.1. Authorization of Transactions
	 	 	34	 
	4.2. Brokerage
	 	 	34	 
	4.3. Membership Interests
	 	 	34	 
	4.4. Litigation
	 	 	35	 
	4.5. Investment Representations of Diana Istre Francis
	 	 	35	 
	4.6. Investment Representations of Michael G. Francis, Bryan Francis and Mackey Francis
	 	 	35	 
	4.7. Receipt of Information
	 	 	36	 
	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
	 	 	36	 
	 
	5.1. Organization and Corporate Power
	 	 	36	 
	5.2. Authorization of Transaction
	 	 	36	 
	5.3. No Violation
	 	 	36	 
	5.4. Governmental Authorities and Consents
	 	 	36	 
	5.5. Litigation
	 	 	37	 
	5.6. Brokerage
	 	 	37	 
	5.7. Note
	 	 	37	 
	5.8. Buyer Stock
	 	 	37	 
	5.9. SEC Filings
	 	 	37	 
	5.10. Solvency
	 	 	38	 
	 
	ARTICLE VI COVENANTS OF THE COMPANY, OAKS AND SELLERS
	 	 	38	 
	 
	6.1. Consents
	 	 	38	 
	 
	ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
	 	 	38	 
	 
	7.1. Closing Consideration
	 	 	38	 
	7.2. Buyer’s Performance
	 	 	39	 
	7.3. Certificate
	 	 	39	 
	7.4. Closing Documents
	 	 	39	 
	 
	ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
	 	 	39	 
	 
	8.1. Sellers’ Performance
	 	 	39	 
	8.2. Certificates
	 	 	39	 
	8.3. Closing Documents
	 	 	39	 
	8.4. No Judgments
	 	 	39	 
	8.5. Termination of Related Party Agreements
	 	 	39	 






ii









 






EXECUTION VERSION





	 	 	 	 	 

	8.6. Title to Owned Real Property
	 	 	39	 
	8.7. Landlord Estoppels
	 	 	40	 
	8.8. Related Party Transactions
	 	 	40	 
	8.9. Pay-Off Letters
	 	 	40	 
	 
	ARTICLE IX SURVIVAL AND INDEMNIFICATION
	 	 	40	 
	 
	9.1. Survival of Representations and Warranties
	 	 	40	 
	9.2. Indemnification by Seller
	 	 	41	 
	9.3. Limit on Indemnity Provided by Company, Oaks and Sellers
	 	 	41	 
	9.4. Additional Limits for Certain Sellers
	 	 	42	 
	9.5. Indemnification and Reimbursement by Buyer
	 	 	42	 
	9.6. Other Indemnification Limitations
	 	 	43	 
	9.7. Third-Party Claims
	 	 	43	 
	9.8. Other Claims
	 	 	45	 
	 
	ARTICLE X other covenants
	 	 	45	 
	 
	10.1. Tax Matters
	 	 	45	 
	10.2. Record Retention and Access to Records
	 	 	47	 
	10.3. Further Assurances
	 	 	47	 
	10.4. Personal Guarantee Releases
	 	 	47	 
	10.5. Health Insurance for Diana Istre Francis
	 	 	48	 
	 
	ARTICLE XI NON-COMPETITION PROVISIONS
	 	 	48	 
	 
	11.1. Non-Competition and Non-Solicitation
	 	 	48	 
	 
	ARTICLE XII MISCELLANEOUS
	 	 	50	 
	 
	12.1. Amendment and Waiver
	 	 	50	 
	12.2. Notices
	 	 	50	 
	12.3. Binding Agreement; Assignment
	 	 	51	 
	12.4. Severability
	 	 	51	 
	12.5. Construction
	 	 	51	 
	12.6. Captions
	 	 	52	 
	12.7. Entire Agreement
	 	 	52	 
	12.8. Counterparts
	 	 	52	 
	12.9. Governing Law
	 	 	52	 
	12.10. Parties in Interest
	 	 	52	 
	12.11. Jurisdiction
	 	 	52	 
	12.12. Delivery by PDF and Facsimile
	 	 	54	 
	12.13. Drafting
	 	 	54	 
	12.14. No Third Party Beneficiaries
	 	 	54	 






iii









 





EXECUTION VERSION



EXHIBITS




	 	 	 

	A

	 	Form of Assignment of Membership Interest
	B

	 	Form of Note
	C

	 	Form of Employment Agreement
	D

	 	Form of Registration Rights Agreement
	E

	 	Form of Escrow Agreement
	F

	 	Form of Mutual Release
	G

	 	Personal Guaranties of Seller
	H

	 	Division of Purchase Price Among Sellers






iv









 





EXECUTION VERSION



INDEX OF SCHEDULES




	 	 	 

	Schedule 2.1

	 	Ownership of Membership Interests
	Schedule 3.1

	 	Organization and Corporate Power
	Schedule 3.2

	 	Authorization of Transactions
	Schedule 3.3

	 	Capitalization
	Schedule 3.4

	 	Subsidiaries
	Schedule 3.5

	 	Financial Statements
	Schedule 3.6

	 	Undisclosed Liabilities
	Schedule 3.7

	 	Certain Developments
	Schedule 3.8(a)

	 	Owned Real Property
	Schedule 3.8(b)

	 	Leased Real Property
	Schedule 3.8(j)

	 	Operating Leases for Equipment
	Schedule 3.8(k)

	 	Large Leases
	Schedule 3.8(l)

	 	Liens
	Schedule 3.9

	 	Taxes
	Schedule 3.10

	 	Contracts and Commitments
	Schedule 3.11

	 	Items Related to Computer Software and Proprietary Rights
	Schedule 3.12

	 	Litigation; Proceedings
	Schedule 3.13

	 	Brokerage (Company)
	Schedule 3.14

	 	Governmental Licenses and Permits
	Schedule 3.15(a)

	 	Employees
	Schedule 3.15(b)

	 	Agreements Requiring Additional Payments
	Schedule 3.16(a)

	 	Employee Benefit Plans
	Schedule 3.16(c)

	 	Material Bonus, Severance or Similar Benefit
	Schedule 3.17

	 	Insurance
	Schedule 3.18(a)

	 	Officers and Directors
	Schedule 3.18(b)

	 	Bank Accounts
	Schedule 3.19

	 	Affiliate Transactions
	Schedule 3.20

	 	Compliance With Laws
	Schedule 3.21

	 	Environmental Compliance
	Schedule 3.22

	 	Indebtedness
	Schedule 3.23

	 	Certifications
	Schedule 3.24

	 	Customers
	Schedule 3.25

	 	Suppliers
	Schedule 3.26

	 	Title of Acquired Assets
	Schedule 3.27

	 	Condition of Acquired Assets
	Schedule 3.28

	 	Accounts Receivable
	Schedule 4.3

	 	Rights to Acquire or Control Membership Interests
	Schedule 13.1(b)

	 	Parishes Covered by Noncompetition Agreement






INDEX OF BUYER’S SCHEDULE




	 	 	 

	Buyer’s Schedule 5.8

	 	Capitalization of Buyer
	Buyer’s Schedule 5.9

	 	Buyer SEC Filings







v












 





EXECUTION VERSION




MEMBERSHIP INTERESTS PURCHASE AGREEMENT




     THIS MEMBERSHIP INTERESTS PURCHASE AGREEMENT (this “Agreement”) is entered into as of November
__, 2010 (the “Execution Date”), by and among NYTEX Energy Holdings, Inc., a Delaware corporation
(“Buyer”), Francis Drilling Fluids, Ltd., a Louisiana business corporation (the “Company”), Francis
Oaks, L.L.C., a Louisiana limited liability company (“Oaks”), and all of the members of Oaks
(collectively, “Sellers” or singularly, “Seller”). Buyer, the Company, Oaks and Sellers are
collectively referred to herein as the “Parties” and individually as a “Party.” Capitalized terms
used in this Agreement without definition shall have the meaning given to such terms in Article I
hereof.



W I T N E S S E T H:




     WHEREAS, the Sellers own beneficially and of record 100% of the outstanding membership
interests of Oaks (the “Membership Interests”); and



     WHEREAS, Oaks owns beneficially and of record all of the shares of outstanding capital stock
of the Company (the “Company Shares”) which consists entirely of 1,000 shares of no par value
Common Stock of the Company; and



     WHEREAS, upon the terms and subject to the conditions of this Agreement, Buyer desires to
acquire from the Sellers, and the Sellers desire to sell to Buyer, all of the Membership Interests;



     NOW, THEREFORE, in consideration for the premises and the mutual promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:



ARTICLE I

DEFINITIONS




     1.1. Definitions. For purposes of this Agreement, the following terms shall have the
meanings set forth below:



     “Adjusted EBITDAR” means EBITDAR plus the Operating Leases for Equipment Amount.



     “Affiliate” of any particular Person means any other Person controlling, controlled by or
under common control with such particular Person, where “control” means the possession, directly or
indirectly, of the power to direct the management and policies of a Person whether through the
ownership of voting securities or otherwise.



     “Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or any
similar combined, consolidated or unitary group defined under state, local or foreign income Tax
law).


MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 1






 









 






EXECUTION VERSION






     “Aggregate Consideration” means, collectively, the Purchase Price to be paid for the
Membership Interests to each of the Sellers, including the Note to be delivered to Diana Istre
Francis in accordance with Section 2.4(a) and (b), and the shares of Buyer Stock and the cash
payments to be delivered to all Sellers hereunder.



     “Assignments of Membership Interests” means each Assignment of Membership Interest, in
substantially the form attached as Exhibit A, signed by each Seller to evidence the sale
and assignment of its Membership Interests to Buyer.



     “Buyer’s Knowledge” means those facts of which the Representatives of Buyer are aware or
should reasonably be aware.



     “Buyer Stock” means the Buyer’s $.001 par value per share common stock.



     “Claim” means any claim made by any Person, including Third Party Claims and claims that are
not Third Party Claims.



     “Closing EBITDAR” means Adjusted EBITDAR of the Company for the fiscal year ended August 31,
2010.



     “Closing Working Capital” means the Working Capital as of the Closing.



     “Code” means the Internal Revenue Code of 1986, as amended from time to time.



     “Company Group” means the Company, Oaks and their respective direct and indirect Subsidiaries.



     “Company’s Knowledge” means those facts of which any of the Representatives of the Company
Group (a) is aware or (b) should reasonably be aware, but only to the extent the event or
circumstance in question occurred in the five-year period before Closing.



     “Contract” means any contract, license, sublicense, franchise, permit, mortgage, purchase
order, indenture, loan agreement, lease, sublease, agreement, obligation, instrument or other
arrangement or any commitment to enter into any of the foregoing (in each case, whether written or
oral) to which the Person is a party or by which any of its assets or properties are bound.



     “Damages” means any loss, liability, claim, demand, obligation, judgment, suit, proceedings,
Tax, damage, cost, fee, expense (including reasonable attorneys’ fees and expenses), penalties or
fines.



     “EBITDAR” means the Company’s earnings before interest, taxes, depreciation, amortization and
rental payments for Equipment for a particular fiscal year or other specified period determined in
accordance with GAAP and with methods consistently applied by the Company in the preparation of the
Interim Balance Sheet and the Financial Statements.



     “Equipment” means all equipment and machinery owned or used by the Company Group in its
Business.


MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 2






 









 








EXECUTION VERSION




     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time
to time.



     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.



     “GAAP” means United States generally accepted accounting principles.



     “Governmental Body” means any federal, state, local, foreign or other governmental or
administrative body, instrumentality, department or agency or any court tribunal or administrative
hearing body.



     “Income Taxes” means any Tax imposed by a taxing authority based upon or measured by gross or
net income or receipts.



     “Indebtedness” means (i) all obligations for borrowed money and all obligations issued in
substitution for or exchange of obligations for borrowed money, (ii) all obligations evidenced by
any note, bond, debenture or other debt security, (iii) all obligations for the deferred purchase
price of property or services with respect to which a Person is liable, contingently or otherwise,
as obligor or otherwise, (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement Liability with respect to letters of
credit), (v) any indebtedness guaranteed in any manner by a Person (including, without limitation,
guarantees in the form of an agreement to repurchase or reimburse), (vi) any Liabilities under
capitalized leases with respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, including, without limitation, any lease termination payments or charges,
(vii) any indebtedness secured by a Lien on a Person’s assets, (viii) any unsatisfied obligation
for “withdrawal liability” to a “multiemployer plan” as such terms are defined under ERISA, (ix)
any amounts currently owed to any Person under any noncompetition, consulting or similar
arrangements, (x) any change-of-control or similar payment or increased cost which is triggered in
whole or in part by the transactions contemplated by this Agreement, (xi) any Liability of a Person
under deferred compensation plans, phantom stock plans, bonus plans, or for severance payments or
similar arrangements made payable in whole or in part as a result of the transactions contemplated
herein, (xii) any off-balance sheet financing of a Person, (xiii) the gross amount paid or payable
with respect to any employee bonus or retention arrangement or other compensation payable to any
Person as a result of the announcement or consummation or the transactions contemplated by this
Agreement, and (xiv) any accrued and unpaid interest on, and any prepayment premiums, penalties or
similar contractual charges in respect of, any of the foregoing obligations computed as though
payment is being made in respect thereof on the Closing Date.



     “Inventory” means the inventory of raw materials, ingredients, packaging, supplies, spare
parts, consumable inventory and products, work in progress and finished goods related to the
Business of the Company Group.



     “Legal Requirement” means any federal, state, local, foreign or other administrative order,
permit, ruling, judgment, injunction, decree, constitution, law, ordinance, regulation or statute.


MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 3






 









 








EXECUTION VERSION




     “Letter of Intent” means that certain letter of intent dated May 20, 2010, and amended on
July 23, 2010 and October 20, 2010, by and among Buyer, the Company, Oaks and Sellers.



     “Liability” means any liability, debt, obligation of the Company Group, of any kind or nature
whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or
unaccrued, liquidated or unliquidated, and whether due or to become due.



     “Liens” means any mortgages, pledges, security interests, encumbrances, claims, liens or
charges of any kind (including, without limitation, any conditional sale or other title retention
agreements or leases in the nature thereof) or any agreements to file any of the foregoing, any
sales of receivables with recourse, and any filings or agreements to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute. As used herein, the term “Lien”
shall not include any Permitted Lien.



     “Material Adverse Effect” means any event, circumstance, condition, change, occurrence or
effect that individually or in the aggregate with all other events, circumstances, conditions,
changes, occurrences and effects, has or could reasonably be expected to have a material adverse
effect upon the assets, liabilities, business, financial condition or operating results of the
Person or that could reasonably be expected to prevent or materially delay or impair the ability of
the Person to consummate the transactions contemplated by this Agreement.



     “Note” means the note issued by Buyer substantially in the form attached hereto as
Exhibit B in the aggregate amount of $750,000 payable to Seller Diana Istre Francis.



     “Operating Leases for Equipment Amount” means $5,056,409 which equals the amount paid by the
Company from September 1, 2009 until August 31, 2010 for the leasing of equipment under Operating
Leases for Equipment.



     “Ordinary Course of Business” means ordinary course of business consistent with past custom
and practice (including with respect to quantity and frequency).



     “Permitted Liens” means (i) mechanic’s and materialmen’s liens and similar encumbrances
arising in the Ordinary Course of Business of the Person that are not delinquent and not material
to the business of the Person, (ii) liens or encumbrances for federal, state, local, foreign and
other Taxes or assessments not yet due and payable or delinquent, and (iii) purchase money
encumbrances and encumbrances securing rental payments under capital lease arrangements that are
not delinquent and not material to the business of the Person.



     “Person” means an individual, a partnership, a limited liability company, a corporation, a
cooperative, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, Governmental Body or any other entity.



     “Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date.
Notwithstanding anything to the contrary herein, any franchise Tax shall be allocated to the period
during which the income, operations, assets or capital comprising the base of such Tax is
measured, regardless of whether the right to do business for another period is obtained by the
payment of such franchise Tax.



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 4






 









 








EXECUTION VERSION




     “Proprietary Rights” means all of the following in any jurisdiction throughout the world:
(i) patents, patent applications and patent disclosures; (ii) trademarks, service marks, trade
dress, trade names, corporate names, assumed names, logos (all translations, adaptations,
derivations and combinations of the foregoing) and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights; and (iv) registrations and
applications for any of the foregoing.



     “Purchase Price” means the aggregate sum of the Unadjusted Purchase Price minus (a) the
amount, if any, by which the Closing Working Capital is less than the amount of Target Working
Capital, plus (b) the amount, if any, by which the amount of Closing Working Capital exceeds the
Target Working Capital. Solely for the purposes of determining the Purchase Price at the Closing,
the Purchase Price shall be based on the Estimated Statement determined in accordance with
Section 2.5(a). The Purchase Price shall be subject to adjustment following the Closing as
provided in Section 2.5(b).



     “Repayment of the Senior Indebtedness and Large Leases” means the agreement by Buyer, as
referenced in Sections 2.1(a), 2.4(j) and 2.4(k), to pay off all amounts due as of the Closing by
the Company under Senior Indebtedness (up to a maximum of $13,750,000) and the Large Leases (up to
a maximum of $12,600,000).



     “Representative” means with respect to a particular Person, any director, officer, partner,
employee, agent, consultant, advisor, or other representative of such Person, including legal
counsel, accountants, and financial advisors.



     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.



     “Sellers’ Knowledge” or “Knowledge of the Sellers” means (a) in the case of all Sellers, those
facts of which each Seller is aware, or (b) in the case of Michael G. Francis and Bryan Francis,
those facts of which such Sellers should reasonably be aware, but only to the extent the event or
circumstance in question occurred in the five-year period before Closing.



     “Senior Indebtedness” means all Indebtedness of any member of the Company Group which is owed
to a bank or finance company, including any lines of credit and term credit facilities secured
either with a general security interest in all assets of the Company or specific liens on
Equipment, vehicles, mortgages or other property of the Company.



     “Straddle Period” means any Tax period beginning on or before and ending after the Closing
Date. Notwithstanding anything to the contrary herein, any franchise Tax shall be allocated to the
period during which the income, operations, assets or capital comprising the base of such Tax is
measured, regardless of whether the right to do business for another period is obtained by the
payment of such franchise Tax.



     “Subsidiary” means, with respect to any Person or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled (without regard to
the
occurrence of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more
of the


MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 5






 









 








EXECUTION VERSION




other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
limited liability company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability company, association or
other business entity gains or losses or shall be or control the managing director or general
partner of such partnership, limited liability company, association or other business entity.



     “Target Working Capital” means ONE HUNDRED NINETY-FOUR THOUSAND TWO HUNDRED SIXTY-THREE AND
00/100 DOLLARS ($194,263.00).



     “Tax” or “Taxes” means any tax or excise due from laws relating to federal, state, local or
foreign income, gross receipts, capital gains, franchise, alternative or add-on minimum, estimated,
sales, use, goods and services, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment, employment, disability,
payroll, license, employee or other withholding, contributions or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional amounts in respect
of the foregoing.



     “Tax Returns” means returns, declarations, reports, claims for refund, information returns or
other documents (including any related or supporting schedules, statements or information) filed or
required to be filed in connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative requirements relating to any
Taxes.



     “Third Party Claim” means any claim against an Indemnified Person by a Person that is not a
Party, Buyer Indemnitee or Seller Indemnitee.



     “Transaction Documents” means this Agreement and any other agreement contemplated by this
Agreement to which Buyer, any Company Group member or any Seller is a party including, without
limitation, the Assignments of Membership Interests, the Note, the Employment Agreement, the
Registration Rights Agreement, the Escrow Agreement and the Mutual Release.



     “Unadjusted Purchase Price” means THIRTY-THREE MILLION SEVEN HUNDRED SEVENTY-TWO THOUSAND
SEVEN HUNDRED EIGHTY DOLLARS ($33,772,780), which equals $15,700,000 plus four (4) times the amount
that the mutually agreed upon Closing EBITDAR exceeds $9,000,000.



     “Working Capital” means the Company’s net working capital, calculated as follows: (A) all
current assets which consist of the Company’s Inventory, Accounts Receivables and cash and
marketable securities in Company bank and investment accounts, (but excluding the Seller Note
Receivables), less (B) all current liabilities of the Company Group. For the purposes of
determining Working Capital, (X) Inventory shall be valued at actual cost, and (Y) Accounts


MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 6






 









 








EXECUTION VERSION




     Receivable shall only include receivables which are both due and which have not been
outstanding for over 120 days.



     1.2. Other Definitions. Each of the following defined terms has the meaning given
such term in the Section set forth opposite such defined term:



	 	 	 
	Section Reference	 	Defined Term
	3.28

	 	Accounts Receivable
	4.6(a)

	 	Acquired Stock
	Preamble

	 	Agreement
	2.7(a)

	 	Appointing Sellers
	2.5(e)

	 	Arbitrating Accountants
	12.11(b)

	 	Arbitration Notice
	12.11(a)

	 	Arbitrator
	3.16(a)

	 	Benefit Plans
	11.1

	 	Business
	Preamble

	 	Buyer
	9.2

	 	Buyer Indemnitees
	5.9

	 	Buyer SEC Filings
	5.10(a)

	 	Cash Consideration
	2.2

	 	Closing
	2.2

	 	Closing Date
	2.5(b)

	 	Closing Statement
	Preamble

	 	Company
	3.11(c)

	 	Company Proprietary Rights
	Recitals

	 	Company Shares
	3.11(a)

	 	Company Software
	11.1(c)

	 	Confidential Information
	12.11(a)

	 	CPR
	12.11(b)

	 	Demanding Party
	3.11(b)

	 	Development Software
	2.3(c)

	 	Employment Agreement and Employment Agreements
	3.21(a)

	 	Environmental Laws
	2.3(e)

	 	Escrow Agent
	2.3(e)

	 	Escrow Agreement
	2.6

	 	Escrow Deposit
	2.5(a)

	 	Estimated Statement
	8.7

	 	Estoppels
	Preamble

	 	Execution Date
	3.5

	 	Financial Statements
	3.21(f)

	 	Hazardous Material
	9.7(a)

	 	Indemnified Person
	9.7(a)

	 	Indemnifying Person
	3.19

	 	Insider
	3.5

	 	Interim Balance Sheet
	3.11(b)

	 	IT Software
	3.8(k)

	 	Large Leases
	3.8(b)

	 	Leased Real Property
	3.14

	 	Licenses
	3.10(b)

	 	Material Contract or Material Contracts






MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 7




 









 








EXECUTION VERSION




	 	 	 
	Section Reference	 	Defined Term
	Recitals

	 	Membership Interests
	2.1(a)

	 	Michael Francis Escrow Stock
	2.3(f)

	 	Mutual Release
	11.1(a)

	 	Non-Compete Period
	12.11(a)

	 	Noticed Party
	2.5(d)

	 	Notice of Dispute
	Preamble

	 	Oaks
	3.8(k)

	 	Operating Leases for Equipment
	3.8(a)

	 	Owned Real Property
	Preamble

	 	Party or Parties
	6.4

	 	Pay-Off Letters
	14.12

	 	PDF
	3.23

	 	Product Certifications
	3.8(c)

	 	Real Property
	2.3(d)

	 	Registration Rights Agreement
	Preamble

	 	Seller or Sellers
	11.5

	 	Seller Indemnitees
	2.3(p)

	 	Seller Note Receivables
	2.7(a)

	 	Seller Representative
	11.1

	 	Statute of Limitations
	2.7(g)

	 	Successor Seller Representative
	9.8

	 	Third Party Landlords
	3.11(b)

	 	Third Party Software






ARTICLE II

PURCHASE AND SALE OF MEMBERSHIP INTERESTS




     2.1. Agreement to Sell and Purchase Membership Interests; Other Transactions. On the
terms and subject to the conditions set forth in this Agreement and in exchange for the payment of
the Purchase Price in the relative amounts and types of consideration specified on Exhibit
H to Sellers and the Repayment of the Senior Indebtedness and the Large Leases by Buyer, at the
Closing, Buyer shall purchase, acquire and accept from each of the Sellers, and each of the Sellers
shall sell, assign, transfer and deliver to Buyer the respective Membership Interests referred to
opposite of such Seller’s name on Schedule 2.1, free and clear of any Liens, restrictions
on transfer, options, rights, calls, commitments, proxies or other contract rights. The Note shall
be delivered to and held by the Escrow Agent pursuant to the Escrow Agreement. 625,000 restricted
shares of Buyer Stock to be issued to Michael G. Francis (the “Michael Francis Escrow Stock”) shall
be delivered to and held by the Escrow Agent pursuant to the Escrow Agreement.



     2.2. Closing. Subject to satisfaction or waiver of the conditions contained in this
Agreement, the closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place electronically by the exchange of signature pages to all Transaction Documents and other
closing deliverables on November 22, 2010, or if later, on or before three (3) business days after
the date on which the last of the conditions set forth in Articles VII and VIII are satisfied or
waived (other than any conditions that are not capable of being satisfied until the Closing, but
subject to the satisfaction or waiver of such conditions at Closing), or (b) at such other
place or on such other date as may be mutually agreeable to Buyer and Sellers. The date and time
of the



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EXECUTION VERSION



Closing are herein referred to as the “Closing Date.” The Closing shall be deemed to be effective
at 12:01 a.m. (Dallas Time) on the Closing Date.




     2.3. Company and Sellers Deliverables at Closing. On or prior to the Closing Date,
the Company (the obligations of the Company and Oaks to make the closing deliveries shall be the
responsibility of Michael G. Francis) and each of the Sellers (the obligations of each Seller to
make the deliveries of Sellers shall apply individually to each Seller and not to any other Seller)
shall have delivered or caused to be delivered to Buyer, in form acceptable to Buyer in its
complete discretion, each of the following:



          (a) (i) Certificates representing the Membership Interests owned by each Seller and (ii) an
Assignment of Membership Interests duly executed by each Seller; and



          (b) All original books and records of the Company and Oaks.



          (c) Employment Agreements between (i) Michael G. Francis and the Company, and (ii) Bryan
Francis and the Company in substantially the form attached as Exhibit C hereto (each
individually an “Employment Agreement” and collectively the “Employment Agreements”) duly executed
by Michael G. Francis and Bryan Francis, respectively;



          (d) Registration Rights Agreement among Buyer and Diana Istre Francis in substantially the
form attached as Exhibit D (the “Registration Rights Agreement”) duly executed by Diana
Istre Francis;



          (e) The Escrow Agreement among Buyer (or one of its Affiliates), Diana Istre Francis, the
Seller Representative and The F&M Bank & Trust Company (the “Escrow Agent”) in substantially the
form attached as Exhibit E (the “Escrow Agreement”) duly executed by each of Diana Istre
Francis and the Seller Representative on behalf of the Appointing Sellers and delivered to Buyer
and the Escrow Agent.



          (f) A Mutual Release in substantially the form of Exhibit F (the “Mutual Release”)
duly executed by each Seller;



          (g) Certificates from each of the Company, Oaks and Sellers in form and substance reasonably
satisfactory to Buyer, dated as of the Closing Date, stating that (i) the representations and
warranties set forth in Article III and Article IV hereof are true and correct in all respects, and
(ii) each of the Company, Oaks and Sellers have performed and complied in all material respects
with all of the covenants and agreements required to be performed by each of them under this
Agreement on or prior to the Closing, including, without limitation, the simultaneous transfer of
all outstanding Membership Interests to Buyer;



          (h) Copies of all third party and Governmental Body consents, approvals, filings, releases,
terminations, payoff letters, etc., required for the transfer of the Membership Interests to Buyer
and the consummation of the transactions contemplated hereby and in the other Transaction
Documents, including those consents listed on Schedule 3.2;



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 9




 









 








EXECUTION VERSION




          (i) A certified copy of the articles of incorporation prior to the Closing Date, and certified
copies of the by-laws (or other appropriate corresponding organizational documents) of the Company,
each as amended or restated from time to time, and the resolutions of the Company’s board of
directors authorizing the execution, delivery and performance of this Agreement and the other
Transaction Documents and approving the consummation of the transactions contemplated hereby and
thereby;



          (j) A certified copy of the articles of organization prior to the Closing Date, and certified
copy of the operating agreement (or other appropriate corresponding organizational documents) of
Oaks, each as amended or restated from time to time, and the resolutions of Oaks’ Manager
authorizing the execution, delivery and performance of this Agreement and the other Transaction
Documents and approving the consummation of the transactions contemplated hereby and thereby;



          (k) Certificates of the appropriate official of the jurisdiction in which each Company Group
member is incorporated or organized and any other state in which each Company Group member does
business, stating that such Company Group member is in good standing, qualified to do business or
the equivalent, each dated within three (3) business days prior to the Closing Date;



          (l) A properly completed and executed certificate (i) from each Seller to the effect that each
such Seller is not a foreign person (each such certificate in the form required by Treasury
Regulation Section 1.1445-2(b)(2)) or (ii) from Oaks, a certificate to the effect that the
Membership Interests are not a U.S. real property interest (such certificate in the form required
by Treasury Regulation Section 1.1445-2(c)(3));



          (m) Pay-Off Letters with respect to all Senior Indebtedness and Large Leases outstanding as of
the Closing;



          (n) Complete releases of all Liens (other than Permitted Liens);



          (o) Copies of all of the resignations of all of the directors, managers and officers of the
Company and Oaks (except for Michael G. Francis in his capacity as President and Chief Executive
Officer of the Company) effective as of the Closing Date;



          (p) Evidence that all notes receivable owed from any Seller or any officer of the Company to
the Company (the “Seller Note Receivables”) have been paid in full or written off by the Company
and that any related promissory notes have been marked as “paid” and return to such Seller or
officer;



          (q) Evidence that any amounts owed to a Seller have been paid off;



          (r) At least three (3) days before Closing, the Seller Representative shall deliver to Buyer
wire transfer instructions for the Seller Representative, Diana Istre Francis, Michael G. Francis,
Bryan Francis and Mackey Francis;



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 10




 









 








EXECUTION VERSION




          (s) All other Transaction Documents to which Sellers are parties and shall have delivered each
such Transaction Document to Buyer and each of the other parties thereto; and



          (t) Such other documents or instruments as Buyer may reasonably request to effectuate the
transactions contemplated hereby.



     2.4. Buyer Deliverables at Closing. On or prior to the Closing Date, Buyer shall have
delivered to the Company, the Sellers, the Seller Representative, the Escrow Agent or other
relevant Persons, as applicable:



          (a) The Purchase Price (less the Escrow Deposit), the cash portion of which shall be paid by
wire transfer of immediately available funds to an account or accounts specified by the Sellers and
the stock portion of which delivered to the Sellers;



          (b) The Note duly executed by Buyer and delivered to the Escrow Agent;



          (c) The Employment Agreements duly executed by the Company and delivered to Michael G. Francis
and Bryan Francis;



          (d) The Registration Rights Agreement duly executed by Buyer and delivered to Diana Istre
Francis;



          (e) The Escrow Agreement duly executed by Buyer and delivered to Diana Istre Francis, the
Seller Representative and the Escrow Agent;



          (f) The Escrow Deposit by wire transfer of immediately available funds, the Note and the
Michael Francis Escrow Stock to the Escrow Agent;



          (g) The Mutual Release duly executed by the Company and Oaks and delivered to each Seller;



          (h) Each Assignment of Membership Interests duly executed by Buyer and delivered to the
appropriate Seller;



          (i) To the extent available at Closing, releases of Michael G. Francis from his obligations to
guarantee the Senior Indebtedness and Large Leases;



          (j) As part of the Repayment of the Senior Indebtedness and Large Leases, payment by wire
transfer of the full amount owed for Senior Indebtedness to the holders thereof as reflected in the
Pay-Off Letters, subject to a maximum of $13,750.000;



          (k) As part of the Repayment of the Senior Indebtedness and Large Leases, payment by wire
transfer of the full amount of the residual payments owed on the Large Leases to the lessors
thereof as reflected in the Pay-Off Letters, subject to a maximum of $12,600,000;



          (l) A certificate from Buyer, in form and substance reasonably satisfactory to the Company and
Sellers, dated as of the Closing Date, stating that (i) the representations and



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 11




 









 








EXECUTION VERSION



warranties of Buyer set forth in Article V are true and correct in all respects; and
(ii) Buyer has performed and complied in all material respects with all of the covenants and
agreements required to be performed by it under this Agreement on or prior to the Closing;




          (m) All other Transaction Documents to which Buyer is a party and shall have delivered each
such Transaction Document to each of the Sellers and the other parties thereto; and



          (n) Such other documents or instruments as the Company or Sellers may reasonably request to
effectuate the transactions contemplated hereby.



     2.5. Purchase Price Adjustment for Working Capital.



          (a) Preparation of Estimated Statement. No later than three (3) business days prior
to the Closing Date, the Seller Representative shall provide to Buyer a statement (the “Estimated
Statement”) setting forth in reasonable detail and with reasonable supporting documentation the
calculation of the Purchase Price, including calculations of the estimated amount of Closing
Working Capital and a certificate of the Seller Representative certifying that the respective
amounts have been calculated in accordance with this Agreement. The Sellers shall cause the
Estimated Statement to be prepared in good faith and in accordance with this Agreement and, to the
extent not inconsistent with this Agreement and otherwise applicable to the particular calculation,
GAAP and the Company’s accounting practices as of August 31, 2010.



          (b) Closing Statement Preparation. Within 60 days after the Closing, Buyer shall
prepare or cause to be prepared a statement (the “Closing Statement”) setting forth in reasonable
detail and with reasonable supporting documentation its calculation of the Purchase Price,
including the calculation of Working Capital at Closing. Buyer shall prepare the Closing Statement
in accordance with this Agreement and, to the extent not inconsistent with this Agreement and
otherwise applicable to the particular calculation, GAAP and the Company’s accounting practices as
of August 31, 2010. Additionally, to the extent that during the 60-day period following Closing
the Company collects Accounts Receivable which were outstanding for over 120 days as of the Closing
and, therefore, not included in the calculation of Working Capital on the Estimated Statement,
Buyer shall include any such collected amounts in its calculation of Working Capital on the Closing
Statement.



          (c) Review of Closing Statement. After preparation of the Closing Statement, Buyer
shall promptly deliver the Closing Statement to the Seller Representative for review. Buyer shall
grant the Seller Representative and his or her authorized accounting and legal Representatives
reasonable access to such work papers or other documents and information as they reasonably request
relating to the calculation of each component of the Purchase Price, and Buyer shall make
appropriate officers of the Company sufficiently available to assist the Seller Representative and
respond to questions in connection with the Seller Representative’s review of the Closing
Statement.



          (d) Notices of Disputes. The Seller Representative shall have a period of 20 days
after the delivery of the Closing Statement by Buyer to give Buyer written notice of any dispute
regarding the amounts reflected in the Closing Statement. If the Seller Representative



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 12




 









 








EXECUTION VERSION



does not give Buyer written notice of a dispute within such 20 day period, the Closing
Statement shall be deemed to have been accepted and agreed to by the Seller Representative on
behalf of all of the Sellers in the form in which it was delivered, and shall be final and binding
upon the Parties hereto. Any written notice of a dispute regarding the Closing Statement shall set
forth in reasonable detail the elements and amounts with which the Seller Representative disagrees
(a “Notice of Dispute”). During the 30 day period following the delivery of a Notice of Dispute,
Buyer and the Seller Representative shall make reasonable good faith efforts to attempt to resolve
such dispute and agree in writing upon the final content of the disputed Closing Statement or to
stipulate to such portion thereof with respect to which there is no dispute.




          (e) Dispute Resolution. If the parties cannot resolve or stipulate to all disputes
relating to the Closing Statement within the 30 day period referenced above, the matters with
respect to which no resolution or stipulation can be reached shall be submitted to and resolved by
the independent accounting firm of Broussard, Poche, Lewis, and Breaux (the “Arbitrating
Accountants”). Buyer and the Seller Representative shall each immediately enter into a customary
engagement letter with the Arbitrating Accountants and shall instruct the Arbitrating Accountants
that the written determination (which shall contain the underlying reasoning) of the Arbitrating
Accountants with respect to such disputed items and the accuracy of the Closing Statement as a
result of the resolution of such disputed items shall be completed and distributed to Buyer and the
Seller Representative within 30 days after the engagement of the Arbitrating Accountants. The
decision of the Arbitrating Accountants shall be final and binding on all parties and the Closing
Statement as determined by the Arbitrating Accountants shall constitute the final and binding
Closing Statement. The fees, expenses, and costs of the Arbitrating Accountants shall be borne by
Buyer, on the one hand, and the Sellers, on the other hand, in the same proportion that the dollar
amount of disputed items lost by Buyer on the one hand, or the Seller Representative, on the other
hand, bears to the total dollar amount in dispute that is resolved by the Arbitrating Accountants.



          (f) Purchase Price True-Up Payment. If the Purchase Price, as finally determined as
provided in Section 2.5(d) or Section 2.5(e), as applicable, is less than the Purchase Price as set
forth in the Estimated Statement, then Buyer shall be entitled to immediately make a claim against
the Escrow Deposit in the amount of any such deficiency. If the Purchase Price, as finally
determined as provided in Section 2.5(d) or Section 2.5(e), as applicable, exceeds the Purchase
Price as set forth in the Estimated Statement, then Buyer shall pay 43.1% of such excess to Diana
Istre Francis and 56.9% of such excess to the Seller Representative by wire transfer of immediately
available funds within two (2) business days after the final determination of the Purchase Price.
If the amount of any sums due to Buyer under this Section 2.5(f) is in excess of the amount of the
Escrow Deposit, Sellers shall, jointly and severally, indemnify and pay Buyer the amount of such
excess. Buyer, Diana Istre Francis and the Seller Representative hereby agree to promptly jointly
instruct the Escrow Agent to make the disbursements required by this Section 2.5(f).



     2.6. Escrow Deposit. At the Closing, Buyer shall deposit a portion of the Purchase
Price equal to ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000) plus the Note and Michael
Francis Escrow Stock (the “Escrow Deposit”) with the Escrow Agent under the Escrow Agreement, by
wire transfer of immediately available funds to the account of



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 13




 









 








EXECUTION VERSION



the Escrow Agent. The Escrow Deposit will be used to satisfy liabilities from which Buyer is
indemnified, that are caused by breaches by the Company or Sellers under this Agreement or any of
the other Transaction Documents or any breaches by the Company or Sellers of the representations
therein. The Escrow Deposit shall be held and disbursed by the Escrow Agent as specified in and
pursuant to the terms and conditions of the Escrow Agreement.




     2.7. Seller Representative.



          (a) Each of Michael G. Francis, Mackey Francis and Bryan Francis (the “Appointing Sellers”)
hereby constitutes and appoints Bryan Francis as his representative and true and lawful agent and
attorney-in-fact (in such capacity, the “Seller Representative”) with full power and authority in
each of their names and on behalf of each of them:




          (i) to act on behalf of each of them in the absolute discretion of the Seller
Representative, but only with respect to the following provisions of this Agreement, with
the power to: (A) upon written instructions from an Appointing Seller, designate the
account for payment of any payments to be made to any Appointing Seller pursuant to the
Escrow Agreement; (B) act pursuant to Section 2.5, including with respect to the Closing
Working Capital determinations; (C) execute, deliver and act under the Escrow Agreement;
(D) execute and deliver any waiver, consent or amendment under or to the Escrow Agreement;
(E) act in connection with any matter as to which the Appointing Sellers have or are
alleged to have indemnity obligations, or as to which any Appointing Seller is or claims to
be an Indemnified Person, under Article IX; (F) act, give and receive notices pursuant to
this Agreement; and (G) receive and accept such notices or correspondence, execute such
other documents, and take such other actions as are provided herein or in the Escrow
Agreement to be received, accepted, executed or taken by the Seller Representative; and




          (ii) in general, to do all things and to perform all acts, including executing and
delivering all agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable, to effectuate the provisions of this Section 2.7.



          (b) The foregoing appointment and grant of power and authority is coupled with an interest and
is in consideration of the mutual covenants made herein and is irrevocable and shall not be
terminated by any act of any Appointing Seller or by operation of law or by the occurrence of any
other event. By the Seller Representative’s execution of this Agreement, the Seller Representative
accepts such appointment and grant.



          (c) Each Appointing Seller consents to the taking by the Seller Representative of any and all
actions and the making by the Seller Representative of any decisions required or permitted to be
taken or made by the Seller Representative pursuant to this Section 2.7 and agrees that each such
action or decision shall bind such Appointing Seller. Each Appointing Seller hereby authorizes and
approves the execution and delivery of the Escrow Agreement by the Seller Representative on such
Appointing Seller’s behalf and further acknowledges and agrees that, when so executed and
delivered, such Appointing Seller shall be bound thereby as if such Seller had executed the Escrow
Agreement directly.



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 14




 









 








EXECUTION VERSION




          (d) Each Appointing Seller agrees that the Seller Representative shall have no obligation or
liability to any Person for any action or omission taken or omitted by the Seller Representative in
good faith hereunder.



          (e) Buyer and the Escrow Agent shall be entitled to conclusively rely, without any independent
verification or inquiry, upon any document or notice delivered by the Seller Representative or upon
any other action taken by the Seller Representative as (i) genuine and correct and (ii) having been
duly signed or sent or taken by the Seller Representative.



          (f) Payments made to or as directed by the Seller Representative under the Escrow Agreement,
are binding to the same extent as though such payments were made directly to the appropriate
Appointing Sellers entitled to the same, as the case may be. Neither Buyer nor the Escrow Agent
shall have any responsibility or liability for any further delivery or application of any such
payment, it being agreed by the Appointing Sellers that, on the terms set forth herein, (i) any
payment the Escrow Agent is required to make under the Escrow Agreement may be made to or as
directed by the Seller Representative on behalf of such Appointing Seller; (ii) the Appointing
Sellers shall determine among themselves the amount due to each Appointing Seller from each payment
made to or as directed by the Seller Representative hereunder or under the Escrow Agreement; and
(iii) each Appointing Seller shall look solely to the Seller Representative for such Seller’s
respective share of any payment made to or as directed by the Seller Representative hereunder or
under the Escrow Agreement.



          (g) The Seller Representative or any successor thereto may appoint a successor Seller
Representative (the “Successor Seller Representative”). To be effective, such appointment must be
(i) written, (ii) signed by the outgoing Seller Representative or outgoing Successor Seller
Representative as the Seller Representative hereunder, (iii) indicate such appointment, (iv) signed
by the Successor Seller Representative to indicate its acceptance of such appointment and its
agreement to be bound by the terms hereof pertaining to the “Seller Representative,” and
(v) delivered to Buyer. Upon such an appointment of a Successor Seller Representative under this
Agreement, such Successor Seller Representative will succeed to and become vested with all of the
rights, powers, privileges and duties of the Seller Representative, and the Seller Representative
shall be discharged from such predecessor Seller Representative’s duties and obligations under this
Agreement.



          (h) Diana Istre Francis is not an Appointing Seller and shall not be represented by the Seller
Representative.



ARTICLE III

REPRESENTATIONS AND WARRANTIES

CONCERNING THE COMPANY




     As a material inducement to Buyer to enter into this Agreement, each of the Appointing
Sellers, Oaks and the Company hereby jointly and severally represent and warrant to Buyer as of
each of the Execution Date and the Closing Date that:



     3.1. Organization and Corporate Power. Each Company Group member is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 15




 









 








EXECUTION VERSION



incorporation or other formation. Each Company Group member is qualified to do business in
every jurisdiction where such Company Group member conducts business and in which such
qualification is necessary. All jurisdictions in which each Company Group member is qualified to
do business are set forth on Schedule 3.1. Each Company Group member has all requisite
corporate or appropriate organizational power and authority and all Licenses necessary to own and
operate its properties and to carry on its business as now conducted. The articles of
incorporation and by-laws (or other appropriate corresponding organizational documents) of each
Company Group member, each as amended or restated from time to time, have previously been furnished
to Buyer and reflect all amendments thereto and are correct and complete. The minute books
containing the records of the meetings of the stockholders and the board of directors, the stock
certificate books and the stock record books (or other appropriate corresponding organizational
documents) of each Company Group member have been furnished to Buyer and are correct and complete.
No Company Group member is in default under or in violation of any provision of its articles of
incorporation or by-laws (or other appropriate corresponding organizational documents), each as
amended or restated from time to time.




     3.2. Authorization of Transactions.



          (a) Each of the Company and Oaks has all requisite corporate power and authority to execute
and deliver this Agreement and each of the other Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby. Each of the board of directors of
the Company and the members and managers of Oaks has duly approved this Agreement and all other
Transaction Documents to which the Company or Oaks is a party and has duly authorized the execution
and delivery of this Agreement and all other Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby. No other corporate or other
organizational proceedings on the part of the Company Group members are necessary to approve and
authorize the execution and delivery of this Agreement or the other Transaction Documents to which
a Company Group member is a party and the consummation of the transactions contemplated hereby and
thereby. This Agreement and all other Transaction Documents to which a Company Group member is a
party have been duly executed and delivered by the Company Group member.



          (b) Except as set forth on Schedule 3.2, the execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby by any Company Group member and/or Sellers do not and shall not in
such a manner as to cause a Material Adverse Effect on the Company (i) conflict with or result in
any breach of any of the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in a violation of, (iv) give any third party the right to modify, terminate or
accelerate or cause the modification, termination or acceleration of, any obligation under, (v)
result in the creation of any Lien upon the capital stock or the assets of the Company Group, or
(vi) require any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any Governmental Body, under (A) the provisions of the articles of
incorporation or by-laws (or the appropriate corresponding organizational documents) of each
Company Group member, each as amended or restated from time to time, (B) any Contract to which a
Company Group member is bound, or (C) any Legal Requirement to which a Company Group member is
subject.



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 16




 









 








EXECUTION VERSION




     3.3. Capitalization.



          (a) Schedule 3.3 attached hereto accurately sets forth by entity: (i) the authorized,
and issued and outstanding capital stock (or organizational equivalent) of each member of the
Company Group and (ii) the name of each record holder of capital stock (or organizational
equivalent) of each member of the Company Group and the number of shares held by each record holder
of each class of each member of the Company Group. All of the issued and outstanding shares (or
organizational equivalent) of each member of the Company Group’s capital stock (or organizational
equivalent) have been duly authorized, are validly issued, fully paid and nonassessable, are not
subject to, nor were they issued in violation of, any preemptive rights, rights of first refusal,
or similar rights, and are owned of record and beneficially by the owners of each Company Group
member in the amounts as set forth on Schedule 3.3, free and clear of all options,
Contracts, calls, puts, rights to subscribe, conversion rights and other Liens. Except for this
Agreement and except as set forth on Schedule 3.3, there are no outstanding or authorized
options, rights, Contracts, calls, puts, rights to subscribe, conversion rights or other agreements
or commitments to which any Company Group member is a party or which are binding upon any Company
Group member providing for the issuance, disposition or acquisition of any of the capital stock (or
organizational equivalent) of any Company Group member or any rights or interests exercisable
therefor. Except as set forth in Schedule 3.3, there are no outstanding or authorized
stock (or organizational equivalent) appreciation, phantom stock or similar or corresponding rights
with respect to the capital stock (or organizational equivalent) of any Company Group member.
There are no voting trusts, proxies or any other agreements or understandings with respect to the
voting of the capital stock (or organizational equivalent) of any Company Group member. Except as
set forth in Schedule 3.3, no Company Group member is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock (or
organizational equivalent).



          (b) The Company Shares owned by Oaks constitute 100% of the outstanding capital stock of the
Company



     3.4. Subsidiaries; Investments. Except for the other members of the Company Group and
as set forth on Schedule 3.4, each Company Group member does not have any Subsidiaries.
Except for the other members of the Company Group and as set forth on Schedule 3.4, no
Company Group member controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other entity. Except as set forth on
Schedule 3.4, no Company Group member owns or controls or has any right to acquire
(directly or indirectly) any stock, partnership interest, membership interest, joint venture
interest, equity participation or other security or interest in any other Person.



     3.5. Financial Statements. The Company has delivered to Buyer and attached hereto as
Schedule 3.5: (a) the Company’s consolidated audited balance sheets as of each of August
31, 2005, August 31, 2006, August 31, 2007, August 31, 2008, and August 31, 2009 and the
consolidated unaudited balance sheet as of August 31, 2010, and the related statements of
operations, shareholders’ equity and cash flows for the respective twelve-month periods then ended;
and (b) the Company’s consolidated unaudited balance sheet as of September 30, 2010 (the “Interim
Balance Sheet”), and the related statements of operations for the one-month period then ended.
Except as disclosed on Schedule 3.5, each of the foregoing financial statements



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EXECUTION VERSION



(including in all cases the notes thereto, if any) (the “Financial Statements”) are accurate
and complete in all respects and are consistent with the books and records of the Company, present
fairly in all respects the financial condition and results of operations of the Company on a
consolidated basis as of and for the periods referred to therein, and have been prepared in
accordance with GAAP, consistently applied, subject in the case of unaudited interim financial
statements, to the absence of footnote disclosure. The Closing EBITDAR is $13,518,195.




     3.6. Absence of Undisclosed Liabilities. No Company Group member has any Liability
which is material, relates to that particular Company Group member and which continues to be
outstanding, arising out of (i) transactions entered into at or prior to the Closing, (ii) any
action or inaction at or prior to the Closing, or (iii) any state of facts exist at or prior to the
Closing, including any Taxes with respect to or based upon transactions or events occurring on or
before the Closing, except (a) Liabilities under Contracts described in Schedule 3.10 or
under Contracts which are not required to be disclosed thereon (but not Liabilities for breaches or
violations thereof), (b) Liabilities reflected on the face of the Interim Balance Sheet,
(c) Liabilities which have arisen after the date of the Interim Balance Sheet in the Ordinary
Course of Business of the Company Group otherwise in accordance with the terms and conditions of
this Agreement (none of which is a Liability for breach of Contract, breach of warranty, tort or
infringement or a claim or lawsuit or an environmental liability) to which a policy of insurance is
not available to cover all or substantially all of such possible Liabilities, (d) Liabilities
disclosed on Schedule 3.6, and (e) Liabilities to the extent expressly disclosed in the
disclosure schedules attached hereto.



     3.7. Absence of Certain Developments. Except as set forth in Schedule 3.7 and
except as expressly contemplated by this Agreement, since January 1, 2010, each Company Group
member has conducted its business only in the Ordinary Course of Business and no Company Group
member has:



          (a) suffered a Material Adverse Effect or suffered any theft, damage, destruction or casualty
loss in excess of $250,000 in the aggregate to its assets, whether or not covered by insurance;



          (b) redeemed or repurchased, directly or indirectly, any shares of capital stock or other
equity security or declared, set aside or paid any dividends or made any other distributions
(whether in cash or in kind) with respect to any shares of its capital stock or other equity
security;



          (c) issued, sold or transferred any notes, bonds or other debt securities, any equity
securities, any securities convertible, exchangeable or exercisable into shares of its capital
stock or other equity securities, or options or other rights to acquire shares of its capital stock
or other equity securities;



          (d) borrowed any amount or incurred or become subject to any Indebtedness or other
Liabilities, except Liabilities incurred in the Ordinary Course of Business;



          (e) discharged or satisfied any Lien or paid any Liability (other than Liabilities paid in the
Ordinary Course of Business), prepaid any amount of Indebtedness or



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EXECUTION VERSION



subjected any portion of its properties or assets to any Lien other than vendor’s liens for
accounts payable incurred in the Ordinary Course of Business or unrecorded property tax liens
incurred by virtue of property ownership;




          (f) sold, leased, assigned or transferred (including, without limitation, transfers to Sellers
or any Insider) any of its material tangible or intangible assets (including Proprietary Rights),
except for sales of Inventory, non-exclusive licenses granted in the Ordinary Course of Business to
unaffiliated third Persons on an arm’s length basis, or disclosed any confidential information
(other than pursuant to agreements requiring the Person to whom the disclosure was made to maintain
the confidentiality of and preserving all rights of the such Company Group member in such
confidential information);



          (g) waived, canceled, compromised or released any rights or claims of material value, whether
or not in the Ordinary Course of Business;



          (h) entered into, amended or terminated any Material Contract or entered into any other
material transaction, whether or not in the Ordinary Course of Business, or materially changed any
business practice;



          (i) made, granted or promised any bonus or any wage, salary or compensation increase in excess
of $10,000 per year to any director, officer, employee, sales representative or consultant or made,
granted or promised any increase in any Benefit Plan, or amended or terminated any existing Benefit
Plan or adopted any new Benefit Plan;



          (j) made any other change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business or entered into any transaction with any Insider;



          (k) conducted its cash management customs and practices other than in the Ordinary Course of
Business (including, without limitation, with respect to maintenance of working capital balances
and inventory levels, collection of accounts receivable, payment of accounts payable, accrued
liabilities and other Liabilities and pricing and credit policies);



          (l) made any capital expenditures that aggregate in excess of $250,000;



          (m) made any loans or advances in excess of $10,000 in the aggregate to, or guarantees for the
benefit of, any Persons;



          (n) amended or authorized any amendment to its certificate of incorporation, by-laws or other
governing or organizational documents;



          (o) instituted or settled any claim or lawsuit for an amount involving in excess of $250,000
in the aggregate or involving equitable or injunctive relief, unless same was done in connection
with a policy of insurance and the obligations of such Company Group member not covered by
insurance do not exceed $250,000;



          (p) granted any performance guarantee to its customers other than in the Ordinary Course of
Business and consistent with past policies and practices;



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 19




 









 








EXECUTION VERSION




          (q) acquired any other business or Person (or any significant portion or division thereof),
whether by merger, consolidation or reorganization or by purchase of its assets or stock or
acquired any other material assets;



          (r) paid any management fees;



          (s) failed to make any regularly scheduled payments of principal or interest on the Senior
Indebtedness or the Large Leases; or



          (t) committed or agreed to any of the foregoing.



     3.8. Real Property and Personal Property; Title to Property.



          (a) Each member of the Company Group has good and indefeasible fee simple title to the real
property shown as owned by it in Schedule 3.8(a) (the “Owned Real Property”), in each case
free and clear of Liens except only the applicable Permitted Liens and Liens set forth on
Schedule 3.8(a).



          (b) Pursuant to the real property leases described in Schedule 3.8(b), each member of
the Company Group leases the real property shown as leased by it, as lessee or lessor, on
Schedule 3.8(b) (the “Leased Real Property”).



          (c) The Owned Real Property and the Leased Real Property (collectively, the “Real Property”)
constitute all real property owned or leased by any member of the Company Group.



          (d) There are no (i) condemnation(s) or assessment(s) pending that affecting any of the Real
Property, or any material portion thereof, or contemplated with respect to the Real Property or any
material portion thereof or, (ii) actions, suits or proceedings pending or to Sellers’ Knowledge
threatened against the Real Property (including, but not limited to, any pending or proposed
application for any rezoning or change in zoning not consented to by Buyer that would apply to the
Real Property or any portion thereof that would inhibit or prohibit Buyer from utilizing the
portion of the Real Property in question for its customary purposes).



          (e) There are no unpaid assessments (governmental or otherwise) for sewers, water, paving,
electrical power or otherwise affecting the Real Property or any portion thereof, whether matured
or unmatured, and no such assessments are to Sellers’ Knowledge threatened.



          (f) Each member of the Company Group has complied with all Legal Requirements, pertaining to
or affecting the Real Property owned or leased by it in all material respects, and there are no
legal actions, suits or other legal or administrative proceedings pending or to Sellers’ Knowledge
threatened against the Real Property, and Sellers are not aware of any facts that might result in
any such action, suit or other proceeding.



          (g) Neither the Sellers nor any member of the Company Group have received any written notice
from any governmental or quasi-governmental agency or insurance underwriter requiring or suggesting
that the Sellers, a member of the Company Group or any



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EXECUTION VERSION



other party should correct (which has not previously been corrected) any condition or modify
or add any improvement with respect to the Real Property or any portion thereof.




          (h) No member of the Company Group is subject to any “rollback” taxes resulting from
subsequent assessments for years or portions thereof prior to the Closing Date due to change in
land usage or ownership, that may be assessed in the future against any of the Real Property.



          (i) Except as otherwise expressly disclosed on Schedule 3.8(a), there are no adverse
or other parties in possession of the Real Property, or of any part thereof as lessees, tenants at
sufferance, or trespassers.



          (j) Schedule 3.8(j) lists all leases with annual payments of $50,000 or more pursuant
to which each member of the Company Group leases the personal property as lessee or lessor, and all
such operating leases for Equipment are designated as such on Schedule 3.8(j) (the
“Operating Leases for Equipment”).



          (k) Schedule 3.8(k) lists all leases of rolling stock of each member of the Company
Group with over $250,000 in residual payments to be made after the Execution Date (the “Large
Leases”) and the balance of the residual payments as of the Execution Date. The Large Leases will
have $250,000 or less in residual payments to be made after the Closing, and
Schedule 3.8(k) will be updated by Seller at the Closing to reflect the balance of the
residual payments as of Closing.



          (l) Subject only to the Permitted Liens, (i) each member of the Company Group has valid title
to, or, in the case of leased tangible personal property, valid leasehold interests in, all of the
tangible personal property owned or leased by it and used or held for use in the Business of the
Company, free and clear of all Liens, other than Liens set forth on Schedule 3.8(l), and
(ii) to the Knowledge of the Sellers, no material defects exist with respect to the condition of
any of such tangible personal property that would interfere in any material respect with the
continued use and operation thereof as the same is currently used and operated by the Company.



     3.9. Taxes.



          (a) Except as set forth on Schedule 3.9:




          (i) All Tax Returns required to be filed by the Company Group or any member of the
Company Group have been filed on or before the due date for such Tax Returns (taking into
account all extensions of due dates). No member of the Company Group is the beneficiary of
any extension (that is currently in effect) of the time for filing any Tax Return. All Tax
Returns filed by any member of the Company Group are true, correct and complete in all
material respects (taking into account any amendments thereto that have been filed).



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EXECUTION VERSION





          (ii) All Taxes of the Company Group that have become due and payable have been paid,
other than any amount that is being contested in good faith by appropriate proceedings as
described on Schedule 3.9.




          (iii) All material monies that the members of the Company Group are required by law to
withhold in connection with amounts paid or owing to any Person have been withheld and
either timely paid to the proper Governmental Body or, if not yet due, set aside in
accounts for such purposes and accrued by the applicable member of the Company Group.




          (iv) No deficiencies for any Taxes have been asserted or assessed in writing against
any member of the Company Group, which have not been resolved or paid. To the Knowledge of
the Sellers, there are no claims, audits, or investigations pending or threatened against
any member of the Company Group for any Tax.




          (v) There are no Liens for Taxes (other than Taxes not yet past due) on any of the
assets of any member of the Company Group.




          (vi) No member of the Company Group has consented to extend to a date later than the
Closing Date the time in which any Tax may be assessed or collected by any tax authority.




          (vii) No member of the Company Group is a party to any tax allocation or sharing
agreement with any Person, or a party to any agreement to indemnify any Person with respect
to Taxes. No member of the Company Group (i) has been a member of any affiliated group
filing a consolidated federal income Tax Return or (ii) has any liability for the Taxes of
any Person (other than the members of the Company Group) under Treasury Regulation Section
1.1502-6 (or any corresponding provision of any other applicable Tax law).




          (viii) No member of the Company Group is a partner in any entity classified as a
partnership for federal income Tax purposes that is not also a member of the Company Group.




          (ix) No Seller or member of the Company Group is a “foreign person” within the meaning
of Treasury Regulation Section 1.1445-2(b).




          (x) No member of the Company Group has (i) participated (within the meaning of
Treasury Regulations § 1.6011-4(c)(3)) in any transaction that a member has determined
constitutes a “reportable transaction” within the meaning of Treasury Regulations §
1.6011-4(b) (and all predecessor regulations); (ii) claimed any deduction, credit or other
tax benefit by reason of any transaction that a member has determined constitutes a “tax
shelter” within the meaning of former Section 6111(c) of the Code and the Treasury
Regulations thereunder or any transaction that a member has determined constitutes a
“confidential corporate tax shelter” within the meaning of former Section
6111(d) of the Code and the Treasury Regulations thereunder; or (iv) purchased or
otherwise acquired an interest in any transaction that a member has determined




MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 22




 









 







EXECUTION VERSION





constitutes a “potentially abusive tax shelter” within the meaning of Treasury Regulations
§ 301.6112-1 prior to amendment by Treasury Decision 9352 (7/31/07).




          (xi) No member of the Company Group will be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any:




          (A) change in method of accounting made at or prior to the Closing Date for a
Pre-Closing Tax Period;




          (B) closing agreement as described in Section 7121 of the Code (or any
corresponding or similar provision of any other applicable income tax law) executed
at or prior to the Closing Date;




          (C) intercompany transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any corresponding or similar
provision of any other applicable income Tax law) entered into or existing at or
prior to the Closing Date;




          (D) installment sale or open transaction disposition made at or prior to the
Closing Date; or




          (E) prepaid amount received at or prior to the Closing Date.




          (xii) The Company has not distributed stock of another corporation, or has had its
stock distributed by another corporation, in a transaction that was purported or intended
to be governed in whole or in part by Sections 355 or 361 of the Code.




          (xiii) Except as provided in Section 3.16 (relating to employee benefit plans), the
representations and warranties set forth in this Section 3.9 are the exclusive
representations and warranties with respect to Taxes, and other provisions of this
Article III shall be interpreted to apply only to matters other than Taxes.



     3.10. Contracts and Commitments.



          (a) Except as specifically contemplated by this Agreement and except as set forth in
Schedule 3.10, no Company Group member is a party to or bound by, whether written or oral,
any:




          (i) collective bargaining agreement or Contract with any labor union or any bonus,
commissions, pension, profit sharing, retirement or any other form of deferred compensation
or incentive plan or any stock purchase, stock option, hospitalization insurance or similar
plan or practice, whether formal or informal;




          (ii) Contract for the employment of any officer, individual employee or other Person
on a full-time, consulting or independent contractor basis (except for employees who may be
terminated at-will) or any severance agreements or change-of-control agreements;



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EXECUTION VERSION





          (iii) Contract relating to Indebtedness or to mortgaging, pledging or otherwise
placing a Lien on any of such Company Group member’s assets, other than a Permitted Lien
and any vendor’s liens under $50,000;




          (iv) Contract with respect to the lending or investing of funds;




          (v) license or royalty Contract, or management, consulting, or advisory Contract;




          (vi) guaranty of any obligation, other than endorsements made for collection;




          (vii) Contract under which a Company Group member is lessee of, or holds or operates,
any personal property owned by any other party calling for payments by a Company Group
member or under which a Company Group member is lessor of or permits any third party to
hold or operate any property, real or personal, owned or controlled by a Company Group
member;




          (viii) Contract or group of related Contracts with the same party for the purchase or
sale of supplies, products or other personal property or for the furnishing or receipt of
services which calls for performance over a period of more than one year;




          (ix) Contract or group of related Contracts with the same party continuing over a
period of more than six months from the date or dates thereof, not terminable by the
Company Group member on 30 days or less notice without penalties;




          (x) Contract relating to the ownership of or investments in any business or enterprise
(including, but not limited to, investments in joint ventures and minority equity
investments);




          (xi) Contract which prohibits a Company Group member from freely engaging in business
anywhere in the world;




          (xii) Contract relating to the distribution, marketing, advertising or sales of the
Company Group’s products and/or services;




          (xiii) Contract pursuant to which a Company Group member subcontracts work to third
parties;




          (xiv) power of attorney;




          (xv) Contract relating to the acquisition or sale of the Company Group’s Business (or
any material portion thereof);




          (xvi) Material contract relating to Proprietary Rights except as set forth in
Schedule 3.11; or



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 24




 









 








EXECUTION VERSION





          (xvii) other Contract material to a Company Group member, whether or not entered into
in the Ordinary Course of Business.



          (b) Except as disclosed in Schedule 3.8(a), Schedule 3.8(j), Schedule
3.8(k), Schedule 3.10 or Schedule 3.11, (i) no Contract or commitment required
to be disclosed on Schedule 3.8(a), Schedule 3.8(j), Schedule 3.8(k),
Schedule 3.10 or Schedule 3.11 (each, a “Material Contract” and collectively, the
“Material Contracts”) has, to Sellers’ Knowledge, been breached or canceled by the other party, and
there are no anticipated breaches by any other party to any Material Contract, (ii) each Company
Group member has performed all the obligations required to be performed by it under the Material
Contracts to the extent required to be so performed as of the date hereof or as of the Closing Date
and is not in default under or in breach of any Material Contract, and no event or condition has
occurred or arisen which with the passage of time or the giving of notice or both would result in a
default or breach thereunder, (iii) no Company Group member has a present expectation or intention
of not fully performing any obligation pursuant to any Material Contract, and (iv) each Material
Contract is legal, valid, binding, enforceable and in full force and effect and will continue as
such following the consummation of the transactions contemplated hereby.



          (c) The Company has made available to Buyer a true and correct copy of all written Material
Contracts, in each case together with all amendments, waivers or other changes thereto (all of
which are disclosed on Schedule 3.8(a), Schedule 3.8(j), Schedule 3.8(k),
Schedule 3.10 or Schedule 3.11). Schedule 3.8(a), Schedule 3.8(j),
Schedule 3.8(k), Schedule 3.10 or Schedule 3.11 contains an accurate and
complete description of all material terms of all oral Material Contracts referred to therein.



          (d) During the two-year period ending on the date of this Agreement, no Company Group member
has used any name or names under which they have invoiced account debtors, maintained records
regarding its assets or otherwise conducted business other than the exact names set forth on
Schedule 3.8(a), Schedule 3.8(j), Schedule 3.8(k), Schedule 3.10 or
Schedule 3.11.



     3.11. Computer Software and Proprietary Rights.



          (a) Schedule 3.11 attached hereto sets forth a complete and correct list of: (i) all
patented or federal or state registered Proprietary Rights owned by the Company Group, including,
without limitation, Internet domain name registrations; (ii) all pending patent applications or
other applications for registration of Proprietary Rights owned by the Company Group; (iii) all
trade names and unregistered marks owned and used by the Company Group; (iv) all computer software
owned by and distributed or maintained by the Company Group (“Company Software”), listed by major
point release; and (v) other than Company Software, all other material unregistered copyrights,
mask works and computer software owned by the Company Group, including, without limitation,
internally developed back office software, etc.



          (b) Excluding commercially available computer applications, Schedule 3.11 attached
hereto sets forth a complete and correct list of: (i) all computer software licenses or similar
agreements or arrangements through which the Company Group embeds, integrates, bundles,
redistributes, resells, or otherwise sublicenses such third party software (“Third Party



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EXECUTION VERSION



Software”); (ii) all computer software licenses or similar agreements or arrangements used by
the Company Group to support the development of Computer Software (“Development Software”);
(iii) all computer software licenses or similar agreements or arrangements relating to information
technology used in the operations of the Company Group (“IT Software”) for which the Company Group
paid more than $5,000 in the aggregate in license fees or pays more than $1,000 in annual support
fees; (iv) all other material licenses or similar agreements or arrangements, in effect in which
the Company Group is a licensee of Proprietary Rights; (v) other than customer Contracts entered
into in the Ordinary Course of Business and standard “affiliate” agreements wherein such affiliates
have no right to directly license Company Software to customers, all licenses or similar agreements
or arrangements in which the Company Group is a licensor of Proprietary Rights, including, without
limitation, reseller agreements; and (vi) all other material agreements or similar arrangements, in
effect relating to the use of Proprietary Rights by the Company Group, including, without
limitation, material settlement agreements, consent-to-use or standstill agreements, standalone
source code escrow agreements, outsourcing agreements relating to software development or
information technology, and standalone indemnification agreements.




          (c) Except as set forth on Schedule 3.11, (i) each Company Group member owns and
possesses all right, title and interest in and to the Proprietary Rights set forth in Schedule
3.11, has a valid and enforceable right to use such Proprietary Rights pursuant to the
agreements set forth in Schedule 3.11, and otherwise owns and possesses all right, title
and interest in and to all other Proprietary Rights necessary for the operation of the Company
Group’s Business as currently conducted, free and clear of all Liens (other than Permitted Liens)
(collectively, the “Company Proprietary Rights”); and (ii) the Company Group has not licensed any
of its Proprietary Rights to any third party on an exclusive basis, and no Seller nor any of each
Seller’s Affiliates own any Company Proprietary Rights.



          (d) The Company does not own and is not licensed to use any patents, trademarks, trade names,
service marks, copyrights, logos or other such intellectual or Proprietary Rights, other than those
set forth on Schedule 3.11. Neither the Company nor any of its officers or employees has
any patent applications pending for any device, process, method, design or invention of any kind
now used or needed by the Company in the furtherance of its business operations as currently being
conducted or as currently proposed to be conducted by the Company. The Company has taken
reasonable steps to maintain the confidentiality of its client or customer lists and client or
customer information, trade secrets and other Proprietary rights. Except as set forth on
Schedule 3.11, (i) neither Sellers, the Company nor any of its registered agents has
received or is aware of any pending or threatened claims of infringement or misappropriation of, or
conflict with any Proprietary Rights of any third party; and (ii) neither Sellers nor the Company
has infringed, misappropriated or otherwise violated any Proprietary Rights of any third parties,
and none of the Sellers nor the Company has any Knowledge of any infringement, misappropriation or
conflict which will occur as a result of the continued conduct of the business as presently
conducted or as currently proposed to be conducted.



          (e) Excluding commercially available computer applications and except as set forth on
Schedule 3.11, the Company Software, including any embedded or integrated Third Party
Software, does not contain any open source or freeware and the sale or licensing of the



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EXECUTION VERSION



Company Software in the Ordinary Course of Business is not governed, in whole or in part, by the
terms of the GNU General Public License or any other license requiring any Company Group member to
disclose source code to any of the Company Software and any other software for which a reasonably
prudent Person would hold in confidence.




          (f) Excluding commercially available computer applications and except as set forth in
Schedule 3.11, the Company Group is in possession of the source code and object code for
all Company Software, Third Party Software, Development Software and IT Software and copies of all
other material related thereto, including, without limitation, installation and user documentation,
engineering specifications, flow charts, and know-how reasonably necessary for the use,
maintenance, enhancement, development and other exploitation of such software as currently used in,
or currently under development for, the Business, except for those materials and source code where
the failure of a Company Group member to possess such materials and source code would not
reasonably be expected to have a Material Adverse Effect.



          (g) The computer software, computer firmware, computer hardware (whether general purpose or
special purpose), and other similar or related items of automated, computerized and/or software
system(s) that are used by a Company Group member in the conduct of its Business is sufficient in
all material respects for the current needs of the Business of the Company Group as currently
conducted and the Company Group has purchased a sufficient number of license seats for all
Development Software and IT Software used in the Business.



     3.12. Litigation; Proceedings. Except as set forth in Schedule 3.12, there
are no actions, suits, proceedings, orders, judgments, decrees or, to the Sellers Knowledge,
investigations pending, or, to the Company’s Knowledge or the Sellers’ Knowledge, threatened
against or imposing obligations on a Company Group member at law or in equity, or before or by any
Governmental Body and there is no basis for any of the foregoing. Except as set forth on
Schedule 3.12, no Company Group member has received any written opinion or legal advice in
writing to the effect that any Company Group member is exposed from a legal standpoint to any
liability or disadvantage which may be material to the Company Group’s Business as presently
conducted. No Company Group member is subject to any outstanding order, judgment or decree issued
by any Governmental Body or any arbitrator.



     3.13. Brokerage. Except as set forth on Schedule 3.13, there are no claims
for brokerage commissions, finders’ fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or agreement made by or on
behalf of a Company Group member.



     3.14. Governmental Licenses and Permits. Except for Product Certifications,
Schedule 3.14 contains a complete listing of all permits, licenses franchises, certificates
of authorization, registrations and other material written authorizations of foreign, federal,
state and local governments or regulatory authorities, or other similar authorizations
(collectively, the “Licenses”) owned or possessed by each Company Group member or used by a Company
Group member in the conduct of its Business. Except as indicated on Schedule 3.14, each
Company Group member owns or possesses all right, title and interest in and to all Licenses which
are necessary to conduct its business as presently conducted. Each Company Group member is in



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EXECUTION VERSION



material compliance with the terms and conditions of such Licenses. No loss or expiration of
any License is pending, or to the Company’s Knowledge, threatened or reasonably foreseeable
(including, without limitation, as a result of the transactions contemplated hereby) other than
expiration in accordance with the terms thereof, which terms do not expire as a result of the
consummation of the transactions contemplated hereby.




     3.15. Employees.



          (a) Except as set forth on Schedule 3.15(a), no key executive employee or group of
employees or independent contractors of the Company Group have notified the company of any plans to
terminate his or her employment or relationship as an employee or independent contractor with the
Company Group. Each Company Group member has complied with and is in compliance with all
applicable laws relating to the employment of personnel and labor, including provisions thereof
relating to wages, hours, vacation, overtime, notice, pay in lieu of notice, termination and
severance pay, obligation, human rights, occupational health and safety, equal opportunity,
collective bargaining and the payment of social security and other Taxes, the Worker Adjustment and
Retraining Notification Act, and the Immigration Reform and Control Act of 1986. No Company Group
is party to or bound by any collective bargaining agreement, nor has it experienced any strikes,
grievances, unfair labor practices claims or other material employee or labor disputes. No Company
Group member has engaged in any unfair labor practice. There are no organizational efforts
presently being made or, to the Company’s Knowledge, threatened by or on behalf of any labor union
with respect to employees of the Company Group. Schedule 3.15(a) sets forth the names,
present annual or, as the case may be, hourly rate of compensation (including salary, bonuses and
commissions) of all persons employed or engaged as of the Closing Date by each Company Group member
(including its independent contractors) and whether, and to what extent, each Company Group member
may have a contractual obligation to pay severance upon termination of employment. None of the
employees of a Company Group member is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar Contract relating to, affecting or in conflict with the present
business activities of a Company Group member.



          (b) Except as set forth on Schedule 3.15(b), no Company Group member is party to any
agreement nor do any facts or circumstances exist which would require a Company Group member to pay
any additional compensation, bonuses (including, without limitation, any retention bonuses) or
other amounts as a result, in whole or in part, of the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, to any employee or former employee of a
Company Group member.



     3.16. Employee Benefit Plans.



          (a) With respect to current or former employees of the Company Group, the Company Group does
not maintain and has not maintained, does not contribute to and has not contributed to, does not
have and has not had any obligation to contribute to, does not have and has not had any actual or
potential Liability with respect to any (i) deferred compensation or bonus or retirement plans or
arrangements, (ii) qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans (as defined in Section 3(2) of ERISA),
(iii) employee welfare benefit plans (as defined in Section 3(1) of



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EXECUTION VERSION



ERISA) or other employee benefit plans (as defined in Section 3(3) of ERISA), (iv) stock
option or stock purchase plans, or (v) material fringe benefit plans, programs or arrangements,
whether in writing or oral ((i) through (v) collectively, the “Benefit Plans”) other than the
Benefit Plans listed on Schedule 3.16(a). No Company Group member has contributed to and
has no Liability with respect to any multiemployer pension plan (as defined in Section 3(37) of
ERISA). No Company Group member has maintained or contributed to and has no Liability with respect
to any defined benefit plan (as defined in Section 3(35) of ERISA). No Company Group member
maintains or contributes to any employee welfare benefit plan or has any obligation under an
arrangement which provides health, accident or life insurance benefits to former employees, their
spouses or dependents, other than in accordance with Section 4980B of the Code.




          (b) No Company Group member has incurred any Liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, any multiemployer plan or otherwise with respect to any
employee pension benefit plan currently or previously maintained or contributed to by members of
the controlled group of companies (as defined in Sections 414(b), (c), (m) and (o) of the Code)
that includes or included a Company Group member that has not been satisfied in full, and no
condition exists that presents a risk to a Company Group member of incurring such a Liability.



          (c) Except as specifically provided in this Agreement or as set forth in
Schedule 3.16(c), no employee or former employee of a Company Group member will become
entitled to any material bonus, severance or similar benefit (including acceleration of vesting or
exercise of an incentive award) as a result of the transactions contemplated hereby, and there is
no Contract, plan or arrangement covering any employee or former employee of such Company Group
member that, individually or collectively, will give rise to a payment that would not be deductible
by such Company Group member by reason of Section 280G of the Code or require payment of an excise
tax under Section 4999 of the Code solely as a result of the transactions contemplated hereunder.



          (d) No Company Group member maintains, contributes to or has any Liability with respect to any
nonqualified deferred compensation plan covered by Section 409A of the Code.



     3.17. Insurance. Schedule 3.17 lists each insurance policy maintained by or
on behalf of each Company Group member with respect to its properties, assets and business,
together with a claims history since January 1, 2008. All of such insurance policies are in full
force and effect, and no Company Group member has been, except to the extent the Company Group
member has been directly affected by natural disasters, (a) in default with respect to its
Liabilities under any such insurance policies or (b) denied insurance coverage. Except as set
forth on Schedule 3.17, no Company Group member has any self-insurance or co-insurance
programs and, to the Company’s Knowledge, the reserves set forth on the Interim Balance Sheet are
adequate to cover any insurance deductibles or any Liabilities of which there is Company knowledge
with respect to any self insurance or coinsurance programs.



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     3.18. Officers and Directors; Bank Accounts.



          (a) Schedule 3.18(a) lists all officers and directors (or other organizational
equivalent) of each Company Group member.



          (b) Schedule 3.18(b) lists all bank accounts, safety deposit boxes and lock boxes
(designating each authorized signatory with respect thereto) of each Company Group member.



     3.19. Affiliate Transactions. Except for at will termination or employment
contracts disclosed in Schedule 3.15, and except for intercompany transactions disclosed on
the Financial Statements and as disclosed on Schedule 3.19, no officer, director, employee,
stockholder or other Affiliate of the Company Group or any individual related by marriage or
adoption to any such Person or any entity in which any such Person owns any beneficial interest
(each an “Insider”), is a party to any Contract or transaction with a Company Group member or which
is pertaining to the Business of the Company Group or has any interest in any property, real or
personal or mixed, tangible or intangible, used by a Company Group member in the conduct of its
Business. Schedule 3.19 hereto describes all affiliated services provided to or on behalf
of each Company Group member by Sellers or their Affiliates and to or on behalf of Sellers and such
Affiliates by a Company Group member and all affiliate transactions or Contracts among each Company
Group member and Sellers or their Affiliates (including, in each case, the costs charged to or by
such Company Group member).



     3.20. Compliance with Laws. To Sellers’ Knowledge, except as disclosed on
Schedule 3.20, each Company Group member has complied with and is in compliance with all
applicable Legal Requirements of all Governmental Bodies which are applicable to the Business,
business practices (including, but not limited to, each Company Group member’s production,
procurement of contracts, marketing, sales and distribution of its products and services) or any
owned or leased properties of each Company Group member and to which each Company Group member may
be subject except where the failure to be in compliance has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company, and no claims have been filed against
such Company Group member alleging a violation of any such Legal Requirements, and no Company Group
member has received notice of any such violations.



     3.21. Environmental Compliance. Except as set forth on Schedule 3.21 or
as disclosed in the Phase I environmental surveys listed on Schedule 3.21:



          (a) To Sellers’ Knowledge, all of the Owned Real Property and Leased Real Property is in
compliance with all applicable Environmental Laws, except where the failure to be in compliance has
not had and would not reasonably be expected to have a Material Adverse Effect. As used herein,
“Environmental Laws” means all applicable Legal Requirements relating to pollution or protection of
the environment (including ambient air, surface water, ground water, land or surface or subsurface
strata), including all applicable federal, state or local laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment and all applicable legal requirements relating
to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or
handling of any of the foregoing,



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including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§ 9601, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et. seq.), and the
rules and regulations promulgated thereunder.




          (b) All material permits required under applicable Environmental Laws for the current use,
operation or ownership of the Owned Real Property and Leased Real Property have been obtained and
are current, except where the failure to obtain or maintain such permit has not had and would not
reasonably be expected to have a Material Adverse Effect. No federal, state or local governmental
entity has notified any member of the Company Group that any such permit will be suspended,
cancelled, revoked or modified, or that any such permit cannot be renewed in the Ordinary Course of
Business.



          (c) No member of the Company Group has received from any federal, state or local
governmental entity or other Person any unresolved order, directive, information request, notice of
violation, notice of alleged violation, notice of noncompliance, notice of liability or potential
liability, regarding compliance with, or liability or potential liability under, applicable
Environmental Laws concerning any of the Owned Real Property or Leased Real Property or any
off-site disposal of a hazardous substance (including any letter or request for information under
Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
§ 9604) or any comparable state law).



          (d) No member of the Company Group has entered into any agreement with any federal, state
or local governmental entity or any other Person pursuant to which the member of the Company Group
assumed responsibility for the investigation or remediation of any condition resulting from the
release, treatment, storage or disposal of hazardous substances, which matter has not been
completed or resolved.



          (e) The Company has made available to Buyer all studies, site assessments, compliance
audits and similar environmental reports, analyses, and test results that to the Sellers’ Knowledge
are in the possession, custody or control of any member of the Company Group, relating to any past
or present (i) environmental conditions concerning the Business of any member of the Company Group
or on, under or about the Owned Real Property or Leased Real Property, or (ii) activities relating
to hazardous substances on, or any off-site disposal of a hazardous substance from any Owned Real
Property or Leased Real Property.



          (f) No member of the Company Group has used the Real Property or any portion thereof for
the disposal or dumping, nor, to the Knowledge of the Sellers, has there been any spillage,
seepage, or uncontrolled loss on or filtration from or onto the Real Property or any portion
thereof, of any petroleum, petroleum distillates, asbestos, asbestos containing Hazardous Materials
(as hereinafter defined), hazardous substances or hazardous wastes, the Real Property contains no
Hazardous Materials in quantities or methods of storage violating applicable laws, including,
without limitation, Environmental Laws. None of the Sellers or any member of the Company Group has
received written notice of any violation by the Real Property and/or any member of the Company
Group of any environmental laws, ordinances, regulations or requirements, whether federal, state or
local. There are no underground storage tanks located in, on or under the Real Property or any
portion thereof. For purposes of this Agreement, the term “Hazardous Material” means any
substance, material or waste that is toxic, ignitable, reactive or



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corrosive and that is regulated by any local or state governmental authority or the United
States Government. The term Hazardous Material includes, without limitation, any material or
substance that is, (i) defined as a “hazardous waste,” “extremely hazardous waste,” “restricted
hazardous waste,” “hazardous substance,” or “hazardous material”, by any local or state law; (ii)
oil and petroleum products and their by-products; (iii) asbestos; (iv) designated as a “hazardous
substance” pursuant to the Federal Water Pollution Control Act; (v) defined as a “hazardous waste”
pursuant to the Federal Resource Conservation and Recovery Act; or (vi) defined as a “hazardous
substance” pursuant to the Comprehensive Environmental Response, Compensation and Liability Act.




          (g) Except where no member of the Company Group engages in transportation of Hazardous
Materials and except where such transportation is performed, such member of the Company Group is
fully qualified and authorized to transport Hazardous Materials in the United States and are fully
familiar with the Legal Requirements enforced by the U.S. Department of Transportation and its
constituent agencies. Any transportation of Hazardous Materials by the Company or any other member
of the Company Group is performed in material compliance with all applicable Legal Requirements,
including requirements with regard to registration, training, packaging, loading, placarding,
documentation and labeling of shipments containing Hazardous Materials.



     3.22. Indebtedness. Except as set forth on Schedule 3.22, no Company
Group member is subject to any long-term Liabilities or Indebtedness. Schedule 3.22
details the GAAP accounting outstanding balance (including accrued and unpaid interest) for each
such outstanding item of Indebtedness. All Senior Indebtedness is reflected and marked as “Senior
Indebtedness” on Schedule 3.22 and the outstanding principal and interest balance as of the
Execution Date is reflected thereon. The balance of the Senior Indebtedness shall be $13,750,000
or less as of the Closing. Sellers shall update the outstanding principal and interest balance
owed on Senior Indebtedness as of the Closing by providing an update to Schedule 3.22 at
Closing. Except as set forth on Schedule 3.22, there are no outstanding powers of attorney
executed on behalf of any Company Group member. Except as set forth on Schedule 3.22, no
Company Group member is a guarantor or otherwise liable for any Indebtedness of any other Person
other than endorsements for collection in the Ordinary Course of Business.



     3.23. Certifications. Each Company Group member holds all material product
registrations, accreditations and other certifications required for the conduct of its Business
(all of such registrations, accreditations and certifications being referred to herein as “Product
Certifications”), which Product Certifications are set forth on Schedule 3.23 attached
hereto. There is no reasonable basis for any present action rescinding any such Product
Certifications and no loss or expiration of any such Product Certifications is reasonably
foreseeable or has had or would reasonably be expected to have a Material Adverse Effect. Each
product manufactured, sold, leased or delivered by such Company Group member has been in conformity
with all applicable contractual commitments and all express and implied warranties, and such
Company Group member does not have any Liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the a
Company Group member giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith. Schedule 3.23 includes copies of the standard terms and



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conditions of sale or lease for each Company Group member (containing applicable guaranty,
warranty, and indemnity provisions). No product manufactured, sold, leased or delivered by any
Company Group member is subject to any guaranty, warranty, or other indemnity unless such guaranty,
warranty, or other indemnity is provided by a policy of insurance that provides coverage of
substantially all amounts of exposure beyond the applicable standard terms and conditions of sale
or lease set forth in Schedule 3.23.




     3.24. Customers. Except as disclosed on Schedule 3.24, no Company Group
member as of Closing Date has received any notice that any of its top twenty (20) customers set
forth on the attached Schedule 3.24 (which lists the top twenty (20) customers of each
Company Group member for the 12 month period ending August 31, 2010) has terminated or intends to
terminate or materially reduce its business with such Company Group member.



     3.25. Suppliers. No Company Group member as of Closing Date has received any
notice that any of its top ten (10) suppliers of tangible personal property, Third Party Software
or other goods and services set forth on the attached Schedule 3.25 (which lists the top
ten (10) suppliers of each Company Group member for a 12 month period ending August 31, 2010) has
terminated or intends to terminate or materially reduce its business with such Company Group
member.



     3.26. Title of Acquired Assets. Except as disclosed on Schedule 3.26,
each Company Group member is the lawful owner of its business personal property, and has good title
to all its assets, free and clear of any and all Liens of any kind or nature whatsoever, direct or
indirect, accrued, absolute, contingent or otherwise.



     3.27. Condition of Acquired Assets. Except as disclosed on Schedule 3.27,
all of the assets of each Company Group member are in good operating condition and sufficient to
carry on the Business in the normal course as it is presently conducted and are free from defects,
whether patent or latent. None of the Inventory or Equipment, reasonable wear and tear excepted,
comprising a part of the assets is obsolete or not marketable in the Ordinary Course of Business of
each Company Group member at substantially its fair market value. Any information technology
systems used in the operation of the Business are adequate and sufficient in all respects to
conduct the Business.



     3.28. Accounts Receivable. Schedule 3.28 contains a list of all accounts
and notes receivable of each Company Group member as of September 30, 2010. Except as set forth on
Schedule 3.28, all accounts and notes receivable reflected on the Interim Balance Sheet and
all accounts and notes receivable to be reflected on the consolidated books of the Company Group as
of the Closing (net of allowances for doubtful accounts as reflected thereon and as determined in
accordance with GAAP) are valid receivables arising in the Ordinary Course of Business and are
current and collectible at the amounts set forth on the consolidated books of the Company Group as
of the Closing (net of allowances for doubtful accounts as reflected thereon and as determined in
accordance with GAAP) within 120 days after the Closing (the “Accounts Receivable”). No agreement
for deduction, free goods, discount or other deferred price or quantity adjustment has been made
with respect to any such Accounts Receivable.



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     3.29. Full Disclosure. No representation or warranty of the Company or Sellers
contained in this Agreement or in any of the other Transaction Documents, and no written statement
made by or on behalf of the Company or Sellers to Buyer pursuant to this Agreement or any of the
other Transaction Documents, contain an untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not misleading. There
are no facts which the Company or Sellers have not disclosed to Buyer in writing which could,
individually or in the aggregate, reasonably be expected to have a Material Adverse Change.



ARTICLE IV

REPRESENTATIONS AND WARRANTIES

WITH RESPECT TO SELLERS




     As a material inducement to Buyer to enter into this Agreement, each Sellers hereby represents
and warrants individually to Buyer as of each of the Execution Date and the Closing Date, and all
references hereinbelow to “each Seller” or “any Seller” or “no Seller” shall only apply singularly
to a particular Seller’s warranty as to itself, himself, or herself and shall not apply to any
other Seller, that:



     4.1. Authorization of Transactions.



          (a) Seller has all requisite power, authority and legal capacity to enter into this
Agreement and the other Transaction Documents to which such Seller is a party and to perform his or
her obligations hereunder and thereunder. This Agreement and the other Transaction Documents to
which each Seller is a party have been duly executed and delivered by such Seller.



          (b) Neither the execution and the delivery of this Agreement and the other Transaction
Documents to which each Seller is a party, nor the consummation of the transactions contemplated
hereby and thereby, shall (i) conflict with, result in a breach of any of the provisions of, (ii)
constitute a default under, (iii) result in the violation of, (iv) give any third party the right
to terminate or to accelerate any obligation under, (v) result in the creation of any Lien upon the
Membership Interests owned by any Seller under, or (vi) require any authorization, consent,
approval, execution or other action by or notice to any Governmental Body regarding, the provisions
of any Contract to which any Seller is bound or affected, or any applicable statute, regulation,
rule, judgment, order, decree or other restriction of any Governmental Body to which any Seller is
subject. No notice to, filing with or authorization, consent or approval of any Governmental Body
by any Seller is necessary for the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents to which any Seller is a party.



     4.2. Brokerage. Except as set forth on Schedule 3.13, there are no claims
for brokerage commissions, finders’ fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or agreement made by Sellers.



     4.3. Membership Interests. Each Seller holds of record and owns beneficially the
Membership Interests set forth opposite such Seller’s name on Schedule 2.1, and at the
Closing,



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each Seller will transfer to Buyer good and marketable title to such Membership Interests, in
each case free and clear of any Liens, restrictions on transfer (other than any restrictions under
the Securities Act and applicable state securities laws), options, warrants, rights, calls,
commitments, proxies or other contract rights. Except as set forth on Schedule 4.3, no
Seller is a party to any option, warrant, right, Contract, call, put or other agreement or
commitment providing for the disposition or acquisition of any Membership Interests or other
interest in Oaks or any capital stock of the Company (other than this Agreement). Except as set
forth on Schedule 4.3, no Seller is a party to any voting trust, proxy or other agreement
or understanding with respect to the voting of any Membership Interests or other interest in Oaks
or any capital stock of the Company.




     4.4. Litigation. There are no actions, suits, proceedings or orders pending, or,
to Sellers’ Knowledge, threatened against or affecting any Seller at law or in equity, or before or
by any Governmental Body, which would adversely affect each Seller’s performance under this
Agreement and the other Transaction Documents to which Sellers are parties or the consummation of
the transactions contemplated hereby or thereby.



     4.5. Investment Representations of Diana Istre Francis. Diana Istre Francis
acknowledges, agrees and represents that (i) she is an “accredited investor” as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act, (ii) she is able to bear
the economic risk of the holding of the Note (including a complete loss of the value to her) for an
indefinite period of time, and (iii) she has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of her acquisition of the Note and
any shares of Buyer Stock she receives in the transactions contemplated hereby.



     4.6. Investment Representations of Michael G. Francis, Bryan Francis and Mackey
Francis.



          (a) Each of Michael G. Francis, Bryan Francis and Mackey Francis acknowledges, agrees and
represents that the share of Buyer Stock to be acquired by Michael G. Francis, Bryan Francis and
Mackey Francis hereunder (the “Acquired Stock”) will, when acquired, be acquired for such Seller’s
own account, for investment purposes and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act or applicable
state securities laws.



          (b) Each of Michael G. Francis, Bryan Francis and Mackey Francis acknowledges, agrees and
represents that he understands that (i) the Acquired Stock has not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and have not been qualified under any state
securities laws on the grounds that the offering and sale of securities contemplated by this
Agreement are exempt from registration thereunder, and (ii) Buyer’s reliance on such exemptions is
predicated on each Seller’s representations set forth herein.



          (c) Each of Michael G. Francis, Bryan Francis and Mackey Francis acknowledges, agrees and
represents that (i) such Seller is an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act, (ii) such Seller is able to bear the economic
risk of the holding of the Acquired Stock (including a complete loss of



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the value to each Seller on such items) for an indefinite period of time, and (iii) such
Seller has such knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of its acquisition of the Acquired Stock, including the
implications of such shares being unregistered under the Securities Act.




     4.7. Receipt of Information. Each Seller acknowledges and agrees that it has had
the opportunity to ask all questions of Buyer and receive all such information from Buyer that such
Seller deems necessary and appropriate to enter into this Agreement and the other Transaction
Documents.



ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER




     As a material inducement to Sellers to enter into this Agreement, Buyer hereby represents and
warrants to Sellers as of each of the Execution Date and the Closing Date that:



     5.1. Organization and Corporate Power. Buyer is duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full power and authority to
enter into this Agreement and the other Transaction Documents to which Buyer is a party and perform
its obligations hereunder and thereunder.



     5.2. Authorization of Transaction. Buyer has the requisite corporate power and
authority to execute and deliver this Agreement and each of the other Transaction Documents to
which it is a party and to consummate the transactions contemplated hereby and thereby. The board
of directors of Buyer has duly approved this Agreement and all other Transaction Documents to which
Buyer is a party and has duly authorized the execution and delivery of this Agreement and all other
Transaction Documents to which it is a party and the consummation of the transactions contemplated
hereby and thereby. No other corporate proceedings on the part of Buyer are necessary to approve
and authorize the execution and delivery of this Agreement or the other Transaction Documents to
which Buyer is a party and the consummation of the transactions contemplated hereby and thereby.
This Agreement and all other Transaction Documents to which Buyer is a party have been duly
executed and delivered by Buyer and constitute the valid and binding agreements of Buyer,
enforceable against Buyer in accordance with their terms.



     5.3. No Violation. Buyer is not subject to any Legal Requirement of any
Governmental Body, or any Contract, or any License, which would be breached or violated by its
execution, delivery or performance of this Agreement and the other Transaction Documents to which
Buyer is a party nor does the execution or delivery of this Agreement and the other Transaction
Documents to which Buyer is a party violate or otherwise conflict with Buyer’s Certificate of
Incorporation or Bylaws, each as amended or restated from time to time.



     5.4. Governmental Authorities and Consents. Buyer is not required to submit any
notice, report or other filing with any Governmental Body in connection with the execution or
delivery by it of this Agreement and the other Transaction Documents to which Buyer is a party or
the consummation of the transactions contemplated hereby or thereby. No consent, approval or
authorization of any Governmental Body is required to be obtained by Buyer in connection



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with its execution, delivery and performance of this Agreement and the other Transaction
Documents to which Buyer is a party or the transactions contemplated hereby or thereby.




     5.5. Litigation. There are no actions, suits, proceedings or orders pending or,
to Buyer’s Knowledge, threatened against or affecting Buyer at law or in equity, or before or by
any Governmental Body, which would adversely affect Buyer’s performance under this Agreement and
the other Transaction Documents to which Buyer is a party or the consummation of the transactions
contemplated hereby or thereby.



     5.6. Brokerage. There are no claims for brokerage commissions, finders’ fees or
similar compensation in connection with the transactions contemplated by this Agreement based on
any arrangement or agreement made by or on behalf of Buyer.



     5.7. Note. The Note has been duly and validly authorized by Buyer and, when
executed by Buyer in accordance with the provisions thereof, and upon delivery to Diana Istre
Francis, she will be entitled to the benefits thereof and the Note will constitute a valid and
binding obligation of Buyer enforceable in accordance with its terms, except that the enforcement
thereof may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors’ rights generally and (b) general principles
of equity (regardless of whether enforceability is considered in a proceeding at law or in equity)
and the discretion of any court before which any proceeding therefor may be brought.



     5.8. Buyer Stock. Buyer’s Schedule 5.8 accurately sets forth (i) the
total authorized, and issued and outstanding shares of Buyer Stock as of September 30, 2010, and
(ii) the name of each record holder of shares of Buyer Stock, and the number of shares of Buyer
Stock held by each such record holder as of September 30, 2010. All of the issued and outstanding
shares of Buyer Stock have been duly authorized, are validly issued, fully paid and nonassessable,
are not subject to, nor were they issued in violation of, any preemptive rights, rights of first
refusal, or similar rights. Except for this Agreement and except as set forth on Buyer’s
Schedule 5.8, there are no outstanding or authorized options, rights, Contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to which Buyer is a party
or which are binding upon Buyer providing for the issuance, disposition or acquisition of any Buyer
Stock or any rights or interests exercisable therefor. Except as set forth in Buyer’s Schedule
5.8, there are no outstanding or authorized stock appreciation, phantom stock or similar or
corresponding rights with respect to the Buyer Stock. There are no voting trusts, proxies or any
other agreements or understandings with respect to the voting of the Buyer Stock. Except as set
forth in Buyer’s Schedule 5.8, Buyer is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of Buyer Stock.



     5.9. SEC Filings. Except as set forth on Buyer’s Schedule 5.9, Buyer has
filed or furnished all forms, reports and other documents required to be filed or furnished by it
under the Securities Act or the Exchange Act, as the case may be, since September 30, 2010
(collectively, the “Buyer SEC Filings”). Each Buyer SEC Filing (a) as of its filing date, complied
in all material respects with the requirements of the Securities Act or the Exchange Act, as the
case may be; and (b) did not, at the time it was filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make
the



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statements made therein, in the light of the circumstances under which they were made, not
misleading.




     5.10. Solvency



          (a) Buyer is not now insolvent nor will it be rendered insolvent by giving effect to the
closing of this Agreement including payment of the cash consideration portion of the Purchase Price
(“Cash Consideration”). As used in this subsection, “insolvent” means that the sum of the debts
and other probable liabilities of Buyer exceeds the present fair salable value of Buyer’s assets.



          (b) Buyer has, or will have at Closing, cash immediately available sufficient to pay to
Sellers the full Cash Consideration.



          (c) Immediately after giving effect to the closing of this Agreement, including payment of
the Cash Consideration, (i) Buyer will be able to pay or otherwise perform its assumed Liabilities
when due or eligible in the usual course of business; (ii) Buyer will not have an unreasonably
small amount of capital with which to conduct business; (iii) Buyer will have assets (calculated at
fair market) that exceed the assumed Liabilities (including but not limited to the obligations to
pay the Senior Indebtedness and Large Leases in full after closing. (iv) Taking into account all
other obligations and anticipated uses of cash, Buyer will have sufficient cash to pay all such
Liabilities and Indebtedness, in a prompt and timely manner.



ARTICLE VI

COVENANTS OF THE COMPANY, OAKS AND SELLERS




     6.1. Consents. To the extent such items are not available at Closing, the Company
and Oaks shall, and each of the Appointing Sellers shall cause each member of the Company Group to,
(a) use commercially reasonable efforts to obtain all consents or approvals such Persons are
required to obtain to carry out the transactions contemplated by this Agent, (b) cooperate with
Buyer and its Representatives in Buyer’s efforts to obtain all other consents, approvals and
authorizations Buyer is required to obtain to carry out the transactions contemplated by this
Agreement or which Buyer reasonably deems necessary or appropriate, and (c) cooperate in the
preparation of any document or other material which may be required by any Governmental Body as a
predicate to or result of the transactions contemplated in this Agreement.



ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS




     The obligations of each Seller to consummate the Closing shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, except to the extent specifically
waived in writing by the Seller Representative in whole or in part at or prior to the Closing:



     7.1. Closing Consideration. Each item of consideration to be paid on or before
the Closing by the Buyer shall have been paid in a manner satisfactory to Sellers.



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     7.2. Buyer’s Performance. Each covenant of Buyer in this Agreement that Buyer is
required to perform or to cause to be performed at or prior to the Closing shall have been
performed in all material respects.



     7.3. Certificate. Seller Representative shall have received a certificate of
Buyer in a form reasonably satisfactory to the Seller Representative dated as of the Closing Date,
stating that each representation and warranty of Buyer in this Agreement is true and correct in all
material respects as of the Closing Date (except in each case for those representations and
warranties that address matters only as of a specified date, which shall have been true and correct
as of such specified date).



     7.4. Closing Documents. Seller Representative shall have received from the Buyer
each of the items required to be delivered by Section 2.4.



ARTICLE VIII

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER




     The obligations of Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, except to the extent specifically waived
in writing by Buyer in whole or in part at or prior to the Closing:



     8.1. Sellers’ Performance. Each covenant of each of the Company, Oaks or any
Seller in this Agreement that any such Party is required to perform or cause to be performed at or
prior to the Closing shall have been performed in all material respects.



     8.2. Certificates. Buyer shall have received (a) a certificate of each of the
Sellers in a form reasonably satisfactory to Buyer, dated as of the Closing Date, stating that each
representation and warranty of each of the Company and Oaks and each Seller in this Agreement shall
be true and correct in all respects at and as of the Closing Date (determined without giving
duplicative effect to any materiality or Material Adverse Effect limitation contained therein, and
except in each case for such representations and warranties made as of a specified date, which
shall be required to be true and correct only on and as of such specified date).



     8.3. Closing Documents. Buyer shall have received from the Sellers or Partners,
as applicable, each of the documents required to be delivered by Section 2.3.



     8.4. No Judgments. No judgment, decree or order shall have been entered which
would prevent the consummation of the Closing.



     8.5. Termination of Related Party Agreements. All Related Party Agreements except
for the Permitted Related Party Agreements shall have been terminated and the member of the Company
Group party thereto shall have been fully released from all obligations and liabilities under such
Related Party Agreements.



     8.6. Title to Owned Real Property. Each member of the Company Group shall have
good, marketable and indefeasible title to the Owned Real Property that is shown to be owned by
such member of the Company Group on Schedule 3.8 subject only to Permitted Liens.



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     8.7. Landlord Estoppels. Buyer shall have obtained estoppel certificates signed
by each of the landlords under all leases for the Leased Real Property (the “Third Party
Landlords”), addressed to Buyer and otherwise in forms reasonably acceptable to Buyer (the
“Estoppels”), which Estoppels shall include, if required by the terms of the applicable lease
instrument, an acknowledgement and approval by the applicable Third Party Landlord of the change of
control resulting from the consummation of the transactions contemplated by this Agreement.



     8.8. Related Party Transactions. Effective at the Closing, all Related Party
Agreements, other than the Permitted Related Party Agreements, shall be terminated and shall be
without any further force and effect, and there shall be no further obligations of any of the
parties thereunder. Sellers agree to take and to cause the members of the Company Group and their
respective Affiliates to take, any action prior to or following the Closing that would be required
to give effect to the termination of the Related Party Agreements other than the Permitted Related
Party Agreements.



     8.9. Pay-Off Letters. At least three (3), but no more than five (5), business
days prior to the Closing Date, Sellers shall cause the members of the Company Group to obtain
payoff letters in form and substance satisfactory to Buyer in respect of all Senior Indebtedness
and Large Leases and full and complete releases in recordable form of all Liens securing such
Indebtedness and Large Leases and full and complete releases of any guarantees by a Seller of such
Indebtedness (or a commitment from such lender to deliver such releases upon receipt of payment in
full of the Indebtedness secured) (collectively, the “Pay-Off Letters”).



ARTICLE IX

SURVIVAL AND INDEMNIFICATION




     9.1. Survival of Representations and Warranties. The representations and
warranties of the Parties made or provided for in this Agreement shall survive the Closing for a
period of eighteen (18) months; provided, however, that the representations and warranties in
Sections 3.1 (Organization and Corporate Power), 3.2 (Authorization of Transactions), 3.26 (Title of Acquired Assets), but only as to title in the personal property, 4.1 (Authorization
of Transactions), 4.3 (Membership Interests), 5.1 (Organization and Corporate Power), 5.2
(Authorization of Transaction) and 5.3 (No Violation) shall survive indefinitely, and the
representations and warranties in Sections 3.9 (Taxes), 3.12 (Litigation; Proceedings), 3.16
(Employee Benefit Plans), and 3.21 (Environmental Compliance) shall survive through the end of the
period for the lesser of (a) applicable Statute of Limitations (as defined hereinbelow), plus
ninety (90) days or (b) four (4) years plus ninety (90) days. The covenants contained in this
Agreement shall survive for the lesser of two (2) years or until they are fully discharged. All
other Claims pursuant to Section 9.2 may be brought for a period of eighteen (18) months following
the Closing. No Claim for indemnification for breaches of any representation, warranty or
covenant may be asserted after the expiration of the applicable survival period set forth in this
Section 9.1. So long as an Indemnified Party asserts a Claim for indemnification under and in
accordance with this Article IX for a breach by another Party of any of its representations,
warranties or covenants contained in this Agreement prior to the expiration of the applicable
survival period set forth in this Section 9.1, such Indemnified Party shall be deemed to have
preserved its rights to indemnification under this Article IX regardless of when



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such Claim is ultimately liquidated or resolved. For purposes of this Section 9.1, the term
“Statute of Limitations”, with respect to any indemnity claim between the parties hereto seeking
reimbursement with regards to a third party claim, shall mean the longer of (i) eighteen (18)
months or (ii) the applicable statute of limitations of the jurisdiction in which a third party
claim with regard to which indemnity is sought hereunder is brought by the third party; provided,
however, that as to claims between Buyer and Seller not arising from a third party claim, the term
Statute of Limitations shall mean the statute of limitations solely under the laws applicable to
this agreement in accordance with Section 12.9 herein.




     9.2. Indemnification by Seller. Subject to the provisions of this Article IX,
Company, Oaks, and each of the Sellers, agrees to indemnify, defend and hold harmless Buyer and
its Affiliates (collectively, the “Buyer Indemnitees”) from and after the Closing, against any
Damages related to any and all Claims to the extent such Claims are based upon, arise out of or
are related to:



          (a) any breach of any representation or warranty made by any of the Company or Oaks or any
of the Sellers in this Agreement or contained in any certificate delivered by any of the Company or
Oaks or any of the Sellers pursuant to Section 8.2; provided, however, that when determining the
amount of Damages from such breach, any exception or qualification in such representations and
warranties relating to materiality, Material Adverse Effect or other similar qualifications as used
therein shall be disregarded therein;



          (b) any breach of any covenant of any of the Company or Oaks or any of the Sellers in this
Agreement or in any certificate, writing or instrument executed and delivered by any of the Company
or Oaks or any of the Sellers pursuant to this Agreement;



          (c) any claim of any Person for brokerage or finder’s fees or commissions or similar
payments owed or alleged to be owed under any agreement or understanding made, or alleged to have
been made, by such Person with any Seller (or any Person acting on behalf of any Seller) in
connection with any of the transactions contemplated by this Agreement;



          (d) any Seller Indemnified Taxes;



          (e) any non-compliance with applicable statutory or regulatory requirements promulgated or
administered by the U.S. Department of Transportation or any subdivision thereof or any state or
local Governmental Body relating to transportation, safety or protection of the environment with
respect to the Business; or



          (f) any amounts required to pay any expenses and Indebtedness of the any member of the
Company Group (other than the Senior Indebtedness and Large Leases) not taken into account in
making the calculations of the Purchase Price and the Closing Working Capital hereunder.



     9.3. Limit on Indemnity Provided by Company, Oaks and Sellers. Notwithstanding
anything to the contrary contained anywhere in this Agreement:



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          (a) Company, Oaks and Sellers shall have no obligation to indemnify Buyer Indemnitees
pursuant to Section 9.2 until Buyer Indemnitees have a claim or claims in excess of one hundred
fifty thousand ($150,000) dollars, at which point Company, Oaks, and Sellers obligation to
indemnify shall apply to such claims in excess of such amount; provided, however, that the total
amount of the following claims shall be counted and indemnity shall be due regardless of whether
disclosed on Sellers’ Disclosure Schedules: (i) matters requiring remediation, if any, that are
described on Schedule 3.21; (ii) that certain DOL matter described on Schedule
3.12; and (iii) those certain matters involving fatalities disclosed on Schedule 3.12;
for which the statue of limitations has not expired.



          (b) Company, Oaks and Sellers obligation to indemnify Buyer Indemnitees pursuant to (i)
Section 9.2(a) with respect to a breach of the warranties and representations contained in Sections
3.1 (Organization), 3.2 (Authorization of Transaction), 3.9 (Taxes), 3.16 (Benefit Plans), and 3.26
(Title of Acquired Assets), but only as to title in the personal property, and (ii) liabilities
identified in the Schedules to Section 3.9 (Taxes) and Section 3.16 (Benefit Plans) shall be
limited, in the aggregate, to the Purchase Price;



          (c) Company, Oaks and Sellers’ obligation to indemnify Buyer Indemnitees pursuant to (i)
Section 9.2(a) with respect to a breach of any representations or warranties contained in Section
3.12 (Litigation; Proceedings) and Section 3.21 (Environmental Compliance), and (ii) Liabilities
identified in Schedule 3.12 (Litigation; Proceedings) and Schedule 3.21 (Environmental Compliance)
shall be limited, in the aggregate, to Eight Million Dollars ($8,000,000);



          (d) Company, Oaks and Sellers’ obligations to indemnify Buyer Indemnitees for a breach of
all other warranties, representations and covenants under this Agreement shall be limited, in the
aggregate, to the amount of the Escrow Deposit and satisfied therefore by mutual agreement of the
parties or based on a non-appealed judgment from a court of competent jurisdiction; and



          (e) Sellers’ aggregate liability with respect to claims addressed by Sections 11.3(b), (c)
and (d) shall be limited, in the aggregate, to the Purchase Price.



     9.4. Additional Limits for Certain Sellers. Sellers Bryan K. Francis and Mackey
G. Francis own less than 10% of Oaks and are hereinafter referred to as “Minority Sellers”. In no
event shall a Minority Seller be required to make any payments for Buyer Indemnitees pursuant to
Section 9.2 in excess of the applicable Section 9.3 limitations multiplied by seventy (70%) percent
of their respective percentage membership ownership in Oaks. Seller Diana Istre Francis shall not
be required to make any payments to Buyer Indemnitees pursuant to Section 9.2 if the Claim results
from a breach of a representation in Article III, except for the amounts held under the Escrow
Agreement. Notwithstanding the above, these limitations shall not affect the aggregate amount to
be paid to Buyer Indemnitees under Article IX.



     9.5. Indemnification and Reimbursement by Buyer. From and after the Closing, upon
the terms and subject to the conditions and limitations contained in this Article IX, Buyer shall
indemnify and hold harmless each Seller (collectively, the “Seller Indemnitees”) against, and shall
reimburse the Seller Indemnitees for, any Damages arising out of or in connection with:



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          (a) any breach of any representation or warranty made by Buyer in this Agreement or
contained in any certificate delivered by Buyer pursuant to Section 7.3;



          (b) any breach of any covenant of Buyer in this Agreement or in any certificate, writing
or instrument executed and delivered by Buyer pursuant to this Agreement, which covenant by its
terms is required to be performed at or prior to the Closing; or



          (c) any claim of any Person for brokerage or finder’s fees or commissions or similar
payments owed or alleged to be owed any agreement or understanding made, or alleged to have been
made, by such Person with Buyer (or any Person acting on Buyer’s behalf) in connection with any of
the transactions contemplated by this Agreement.



     9.6. Other Indemnification Limitations.



          (a) The amount of each indemnity claim shall be determined only after giving credit for
the amount of the net monetary benefit, including, without limitation, insurance coverage, any
income tax or other tax benefit, and any other payments received by the indemnified party by reason
of recompense, contribution, indemnification or subrogation from any third party, resulting from
or attributable to, the event, occurrence, state of facts, actions or other circumstance causing
or giving rise to any such indemnity claim. The forgoing shall be taken into consideration before
applying the indemnity deductible set forth above in this paragraph.



          (b) Neither party shall be liable to the other for punitive or exemplary damages
resulting from or arising out of this Agreement or any other documents referred to herein or
relating hereto.



     9.7. Third-Party Claims.



          (a) Promptly after receipt by any Seller Indemnitee or Buyer Indemnitee entitled to
indemnity under Section 9.2 or Section 9.3 (an “Indemnified Person”) of notice of the assertion of
a Third-Party Claim against it, such Indemnified Person shall give notice to the Person obligated
to indemnify under any such section (an “Indemnifying Person”) of the assertion of such Third-Party
Claim, provided that the failure to notify the Indemnifying Person will not relieve the
Indemnifying Person of any liability that it may have to any Indemnified Person, except to the
extent that the Indemnifying Person proves that the defense of such Third-Party Claim is prejudiced
by the Indemnified Person’s failure to give such notice.



          (b) If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section
9.4(a) of the assertion of a Third-Party Claim, the Indemnifying Person, at its sole cost and
expense, shall be entitled to participate in the defense of such Third-Party Claim and, to the
extent that it wishes (unless (i) the Indemnifying Person is also a Person against whom the
Third-Party Claim is made and the Indemnified Person determines in good faith that joint
representation would be inappropriate or (ii) the Indemnifying Person fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to defend such Third-Party Claim and
provide indemnification with respect to such Third-Party Claim), to assume the defense of such
Third-Party Claim with counsel satisfactory to the Indemnified Person. After notice from



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the Indemnifying Person to the Indemnified Person of its election to assume the defense of
such Third-Party Claim, the Indemnifying Person shall not, so long as it diligently conducts such
defense, be liable to the Indemnified Person under this Article IX for any fees of other counsel or
any other expenses with respect to the defense of such Third-Party Claim, in each case subsequently
incurred by the Indemnified Person in connection with the defense of such Third-Party Claim.
Notwithstanding the assumption of defense by the Indemnifying Person, the Indemnified Person may,
at its sole cost and expense, file any motion, answer or other pleadings that the Indemnified
Person may deem necessary or appropriate to protect its interests or those of the Indemnifying
Person and which is not prejudicial, in the reasonable judgment of the Indemnifying Person, to the
Indemnifying Person. If requested by the Indemnifying Person, the Indemnified Person agrees, at
the sole cost and expense of the Indemnifying Person, to cooperate with the Indemnifying Person and
its counsel in contesting any Third-Party Claim that the Indemnifying Person assumes the defense of
and elects to contest, or, if appropriate and related to the Third-Party Claim in question, in
making any counterclaim against the Person asserting the Third-Party Claim, or any cross-complaint
against any Person (other than the Indemnified Person or any of its Affiliates or, if the
Indemnified Person is a Seller, any other Seller). The Indemnified Person may participate in, but
not control, any defense or settlement of any Third-Party Claim controlled by the Indemnifying
Person pursuant to this Section 9.4(b), and except as specifically provided in this Section 9.4(b),
the Indemnified Person will bear its own costs and expenses with respect to such participation
(provided, however, that the Indemnifying Person shall pay the attorneys’ fees of the Indemnified
Person if (A) the employment of separate counsel shall have been authorized in writing by any such
Indemnifying Person in connection with the defense of such Third-Party Claim, (B) the Indemnified
Person shall have reasonably concluded that there may be defenses available to such Indemnified
Person that are different from or additional to those available to the Indemnifying Person, or (C)
the Indemnified Person’s counsel shall have advised the Indemnified Person in writing, with a copy
delivered to the Indemnifying Person, that there is a conflict of interest that could make it
inappropriate under applicable standards of professional conduct to have common counsel). If the
Indemnifying Person assumes the defense of a Third-Party Claim, (i) such assumption will
conclusively establish for purposes of this Agreement that the claims made in that Third-Party
Claim are within the scope of and subject to indemnification, (ii) no compromise or settlement of
such Third-Party Claim may be effected by the Indemnifying Person without the Indemnified Person’s
written consent unless (A) there is no finding or admission of any violation of any law, rule or
regulation or any violation of the rights of any Person, (B) the sole relief provided is monetary
damages that are paid in full by the Indemnifying Person and (C) in the opinion of the Indemnified
Person, there would not be any adverse effect on the business, operations, assets or financial
condition of the Indemnified Person, and (iii) the Indemnifying Person shall have no liability with
respect to any compromise or settlement of such Third-Party Claim effected without its written
consent.




          (c) If notice is given to an Indemnifying Person of the assertion of any Third-Party Claim
and the Indemnifying Person does not, within ten (10) days after the Indemnified Person’s notice is
given, give notice to the Indemnified Person of its election to assume the defense of such
Third-Party Claim, or if the Indemnifying Person gives such a notice but fails to prosecute
diligently the defense of such Third-Party Claim, then the Indemnified Person will have the right
to defend, at the sole cost and expense of the Indemnifying Person, such Third-Party Claim by all
appropriate proceedings. In such event, the Indemnified Person will have full



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control of such defense and proceedings, including any compromise or settlement thereof, and the
Indemnifying Person will be bound by any determination made in such Third-Party Claim or any
compromise or settlement effected by the Indemnified Person; provided, however, that if requested
by the Indemnified Person, the Indemnifying Person agrees, at the sole cost and expense of the
Indemnifying Person, to cooperate with the Indemnified Person and its counsel in contesting any
Third-Party Claim which the Indemnified Person is contesting, or, if appropriate and related to the
Third-Party Claim in question, in making any counterclaim against the Person asserting the
Third-Party Claim, or any cross-complaint against any Person (other than the Indemnifying Person or
any of its Affiliates or, if the Indemnifying Person is a Seller, any other Seller).




          (d) Each Party consents to the nonexclusive jurisdiction of any court in which a
proceeding in respect of a Third-Party Claim is brought against any Indemnified Person for purposes
of any claim that an Indemnified Person may have under this Agreement with respect to such
proceeding or the matters alleged therein and agrees that process may be served on any Party with
respect to such a claim anywhere in the world.



          (e) With respect to any Third-Party Claim subject to indemnification under this Article
IX, (i) both the Indemnified Person and the Indemnifying Person, as the case may be, shall keep the
other Person fully informed of the status of such Third-Party Claim and any related proceedings at
all stages thereof where such other Person is not represented by its own counsel, and (ii) the
Parties agree (each at its own expense except as specifically provided in this Section 9.4 to
render to each other such assistance as they may reasonably require of each other and to cooperate
in good faith with each other in order to ensure the proper and adequate defense of any Third-Party
Claim.



     9.8. Other Claims. A claim for indemnification for any matter not involving a
Third-Party Claim may be asserted by notice to the Party from whom indemnification is sought.



ARTICLE X

OTHER COVENANTS




     10.1. Tax Matters.



          (a) Preparation and Filing of Tax Returns. Sellers shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns relating to members of the Company Group for
taxable periods ending on or prior to the Closing Date. Buyer shall prepare or cause to be
prepared and shall file or cause to be filed all Tax Returns relating to members of the Company
Group for taxable periods ending after the Closing Date. Buyer shall permit Sellers to review and
comment on each Tax Return for any Tax based on or measured by income or gross receipts for a
taxable period that includes any Pre-Closing Tax Period prior to filing and shall make such
revision to such Tax Returns as are reasonably requested by Sellers. Not later than five (5) days
prior to the due date for payment of Taxes with respect to any Tax Return for a Pre-Closing Tax
Period or Straddle Period, the Sellers shall pay to the Buyer the amount of any Seller Indemnified
Taxes with respect to such Tax Return and the Partners shall pay to the Buyer the amount of any
Partner Indemnified Taxes with respect to such Tax Return; provided that the



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payment due from any such Person to the Buyer shall be required not earlier than three (3)
Business Days following receipt of the Buyer’s written notice and demand for such payment.




          (b) Proration of Straddle Period Taxes. In the case of Taxes that are payable
with respect to any Straddle Period, the portion of any such Taxes that is attributable to the
portion of the period ending on the Closing Date shall be:




          (i) in the case of Taxes that are either (A) based upon or related to income or
receipts, or (B) imposed in connection with any sale or other transfer or assignment of
property (real or personal, tangible or intangible), deemed equal to the amount that would
be payable if the Tax period ended with (and included) the Closing Date; provided that
exemptions, allowances or deductions that are calculated on an annual basis (including
depreciation and amortization deductions) shall be allocated between the period ending on
and including the Closing Date and the period beginning after the Closing Date in
proportion to the number of days in each period; and




          (ii) in the case of Taxes that are imposed on a periodic basis with respect to
assets or capital, deemed to be the amount of such Taxes for the entire Straddle Period
(or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding period), multiplied by a fraction the numerator of which is the
number of calendar days in the portion of the period ending on and including the Closing
Date and the denominator of which is the number of calendar days in the entire period.



          (c) Tax Accounting Practices. To the extent items reported on a Tax Return
described in the second to last sentence of Section 10.1(a) might reasonably affect items reported
on any Tax Return for any Pre-Closing Tax Period, any Tax Return for any taxable period ending
after the Closing Date shall be prepared in accordance with past Tax accounting practices used with
respect to the Tax Returns in question (unless such past practices are no longer permissible under
the Code or other applicable Tax law), and to the extent any items are not covered by past
practices (or in the event such past practices are no longer permissible under the Code or other
applicable Tax law), in accordance with reasonable Tax accounting practices selected by the party
responsible for preparing the Tax Return. The amount of Taxes of the Company Group attributable to
the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the
Effective Time, provided that Extraordinary Costs and Expenses to be paid by any member of the
Company Group as a consequence of the transactions contemplated by this Agreement shall be
allocated to the Pre-Closing Tax Period for federal income tax purposes. Except as provided in the
preceding sentence, transactions occurring on the Closing Date after the Effective Time shall be
allocated to the following day in accordance with the principals of the next day rule of Treasury
Regulation § 1.1502-76(b)(1)(ii)(B) and any corresponding or similar provision of any other
applicable tax law. The parties will not make any ratable allocation election under Treasury
Regulation § 1.1502-76(b)(2)(ii) or any corresponding or similar provision of any other applicable
tax law.



          (d) Amended Returns. The Parties will not file any amended Tax Return, carryback
claim with respect to Taxes, or other adjustment request with respect to Taxes, relating to any
member of the Company Group for any Pre-Closing Tax Period unless such action is



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required by law, or unless the Party proposing such action has obtained the other Party’s
written consent, which consent shall not be unreasonably withheld. For this purpose, the Seller
Representative shall represent all of the Sellers, and Buyer shall represent Buyer and all members
of the Company Group. Unless the Parties agree otherwise, the Tax Benefit resulting from any such
action shall be allocated among the Parties according to the principles of Section 10.1(c).




          (e) Cooperation on Tax Matters. Sellers and Buyer shall, and Buyer shall cause
each member of the Company Group to, cooperate fully as and to the extent reasonably requested by
the other Party in connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other
Party ‘s request) the provision of records and information relevant to any such Tax Return or Tax
proceeding; and making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided under this Section 10.1(e). Buyer shall cause
each member of the Company Group to (i) retain all books and records with respect to Tax matters
pertinent to the Company Group relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations of the respective taxable periods, and abide by
all record retention agreements entered into with any taxing authority and (ii) give the Seller
Representative reasonable written notice prior to transferring, destroying, or discarding any such
books and records and, if the Seller Representative so requests, shall allow the Seller
Representative to take possession of such books and records. Upon request, Buyer and Sellers
further agree to use their best efforts to obtain any certificate or other document from any
Governmental Body or any other Person as may be necessary to mitigate, reduce, or eliminate any Tax
that could be imposed (including any Tax with respect to the transactions contemplated hereby).



     10.2. Record Retention and Access to Records. After the Closing Date, Buyer shall
retain for a period consistent with Buyer’s record-retention policies and practices those records
of the members of the Company Group retained by them as of the Closing Date. Buyer also shall
provide Sellers and their representatives reasonable access thereto, during normal business hours
and on not less than three days prior written notice, to enable them to prepare financial
statements or tax returns or deal with tax audits. After such three (3) year period, to the extent
such records are not available in Dallas, Texas, Buyer upon the request of Seller Representative
shall use commercially reasonable efforts to make any such records available to Sellers
electronically.



     10.3. Further Assurances. From and after the Closing, the Parties shall cooperate
reasonably with each other and with their respective representatives in connection with any steps
required to be taken as part of their respective obligations under this Agreement, and shall (a)
furnish upon request to each other such further information; (b) execute and deliver to each other
such other documents; and (c) do such other acts and things, all as a Party may reasonably request
for the purpose of carrying out the intent of this Agreement and the transactions contemplated by
this Agreement.



     10.4. Personal Guarantee Releases. A list of all Company liabilities for which
any Seller has personally guaranteed payment, is set forth on Exhibit G. Buyer agrees to
use commercially reasonable efforts to attempt to obtain a release of all such liability of
personal



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guarantees of any Seller, on or before the Closing, and, if not obtained before Closing,
hereby indemnifies and holds all Sellers harmless with respect thereto.




     10.5. Health Insurance for Diana Istre Francis. Buyer agrees to cause the Company to
pay for and provide Diana Istre Francis with health insurance equivalent to her current coverage
(medical, dental and vision) for a period of five (5) years after Closing.



ARTICLE XI

NON-COMPETITION PROVISIONS




     11.1. Non-Competition and Non-Solicitation.



          (a) Non-Competition. During the period beginning on the Closing Date and ending two
years after the termination of the Employment Agreement of Michael G. Francis (the “Non-Compete
Period”), Michael G. Francis shall not, and shall not allow any of his Affiliates to, engage in, or
be connected with any business, business operation, or activity (whether as an owner, partner,
shareholder, member, joint venturer, operator, promoter, manager, employee, officer, director,
consultant, advisor, independent contractor, agent, representative or otherwise), directly or
indirectly, which consists in whole or in part of the Business within the geographical area the
Business operates as of the Closing Date; provided, however, that ownership of less than five
percent (5%) of the outstanding stock of any publicly-traded corporation shall not be deemed to be
engaging solely by reason thereof in any of its business. Michael G. Francis expressly
acknowledges and agrees that each and every restriction imposed by this Section 11.1 is reasonable
with respect to subject matter, time period and geographical area. To the extent that Michael G.
Francis remains employed by the Company after the Closing, such employment shall not be deemed a
violation of this Section 11.1(a).




          (b) Non-Solicitation. Each Seller agrees that, during the Non-Compete Period, such
Seller shall not, and shall not permit any of his or her Affiliates to, directly or indirectly:





          (i) Call upon, solicit or divert to a competitor, any customer whose account is
serviced in whole or in part by Buyer or the Company Group or their respective Affiliates
as of the Closing Date with the purpose of selling or attempting to sell to any such
customer any services included within that offered by Buyer or the Company Group or their
respective Affiliates as of the Closing Date; or




          (ii) Divert, solicit, recruit or take away any customer, supplier, or employee of
Buyer or the Company Group or their respective Affiliates that conducted business with
Buyer or Business with the Company Group or their respective Affiliates at any time within
the 24 month period preceding the Closing Date, or the patronage of any customer or
supplier of Buyer or Business with the Company Group or their respective Affiliates that
conducted business with Buyer or the Company Group at any time within the 24 month period
preceding the Closing Date, or otherwise interfere with or disturb the relationship
existing between Buyer or the Company Group or their respective Affiliates and any of its
respective customers, suppliers, or employees, directly or indirectly.



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 48




 









 





EXECUTION VERSION





          For the purposes of this Agreement, the term “Business” shall mean the current business
operations of the Company Group, being the manufacturing, transportation, distribution and supply
of liquid mud, dry sack materials and boat washings to the oil industry along the Gulf Coast of the
United States, including the entire states of Texas, Mississippi, Alabama, Florida and Wyoming, and
all of the Parishes of Louisiana listed on Schedule 13.1(b), and any other areas of
business in which the Company Group has been engaged in the past or as of the Closing Date.




          (c) Confidentiality. Each of the Sellers shall treat and hold as confidential any
information concerning the Business and affairs of the Company Group that is not already generally
available to the public (the “Confidential Information”), refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all copies) of the
Confidential Information which are in their possession or under their control. In the event that
any Seller is requested or required (by oral question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, such Seller shall notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 11.1(c). If, in the absence of a protective order or the receipt of a
waiver hereunder, any Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, such Seller may disclose the
Confidential Information to the tribunal; provided that such Seller shall use his commercially
reasonable best efforts to obtain, at the request of Buyer, an order or other assurance that
confidential treatment shall be accorded to such portion of the Confidential Information required
to be disclosed as Buyer shall designate, provided that Buyer shall reimburse such Seller within 15
days for the reasonable out of pocket expenses actually incurred by Seller in connection therewith.




          (d) Remedy for Breach. Each Seller acknowledges and agrees that in the event of a
breach by such Seller (or any of such Seller’s Affiliates) of any of the provisions of this
Section 11.1, monetary damages shall not constitute a sufficient remedy. Consequently, in the
event of any such breach, the Company Group, Buyer and/or their respective successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or other relief in
order to enforce or prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages; provided, however, that if a bond is
required to be posted in order for Company Group, Buyer and/or their respective successors or
assigns, to secure an injunction, then the Parties hereby stipulate that a bond in the amount of
$1,000 will be sufficient and reasonable in all circumstances to protect the rights of the Parties.




          (e) Enforcement. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 11.1 is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or




MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 49




 









 




EXECUTION VERSION





unenforceable term
or provision, and this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.




          (f) Acknowledgment. Sellers acknowledge and agree that (i) the restrictions contained
in this Section 11.1 are reasonable in all respects (including, without limitation, with respect to
the subject matter, time period and geographical area) and are necessary to protect Buyer’s
interest in, and value of, the Membership Interests (including, without limitation, the goodwill
inherent therein), (ii) Sellers are primarily responsible for the creation of such value, and
(iii) Buyer would not have consummated the transactions contemplated hereby without the
restrictions contained in this Section 11.1.




ARTICLE XII

MISCELLANEOUS




     12.1. Amendment and Waiver. This Agreement may be amended and any provision of this
Agreement may be waived, provided that any such amendment or waiver shall be binding upon a Party
only if such amendment or waiver is set forth in a writing executed by Buyer and Sellers. No
course of dealing between or among any persons having any interest in this Agreement shall be
deemed effective to modify, amend or discharge any part of this Agreement or any rights or
obligations of any Party under or by reason of this Agreement.



     12.2. Notices. All notices, demands and other communications given or delivered under
this Agreement shall be in writing and shall be deemed to have been given when (i) personally
delivered, (ii) mailed by first class mail, return receipt requested, or (iii) delivered by express
courier service or telecopied (with hard copy to follow). Notices, demands and communications to
Sellers shall, unless another address is specified in writing, be sent to the address or telecopy
number indicated on the signature page attached hereto, and notices, demands and communications to
the Company and Buyer shall, unless another address is specified in writing, be sent to the address
or telecopy number indicated below:



	 	 	 

	Notices to Diana Istre Francis:
	 	 
	 
	 	 
	Hunter, Hunter & Sonnier LLC

1807 Lake Street

Lake Charles, Louisiana 70601

Attention: Shayna L. Sonnier

Fax: (337) 439-2505
	 	 
	 
	 	 
	Notices to Oaks or the Company Prior
to Closing or to All Sellers except
Diana Istre Francis:

	 	with a copy to:

(which shall not constitute notice
to the Company, Oaks or Sellers)
	 
	 	 
	Francis Drilling Fluids, Ltd.

205 Jasmine Road 

Crowley, Louisiana 70526 

Attention: Michael G. Francis 

Fax: (337) 783-0059

	 	William P. Stubbs, Jr.

Post Office Box 51201

Lafayette, Louisiana 70505-1201

Fax: (337) 233-9771






MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 50




 









 




EXECUTION VERSION






	 	 	 

	Notices to Buyer or, following the 


Closing, the Company or Oaks:

	 	with copies to:

(which shall not constitute notice
to Buyer or,

 following the Closing,
the Company)
	 
	 	 
	NYTEX Energy Holdings, Inc. 

12222 Merit Drive, Suite 1850 

Dallas, Texas 75251 

Attn: Kenneth Kase Conte,

         Chief Financial Officer

Fax: 972-770-4701

	 	Strasburger & Price, LLP

901 Main Street, Suite 4400

Dallas, Texas 75202

Attention: Kevin Woltjen, Esq.

Fax: 214-659-4025






     12.3. Binding Agreement; Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties and their respective successors and
permitted assigns; provided that neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any Seller or Buyer without the prior written consent of
all Parties. Notwithstanding the immediately preceding sentence, without the prior written consent
of Sellers, each of Buyer and its permitted assigns may at any time, in its sole discretion,
assign, in whole or in part, (a) its rights and obligations pursuant to this Agreement and the
other Transaction Documents to one or more of its Affiliates; (b) its rights under this Agreement
and the other Transaction Documents for collateral security purposes to any lender providing
financing to Buyer, a Company Group member, such permitted assign or any of their Affiliates and
any such lender may exercise all of the rights and remedies of Buyer or such permitted assign
hereunder and thereunder; and (c) its rights under this Agreement and the other Transaction
Documents, in whole or in part, to any subsequent purchaser of Buyer, a Company Group member, such
permitted transferee or any of their divisions or any material portion of their assets (whether
such sale is structured as a sale of stock, sale of assets, merger, recapitalization or otherwise).
Notwithstanding the immediately preceding sentence, such assignment shall not relieve or alleviate
any duties, responsibilities and/or obligations of this Agreement of Buyer.



     12.4. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Agreement.



     12.5. Construction. The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of strict construction
shall be applied against any person. Nothing in the Schedules hereto shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless a reasonable inference can
be made that the Schedule identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact that there exists
another representation, warranty, or covenant relating to the same subject matter



MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 51





 









 





EXECUTION VERSION




(regardless of
the relative levels of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation, warranty, or covenant.
In addition, each of the Parties acknowledges and agrees that any Purchase Price adjustments as a
result of the application of any provision of this Agreement or any other of the Transaction
Documents do not prejudice or limit in any respect whatsoever any Party’s rights to indemnification
under any other provision of this Agreement or any other Transaction Document or pursuant to any
other applicable requirements of law. The word “including” shall mean including without limitation
regardless of whether such words are included in some contexts but not others. The defined terms
used in this Agreement include the plural as well as the singular.




     12.6. Captions. The captions used in this Agreement are for convenience of reference
only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize
or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be
enforced and construed as if no caption had been used in this Agreement.



     12.7. Entire Agreement. The Schedules identified in this Agreement are incorporated
herein by reference. This Agreement and the documents referred to herein contain the entire
agreement between the Parties and supersede any prior understandings, agreements or representations
by or between the Parties, written or oral, which may have related to the subject matter hereof in
any way, including, without limitation, the Letter of Intent.



     12.8. Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original but all of which taken together shall constitute one and the same
instrument.



     12.9. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Louisiana, without giving effect to any choice of law or conflict of law
provision (whether of the State of Louisiana or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Louisiana.



     12.10. Parties in Interest. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the Parties and their respective successors and assigns
any rights or remedies under or by virtue of this Agreement.



     12.11. Jurisdiction. Any dispute arising from or connected with this Agreement shall
be resolved only by binding arbitration requested by a Party and brought in the state district
court situated in Acadia Parish, Louisiana.



          (a) Arbitrable Matters. All disputes arising out of this Agreement, between or among
the Parties to this Agreement, shall be submitted to arbitration at the behest of any Party. The
arbitration proceeding shall be held in Acadia Parish, Louisiana and shall be conducted in
accordance with the CPR Institute for Dispute Resolution (“CPR”) Rules for Non-Administered
Arbitration of Business Disputes as here modified. The arbitration shall be conducted by a sole
arbitrator (or an amicable compounder) acceptable to each Party, appointed from CPR’s roster of
neutrals (the “Arbitrator”). Should the Parties not reach an agreement on a sole arbitrator (or an
amicable compounder) or a Party refuse to participate in the arbitration within 15 days of




MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 52




 









 




EXECUTION VERSION





submission as specified below, then any Party may institute a proceeding to compel arbitration in
the state district court situated in Acadia Parish, Louisiana. Each Party to the arbitration shall
have the right to nominate one or more disinterested individuals from CPR’s roster of neutrals to
serve as Arbitrator, and the court shall appoint one of the nominees to that office.




          (b) Submission to Arbitration. The Party submitting any matter arising out of this
Agreement to arbitration (the “Demanding Party”) shall do so by delivering written notice thereof
(the “Arbitration Notice”) to the other Party or Parties (the “Noticed Party”). In addition to
indicating the Demanding Party’s intention to commence arbitration proceedings, the Arbitration
Notice shall state the nature, with reasonable detail, of the dispute and the Demanding Party’s
claim or claims, the question or questions to be submitted for decision or award by arbitration and
the relief or remedy sought. A copy of the Arbitration Notice shall be concurrently provided by
CPR, along with a copy of this Agreement. Either Party may bring an action in any court of
competent jurisdiction to enforce any award or judgment granted by the Arbitrator, or to impose or
enforce any injunctive relief to which a Party may be entitled.




          (c) Arbitration Procedures. The Arbitrator shall apply the substantive law, not the
laws of conflict, (and the law of remedies, if applicable) of the State of Louisiana as applicable
to the claim asserted, and the interpretation of this Agreement. The Federal Rules of Evidence
shall apply. The Arbitrator shall have no authority to change this Agreement unless otherwise
agreed by all Parties. The Arbitrator, and not any federal, state, or local court or agency, shall
have exclusive authority to resolve any dispute relating to the interpretation, applicability,
enforceability or formation of this Agreement, including, but not limited to, any claim that all or
any part of this Agreement is void or voidable. Any Party may be represented by an attorney or
other representative selected by the Party.




The Arbitrator shall have jurisdiction to hear and rule on pre-hearing disputes and is authorized
to hold pre-hearing conferences by telephone or in person as the Arbitrator deems necessary. The
Arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary
judgment by any Party and shall apply the standards governing such motions under the Federal Rules
of Civil Procedure.




          (d) Compliance with Decisions. To the extent permissible under applicable law, the
Parties agree that the award of the Arbitrator shall be final and binding and shall be subject only
to the judicial review permitted by the United States Arbitration Act or other applicable
arbitration law pursuant. All Parties to this Agreement shall abide by the Arbitrator’s decision.
Furthermore, they agree that all resolutions through this arbitration shall be completed by
arbitration and not by mediation. Notwithstanding the foregoing, the Arbitrator may not award
punitive or exemplary (or anything similar) damages, and the Parties hereby irrevocable waive any
claims to punitive or exemplary damages (or anything similar). Judgment over the arbitration award
may be entered and enforced in any court having jurisdiction over the Parties or their assets. It
is the intent of the Parties that the arbitration provisions hereof be enforced to the fullest
extent permitted by applicable law.




          (e) Obligation to Pay Costs. In either case, the losing Party shall pay all court
costs, reasonable attorney fees, travel, lodging and any other costs in connection with any
dispute.




MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 53




 









 





EXECUTION VERSION





          (f) Mediation. The Parties are encouraged, but not required, to attempt mediation as
a way of resolving minor disputes.




     12.12. Delivery by PDF and Facsimile. This Agreement and any other Transaction
Document, and any amendments hereto or thereto, to the extent signed and delivered by means of
portable document format (“PDF”) or a facsimile machine, shall be treated in all manner and
respects as an original Contract and shall be considered to have the same binding legal effects as
if it were the original signed version thereof delivered in person. At the request of any Party
hereto or to any such Contract, each other Party hereto or thereto shall re-execute original forms
thereof and deliver them to all other Parties. No Party hereto or to any such Contract shall raise
the use of PDF or a facsimile machine to deliver a signature or the fact that any signature or
Contract was transmitted or communicated through the use of PDF or a facsimile machine as a defense
to the formation of a Contract and each such Party forever waives any such defense.



     12.13. Drafting. Each Party hereto acknowledges that each Party was actively involved
in the negotiation and drafting of this Agreement; therefore, the language in all parts of this
Agreement shall in all cases be construed simply, accurately to its fair meaning, and not strictly
for or against any of the Parties hereto, without limitation, there shall be no presumption against
any Party on the ground that such Party was responsible for drafting this Agreement or any part
thereof, and any rule of law, or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no application and is
expressly waived.



     12.14. No Third Party Beneficiaries. This Agreement is solely for the benefit of the
parties hereto, the Buyer indemnified parties, the Seller indemnified parties and their successors
and assigns permitted under this Agreement, and no provisions of this Agreement shall be deemed to
confer upon any other Persons any remedy, claim liability, reimbursement, cause of action or other
right except as expressly provided herein. No insurance company or any other third party shall be
a beneficiary of Sellers’ or Purchaser’s indemnification obligations under this Agreement and in
no way shall any obligations of any insurance company or other third party be reduced or mitigated
as a result of this Agreement.



[The Remainder of This Page Intentionally Left Blank]




MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 54



 









 






EXECUTION VERSION




     IN WITNESS WHEREOF, the Parties have executed this Membership Interests Purchase
Agreement as of the date first written above.



	 	 	 	 	 
	 	BUYER:



NYTEX ENERGY HOLDINGS, INC.,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Michael Galvis, President 	 
	 	 	 	 
	 
	 	COMPANY:



FRANCIS DRILLING FLUIDS, LTD.,

a Louisiana business corporation

 	 
	 	By:  	 	 
	 	 	Michael G. Francis, President 	 
	 	 	 	 
	 
	 	OAKS:



FRANCIS OAKS, L.L.C., a Louisiana limited

liability company

 	 
	 	By:  	 	 
	 	 	Michael G. Francis, Manager 	 
	 	 	 	 
	 



SIGNATURE PAGE TO MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 1





 









 





EXECUTION VERSION





	 	 	 	 	 
	 	SELLERS:

 	 
	 	
 	 
	 	Diana Istre Francis 	 
	 	 	 
	 
	 	
 	 
	 	Michael G. Francis 	 
	 	 	 
	 
	 	
 	 
	 	Mackey Francis 	 
	 	 	 
	 
	 	
 	 
	 	Bryan Francis 	 
	 	 	 
	 
	 	SELLER REPRESENTATIVE:

 	 
	 	
 	 
	 	Bryan Francis, Seller Representative 	 
	 



SIGNATURE PAGE TO MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 2





 











 






EXECUTION VERSION




	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF DALLAS

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared Michael Galvis, known to
me to be the person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of said NYTEX ENERGY HOLDINGS, INC., a Delaware
corporation, and that he executed the same as the act of such corporation for the purposes and
consideration therein expressed and in the capacity therein stated.



     GIVEN UNDER MY HAND AND SEAL this ______ day of ______________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Texas 	 
	 	 	 
	 



My Commission Expires:




                                                            




	 	 	 
	STATE OF LOUISIANA

	 	§
	 

	 	§
	PARISH OF __________

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared Michael G. Francis,
known to me to be the person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of said FRANCIS DRILLING FLUIDS, LTD., a Louisiana
business corporation, and that he executed the same as the act of such corporation for the purposes
and consideration therein expressed and in the capacity therein stated.



     GIVEN UNDER MY HAND AND SEAL this ______ day of ______________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Louisiana 	 
	 	 	 
	 



My Commission Expires:




                                                            




SIGNATURE PAGE TO MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 3










 









 









EXECUTION VERSION




	 	 	 

	STATE OF LOUISIANA

	 	§
	 

	 	§
	PARISH OF __________

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared Michael G. Francis,
known to me to be the person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of said FRANCIS OAKS, L.L.C., a Louisiana limited
liability company, and that he executed the same as the act of such limited liability company for
the purposes and consideration therein expressed and in the capacity therein stated.



     GIVEN UNDER MY HAND AND SEAL this ______ day of ______________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Louisiana 	 
	 	 	 
	 



My Commission Expires:




                                                            




	 	 	 
	STATE OF LOUISIANA

	 	§
	 

	 	§
	PARISH OF __________

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared DIANA ISTRE FRANCIS,
known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged
to me that she executed the same for the purposes and consideration therein expressed and in the
capacity therein stated.



     GIVEN UNDER MY HAND AND SEAL this ____ day of __________________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Louisiana 	 
	 	 	 
	 



My Commission Expires:




                                                            




SIGNATURE PAGE TO MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 4





 









 








EXECUTION VERSION




	 	 	 
	STATE OF LOUISIANA

	 	§
	 

	 	§
	PARISH OF __________

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared MICHAEL G. FRANCIS,
known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration therein expressed and in the
capacity therein stated.



     GIVEN UNDER MY HAND AND SEAL this ____ day of __________________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Louisiana       	 
	 	 	 
	 



My Commission Expires:




                                                            




	 	 	 
	STATE OF LOUISIANA

	 	§
	 

	 	§
	PARISH OF __________

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared MACKEY FRANCIS, known to
me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me
that he executed the same for the purposes and consideration therein expressed and in the capacity
therein stated.



     GIVEN UNDER MY HAND AND SEAL this ____ day of __________________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Louisiana       	 
	 	 	 
	 



My Commission Expires:




                                                            




SIGNATURE PAGE TO MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 5





 









 








EXECUTION VERSION




	 	 	 

	STATE OF LOUISIANA

	 	§
	 

	 	§
	PARISH OF __________

	 	§






     BEFORE ME, the undersigned authority, on this day personally appeared BRYAN FRANCIS, known to
me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me
that he executed the same for the purposes and consideration therein expressed and in the capacity
therein stated.



     GIVEN UNDER MY HAND AND SEAL this ____ day of __________________, 2010.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Notary Public in and for the State of Louisiana 	 
	 	 	 
	 



My Commission Expires:




                                                            




SIGNATURE PAGE TO MEMBERSHIP INTERESTS PURCHASE AGREEMENT — Page 6






 









 








EXECUTION VERSION




EXHIBIT A




FORM OF ASSIGNMENT OF MEMBERSHIP INTEREST



See Attached.



EXHIBIT A





 









 








EXECUTION VERSION




EXHIBIT B




FORM OF NOTE



See Attached.



EXHIBIT B




 









 








EXECUTION VERSION




EXHIBIT C




FORM OF EMPLOYMENT AGREEMENT



See Attached.



EXHIBIT C





 









 








EXECUTION VERSION




EXHIBIT D




FORM OF REGISTRATION RIGHTS AGREEMENT



See Attached.



EXHIBIT D





 









 








EXECUTION VERSION




EXHIBIT E




FORM OF ESCROW AGREEMENT



See Attached.



EXHIBIT E



 









 





EXECUTION VERSION




EXHIBIT F




FORM OF MUTUAL RELEASE



See Attached.



EXHIBIT F





 









 








EXECUTION VERSION




EXHIBIT G




PERSONAL GUARANTEES

OF SELLERS



See Attached.



EXHIBIT G





 









 








EXECUTION VERSION




EXHIBIT H




DIVISION OF PURCHASE PRICE

AMONG SELLERS



See Attached.



EXHIBIT H