Exhibit
10.1


 


CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT.  THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED
AND ARE DENOTED BY [***].  THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.


 


 


ASSET
PURCHASE AGREEMENT


 


 


BY
AND AMONG


 


 


STEWART
& STEVENSON SERVICES, INC.,


 


STEWART
& STEVENSON PETROLEUM SERVICES, INC.,


 


STEWART
& STEVENSON INTERNATIONAL, INC.,


 


SIERRA
DETROIT DIESEL ALLISON, INC.,


 


S&S
TRUST


 


AND


 


HUSHANG
ANSARY


 


 


DATED
SEPTEMBER 27, 2005


 





















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and Usage

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  USAGE

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Sale and Transfer of Assets; Closing

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  ASSETS TO BE SOLD

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  EXCLUDED ASSETS

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  CONSIDERATION

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  LIABILITIES

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  PRORATIONS OF CERTAIN PROPERTY TAXES

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  SALES AND TRANSFER TAXES; RECORDING FEES

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  ALLOCATION

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  CLOSING

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  CLOSING OBLIGATIONS

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
  ADJUSTMENT AMOUNT AND PAYMENT

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
  ADJUSTMENT PROCEDURE

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [***]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Representations and Warranties of Sellers

  	
  25

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  ORGANIZATION AND GOOD STANDING

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  ENFORCEABILITY; AUTHORITY; NO CONFLICT

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  FINANCIAL STATEMENTS

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  BOOKS AND RECORDS

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  CONDITION AND SUFFICIENCY OF ASSETS

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
  DESCRIPTION OF REAL PROPERTY

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.7

  	
  TITLE TO ASSETS; ENCUMBRANCES

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
  ACCOUNTS RECEIVABLE

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
  INVENTORIES

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
  [INTENTIONALLY DELETED]

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.11

  	
  TAXES

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.12

  	
  LABOR MATTERS; COMPLIANCE

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.13

  	
  EMPLOYEE BENEFITS

  	
  30

  



 





















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  3.14

  	
  COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
  AUTHORIZATIONS

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.15

  	
  LEGAL PROCEEDINGS; ORDERS

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.16

  	
  ABSENCE OF CERTAIN CHANGES AND EVENTS

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.17

  	
  CONTRACTS; NO DEFAULTS

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.18

  	
  INSURANCE

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.19

  	
  ENVIRONMENTAL MATTERS

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.20

  	
  INTELLECTUAL PROPERTY

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.21

  	
  RELATED PARTY TRANSACTIONS

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.22

  	
  BROKERS OR FINDERS

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.23

  	
  LETTERS OF CREDIT

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Representations and Warranties of Buyer and Buyer
  Entity

  	
  39

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  ORGANIZATION AND GOOD STANDING

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  ENFORCEABILITY; AUTHORITY; NO CONFLICT

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  CERTAIN PROCEEDINGS

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  INVESTIGATION

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  BROKERS OR FINDERS

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Covenants of Buyer and Sellers Prior to Closing

  	
  42

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  REQUIRED APPROVALS

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  NOTIFICATION

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  COMMERCIALLY REASONABLE EFFORTS

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  BULK SALES LAWS

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  LETTERS OF CREDIT

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  UPDATING

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Covenants of Sellers Prior to Closing

  	
  43

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  ACCESS AND INVESTIGATION

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  OPERATION OF THE BUSINESS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  NEGATIVE COVENANT

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  TAX CLEARANCE CERTIFICATES

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Conditions Precedent to Buyer’s Obligation to Close

  	
  45

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  ACCURACY OF REPRESENTATIONS; SELLERS’ PERFORMANCE

  	
  45

  



 





















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  HSR ACT

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  ADDITIONAL DOCUMENTS

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  NO PROCEEDINGS

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  NO CONFLICT

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Conditions Precedent to each Seller’s Obligation to
  Close

  	
  47

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  ACCURACY OF REPRESENTATIONS; BUYER’S PERFORMANCE

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  HSR ACT

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  ADDITIONAL DOCUMENTS

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  NO PROCEEDINGS

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  NO CONFLICT

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Termination

  	
  48

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  TERMINATION EVENTS

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  EFFECT OF TERMINATION

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Additional Covenants

  	
  49

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  EMPLOYEES AND EMPLOYEE BENEFITS

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  NONSOLICITATION

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  CUSTOMER AND OTHER BUSINESS RELATIONSHIPS

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  RETENTION OF AND ACCESS TO RECORDS

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  FURTHER ASSURANCES

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  PROVISIONS RELATING TO CERTAIN ASSETS

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.7

  	
  SUPPORT

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.8

  	
  BUYER ACKNOWLEDGMENT

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Indemnification; Remedies

  	
  54

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  SURVIVAL

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  INDEMNIFICATION AND REIMBURSEMENT BY SELLERS

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  INDEMNIFICATION AND REIMBURSEMENT BY BUYER

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  LIMITATIONS ON AMOUNT — SELLERS

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  LIMITATIONS ON AMOUNT — BUYER

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  TIME LIMITATIONS

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.7

  	
  PROCEDURE

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.8

  	
  PAYMENT

  	
  59

  



 





















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  11.9

  	
  NO SET-OFF

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.10

  	
  INSURANCE

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.11

  	
  NO DUPLICATION

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.12

  	
  REMEDIES

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13

  	
  NO SPECIAL DAMAGES

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Confidentiality

  	
  60

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  DEFINITION OF CONFIDENTIAL INFORMATION

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.2

  	
  RESTRICTED USE OF CONFIDENTIAL INFORMATION

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.3

  	
  EXCEPTIONS

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.4

  	
  LEGAL PROCEEDINGS

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.5

  	
  RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.6

  	
  ATTORNEY-CLIENT PRIVILEGE

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  General Provisions

  	
  63

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  EXPENSES

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  PUBLIC ANNOUNCEMENTS

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3

  	
  NOTICES

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.4

  	
  DISPUTE RESOLUTION

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.5

  	
  ENFORCEMENT OF AGREEMENT

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.6

  	
  WAIVER; REMEDIES CUMULATIVE

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.7

  	
  ENTIRE AGREEMENT AND MODIFICATION

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.8

  	
  ASSIGNMENTS, SUCCESSORS AND NO THIRD PARTY RIGHTS

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.9

  	
  SEVERABILITY

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.10

  	
  CONSTRUCTION

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.11

  	
  TIME OF ESSENCE

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.12

  	
  GOVERNING LAW

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.13

  	
  EXECUTION OF AGREEMENT

  	
  67

  



 





















 


Exhibits


	
  Exhibit 2.9(a)(i)

  	
   

  	
  Form of Bill of Sale,
  Assignment and Assumption Agreement

  
	
  Exhibit 2.9(a)(ii)

  	
   

  	
  Form of Supply
  Agreement

  
	
  Exhibit 2.9(a)(iii)

  	
   

  	
  Form of Assignment of
  Registered Intellectual Property

  
	
  Exhibit 2.9(a)(vi)

  	
   

  	
  Form of Lease Agreement

  
	
  Exhibit 2.9(a)(vii)

  	
   

  	
  Form of Transition
  Services Agreement

  
	
  Exhibit 2.9(a)(xi)

  	
   

  	
  Form of Confirmation of
  Closing

  
	
  Exhibit 2.9(a)(xvi)

  	
   

  	
  [***]

  
	
  Exhibit 2.9(a)(xvii)

  	
   

  	
  [***]

  



 


Sections of Seller Disclosure Letter


	
  Section 1.1

  	
   

  	
  Knowledge

  
	
  Section 2.1(j)

  	
   

  	
  Domain Names

  
	
  Section 2.1(k)

  	
   

  	
  Cash In Bank Accounts

  
	
  Section 2.2(c)

  	
   

  	
  Excluded Deposits,
  Prepaid Expenses, Claims for Refunds and Rights to Offset

  
	
  Section 2.2(e)

  	
   

  	
  Excluded Seller
  Contracts

  
	
  Section 2.2(o)

  	
   

  	
  Excluded Claims Against
  Third Parties

  
	
  Section 2.2(p)

  	
   

  	
  Excluded Business
  Property

  
	
  Section 2.2(q)

  	
   

  	
  Other Excluded Property
  and Assets

  
	
  Section 2.4(a)(v)

  	
   

  	
  Other Assumed
  Liabilities

  
	
  Section 3.2(b)

  	
   

  	
  Conflict

  
	
  Section 3.2(c)

  	
   

  	
  Notices or Consents

  
	
  Section 3.3

  	
   

  	
  Financial Statements

  
	
  Section 3.5(a)

  	
   

  	
  Assets With an Original
  Cost in Excess of $10,000

  
	
  Section 3.5(b)

  	
   

  	
  Leased Assets with
  Monthly Payments in Excess of $2,500

  
	
  Section 3.5(c)

  	
   

  	
  Sufficiency of Assets

  
	
  Section 3.6

  	
   

  	
  Description of Real
  Property

  
	
  Section 3.7(b)(i)

  	
   

  	
  Non-Real Estate
  Encumbrances

  
	
  Section 3.7(b)(ii)

  	
   

  	
  Real Estate
  Encumbrances

  
	
  Section 3.8

  	
   

  	
  Accounts Receivable as
  of September 7, 2005

  
	
  Section 3.9

  	
   

  	
  Inventories

  
	
  Section 3.12(a)

  	
   

  	
  Labor Disputes;
  Compliance

  
	
  Section 3.12(b)

  	
   

  	
  Compensation of
  Affected Employees

  
	
  Section 3.13(a)

  	
   

  	
  Seller Benefit Plans

  
	
  Section 3.13(b)

  	
   

  	
  ERISA Matters

  
	
  Section 3.14(a)

  	
   

  	
  Compliance with Legal
  Requirements

  
	
  Section 3.14(b)

  	
   

  	
  Governmental
  Authorizations

  
	
  Section 3.15(a)

  	
   

  	
  Legal Proceedings

  
	
  Section 3.15(b)

  	
   

  	
  Orders

  
	
  Section 3.15(c)

  	
   

  	
  Compliance with Orders

  
	
  Section 3.16

  	
   

  	
  Certain Changes and
  Events

  
	
  Section 3.17(a)

  	
   

  	
  List of Certain Seller
  Contracts

  
	
  Section 3.17(b)

  	
   

  	
  Enforceability of
  Certain Seller Contracts

  



 





















 


	
  Section 3.17(c)

  	
   

  	
  Compliance of Certain
  Seller Contracts

  
	
  Section 3.17(d)

  	
   

  	
  Warranty Claims

  
	
  Section 3.18(a)

  	
   

  	
  List of Insurance
  Policies

  
	
  Section 3.18(c)

  	
   

  	
  Self Insurance; Third
  Party Insurance Arrangements

  
	
  Section 3.18(d)

  	
   

  	
  Loss Experience

  
	
  Section 3.19

  	
   

  	
  Environmental Matters

  
	
  Section 3.20(a)(i)

  	
   

  	
  Owned Intellectual
  Property

  
	
  Section 3.20(a)(ii)

  	
   

  	
  Intellectual Property
  Encumbrances

  
	
  Section 3.20(b)(i)

  	
   

  	
  Licenses

  
	
  Section 3.21

  	
   

  	
  Related Party
  Transactions

  
	
  Section 3.23

  	
   

  	
  Letters of Credit

  



 


Sections of Buyer Disclosure Letter


 


	
  Section 1.1

  	
   

  	
  Knowledge

  
	
  Section 4.2(c)

  	
   

  	
  Conflicts

  
	
  Section 4.2(d)

  	
   

  	
  Consent

  



 





















 


ASSET PURCHASE AGREEMENT


 


This Asset Purchase Agreement (“Agreement”) is dated September       ,
2005, by and among Hushang Ansary (the “Buyer”), and Stewart & Stevenson
Services, Inc., a Texas corporation (“Parent”), Stewart & Stevenson
Petroleum Services, Inc., a Delaware corporation (“SSPS”), Stewart &
Stevenson International, Inc., a Delaware corporation (“SSI”), Sierra Detroit
Diesel Allison, Inc., a Nevada corporation (“SDDA”), and S&S Trust, a
Pennsylvania business trust (“S&S Trust,” and together with Parent, SSPS, SSI
and SDDA, the “Sellers” and each, a “Seller”).


 


RECITALS


 


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


 


The parties, intending to be legally bound, agree as
follows:


 


1.                                       Definitions
and Usage


 


1.1                                 DEFINITIONS


 


For purposes of this Agreement, the following terms
and variations thereof have the meanings specified or referred to in this
Section 1.1:


 


“Accounts Receivable” — (a) all trade accounts
receivable and other rights to payment (including progress payments) from
customers of Sellers related to the Business and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of each Seller, (b) all other
accounts or notes receivable of each Seller related to the Business and the
full benefit of all security for such accounts or notes and (c) any claim,
remedy or other right related to any of the foregoing.


 


“Adjustment Amount” — as defined in Section 2.10.


 


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


 


“Affidavit of Occasional Sale” — as defined in Section
2.6(b).


 


“Affiliate” means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or under common
control with such Person, and in the case of any natural Person shall include
all relatives and immediate family members of such first Person.


 





















 


For purposes of this definition, a Person shall be
deemed to control another Person if such first Person directly or indirectly
owns or holds fifty percent (50%) or more of the ownership interests in such
other Person.


 


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


 


“Agreement” — as defined in the first paragraph of
this Agreement.


 


“Armored Cab Business” — the business of manufacturing
and assembling Low Signature Armored Cabs, a special troop protection cab that
fits on top of an army truck chassis built and manufactured by Stewart &
Stevenson Tactical Vehicle Systems, L.P., a Subsidiary of Parent.


 


“Assets” — as defined in Section 2.1.


 


“Assignment and Sublicense (Varco)” — as defined in
Section 2.9(a)(xvii).


 


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


 


“Bids”  — as
defined in Section 2.1(e).


 


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


 


“Bulk Sales Laws” — as defined in Section 5.4.


 


“Business” — as defined in Section 2.1.


 


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


 


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


 


“Business Property” — as defined in Section 3.6.


 


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


 


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


 


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


 


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


 


“Buyer Entity” — the Person directly or indirectly
controlled by Buyer that assumes this Agreement pursuant to Section 13.8.


 


2





















 


“Buyer Group” — as defined in Section 6.1.


 


“Buyer Indemnitees” — as defined in Section 11.2.


 


“Closing” — as defined in Section 2.8.


 


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


 


“Closing Date” — the date on which the Closing actually
takes place.


 


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


 


“Closing Payment” —nine million dollars ($9,000,000),
plus a cash amount equal to the Estimated Closing Net Asset Value of the
Business on the Closing Date.


 


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


 


“Code” — the Internal Revenue Code of 1986, as
amended.


 


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


 


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


 


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


 


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


 


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


 


“Customer Performance Assurance” — any guaranty, cash,
letter of credit or other property of any kind or nature deposited as or
otherwise constituting collateral security for the performance by any party
(other than a Seller) to any Seller Contract.


 


“Damages” — as defined in Section 11.2.


 


“DES Business” — all of any Seller’s and its
Affiliates’ right, title, and interest in and to all of such Seller’s or its
Affiliate’s property and assets belonging to such Seller or any of its
Affiliates and all Liabilities of any Seller and its Affiliates that in each
case relate to the business conducted by the former Distributed Energy
Solutions segment of Parent that has been classified as a discontinued
operation in Parent’s publicly disclosed consolidated financial statements.


 


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


 


“Dispute” — as defined in Section 13.4.


 


3





















 


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


 


“Election Period” — as defined in Section 11.7(c).


 


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


 


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


 


“Environmental Laws” — all applicable laws,
regulations, enforceable requirements that have the effect of law, orders,
decrees, judgments, injunctions, permits, licenses, approvals, consents or
authorizations issued, promulgated or entered into by any Governmental Body
pertaining to the protection of human health or the environment, including the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 9601
et seq. (“CERCLA”), the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”), the Federal
Water Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. §
1251 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. § 2601 et seq., and any similar state or local statutes,
in each case where such laws are in effect on or prior to the Closing Date.


 


“Environmental Liabilities” — any and all liabilities,
responsibilities, claims, suits, losses, costs (including remedial, removal,
response, abatement, clean-up, investigative, or monitoring costs and any other
related costs and expenses), other causes of action, damages, settlements,
expenses, charges, assessments, liens, penalties, fines, pre-judgment and
post-judgment interest, attorneys’ fees and other legal fees: (i) pursuant to
any agreement, order, notice (including notices of violation or noncompliance),
or responsibility, directive (including directives embodied in Environmental
Laws), injunction, judgment, or similar documents (including settlements),
arising out of or in connection with any Environmental Laws, or (ii) pursuant
to any claim by a Governmental Body or other Person for personal injury,
property damage, damage to natural resources, remediation, or payment or
reimbursement of response costs incurred or expended by the Governmental Body
or other Person pursuant to Environmental Laws.


 


“Environmental Material Adverse Effect” shall mean any
Environmental Liabilities that are reasonably expected to exceed $25,000 per
occurrence or series of related occurrences, or $100,000 in the aggregate.


 


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


 


4





















 


“ERISA Affiliate” 
— any other entity that, together with any Seller, would be treated as a
single employer under Section 414 of the Code or Section 4001(a) or (b) of
ERISA.


 


“Estimated Closing Balance Sheet” — an estimated
balance sheet of the Business as of the Closing Date prepared in good faith by
Sellers applying the Agreed Accounting Principles, in form and substance as
mutually and reasonably agreed to by Sellers and Buyer.


 


“Estimated Closing Net Asset Value” — the Net Asset
Value calculated from the Estimated Closing Balance Sheet.


 


“Exchange Act” — the Securities Exchange Act of 1934.


 


“Excluded Assets” — as defined in Section 2.2.


 


“Financial Statements” — as defined in Section 3.3.


 


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


 


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


 


“Governmental Body” — any:


 


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


 


(b)                                 federal,
state, local, municipal, foreign or other government;


 


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


 


(d)                                 body
exercising, or entitled or purporting to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power.


 


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


 


“Hazardous Material” — any substance, material or
waste that is regulated by any Governmental Body, including any material,
substance or waste which is defined as a “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,”


 


5





















 


“restricted hazardous waste” or “toxic substance”
under any provision of Environmental Law, and including petroleum, petroleum
products, asbestos, friable asbestos-containing material or asbestos-containing
material, urea formaldehyde and polychlorinated biphenyls.


 


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


 


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


 


“Indemnitee” — as defined in Section 11.7(a).


 


“Indemnitor” — as defined in Section 11.7(a).


 


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


 


“Initial Balance Sheet” — as defined in Section 3.3.


 


“Initial Net Asset Value” — $51,897,000, which is the
excess of total assets over total current liabilities of the Business, as
reflected on the Initial Balance Sheet.


 


“Intellectual Property” — (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent and
invention disclosures, together with all reissuances, continuations,
continuations-in-part, divisionals, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, slogans, trade dress, logos, icons,
designs, trade designation, trade names, and corporate names all registered or
unregistered, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all Software (including data and related documentation), (g) all other
proprietary rights, including internet web sites and internet domain names and
(h) all copies and tangible embodiments thereof (in whatever form or medium).


 


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


 


6





















 


“Inventories” — all inventories of Sellers related to
or used in the operation of the Business, wherever located, including all
finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by Sellers in the production of
finished goods for the Business.


 


“IRS” — the United States Internal Revenue Service
and, to the extent relevant, the United States Department of the Treasury.


 


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


 


“Lease” — any Real Property Lease or any lease or
rental agreement, license, right to use or installment and conditional sale
agreement to which any Seller is a party used in the operation of the Business
and any other Seller Contract pertaining to the leasing or use of any Tangible
Personal Property.


 


“Lease Agreement” — as defined in Section 2.9(a)(vi).


 


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


 


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


 


“Net Asset Value” — the excess of total assets over
total current liabilities of the Business, as reflected on the Initial Balance Sheet
or on the Closing Balance Sheet, as required by the context.


 


“Non-Real Estate Encumbrances” — as defined in Section
3.7(b).


 


“Notice of Dispute” — as defined in Section 13.4.


 


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


 


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


 


“Owned Property” — as defined in Section 3.6.


 


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


 


7





















 


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


 


“Permitted Non-Real Estate Encumbrances” — as defined
in Section 3.7(b).


 


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


 


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


 


“Proceeding” — any action, arbitration, audit,
hearing, investigation, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether public or private)
commenced, brought, conducted or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.


 


“Purchase Price” — as defined in Section 2.3.


 


“Real Property Lease” — as defined in Section 3.6.


 


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


 


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


 


“Registered Intellectual Property”  — all Business Intellectual Property, whether
owned by a Seller or owned by a Third Party who has granted a right of any sort
with respect to such Intellectual Property to a Seller, that is: (i) a patent
or patent application, (ii) an application or a registration for a trademark,
service mark, trade dress, trade name, logo, icon, design, trade designation,
slogan, corporate name or internet web site or internet domain name, or (iii) a
copyright registration or application.


 


“Related Person” — with respect to a specified Person:


 


(a)                                  any
Person that directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such
specified Person;


 


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


 


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


 


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


 


(e)                                  any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity).


 


8





















 


For purposes of this Agreement, (a) “control”
(including “controlling,” “controlled by,” and “under common control with”)
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and shall be
construed as such term is used in the rules promulgated under the Securities
Act; and (b) “Material Interest” means direct or indirect beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least ten percent (10%) of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least ten percent (10%) of the outstanding equity securities or
equity interests in a Person.


 


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


 


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


 


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


 


“Restrictive Covenants” — as defined in Section
11.12(a).


 


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


 


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


 


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


 


“Seller Benefit Plans” — all (i) employee welfare
benefit plans or employee pension benefit plans as defined in sections 3(1) and
3(2) of ERISA, including plans, programs or arrangements that provide
retirement income or result in deferrals of income by employees for periods
extending to their terminations of employment or beyond, and plans that provide
medical, surgical or hospital care benefits or benefits in the event of
sickness, accident, disability, death or unemployment and (ii) other employee
benefit agreements or arrangements that are not ERISA plans, including any
deferred compensation plans, incentive plans, bonus plans or arrangements,
stock option plans, stock purchase plans, stock award plans, golden parachute
agreements, severance pay plans, dependent care plans, cafeteria plans,
employee assistance programs, scholarship programs, retention incentive
agreements, vacation policies and, or other similar plans, agreement or
arrangements that (a) are maintained by any Seller, any ERISA Affiliate or any
of its Related Persons for the benefit of Affected Employees, (b) have been
approved by any Seller, any ERISA Affiliate or any of its Related Persons but
are not yet effective for the benefit of Affected Employees or their
beneficiaries, or (c) were previously maintained by any Seller, any ERISA
Affiliate or any of its Related Persons for the benefit of the Affected
Employees or their beneficiaries and with respect to which, in each case, any
Seller, any ERISA Affiliate or any of its Related Persons may have any
liability, contingent or otherwise. 
However, “Seller Benefit Plans” shall not include any agreements between
any Seller


 


9





















 


and any Affected Employees pursuant to which such
Seller has agreed to pay Affected Employees any compensation in consideration
of their services rendered in connection with the sale of the Assets or the
Business (“Transaction Bonuses”). 


 


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


 


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


 


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


 


“Seller Indemnitees” — as defined in Section 11.3.


 


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


 


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


 


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


 


“Subsidiary” — with respect to any Person (the “Owner”),
any corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation’s or other Person’s board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred), are held by the Owner or one or more of its
Subsidiaries.


 


“Supply Agreement” — as defined in Section 2.9(a)(ii).


 


“Survival Period” — as defined in Section 11.6.


 


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


 


10





















 


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


 


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


 


“Termination Date” — as defined in Section 9.1(e).


 


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


 


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


 


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


 


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


 


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


 


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


 


[***]


 


1.2                                 USAGE


 


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


 


(i)                                           the
singular number includes the plural number and vice versa;


 


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


 


11





















 


(iii)                                     reference
to any gender includes each other gender;


 


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


 


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


 


(vi)                                    “hereunder,”
“hereof,” “hereto,”  and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;


 


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


 


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


 


(ix)                                      with
respect to the determination of any period of time, “from” means “from and
including” and “to” means “to but excluding”; and


 


(x)                                         references
to documents, instruments or agreements shall be deemed to refer as well to all
addenda, exhibits, schedules or amendments thereto.


 


(b)           Accounting
Terms and Determinations. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.


 


(c)           Legal
Representation of the Parties. This Agreement was negotiated by the parties
with the benefit of legal representation, and any rule of construction or
interpretation otherwise requiring this Agreement to be construed or
interpreted against any party shall not apply to any construction or
interpretation hereof.


 


2.                                       Sale
and Transfer of Assets; Closing


 


2.1                                 ASSETS TO BE SOLD


 


Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing and effective as of the Effective Time, each
Seller shall sell, convey, assign, transfer, and deliver to Buyer, and Buyer
shall purchase and acquire from such Seller, free and clear of any


 


12





















 


Encumbrances other than Permitted Encumbrances, all of
such Seller’s right, title, and interest in and to all of the following:


 


(a)                                  all
Real Property Leases described in Section 3.6 of the Seller Disclosure Letter;


 


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


 


(c)                                  all
Inventories;


 


(d)                                 all
Accounts Receivable;


 


(e)                                  all
Seller Contracts, including those listed in Section 3.17(a) of the Seller
Disclosure Letter, and all outstanding offers or solicitations made by or to
any Seller to enter into any Seller Contract (“Bids”), other than Seller
Contracts or Bids described in Section 2.2(e);


 


(f)                                    all
Governmental Authorizations related to or used in the operation of the Business
and all pending applications therefor or renewals thereof, including those
listed in Section 3.14(b) of the Seller Disclosure Letter, in each case to the
extent permitted by applicable Legal Requirement and otherwise transferable to
Buyer;


 


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


 


(h)                                 all
of the intangible rights and property of Sellers that relate exclusively to the
operation of the Business, including any such goodwill and Business
Intellectual Property, as well as the right to sue, at law or in equity, or
otherwise recover damages for any and all infringements, misappropriations or
dilutions of any Business Intellectual Property;


 


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


 


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


 


13





















 


(k)                                  all
cash in the bank accounts listed in Section 2.1(k) of the Seller Disclosure
Letter; and


 


(l)                                     all
of such Seller’s other property and assets, real, personal, or mixed, tangible
and intangible, of every kind and description, wherever located, belonging to
such Seller and which relate primarily to or are used primarily in the operation of the business currently conducted by the
Engineered Products Segment of Sellers that is reported in Parent’s publicly
disclosed consolidated financial statements as the Engineered Products Segment,
including the design, manufacturing, service and sale of equipment for coiled
tubing, acidizing, fracturing, pumping (including nitrogen pumping equipment),
railcar movers, seismic equipment systems, silicon controlled rectifiers and
switchgear equipment as well as any goodwill associated therewith (but
excluding the Excluded Assets) (collectively, the “Business”).


 


All of the property and assets to be transferred to
Buyer hereunder are herein referred to collectively as the “Assets.”


 


2.2                                 EXCLUDED ASSETS


 


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


 


(a)                                  all
cash, cash equivalents, securities, money on deposit with banks, certificates
of deposit and similar instruments and short-term investments, other than as
provided for in Section 2.1(k);


 


(b)                                 all
minute books, stock Records and corporate seals;


 


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


 


(d)                                 all
insurance policies and rights thereunder and all insurance benefits, including
rights and proceeds, arising from or relating to the Assets and the Assumed
Liabilities prior to the Effective Time;


 


(e)                                  all
Seller Contracts listed in Section 2.2(e) of the Seller Disclosure Letter;


 


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


 


(g)                                 all
data and Records that do not constitute Business Records;


 


(h)                                 all
deposits or claims for refund or credit of Taxes and other governmental charges
of whatever nature to the extent relating to periods prior to the Effective
Time;


 


14





















 


(i)                                     all
rights in connection with and assets of the Seller Benefit Plans;


 


(j)                                     all
Government Authorizations that are not transferable;


 


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


 


(l)                                     except
to the extent set forth in Section 3.20(a)(i) of the Seller Disclosure Letter
and except for [***] each Seller’s right, title and interest in or to any
patent, patent applications, corporate names, assumed fictional business names,
trade names, registered and unregistered trademarks, service marks,
applications, logos, icons or designs, including any trade designation that
comprise or are similar to “Stewart & Stevenson,” the Stewart &
Stevenson logo or any derivative or abbreviation thereof;


 


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


 


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


 


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


 


(p)                                 all
real property and interests in real property other than the Business Property,
including, without limitation, the real property and interests in real property
identified on Section 2.2(p) of the Seller Disclosure Letter and all other
tangible personal property located on such premises; provided that this Section
2.2(p) shall not limit Buyer’s right to receive copies of certain data or
Records pursuant to Section 2.1(g); and


 


(q)                                 all
other assets not used in the Business, including, for the avoidance of doubt,
the Armored Cab Business and the Snow Blower Business, as well as the DES
Business and any other business reported as discontinued operations in the
Parent’s publicly disclosed consolidated financial statements dated January 31,
2005 and any other property, assets and rights designated in Section 2.2(q) of
the Seller Disclosure Letter.


 


2.3                                 CONSIDERATION


 


The consideration for the Assets (the “Purchase Price”)
will be (i) the Closing Payment, (ii) plus or minus the Adjustment Amount,
(iii) plus the assumption of the Assumed Liabilities. In accordance with
Section 2.9(b), at the Closing, the cash portion of the Purchase Price, prior
to adjustment on account of the Adjustment shall be delivered by Buyer to
Sellers by wire transfer of immediately available funds.  The balance of the Purchase Price shall be
satisfied by the execution and delivery of the Bill of Sale, Assignment and
Assumption Agreement.  The Adjustment
Amount shall be paid in accordance with Section 2.10.


 


15





















 


2.4                                 LIABILITIES


 


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


 


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


 


(ii)                                        any
Liability to any Seller’s customers under warranties implied by law and any
warranty agreements and indemnities given by any Seller to its customers prior
to the Effective Time in connection with the Business;


 


(iii)                                     any
Liability arising out of or relating to any circumstance, condition, occurrence
or event first happening or manifested at or after the Effective Time and
arising out of or relating to (A) products of the Business designed,
manufactured, distributed or sold or services provided prior to the Effective
Time or (B) the Business or any action or inaction thereof or related thereto
or to the Assets after the Closing Date, except in the case of clause (B), to
the extent such Liability is a Retained Liability;


 


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


 


(v)                                       any
Liability of any Seller expressly described in Section 2.4(a)(v) of the Seller
Disclosure Letter.


 


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


 


(i)                                           any
Liability for Taxes arising as a result of any Seller’s (A) operation of
the Business, (B) ownership of the Assets or (C) inclusion in a consolidated,
affiliated, combined or unitary group (except as provided in Section 2.5) prior
to the Effective Time;


 


(ii)                                        any
Liability under any Contract or Bid not assumed by Buyer under Section 2.4(a);


 


(iii)                                     any
Liability arising out of or relating to any circumstance, condition, occurrence
or event first happening or manifested prior to the Effective Time and arising
out of or relating to the products of the Business designed, manufactured,


 


16





















 


distributed or
sold or services rendered prior to the Effective Time, including any Liability
arising out of any Proceeding (including the obligation to handle such
Proceeding) relating thereto, but excluding any Proceeding described in Section
2.4(a)(v) of the Seller Disclosure Letter;


 


(iv)                                    any
Liability of any Seller under the Seller Benefit Plans or relating to payroll,
sick leave, workers’ compensation or unemployment benefits for any of Seller’s
employees;


 


(v)                                       any
Environmental Liabilities of the Business arising out of or relating to any
circumstance, condition, occurrence or event happening or manifested prior to
the Effective Time;


 


(vi)                                    any
Liability under any Transaction Bonuses or any employment, severance, retention
or termination agreement with any employee of any Seller or any of its Related
Persons, including, but not limited to, sponsorship of any Seller Benefit Plan;


 


(vii)                                 any
Liability of any Seller to any Related Person of such Seller;


 


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


 


(ix)                                      any
Liability of any Seller under this Agreement or any other document executed in
connection with the Contemplated Transactions; and


 


(x)                                         any
Liability of any Seller caused by such Seller’s ownership of the Assets or
operation of Business, or such Seller’s acts or omissions occurring prior to or
after the Effective Time, including without limitation any liability related to
or arising out of the matters described in item 2 on Section 3.14(a) of the
Seller Disclosure Letter.


 


2.5                                 PRORATIONS OF CERTAIN PROPERTY TAXES


 


Any general real or personal property Tax assessed
against or pertaining to the Assets for the Tax period that includes the
Closing Date shall be prorated between Buyer and Sellers as of the Closing Date
in accordance with this Section 2.5.  To
determine Sellers’ liability for any real and personal property Taxes for the
period ending as of the Closing Date (the “Pre-Closing Property Taxes”), the
total amount of such Taxes allocable to Sellers shall be the product of (i)
such Tax for the entirety of the Tax period including the Closing Date,
multiplied by (ii) a fraction, the numerator of which is the number of days in
such Tax period prior to the Closing Date, and the denominator of which is the
total number of days in the Tax period, and the balance of such Taxes shall be
allocable to Buyer.  For purposes of the
Initial Balance Sheet, the Estimated Closing Balance Sheet and, if necessary,
the Closing Balance Sheet, an estimate of the Pre-Closing Property Taxes shall
be based on the immediately preceding Tax period assessment.  When the actual amount of real or personal
property Taxes estimated under this Section 2.5 is known, Buyer shall promptly
advise Sellers of the proportionate share of actual real or personal property
Taxes which constitute Pre-Closing Property Taxes and furnish Sellers with
reasonably


 


17





















 


supporting documents evidencing the actual amount of
such Taxes.  If the estimate of
Pre-Closing Property Taxes made pursuant to this Section 2.5 was less than the
actual Pre-Closing Property Taxes and such deficiency is not taken into account
in the Adjustment Amount, Sellers shall pay in cash to Buyer such deficiency
within thirty (30) days of receipt of such notice and reasonably supporting
documents, and if such estimate was more than the actual Pre-Closing Property
Taxes and such increase is not taken into account in the Adjustment Amount,
Buyer shall, at the time such notice is given (which shall be no later than
thirty (30) days from Buyer’s receipt of documentation evidencing the actual
amount of real and personal property Taxes for the Tax period including the
Closing Date), refund such excess in cash to Sellers.  Any disputes related to the allocation of
real and personal property Taxes under this Section 2.5 shall be resolved by
the Independent Accountants, in accordance with the procedure prescribed for
disputes relating to the calculation of Closing Net Asset Value under Section
2.11.


 


2.6                                 SALES AND TRANSFER TAXES; RECORDING FEES


 


(a)                                  All
sales and use, motor vehicle sales and use, transfer and documentary Taxes, if
any, payable in connection with the sale, conveyances, assignments, transfers
and deliveries to be made to Buyer hereunder shall be borne fifty percent (50%)
by Buyer and fifty percent (50%) by Sellers, unless such Taxes are imposed as a
result of a party’s failure to provide the documentation described in Section
2.6(b) or Section 2.6(c), in which case such Taxes shall be borne one hundred
percent (100%) by the party failing to provide the appropriate documentation at
Closing.  Buyer and Sellers shall each
promptly pay any such Taxes directly to the Governmental Body assessing them
and shall join in the execution of any necessary Tax Returns.  In the event that either Buyer or any Seller
is audited in connection with such Taxes, the party being audited will notify
the other parties of such audit and will not object to the other parties’
appearance in the audit.


 


(b)                                 Sellers
represent and warrant to Buyer that the exchange of the Assets and the Business
to the extent located in Texas qualifies for the occasional sale exemption
provided under Section 151.304(a) and (b)(2) of the Texas Tax Code and 34 Texas
Administrative Code Section 3.316(d), and Sellers shall deliver to Buyer at the
Closing an Affidavit of Occasional Sale in the form promulgated by the Texas
Comptroller of Public Accounts (the “Affidavit of Occasional Sale”) for
purposes of establishing such exemption. 
Upon the receipt of, and in reliance on, such Affidavit of Occasional
Sale, Buyer shall deliver to Sellers a valid Texas exemption certificate
corresponding to the Texas occasional sale exemption at Closing.


 


(c)                                  Sellers
have disclosed in Section 3.5(a) of the Seller Disclosure Letter the United
States locations of any Assets located outside of Texas.  In reliance of such disclosure, Buyer shall
deliver to Sellers all state or local resale or exemption certificates required
to claim valid exemptions, if any, from sale and use, motor vehicle sales and
use, transfer or documentary Taxes otherwise payable in connection with the
sale, conveyances, assignments, transfers and deliveries of the Assets to the
Buyer.  Subject to Section 2.6(a),
applicable sales Taxes shall be collected and due at Closing if valid exemption
certificates are not provided by the appropriate party.


 


18





















 


2.7                                 ALLOCATION


 


Buyer and Sellers shall agree upon the allocation of
the Purchase Price among the Assets in accordance with Section 1060 of the Code
and the Treasury Regulations promulgated thereunder (as well as any similar
provision of state, local or foreign law, as appropriate), and a draft of IRS
Form 8594 shall be delivered at Closing (the “Allocation Schedule”).  The Allocation Schedule shall be binding upon
Buyer and Sellers.  Buyer and Sellers and
their Affiliates agree to amend the Allocation Schedule as necessary to reflect
the Adjustment Amount, and a final Allocation Schedule (the “Final Allocation
Schedule”) shall be prepared by Buyer and Sellers on a basis consistent with
the Allocation Schedule within thirty (30) days following the final determination
of the Adjustment Amount under Section 2.11. 
Buyer and Sellers and their Affiliates shall report, act, and file all
Tax Returns (including, but not limited to, IRS Form 8594) in all respects and
for all purposes consistent with the Final Allocation Schedule.  Buyer and Sellers shall each timely and
properly prepare, execute, file and deliver all such documents, forms, and
other information as either Buyer or Sellers may reasonably request in
preparing the Allocation Schedule or the Final Allocation Schedule.  Neither Buyer nor Sellers shall take any
position (whether in audits, Tax Returns or otherwise) that is inconsistent
with the Final Allocation Schedule unless required to do so by any applicable
Legal Requirement.


 


2.8                                 CLOSING


 


Unless this Agreement shall have been terminated
pursuant to Section 9.1, the purchase and sale provided for in this Agreement
(the “Closing”) shall take place as promptly as practical following the
satisfaction or waiver (subject to applicable Legal Requirement) of all conditions
(other than those conditions which by their nature are to be satisfied at
Closing, but subject to the fulfillment or waiver of those conditions) set
forth in Articles 7 and 8 (and, in any event not more than ten Business Days
following the satisfaction or waiver of all such conditions), at the offices of
Sellers’ counsel at 1301 McKinney, Suite 5100, Houston, Texas, unless Buyer and
Sellers otherwise agree.


 


2.9                                 CLOSING OBLIGATIONS


 


In addition to any other documents to be delivered
under other provisions of this Agreement, at the Closing:


 


(a)           Sellers
shall deliver to Buyer:


 


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


 


(ii)                                        a
Supply Agreement in the form of Exhibit 2.9(a)(ii) executed by Parent (the “Supply
Agreement”);


 


(iii)                                     assignments
of all Registered Intellectual Property that is part of the Assets in the form
of Exhibit 2.9(a)(iii) executed by the applicable Seller;


 


19





















 


(iv)                                    such
other bills of sale, assignments, documents (including the estimates of
transfer tax obligations of Buyer based on the Allocation Schedule) and other
instruments of transfer and conveyance of the Assets as may reasonably be
requested by Buyer, each in form and substance reasonably satisfactory to Buyer
and its legal counsel and executed by the applicable Seller;


 


(v)                                       the
Estimated Closing Balance Sheet;


 


(vi)                                    the
Industrial Lease Agreement in the form of Exhibit 2.9(a)(vi) (the “Lease
Agreement”), executed by Parent or one of its Affiliates, as lessor;


 


(vii)                                 the
Transition Services Agreement in the form of Exhibit 2.9(a)(vii) executed by
Parent (the “Transition Services Agreement”);


 


(viii)                              one
or more subcontracts in form and substance reasonably satisfactory to Sellers
and Buyer covering each of the Seller Contracts that is subject to the
provisions of Section 10.6(c), executed by each applicable Seller and, if
necessary, one or more of its Affiliates (each, a “Subcontract”);


 


(ix)                                      the
certificate required by Section 7.1;


 


(x)                                         a
certificate of the Secretary of each Seller certifying, as complete and
accurate as of the Closing, attached copies of the Articles of Incorporation in
the case of the Parent, Certificates of Incorporation in the case of SDDA, SSPI
and SSI, Deed of Trust in the case of S&S Trust, and bylaws of such Seller
as in effect on the date thereof, certifying and attaching all requisite
resolutions or actions of such Seller’s board of directors (or its equivalent)
approving the execution and delivery of this Agreement and the consummation of
the Contemplated Transactions and certifying to the incumbency and signatures
of the officers of such Seller executing this Agreement and any other document
relating to the Contemplated Transactions;


 


(xi)                                      the
Confirmation of Closing in the form of Exhibit 2.9(a)(xi) executed by Parent
(the “Confirmation of Closing”);


 


(xii)                                   copies
of all Consents which have been obtained by Sellers in connection with the
Contemplated Transactions;


 


(xiii)                                the
Affidavit of Occasional Sale;


 


(xiv)                               a
certificate signed by each Seller stating that such Seller is not a “foreign
person” as defined in Section 1445 of the Code;


 


[***]


 


(b)           Buyer
shall deliver to Sellers:


 


20





















 


(i)                                           the
Closing Payment by wire transfer of immediately available funds to an account
specified by Sellers in a writing delivered to Buyer at least three (3)
business days prior to the Closing Date;


 


(ii)                                        the
Bill of Sale, Assignment and Assumption Agreement executed by Buyer;


 


(iii)                                     the
sales tax exemption certificates described in Section 2.6(b), each in form and
substance reasonably satisfactory to Sellers and their legal counsel and
executed by Buyer;


 


(iv)                                    the
Lease Agreement executed by Buyer, as tenant;


 


(v)                                       the
Transition Services Agreement executed by Buyer;


 


(vi)                                    each
Subcontract executed by Buyer;


 


(vii)                                 the
certificate required by Section 8.1;


 


(viii)                              a
certificate of the Secretary of Buyer certifying, as complete and accurate as
of the Closing, attached copies of the Certificate of Incorporation and bylaws
of Buyer as in effect on the date thereof and certifying and attaching all
requisite resolutions or actions of Buyer’s board of directors approving the
execution and delivery of this Agreement and the consummation of the
Contemplated Transactions and certifying to the incumbency and signatures of
the officers of Buyer executing this Agreement and any other document relating
to the Contemplated Transactions;


 


(ix)                                      the
Supply Agreement executed by Buyer; and


 


(x)                                         the
Confirmation of Closing executed by Buyer.


 


2.10                           ADJUSTMENT AMOUNT AND PAYMENT


 


The “Adjustment Amount” will be equal to the amount
determined by subtracting the Closing Net Asset Value from the Estimated
Closing Net Asset Value. If the Estimated Closing Net Asset Value exceeds the
Closing Net Asset Value, the Adjustment Amount shall be paid by wire transfer
of immediately available funds by Sellers to an account specified by Buyer. If
the Closing Net Asset Value exceeds the Estimated Closing Net Asset Value, the
Adjustment Amount shall be paid by wire transfer of immediately available funds
by Buyer to an account specified by Sellers. Within five (5) business days
after the calculation of the Closing Net Asset Value becomes binding and
conclusive on the parties pursuant to Section 2.11, Sellers or Buyer, as the
case may be, shall make the wire transfer payment provided for in this Section
2.10.  For the purposes of this Section
2.10, the “Estimated Closing Net Asset Value” will equal the amount of the
Estimated Closing Net Asset Value that was paid at Closing.


 


21





















 


2.11                           ADJUSTMENT PROCEDURE


 


(a)                                  Buyer
shall prepare a Closing Balance Sheet (“Closing Balance Sheet”) of the Business
as of the Closing Date applying the Agreed Accounting Principles.  Buyer shall then determine the Net Asset
Value as of the Effective Time (the “Closing Net Asset Value”) based upon the
Closing Balance Sheet.  Buyer shall
deliver the Closing Balance Sheet and its determination of the Closing Net
Asset Value to Sellers within forty-five (45) days following the Closing
Date.  The Closing Balance Sheet (i) will
not account for or reflect in any manner any assets that do not constitute
Assets and (ii) will account for and reflect all Assumed Liabilities that are
required to be accounted for or reflected on such Closing Balance Sheet
applying the Agreed Accounting Principles. 
Sellers and their independent auditors and other Representatives shall
have the right to review and verify the Closing Balance Sheet and determination
of the Closing Net Asset Value when received and Buyer shall provide Sellers
with access to all (i) work papers and written procedures used to prepare the
Closing Balance Sheet and the determination of Closing Net Asset Value and (ii)
books and Records and personnel to the extent necessary to enable Sellers and
their independent auditors and other Representatives to conduct a full review
of the Closing Balance Sheet and for them to fully evaluate Buyer’s calculation
of the Closing Net Asset Value.  By way
of clarification and amplification with respect to Buyer’s preparation of the
Closing Balance Sheet (and to ensure that it is prepared on the same basis and
applying the Agreed Accounting Principles as was done by Sellers in preparing
the Initial Balance Sheet), special mention is made of, and Buyer (A)
understands and accepts as binding with respect to its preparation of the
Closing Balance Sheet the Sellers’ judgments as to valuation and reserve
matters pertaining to such accounts in the Initial Balance Sheet, (B) accepts
and agrees with Sellers’ application of the Agreed Accounting Principles
including the valuations of current assets in respect thereof, and (C) will not
contest or otherwise propose any change to the reserves established in
connection with any Asset and valuation thereof in the Initial Balance Sheet
except to the extent that any further reserves as to such Asset and valuation
thereof are clearly required by application of the Agreed Accounting Principles
as a result of the passage of time or changes in conditions, facts or circumstances
since the date of the Initial Balance Sheet.


 


(b)                                 If
within thirty (30) days following delivery of the Closing Balance Sheet and the
Closing Net Asset Value calculation Sellers have not given Buyer written notice
of their objection as to the Closing Net Asset Value calculation (which notice
shall state the basis of Sellers’ objection), then the Closing Net Asset Value
calculated by Buyer shall be binding and conclusive on the parties and be used
in computing the Adjustment Amount.


 


(c)                                  If
Sellers duly give Buyer such notice of objection, and if Sellers and Buyer fail
to resolve the issues outstanding with respect to the Closing Balance Sheet and
the calculation of the Closing Net Asset Value within thirty (30) days of Buyer’s
receipt of Sellers’ objection notice, Sellers and Buyer shall submit the issues
remaining in dispute to the Independent Accountants, for resolution applying
the Agreed Accounting Principles.  If
issues are submitted to the Independent Accountants for resolution, (i) Sellers
and Buyer shall furnish or cause to be furnished to the Independent Accountants
such work papers and other documents and information relating to the disputed
issues as the Independent Accountants may request and are available to that
party or its agents and shall be afforded the opportunity to present to the


 


22





















 


Independent
Accountants any material relating to the disputed issues and to discuss the
issues with the Independent Accountants; (ii) the determination by the
Independent Accountants, as set forth in a reasonably detailed notice to be
delivered to both Parent and Buyer within forty-five (45) days of the
submission to the Independent Accountants of the issues remaining in dispute,
shall be final, binding and conclusive on the parties and shall be used in the
calculation of the Closing Net Asset Value; and (iii) Sellers and Buyer will
each bear fifty percent (50%) of the fees and costs of the Independent
Accountants for such determination.  In
connection with the retention of the Independent Accountants, Sellers and Buyer
agree that they will enter into a customary engagement agreement therewith,
including appropriate provision for joint and several indemnity of such
Independent Accountants as to their services and conclusions.


 


[***]


 


3.                                       Representations
and Warranties of Sellers


 


As of the date hereof, except with respect to the
representations and warranties in Sections 3.2(c) and 3.17(a), as of August 5,
2005, Sellers, jointly and severally, represent and warrant to Buyer as
follows:


 


3.1                                 ORGANIZATION AND GOOD STANDING


 


Parent is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas, SSPS and
SSI are corporations duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, each with full corporate power and
authority to own, operate and lease their respective properties and assets and
to carry on their respective businesses in the places and in the manner
currently conducted.  S&S Trust is a
business trust duly formed, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, with full trust power and authority
to own, operate and lease its properties and assets and to carry on its
business in the places and in the manner currently conducted.  Each Seller, other than S&S Trust, is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to do so would not have a material adverse effect on such Seller or the
Business.


 


3.2                                 ENFORCEABILITY; AUTHORITY; NO CONFLICT


 


(a)                                  Each
Seller has all requisite corporate or trust power and authority to enter into
this Agreement and the documents to be delivered by such Seller at the Closing
and to perform its obligations hereunder and thereunder, including the Contemplated
Transactions.  This Agreement has been
duly executed and delivered by each Seller and constitutes a legal, valid and
binding obligation of each Seller, enforceable against each such Seller in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect that affect creditors’ rights generally and by
legal and equitable limitations on the availability of specific remedies. This
Agreement and the Contemplated Transactions have been duly authorized by all
necessary action


 


23





















 


by each Seller’s
board of directors or trustees, as applicable. 
No further corporate, trustee or shareholder action is necessary on the
part of Sellers to execute and deliver this Agreement or to consummate the
Contemplated Transactions.


 


(b)           Except as
set forth in Section 3.2(b) of the Seller Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):


 


(i)                                           Conflict
with or violate the Articles of Incorporation of Parent or Certificate of
Incorporation of SSPS or SSI or Deed of Trust of S&S Trust or bylaws of any
Seller;


 


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


 


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


 


(iv)                                    Result
in the imposition or creation of any Encumbrance (other than a Permitted
Encumbrance) upon or with respect to any of the Assets; or


 


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


 


(c)           Except as
set forth in Section 3.2(c) of the Seller Disclosure Letter, no Seller is
required to give any notice to or obtain any Consent or Governmental Authorization
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions,
other than (i) those notices and Consents and Governmental Authorizations that
have been obtained and are in full force and effect at the Effective Time, (ii)
those notices and Consents required under the Seller Contracts not required to
be disclosed in Section 3.17(a) of the Seller Disclosure Letter, and (iii) such
notices and consents as may be required under foreign laws.  Notwithstanding anything herein to the
contrary, the list of Consents set forth in Section 3.2(c) of the Seller
Disclosure Letter that relate to Seller Contracts only relate to those Seller
Contracts set forth in Section 3.17(a) of the Seller Disclosure Letter.


 


3.3                                 FINANCIAL STATEMENTS


 


Set forth in Section 3.3 of the Seller Disclosure
Letter is an unaudited balance sheet of the Business as of September 3, 2005
(the “Initial Balance Sheet”) and a related unaudited statement of income of
the Business for the seven month period then ended (collectively, the “Financial
Statements”).  The Financial Statements
fairly present in all material respects the financial condition and results of
operations of the Business as of and for the seven month period


 


24





















 


ended on the balance sheet date, in accordance with
the Agreed Accounting Principles.  The
Financial Statements do not account for or reflect in any manner any assets
that do not constitute Assets.  The
Financial Statements account for and reflect all Assumed Liabilities that are
required to be accounted for or reflected on such Financial Statements applying
the Agreed Accounting Principles.  The
Financial Statements reflect the consistent application of the accounting
principles applied in the financial statements of the Business as included in
the consolidated financial statements of Parent, except as disclosed in the
notes to the Financial Statements and except as set forth in Section 3.3 of the
Seller Disclosure Letter.  The Financial
Statements have been prepared from and are in accordance with the accounting
Records of Sellers.


 


3.4                                 BOOKS AND RECORDS


 


The Business Records of Sellers, all of which have
been made available to Buyer, are complete and correct and represent actual,
bona fide transactions and have been maintained in accordance with sound
business practices.


 


3.5                                 CONDITION AND SUFFICIENCY OF ASSETS


 


(a)                                  Section
3.5(a) of the Seller Disclosure Letter lists all Assets consisting of
machinery, equipment, vehicles, furniture or other Tangible Personal Property
owned by any Seller having an original cost in excess of $10,000 and the
location thereof as well as all locations in the United States (other than
Texas) where any Assets (including any inventory and inventory on consignment)
are located, regardless of their original cost.


 


(b)                                 Section
3.5(b) of the Seller Disclosure Letter lists all Assets consisting of property
and assets (other than the Business Property) used in the Business that are
leased by any Seller and that involve payments by such Seller in excess of
$2,500 per month.


 


(c)                                  Except
as specifically enumerated in Section 3.5(c) of the Seller Disclosure Letter,
the Assets constitute all of the assets, tangible and intangible, of any nature
whatsoever, necessary to operate the Business immediately after the Closing in
substantially the same manner in which it is presently operated by Sellers.


 


(d)                                 All
equipment, vehicles, furniture and other Tangible Personal Property owned or
leased by Sellers comprising part of the Assets and currently used in the
operation of the Business are in good operating condition and repair (subject
to normal wear and tear) and when transferred will be adequate for the
operation of the Business, and none of such assets are in need of maintenance
or repairs except for ordinary, routine maintenance and repairs consistent with
past practice.


 


3.6                                 DESCRIPTION OF REAL PROPERTY


 


Section 3.6 of the Seller Disclosure Letter sets forth
a complete list of (i) all real property and interests in real property owned
in fee by any Seller and that are used in the operation of the Business
(individually, an “Owned Property” and collectively, the “Owned Properties”),
(ii) all real property and interests in real property leased by any Seller and
that are used in the operation


 


25





















 


of the Business (individually, a “Real Property Lease”
and the real properties specified in such leases, together with the Owned Properties,
being referred to herein individually as a “Business Property” and collectively
as the “Business Properties”) as lessee or lessor.  The Business Properties constitute all
interests in real property currently used or currently held for use in the operation
of the Business.  Sellers have delivered
or otherwise made available to Purchaser true, correct and complete copies of
the Real Property Leases, together with all amendments, modifications or
supplements, if any, thereto.


 


3.7                                 TITLE TO ASSETS; ENCUMBRANCES


 


(a)                                  The
applicable Seller has a valid and subsisting leasehold interest in the real
estate in the Real Property Leases described in Section 3.6 of the Seller
Disclosure Letter.  No Seller is in
default of any material covenant to be performed by such Seller under the Real
Property Leases.


 


(b)                                 Sellers
own good and transferable title to all of the Tangible Personal Property free
and clear of any Encumbrances other than those described in Section 3.7(b)(i)
of the Seller Disclosure Letter (“Non-Real Estate Encumbrances”).  At Closing, all such Tangible Personal
Property shall be free and clear of all Non-Real Estate Encumbrances other than
(i) those identified in Section 3.7(b)(i) of the Seller Disclosure Letter, and
(ii) Encumbrances or other rights of Governmental Bodies or other Persons in
respect of property or assets delivered by any Seller for repair, maintenance,
or other improvements (“Permitted Non-Real Estate Encumbrances” and, together
with those described Encumbrances on Business Property set forth in Section
3.7(b)(ii) of the Seller Disclosure Letter (none of which, individually or in
the aggregate, materially and adversely effect the operation of the Business as
currently operated), “Permitted Encumbrances”).


 


3.8                                 ACCOUNTS RECEIVABLE


 


All Accounts Receivable that are reflected on the
Initial Balance Sheet or that will be reflected on the Closing Balance Sheet
represent or will represent valid obligations arising from sales actually made
or services actually performed by Sellers in the ordinary course of the
Business consistent with past practices, and Section 3.8 of the Seller
Disclosure Letter contains a complete and accurate list thereof as of September
7, 2005, which list sets forth the aging of each such Account Receivable.  To Sellers’ Knowledge, there is no contest,
claim, defense or right of setoff, other than those in the ordinary course of
the Business consistent with past practices, under any Seller Contract with any
account debtor of an Account Receivable relating to the amount or validity of
such Account Receivable.  All Accounts
Receivable relate solely to the sale of goods or services to customers of
Sellers, none of which are Related Persons of any Seller.


 


3.9                                 INVENTORIES


 


Except as set forth in Section 3.9 of the Seller
Disclosure Letter, all items included in the Inventories consist of a quality
and quantity consistent in all material respects with past practices or
reasonable future expectations, except for obsolete items, slow-moving items
and items of


 


26





















 


below-standard quality, all of which have been written
off or written down to net realizable value in the Initial Balance Sheet in
accordance with the Agreed Accounting Principles.  Inventories on hand that were purchased after
the date of the Initial Balance Sheet were purchased in the ordinary course of
the Business consistent with past practices or reasonable future expectations
at a cost generally not exceeding market prices prevailing at the time of
purchase.


 


3.10                           [INTENTIONALLY DELETED]


 


3.11                           TAXES


 


(a)                                  Except
as set forth in Section 3.11(a) of the Seller Disclosure Letter, each of the
Sellers has filed or will file when due all Tax Returns required to be filed
with respect to the Business or the Assets. 
All such Tax Returns were, or will be, correct and complete in all
material respects.  All Taxes owed by
each of the Sellers (whether or not shown on any Tax Return) with respect to
the Business and the Assets have been, or will be when due, fully paid.  There are no Encumbrances on any of the
Assets that arose in connection with any failure (or alleged failure) to pay
any Tax.  No deficiency or adjustment in
respect of any Tax that might result in an Encumbrance on any of the Assets
remains unpaid and no Proceeding is pending or, to any of the Sellers’
Knowledge, threatened with respect to any Taxes whose assessment might result
in an Encumbrance on any of the Assets.


 


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


 


3.12                           LABOR MATTERS; COMPLIANCE


 


(a)           Except as
set forth in Section 3.12(a) of the Seller Disclosure Letter,


 


(i)                                           no
Seller is a party to or bound by any collective bargaining agreement with
regard to the Affected Employees;


 


(ii)                                        each
Seller and its Related Persons are in substantial compliance with all Legal
Requirements applicable to the Affected Employees with regard to employment and
employment practices, terms and conditions of employment, wages, and
occupational safety and health; and are not engaged in any unfair labor or
unfair employment practices;


 


(iii)                                     there
is no unfair labor practice charge or complaint against any Seller or any of
its Related Persons involving or related to Affected Employees pending (with
service of process having been made, or written notice of investigation or
inquiry having been served, on such Seller or any of its Related Persons), or
to Sellers’ Knowledge, threatened before the National Labor Relations Board or
any analogous state or local agency or any court and no charge, complaint or
grievance is pending or, to Sellers’ Knowledge, threatened to be filed;


 


27





















 


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


 


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


 


(vi)                                    no
union certification or decertification petition has been filed (with service of
process having been made on any Seller or any of its Related Persons), or to
Sellers’ Knowledge, threatened, that relates to Affected Employees and no union
authorization campaign has been conducted, in each case, within the past 18
months.


 


(b)           Sellers
have delivered to Buyer a list of all Affected Employees, the rate of all
compensation payable to each such employee in any and all capacities, including
any compensation that will be payable to each such employee in any and all
capacities other than the then current accrual of regular payroll compensation,
except in each case for any Transaction Bonuses.  Any of the Affected Employees can be
dismissed immediately for any reason or no reason without notice and without
further liability, subject to applicable laws, rules and regulations relating
to employment discrimination.  To Sellers’
Knowledge, none of the Affected Employees intend to terminate their employment
relationship with the Business.


 


3.13                           EMPLOYEE BENEFITS


 


(a)                                  Section
3.13(a) of the Seller Disclosure Letter contains a list of all Seller Benefit
Plans.  Sellers have made available for
review by Buyer copies of all Seller Benefit Plans (including all related
trusts, funding arrangements, most recent valuation reports and most recent
annual reports).


 


(b)                                 No
“pension plan” as defined in section 3(2) of ERISA that is maintained or
contributed to by any Seller or any ERISA Affiliate or with respect to which
any Seller or an ERISA Affiliate may have any liability (i) has an accumulated
funding deficiency as defined in section 302 of ERISA and section 412 of the
Code, whether or not waived; (ii) no waiver of minimum funding standards has
been requested or granted by the IRS; and (iii) no Encumbrance in favor of any
Seller Benefit Plan, the IRS or the Pension Benefit Guaranty Corporation exists
or has been threatened.  Except as set
forth in Section 3.13(b) of the Seller Disclosure Letter, neither Sellers nor
any ERISA Affiliate contributes to, has any obligation to contribute to, or has
any liability under or with respect to any “multiemployer plan,” as defined in
Section 3(37) of ERISA.  No material “reportable
event,” within the meaning of Section 4043 of ERISA, for which the thirty-day
reporting requirement has not been waived, and no event described in Sections
4062 or 4063 of ERISA, has occurred in connection with any Seller Benefit Plan
of the Sellers or any ERISA Affiliate. 
Neither Sellers nor any ERISA Affiliate have (1) engaged in, or is a
successor or parent corporation to an entity that has engaged in, a transaction
described in Sections 4069 or 4212(c) of ERISA or (2) except as set forth in
Section 3.13(b) of the Seller Disclosure Letter, incurred any liability or
potential liability under Title IV of ERISA arising in connection with the
termination of, or a complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA.


 


28





















 


(c)                                  No
Seller or any ERISA Affiliate has incurred any withdrawal liability under
Section 4201 of ERISA that could result in any liability to Buyer or
Encumbrance on any of the Assets.  The
requirements of COBRA have been met with respect to each such Seller Benefit
Plan which is an “employee welfare benefit plan,” as defined in Section 3(1) of
ERISA, subject to COBRA.


 


3.14                           COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS


 


(a)           Except as
set forth in Section 3.14(a) of the Seller Disclosure Letter:


 


(i)                                           Sellers
have complied with all Legal Requirements applicable to the conduct and
operation of the Business and the ownership or use of any of the Assets;


 


(ii)                                        With
regard to the Business and the Assets, to Sellers’ Knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
would be reasonably expected to constitute or result in a violation by any
Seller of, or a failure on the part of any Seller to comply with, any Legal
Requirement relating to the Business or the Assets; and


 


(iii)                                     No
Seller has received, at any time since January 31, 2002, any notice from any
Governmental Body regarding any actual, alleged or potential violation of, or
failure to comply with, any Legal Requirement with respect to the Business or
any of the Assets.


 


(b)           Section
3.14(b) of the Seller Disclosure Letter contains a list of each material
Governmental Authorization that is held by any Seller relating to or used in
the operation of the Business or the Assets. 
Each Governmental Authorization listed in Section 3.14(b) of the Seller
Disclosure Letter is in full force and effect. Except as set forth in Section
3.14(b) of the Seller Disclosure Letter:


 


(i)                                           Each
Seller is in compliance in all material respects with all of the terms and
requirements of each Governmental Authorization identified in Section 3.14(b)
of the Seller Disclosure Letter;


 


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


 


(iii)                                     No
Seller has received, at any time since January 31, 2002, any notice from any
Governmental Body regarding (A) any actual, alleged, possible or potential
violation of or failure to comply with any term or requirement of any


 


29





















 


Governmental
Authorization or (B) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of or modification to any
Governmental Authorization; and


 


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


 


(c)           The
Governmental Authorizations listed in Section 3.14(b) of the Seller Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit each Seller to lawfully conduct and operate the Business in the
manner in which it currently conducts and operates such Business and to permit
each Seller to own and use the Assets in the manner in which it currently owns
and uses such Assets.


 


3.15                           LEGAL PROCEEDINGS; ORDERS


 


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


 


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


 


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


 


Except as set forth in Section 3.15(a) of the Seller
Disclosure Letter, to Sellers’ Knowledge, no event has occurred or circumstance
exists that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding.


 


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


 


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


 


(ii)                                        to
Sellers’ Knowledge, no agent or employee of any Seller has been subject to any Order
that prohibits such agent or employee from engaging in or continuing any
conduct, activity or practice relating to the Business.


 


(c)           Except as
set forth in Section 3.15(c) of the Seller Disclosure Letter:


 


(i)                                           each
Seller is in compliance with all of the terms and requirements of each Order to
which it or any of the Assets is or has been subject;


 


30





















 


(ii)                                        no
event has occurred or circumstance exists that is reasonably likely to
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order to which any
Seller (with respect to the Business) or any of the Assets is subject; and


 


(iii)                                     no
Seller has received, at any time since January 31, 2003, any notice from any
Governmental Body regarding any actual, alleged or potential violation of, or
failure to comply with, any term or requirement of any Order to which such
Seller (with respect to the Business) or any of the Assets is or has been
subject.


 


3.16                           ABSENCE OF CERTAIN CHANGES AND EVENTS


 


Except as set forth in Section 3.16 of the Seller
Disclosure Letter or as otherwise permitted by this Agreement, since January
31, 2005, each Seller has conducted the Business only in the ordinary course of
the Business consistent with past practices or reasonable future expectations
and there has not been any:


 


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


 


(b)                                 material
damage, destruction, theft or loss affecting the Assets, except to the extent that
any Asset damaged, destroyed, stolen or lost has been replaced or repaired;


 


(c)                                  entry
into, termination of or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit or similar
Seller Contract to which any Seller is a party used in the operation of the
Business or Assets other than in the ordinary course of business, or (ii) any
Seller Contract described in Section 3.17(a) other than in the ordinary course
of business;


 


(d)                                 sale,
lease or other disposition of any Asset or property of any Seller (including
the Business Intellectual Property Assets) or the creation of any Encumbrance
(other than a Permitted Encumbrance) on any Asset, in each case other than in
the ordinary course of business;


 


(e)                                  cancellation
or waiver of any claims or rights relating to the Business or the Assets having
an aggregate value in excess of $100,000;


 


(f)                                    notification
by any significant customer or supplier of the Business of an intention to
discontinue or materially change the terms of its relationship with the
Business;


 


(g)                                 material
change in the accounting methods used by any Seller, which relates to the
Business or the Assets; or


 


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


 


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3.17                           CONTRACTS; NO DEFAULTS


 


(a)           Other than
the Seller Contracts set forth in Section 2.2(e) of the Seller Disclosure
Letter, Section 3.17(a) of the Seller Disclosure Letter contains an accurate
and complete list, and Sellers have made available to Buyer accurate and
complete copies, of:


 


(i)                                           each
Seller Contract (A) that involves performance of services or delivery of goods
or materials by any Seller of an amount of value in excess of $100,000; or (B)
that has a remaining term of more than one (1) year and that involves
performance of services or delivery of goods or materials by any Seller of an
amount of value in excess of $50,000;


 


(ii)                                        each
Seller Contract (A) that involves performance of services or delivery of goods
or materials to any Seller of an amount of value in excess of $100,000, or (B)
that has a remaining term of more than one (1) year and that involves
performance of services or delivery of goods or materials to any Seller of an
amount of value in excess of $50,000;


 


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


 


(iv)                                    each
Seller Contract affecting the ownership of, leasing of, title to, use of or any
leasehold or other interest in any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $75,000 and with a term of less
than one year);


 


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


 


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


 


(vii)                                 each
Seller Contract containing covenants that restrict any Seller’s business
activity or limit the freedom of such Seller to engage in any line of business
or to compete with any Person;


 


(viii)                              each
Seller Contract providing for payments to or by any Person based on sales,
purchases or profits, other than direct payments for goods;


 


(ix)                                      each
power of attorney of any Seller relating to the Business or the Assets that is
currently effective and outstanding;


 


(x)                                         each
Seller Contract for capital expenditures in excess of $100,000;


 


32





















 


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


 


(xii)                                   each
written warranty, guaranty and/or other similar undertaking with respect to
contractual performance extended by any Seller with respect to the Business
other than in the ordinary course of the Business consistent with past
practices;


 


(xiii)                                each
Bid that involves the performance of services or delivery of goods or materials
by any Seller of an amount of value in excess of $100,000, or that has a
remaining term of more than one (1) year and that involves performance of
services or delivery of goods or materials by any Seller of an amount of value
in excess of $50,000; and


 


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


 


(b)           Except as
set forth in Section 3.17(b) of the Seller Disclosure Letter:


 


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


 


(ii)                                        each
Seller Contract or Bid identified or required to be identified in Section
3.17(a) of the Seller Disclosure Letter or which is being assumed by Buyer
under this Agreement is assignable by the applicable Seller to Buyer without
the Consent of any other Person except as disclosed in or pursuant to Section
3.2(c).


 


(c)           Except as
set forth in Section 3.17(c) of the Seller Disclosure Letter:


 


(i)                                           each
Seller is in compliance with all applicable terms and requirements of each
Seller Contract which is being assumed by Buyer;


 


(ii)                                        no
Seller has released any of its rights under a Seller Contract which is assumed
by Buyer under this Agreement;


 


(iii)                                     to
Sellers’ Knowledge, each other Person that has or had any obligation or
liability under any Seller Contract which is being assumed by Buyer is in
compliance with all applicable terms and requirements of such Seller Contract;


 


(iv)                                    to
Sellers’ Knowledge, no event has occurred or circumstance exists that (with or
without notice or lapse of time) would reasonably be expected to contravene,
conflict with or result in a breach of, or give any Seller or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or payment under, or to cancel, terminate or
modify, any Seller Contract that is being assumed by Buyer under this
Agreement;


 


33





















 


(v)                                       to
Sellers’ Knowledge, no event has occurred or circumstance exists under or by
virtue of any Contract that (with or without notice or lapse of time) would
cause the creation of any Encumbrance (other than a Permitted Encumbrance)
affecting any of the Assets; and


 


(vi)                                    to
Sellers’ Knowledge, there is no Seller Contract listed in Section 3.17(a) of
the Seller Disclosure Letter to be assumed by Buyer on which Sellers are behind
schedule with respect to the timely delivery of any products or services.


 


(d)                                 Section
3.17(d) of the Seller Disclosure Letter sets forth a list of the Seller
Contracts described in Section 3.17(a)(i)(A) in respect of which any Seller has
current or future warranty obligations and, to Sellers’ Knowledge, a list of
all warranty claims of customers of the Business asserted in writing (including
by facsimile or electronic mail) against Sellers in respect of which the
necessary repairs or replacement have not been completed.


 


(e)                                  Each
of the Seller Contracts or Bids entered into since August 5, 2005 through the
date hereof have been entered into or issued in the ordinary course of business
consistent with past practice.


 


3.18                           INSURANCE


 


(a)                                  Section
3.18(a) of the Seller Disclosure Letter sets forth a list of all policies of
fire, casualty, liability, burglary, fidelity, workers’ compensation and other
forms of insurance held by each Seller that are material to the Business and
material details regarding each, including limits of liability, deductibles and
self insurance retentions.


 


(b)                                 All
premiums due and payable for the insurance listed in Section 3.18(a) of the
Seller Disclosure Letter have been duly paid, and such policies or extensions
or renewals thereof in such amounts will be outstanding and duly in full force
without interruption until the Closing Date.


 


(c)                                  Section
3.18(c) of the Seller Disclosure Letter describes, with respect to the Business
or Assets as of the date of this Agreement, by year, for the current policy
year and each of the two (2) preceding policy years (i) any self-insurance
arrangement by or affecting any Seller, including any reserves established
thereunder, and (ii) all obligations of any Seller to provide insurance
coverage to Third Parties (for example, under Leases or service agreements) and
identifies the policy under which such coverage is provided.


 


(d)                                 Section
3.18(d) of the Seller Disclosure Letter sets forth as of the date of this
Agreement, by year, for the current policy year and each of the two (2)
preceding policy years with respect to the Business or Assets:


 


(i)                                           a
summary of the loss experience under each policy of insurance;


 


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


 


34





















 


(A)                              the
name of the claimant;


 


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


 


(C)                                the
amount and a brief description of the claim; and


 


(iii)                                     a
statement describing the loss experience for all claims that were self-insured,
including the number and aggregate cost of such claims.


 


3.19                           ENVIRONMENTAL MATTERS


 


(a)                                  Except
as set forth in Section 3.19 of the Seller Disclosure Letter or except as would
not have an Environmental Material Adverse Effect, each Seller is in compliance
in all material respects with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and obligations of
Environmental Laws;


 


(b)                                 Except
as set forth in Section 3.19 of the Seller Disclosure Letter or except as would
not have an Environmental Material Adverse Effect, there are no Environmental
Liabilities pending or, to Sellers’ Knowledge, threatened by or before any
court or any other Governmental Body directed against any Seller relating to
the operation of the Business that pertain or relate to (i) any obligations of
any Seller under any applicable Environmental Law, (ii) violations by any
Seller of any Environmental Law, (iii) personal injury, property damage, or natural
resources damage claims relating to a Release of Hazardous Materials, or (iv)
response, removal, or remedial costs under CERCLA, RCRA or any similar state
laws;


 


(c)                                  Except
as set forth in Section 3.19 of the Seller Disclosure Letter or except as would
not have an Environmental Material Adverse Effect, all permits required under
Environmental Laws that are necessary for the lawful operation of the Business
by any Seller have been obtained and are in full force and effect and no Seller
has Knowledge of any basis for revocation or suspension of any such permits;


 


(d)                                 Except
as set forth in Section 3.19 of the Seller Disclosure Letter, no portion of any
of the Owned Property is listed on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability Information
System list under CERCLA, or any similar ranking or listing under any state
law;


 


(e)                                  Except
as set forth in Section 3.19 of the Seller Disclosure Letter or except as would
not have an Environmental Material Adverse Effect, no Seller has disposed or
Released any Hazardous Materials on, at, or under the Owned Property, other
than in compliance with Environmental Laws, and no Seller has Knowledge of any
Environmental Conditions on, at, or underlying such Owned Property other than
such Environmental Conditions that do not require remediation under
Environmental Laws; and


 


(f)                                    Except
as set forth in Section 3.19 of the Seller Disclosure Letter, there are no
written notices of violation, non-compliance, or similar notifications relating
to Environmental Liabilities currently pending or, to Sellers’ Knowledge,
threatened, relating or


 


35





















 


pertaining to the Business or the Owned Property that would reasonably
be expected to have an Environmental Material Adverse Effect.


 


3.20                           INTELLECTUAL PROPERTY


 


(a)                                  All
Intellectual Property, including the Intellectual Property Licenses, that
relates exclusively to the Business (the “Business Intellectual Property”) and
that constitutes Registered Intellectual Property is set forth in Section
3.20(a)(i) of the Seller Disclosure Letter (the “Owned Intellectual Property”).  Except as set forth in Section 3.20(a)(ii) of
the Seller Disclosure Letter, Sellers own, free and clear from all Encumbrances
(other than immaterial Encumbrances) or otherwise possesses legally enforceable
rights to all of the Business Intellectual Property.


 


(b)                                 Section
3.20(b)(i) of the Seller Disclosure Letter sets forth, with respect to the
Business, a complete list of all licenses (i) pursuant to which the use by any
Person of Intellectual Property is permitted by any Seller, or (ii) pursuant to
which the use by any Seller of the Intellectual Property of a Third Party is
permitted by any Person (other than commercial software) (collectively, the “Intellectual
Property Licenses”).  The Intellectual
Property Licenses are in full force and effect.


 


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


 


(d)                                 To
Sellers’ Knowledge, no Business Intellectual Property is being infringed or
misappropriated by a Third Party.  There
is no material claim or demand of any Third Party, or any Proceeding which is
pending (with service of process having been served on any Seller) or, to
Sellers’ Knowledge, any basis for or threat of any material claim or demand
that (i) challenges the ownership rights in respect of any Owned Intellectual
Property, (ii) challenges the validity, enforceability or inventorship of the
Business Intellectual Property or (iii) claims that any default exists under
any Intellectual Property License.


 


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


 


(f)                                    The
Assets include all of the Intellectual Property used in the Business other than
any Intellectual Property which is used only incidentally in the Business and
other than any Intellectual Property included in the Excluded Assets.


 


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3.21                           RELATED PARTY TRANSACTIONS


 


Except as set forth in Section 3.21 of the Seller
Disclosure Letter, no Seller or any of their respective Related Persons, nor,
to Sellers’ Knowledge, any current director, officer or employee of any Seller
or any their Related Persons, (a) has any direct or indirect interest (other
than owning two percent (2%) or less of the equity interests of a publicly
traded entity without any control of management) (i) in, or is a director,
officer or employee of, any Person that is a client, customer, supplier,
lessor, lessee, debtor, creditor or competitor of the Business, or (ii) in any
material property, asset or right which is owned or used by any Seller in the
conduct of the Business, or (b) is a party to any agreement or transaction with
any Seller relating to the Business.


 


3.22                           BROKERS OR FINDERS


 


Except for PPHB, L.P., no Seller has used any broker
or finder in connection with the transactions described in this Agreement, and
neither Buyer nor any of its Related Persons shall have any liability or
otherwise suffer or incur any loss or expense as a result of or in connection
with any brokerage or finder’s fee or other commission of any Person retained
by any Seller or any of its Related Persons in connection with the Contemplated
Transactions.


 


3.23                           LETTERS OF CREDIT


 


Section 3.23 of the Seller Disclosure Letter contains
all guaranties, letters of credit or other similar performance assurances of
the Business that benefit the customers or suppliers of the Business.


 


4.                                       Representations
and Warranties of Buyer and Buyer Entity


 


Buyer (with respect to himself) and Buyer Entity (with
respect to itself) represent and warrant to Sellers as follows:


 


4.1                                 ORGANIZATION AND GOOD STANDING


 


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


 


4.2                                 ENFORCEABILITY; AUTHORITY; NO CONFLICT


 


(a)                                  As
of the date hereof, Buyer has all requisite power and authority to enter into
this Agreement and the documents, to the extent required by this Agreement, to
be delivered by Buyer at the Closing and to perform his obligations hereunder
and thereunder, including the Contemplated Transactions.  This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect


 


37





















 


creditors’ rights generally and by legal and equitable limitations on
the availability of specific remedies. No further action is necessary on the
part of Buyer to execute and deliver this Agreement or to consummate the
Contemplated Transactions.


 


(b)                                 As
of the Closing Date, Buyer Entity has all requisite power and authority to assume
Buyer’s obligations under this Agreement and to enter into the documents to be
delivered by it at the Closing and to perform its obligations hereunder and
thereunder, including the Contemplated Transactions.  This Agreement has been duly executed and delivered
by Buyer Entity and constitutes a legal, valid and binding obligation of Buyer
Entity, enforceable against Buyer Entity in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect creditors’ rights generally and by legal and equitable limitations on
the availability of specific remedies. As of the Closing Date, this Agreement
and the Contemplated Transactions have been duly authorized by all necessary
action by Buyer Entity’s board of directors or comparable governing body.  No further corporate, shareholder or similar
action is necessary on the part of Buyer Entity to execute and deliver this
Agreement or to consummate the Contemplated Transactions.


 


(c)                                  Except
as set forth in Section 4.2(c) of the Buyer Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):


 


(i)                                           Conflict
with or violate the constituent documents of Buyer Entity as of the Closing
Date;


 


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


 


(iii)                                     To
Buyer’s Knowledge, contravene, conflict with or result in a violation or breach
of any Governmental Authorization, Legal Requirement or Order applicable to
Buyer or, as of the Closing Date, Buyer Entity or to which Buyer or, as of the
Closing Date, Buyer Entity may be subject.


 


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


 


(e)                                  As
of the Closing Date, Buyer Entity has assumed all of the obligations of Buyer
under this Agreement, subject to the terms of Section 13.8.  Buyer Entity is controlled directly or
indirectly by Buyer.


 


38





















 


4.3                                 CERTAIN PROCEEDINGS


 


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


 


4.4                                 INVESTIGATION


 


Buyer and, as of the Closing Date, Buyer Entity have
conducted their own independent review and analysis of the Business,
operations, assets (including inventories), liabilities, results of operations,
financial condition, software, technology, Business Intellectual Property and
prospects of the Business and acknowledges that it has been provided access to
the personnel, properties, premises and records of the Business for such
purpose.  In connection with Buyer’s and
Buyer Entity’s respective investigation of the Business, Buyer and Buyer Entity
have received certain projections, forecasts, plans and other forward-looking
information with respect to the Business and acknowledges that there are
uncertainties inherent in attempting to make such projections, forecasts and
plans, that Buyer and Buyer Entity are familiar with such uncertainties and
that Buyer and Buyer Entity are taking full responsibility for making their own
evaluation of the adequacy and accuracy of all projections, forecasts, plans and
other forward-looking information so furnished to it (including the
reasonableness of the assumptions underlying such projections, forecasts, plans
and other forward-looking information). 
In entering into or, in the case of Buyer Entity, assuming Buyer’s obligations
under, this Agreement, each of Buyer and, as of the Closing Date, Buyer Entity
acknowledges that each such Person has received offering and other marketing
materials, but that each such Person is a sophisticated and experienced buyer
in transactions similar to the Contemplated Transactions and has relied solely
upon its own investigation and analysis and the specific representations and
warranties of Sellers set forth in this Agreement.


 


4.5                                 BROKERS OR FINDERS


 


Neither Buyer nor, as of the Closing Date, Buyer
Entity has used any broker or finder in connection with the transactions
described in this Agreement, and neither Seller nor any of its Related Persons
shall have any liability or otherwise suffer or incur any loss or expense as a
result of or in connection with any brokerage or finder’s fee or other
commission of any Person retained by Buyer, Buyer Entity or any of their
respective Related Persons in connection with the Contemplated Transactions.


 


5.                                       Covenants
of Buyer and Sellers Prior to Closing


 


5.1                                 REQUIRED APPROVALS


 


(a)                                  Subject
to the terms and conditions of this Agreement, the parties hereto agree to use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under Legal
Requirements to consummate and


 


39





















 


make effective the Contemplated Transactions,
including cooperating fully with the other parties, including by provision of
information and making of all necessary filings in connection with, among other
things, the HSR Act.  The parties hereto
shall cooperate to cause to be filed as promptly as practicable, but no later
than ten calendar days, following the execution of this Agreement, with the
Federal Trade Commission and the Department of Justice the notification and
report form required under the HSR Act for the Contemplated Transactions and to
seek early termination of the waiting period thereunder, and shall use
reasonable efforts to provide any supplemental information that may be
reasonably requested in connection with those filings (it being understood that
the filing fee shall be borne by Buyer).


 


(b)                                 Buyer
and Sellers shall make as promptly as practicable following the date of this
Agreement the other notifications required in connection with this Agreement
and the Contemplated Transactions, and shall use commercially reasonable
efforts to obtain the Consents of all Third Parties required in connection with
the consummation of the Contemplated Transactions.  Subject to Legal Requirements, Buyer and
Sellers shall coordinate and cooperate in exchanging information and assistance
in connection with obtaining Consents of Third Parties and making all filings
or notifications necessary to transfer any Governmental Authorizations to
Buyer, or in connection with any applications for new Governmental
Authorizations relating to or used in the operation of the Business.


 


5.2                                 NOTIFICATION


 


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


 


5.3                                 COMMERCIALLY REASONABLE EFFORTS


 


Buyer and Sellers shall use their commercially
reasonable efforts to cause the conditions in Articles 7 and 8 to be satisfied.


 


5.4                                 BULK SALES LAWS


 


Buyer and Sellers hereby waive compliance with the
bulk-transfer provisions of the Uniform Commercial Code (or any similar law) (“Bulk
Sales Laws”) in connection with the Contemplated Transactions.


 


5.5                                 LETTERS OF CREDIT


 


From and after the Closing, to the extent that any
guaranty, letter of credit or other performance assurance set forth in Section
3.23 of the Seller Disclosure Letter is drawn upon or otherwise results in any
Liability to Sellers, Buyer shall promptly reimburse Sellers following the


 


40





















 


receipt of an invoice therefor; provided, that Buyer shall make such
reimbursement no later than ten (10) Business Days following receipt of such
invoice.  All amounts due under this Section
5.5 that are not paid on or before the due date shall bear interest at the rate
of ten percent (10%) per annum.  Buyer
shall not have any right to setoff any amounts due and payable to Sellers under
this Section 5.5 against any other payments to be made pursuant to this
Agreement or otherwise.  Nothing in this
Section 5.5 shall be deemed to affect Buyer’s rights under Article 11.


 


5.6                                 UPDATING


 


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


 


6.                                       Covenants
of Sellers Prior to Closing


 


6.1                                 ACCESS AND INVESTIGATION


 


Between the date of this Agreement and the Closing
Date, and upon reasonable advance notice received from Buyer, each Seller shall
(a) afford Buyer and its Representatives (collectively, “Buyer Group”) access,
during regular business hours, to Sellers’ personnel, properties, Seller
Contracts, Governmental Authorizations, books and Records and other documents
and data related to the Business and Assets, such rights of access to be
exercised in a manner that does not unreasonably interfere with the operations
of Sellers; (b) furnish Buyer Group with copies of all such Seller Contracts,
Governmental Authorizations, books and Records and other existing documents and
data related to the Business and Assets as Buyer may reasonably request; (c)
furnish Buyer Group with such additional financial, operating and other
relevant data and information regarding the Business and Assets as Buyer may
reasonably request; and (d) otherwise cooperate and assist, to the extent
reasonably requested by Buyer, with Buyer’s investigation of the properties,
assets and financial condition related to the Business and Assets. In addition,
Buyer shall have the right to have the Business Property and Tangible Personal
Property inspected by Buyer Group, at Buyer’s sole cost and expense, for
purposes of determining the physical condition and legal characteristics of the
Business Property and Tangible Personal Property.  Upon notice to Sellers, Buyer shall have the
right to conduct an environmental assessment of the Assets; provided that such
environmental assessment shall not unreasonably interfere with normal operation
of the Assets.  Buyer shall not, however,
be permitted to conduct any sampling, boring, drilling or other invasive
investigative activity with respect to the Assets.  Each Seller shall have the right to be
present during any environmental assessment of the Assets.  Buyer shall maintain, and shall cause its
officers, employees, Representatives, consultants and advisors to maintain, all
information obtained by Buyer


 


41





















 


pursuant to any environmental assessment or other due diligence
activity as strictly confidential, unless disclosure of any facts discovered
through such environmental assessment is required under any Environmental
Laws.  In the event that any necessary
disclosures under applicable Environmental Laws are required with respect to
matters discovered by any environmental assessment conducted by, for or on
behalf of Buyer, Buyer agrees that Sellers shall be the responsible parties for
disclosing such matters to the appropriate Governmental Bodies, unless Buyer is
required by Legal Requirement to make such disclosure, in which case Buyer
shall so notify Sellers and allow Sellers a reasonable time to prepare such
disclosure.


 


6.2                                 OPERATION OF THE BUSINESS


 


Between the date of this Agreement and the Closing,
with respect to the Business and Assets, unless Buyer otherwise consents in
writing, each Seller shall:


 


(a)                                  conduct
the Business only in the ordinary course of the Business consistent with past
practices or reasonable future expectations;


 


(b)                                 without
making any commitment on Buyer’s behalf, use its commercially reasonable
efforts to, in all material respects, preserve intact the current Business
organization, keep available the services of its employees and agents and
maintain its relations and goodwill with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with it;


 


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


 


(d)                                 not
hire any management personnel of the Business, make any changes to any Seller
Benefit Plan affecting the Affected Employees, or increase the wages, salaries
or benefits of any Affected Employee, other than in the ordinary course of
business;


 


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


 


(f)                                    use
its commercially reasonable efforts to keep in full force and effect, without amendment,
all material rights relating to the Business;


 


(g)                                 comply
with all Legal Requirements and use its commercially reasonable efforts to
comply with all contractual obligations applicable to the operations of the
Business;


 


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


 


(i)                                     not
enter into a Seller Contract or Bid described in Section 3.17(a) or relating to
Business Intellectual Property other than in the ordinary course of business;


 


42





















 


(j)                                     not
dispose of or permit to lapse any rights to the use of any Business
Intellectual Property or permit any Governmental Authorization to expire; and


 


(k)                                  maintain
all books and Records of Sellers relating to the Business in the ordinary
course of the Business consistent with past practices.


 


6.3                                 NEGATIVE COVENANT


 


Except as otherwise expressly permitted herein,
between the date of this Agreement and the Closing Date, each Seller shall not,
without the prior written Consent of Buyer, (a) take any affirmative action, or
fail to take any reasonable action within its control, as a result of which any
of the changes or events listed in Section 3.16 would occur or be reasonably
likely to occur; or (b) make any modification to any material Seller Contract
or Governmental Authorization.


 


6.4                                 TAX CLEARANCE CERTIFICATES


 


Promptly after the date hereof, Sellers shall apply
for tax clearance certificates from the State of Texas related to the state or
local sales or use Taxes with respect to the Business.


 


7.                                       Conditions
Precedent to Buyer’s Obligation to Close


 


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


 


7.1                                 ACCURACY OF REPRESENTATIONS; SELLERS’ PERFORMANCE


 


The representations and warranties of each Seller set
forth in this Agreement will be, if qualified by materiality, true and correct
in all respects, and if not so qualified, shall be true and correct in all
material respects (without giving effect to any supplement to the Seller
Disclosure Letter not approved in writing by Buyer), as of the Closing Date as
though made on and as of the Closing Date (except to the extent such
representations and warranties speak as of an earlier date).  Each of the agreements and covenants of
Sellers to be performed and complied with by Sellers pursuant to this Agreement
prior to or as of the Closing Date will have been duly performed and complied
with in all material respects.  Each
Seller shall have delivered to Buyer a certificate signed by one of its duly
authorized officers, dated the Closing Date, certifying, as of such date, (i)
that all representations and warranties (individually and collectively) of
Sellers in Article 3 are, if qualified by materiality, true and correct in all
respects, and if not so qualified, true and correct in all material respects
and (ii) that Sellers have performed and complied in all material respects with
all covenants and agreements (individually and collectively) contained in this
Agreement required to be performed and complied with by them at or prior to the
Closing Date.


 


7.2                                 HSR ACT


 


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


 


43





















 


7.3                                 ADDITIONAL DOCUMENTS


 


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


 


(a)           The
articles of incorporation, as amended (in the case of the Parent), or
certificate of incorporation, as amended (in the case of SSPS, SDDA and SPI),
or deed of trust (in the case of S&S Trust), duly certified as of a recent
date by the Secretary of State of the State of Texas or Delaware, as applicable,
or the Secretary of the Commonwealth of the Commonwealth of Pennsylvania;


 


(b)           Releases
of all Encumbrances on the Assets, other than Permitted Encumbrances;


 


(c)           Such other
documents as Buyer may reasonably request for the purpose of:


 


(i)                                           evidencing
the accuracy of any of Seller’s representations and warranties;


 


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


 


(iii)                                     evidencing
the satisfaction of any condition referred to in this Article 7.


 


7.4                                 NO PROCEEDINGS


 


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


 


7.5                                 NO CONFLICT


 


Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), contravene or conflict with or result in a violation
of or cause Buyer or any Related Person of Buyer to suffer any material adverse
consequence under (a) any applicable Legal Requirement or Order or (b) any
Legal Requirement or Order that has been published, introduced or otherwise
proposed by or before any Governmental Body, excluding Bulk Sales Laws.


 


44





















 


8.                                       Conditions
Precedent to each Seller’s Obligation to Close


 


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


 


8.1                                 ACCURACY OF REPRESENTATIONS; BUYER’S PERFORMANCE


 


The representations and warranties of Buyer set forth
in this Agreement will be, if qualified by materiality, true and correct in all
respects, and if not so qualified, shall be true and correct in all material
respects (without giving effect to any supplement to the Buyer Disclosure
Letter not approved in writing by Seller), as of the Closing Date as though
made on and as of the Closing Date (except to the extent such representations
and warranties speak as of an earlier date). 
Each of the agreements and covenants of Buyer to be performed and
complied with by Buyer pursuant to this Agreement prior to or as of the Closing
Date will have been duly performed and complied with in all material
respects.  Buyer shall have delivered to
Sellers a certificate signed by one of its duly authorized officers, dated the
Closing Date, certifying, as of such date (i) that all representations and
warranties (individually and collectively) of Buyer are, if qualified by materiality,
true and correct in all respects, and if not so qualified, true and correct in
all material respects and (ii) Buyer has performed and complied in all material
respects with all covenants and agreements (individually and collectively)
contained in this Agreement required to be performed and complied with by it at
or prior to the Closing Date.


 


8.2                                 HSR ACT


 


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


 


8.3                                 ADDITIONAL DOCUMENTS


 


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


 


(a)           The
Certificate of Incorporation and all amendments thereto of Buyer, duly
certified as of a recent date by the Secretary of State of the State of
Delaware;


 


(b)           Such other
documents as any Seller may reasonably request for the purpose of:


 


(i)                                           evidencing
the accuracy of any of Buyer’s representations and warranties;


 


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


 


(iii)                                     evidencing
the satisfaction of any condition referred to in this Article 8.


 


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8.4                                 NO PROCEEDINGS


 


There shall not be any Proceeding pending or
threatened against any Seller or Buyer (other than by or at the direction of
Sellers and their Affiliates) or against any Related Person of such Seller (a)
involving any challenge to, or seeking Damages or other relief in connection
with, any of the Contemplated Transactions or (b) that may have the effect of
preventing, delaying, making illegal, imposing limitations or conditions on or
otherwise interfering with any of the Contemplated Transactions.


 


8.5                                 NO CONFLICT


 


Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), contravene or conflict with or result in a violation
of or cause any Seller or any Related Person of such Seller to suffer any
material adverse consequence under (a) any applicable Legal Requirement or
Order or (b) any Legal Requirement or Order that has been published, introduced
or otherwise proposed by or before any Governmental Body, excluding Bulk Sales
Laws.


 


9.             Termination


 


9.1                                 TERMINATION EVENTS


 


By notice given prior to or at the Closing, subject to
Section 9.2, this Agreement may be terminated as follows:


 


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


 


(b)                                 by
either Representative Party (provided that neither the terminating
Representative Party nor any of its Affiliates is then in material breach of
any representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Representative Party
or a party Affiliated with the other Representative Party of any representation
or warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to other
Representative Party of such breach and which breach is reasonably likely, in
the opinion of the terminating Representative Party, to permit such
Representative Party to refuse to consummate the transactions contemplated by
this Agreement in accordance with the terms hereof;


 


(c)                                  by
either Representative Party (provided that neither the terminating
Representative Party nor any of its Affiliates is then in material breach of
any representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Representative Party
or a party Affiliated with the other Representative Party of any covenant or
agreement contained in this Agreement which cannot be or has not been cured
within ten (10) days after the giving of written notice to other Representative
Party of such breach and which breach is reasonably likely, in the opinion of
the terminating Representative Party, to permit such Representative Party to
refuse to consummate the transactions contemplated by this Agreement in
accordance with the terms hereof;


 


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(d)                                 by
either Representative Party in the event (i) any Consent of any Governmental
Body required for consummation of the transactions contemplated hereby shall
have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal
or (ii) the consummation of such transactions shall have been permanently and
restrained, enjoined or otherwise prohibited by force of law; or


 


(e)                                  by
either Representative Party in the event that the Closing shall not have been
consummated by December 31, 2005 (the “Termination Date”); provided that the
failure to consummate the transactions contemplated hereby on or before such
date shall not have been caused by any breach of this Agreement by the
Representative Party electing to terminate pursuant to this Section 9.1(e) or
an Affiliate of such Representative Party.


 


9.2                                 EFFECT OF TERMINATION


 


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


 


10.                                 Additional
Covenants


 


10.1                           EMPLOYEES AND EMPLOYEE BENEFITS


 


(a)                                  As
of the Closing Date, Sellers shall terminate the employment of all of the
Affected Employees (other than those who are on short-term disability
leave).  As soon as practicable after the
date of this Agreement, Buyer shall offer employment, effective as of the
Effective Time, to all persons who are or will be Affected Employees on the day
immediately preceding the Closing Date (other than those on short-term
disability leave).  Each Affected
Employee who accepts any such offer of employment shall be referred to in this
Agreement as a “Transferred Employee.” 
The offer of employment, including wages, salaries and benefits, shall
be, in the aggregate, substantially comparable, but excluding for this purpose
Transaction Bonuses, with the terms and conditions under which the Transferred
Employees were employed immediately before the Closing Date.  Any Affected Employee who is on short-term
disability leave as of the Closing Date shall remain employed by Sellers
through the Affected Employee’s short-term disability leave; provided, however,
that if he or she recovers from his or her disability within the period of his
or her short-term disability leave or the six-month period following the
Closing Date (whichever is shorter), Buyer shall at that time make an offer of


 


47





















 


employment to him or her on the same employment terms and conditions as
are applicable to similarly situated Transferred Employees, subject to the
proviso above.


 


(b)                                 Sellers
shall be responsible for the payment of all wages and other remuneration
accruing to any Affected Employee prior to the time any such Affected Employee
became a Transferred Employee, except to the extent the liability therefor is
reflected as a liability on the Closing Balance Sheet.


 


(c)                                  Sellers
shall be liable for all claims made by Affected Employees and their
beneficiaries under and all other liabilities of the Seller Benefit Plans.


 


(d)                                 Coverage
for Transferred Employees under all “employee welfare benefit plans,” as
defined in Section 3(1) of ERISA, maintained by Sellers shall cease as of the
Effective Time.  Sellers shall be solely
responsible for any continuation coverage required by COBRA for those Affected
Employees of Sellers who are not Transferred Employees.  Buyer shall waive all pre-existing
conditions, limitations or exclusions and waiting periods for the Transferred
Employees under all employee welfare benefit plans and fringe benefit programs
of Buyer, including vacation, bonus and other incentive programs maintained by
Buyer.


 


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


 


(f)                                    Effective
as of the Closing Date (or as to employees on short-term disability leave on
the Closing Date, as of the date of employment by Buyer), Buyer shall take such
actions as are necessary to grant past service credit for all the Transferred
Employees for purposes of determining vesting, eligibility and benefit accruals
under all Buyer’s employee benefit programs in which Transferred Employees are
eligible to participate, including employee retirement plans, severance,
vacation, bonus, incentive compensation and employee welfare benefit plans of
Buyer equal to that which such Transferred Employees were credited with by
Sellers as of the Closing Date for service with Sellers and their current and
former ERISA Affiliates, but excluding benefit accruals for Buyer’s defined
benefit pension and post-retirement medical benefit plans.


 


(g)                                 With
respect to events following the Closing, Buyer shall be responsible for sending
timely and appropriate notices to all Transferred Employees required under all
applicable Legal Requirements relating to plant or facility closings or
otherwise regulating the termination of employees.  To the extent that any liability is incurred
under any such Legal Requirements based on Buyer’s failure to comply with
Section 10.1(a) or Buyer’s actions after


 


48





















 


the Closing, Buyer will be solely and exclusively responsible for all
obligations and liabilities incurred under such Legal Requirements relating to
the Contemplated Transactions.


 


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


 


10.2                           NONSOLICITATION


 


(a)                                  Until
the date three (3) years after the Closing Date, no Seller shall (and each
Seller shall cause its Affiliates not to), without the prior written consent of
Buyer, directly or indirectly, knowingly hire, retain or attempt to hire or
retain any employee or contract employee of Buyer or interfere with the
relationship or prospective employment relationship between Buyer and any
Affected Employee, or any of Buyer’s employees or contract employees; provided,
however, that such Seller shall not be prohibited from hiring, retaining
or attempting to hire or retain any person who responds to a general
solicitation or advertisement.


 


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


 


10.3                           CUSTOMER AND OTHER BUSINESS RELATIONSHIPS


 


For a period of ninety (90) days after the Closing,
each Seller will cooperate with Buyer on a commercially reasonable basis at
Buyer’s sole cost in its efforts to continue and maintain for the benefit of
Buyer those business relationships of such Seller existing prior to the Closing
and relating to the Business after the Closing, including relationships with
lessors, employees, regulatory authorities, licensors, customers, suppliers and
others.


 


10.4                           RETENTION OF AND ACCESS TO RECORDS


 


(a)                                  For
the greater of five years from the Closing Date and any period as may be
required by any statute, regulation or Governmental Body or any then pending
litigation, Buyer shall maintain in the same manner that it currently maintains
its business records and files the business records and files of Sellers that
are transferred to Buyer in connection herewith, and in anticipation of, or
preparation for, existing or future Proceeding or any Tax audit in which Sellers
or any of its Affiliates is involved and which is related to the Business or
the Assets, permit Sellers and their Representatives reasonable access to such
records and files during regular business hours and upon reasonable notice at
Buyer’s principal places of business or at any location where the records are
stored; provided, however, that (i) any access shall be had or
done in a manner so as not to interfere with the normal conduct of the Business
and (ii) Buyer


 


49





















 


shall not be required to provide access to any confidential record or
records, the disclosure of which would violate any governmental statute or
regulation or applicable confidentiality agreement with any Person.  Buyer shall notify Parent in writing at least
ten days prior to any destruction of such transferred records and files prior
to the end of the period referenced in the preceding sentence, and at Parent’s
option, deliver such records and files to Parent.


 


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


 


10.5                           FURTHER ASSURANCES


 


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 the other party may reasonably request for the purpose
of carrying out the intent of this Agreement and the Contemplated Transactions.


 


10.6                           PROVISIONS RELATING TO CERTAIN ASSETS


 


(a)                                  To
the extent that a Seller Contract or Governmental Authorization is not capable
of being sold, assigned, transferred, subcontracted or conveyed without the
approval, consent or waiver of the issuer thereof or the other party thereto,
or any Third Party (including a Governmental Body), and such approval, consent
or waiver has not been obtained prior to the Closing, or if such sale,
assignment, transfer or conveyance or attempted sale, assignment, transfer or
conveyance would constitute a breach thereof or a violation of any Legal
Requirement, neither this Agreement nor any other Transaction Agreement shall
constitute a sale, assignment, transfer or conveyance thereof, or an attempted
sale, assignment, transfer or conveyance thereof.


 


(b)                                 Anything
in this Agreement to the contrary notwithstanding, a Seller is not obligated to
sell, assign, transfer or convey to Buyer any of its rights or obligations in
or to any of the Seller Contracts or Governmental Authorizations without first
obtaining all necessary approvals, consents or waivers; provided, however,
that the foregoing shall not limit Sellers’ liability for a breach of Section
3.14 or Section 5.1.  Buyer and Sellers
shall cooperate with each other to obtain all approvals, consents or waivers
necessary to convey to Buyer each such Seller Contract or Governmental
Authorization, as soon as practicable; provided, however, that
neither such Seller nor Buyer shall be obligated to offer or pay any
consideration or concession therefor to the Third Party from whom such
approval, consent or waiver is requested. 
Other than the Consents set forth on Exhibit 7.2, the failure by any
Seller to obtain any such approval, consent


 


50





















 


or waiver necessary to convey any Seller Contract or Governmental
Authorization to Buyer shall not affect the obligations of the parties to close
hereunder; provided that such Seller uses commercially reasonable efforts to
cause the economic benefit of each Seller Contract to be furnished to Buyer.


 


(c)                                  To
the extent any of the approvals, consents or waivers necessary to convey any
Seller Contract or Governmental Authorization to Buyer have not been obtained
by any Seller as of the Closing or to the extent any Seller Contract or
Governmental Authorization cannot be transferred to Buyer by the Closing, then
Buyer and such Seller shall enter into a Subcontract with respect to any such
Seller Contract, and such Seller shall, during the remaining term of such
Seller Contract or Governmental Authorization, use commercially reasonable
efforts, to (i) at the request of Buyer, cooperate with Buyer to obtain the
consent of any such Third Party; provided, however, that neither such Seller nor Buyer shall be obligated to
offer or pay any consideration to any Person, (ii) at the request of Buyer,
cooperate with Buyer in any reasonable and lawful arrangements designed to
provide the benefits of such Seller Contract or Governmental Authorization to
Buyer, (iii) as it pertains to Seller Contracts, enforce, at the request of
Buyer and at the expense and for the account of Buyer, any rights of such
Seller arising from such Seller Contract against the issuer thereof or the
other party or parties thereto (including the rights to elect to terminate any
such Seller Contract in accordance with the terms thereof upon the request of
Buyer); and (iv) as it pertains to Governmental Authorization, at the request
and expense of Buyer, apply for any necessary renewals or extensions
thereof.  To the extent that any Seller
enters into lawful arrangements satisfactory to Buyer in its sole discretion
designed to provide the benefits of any such Seller Contract or Governmental
Authorization to Buyer as set forth in clauses (i) through (iv) above, such
Seller Contract or Governmental Authorization shall be deemed to have been
conveyed to Buyer for the purposes of this Agreement.


 


10.7                           SUPPORT


 


(a)                                  From
and after the Closing, in the event and for so long as any Seller actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstances, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction relating to the Business
(including during such period prior to Closing), Buyer will cooperate
reasonably with Sellers and Sellers’ counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be reasonably requested in connection with the contest or
defense, all at the reasonable out-of-pocket expense of Sellers (unless Sellers
are entitled to indemnification therefor hereunder).  This Section 10.7 is not intended to alter
applicable discovery procedures in connection with any litigation between or
among the parties hereto.


 


(b)                                 From
and after Closing, Buyer will cooperate reasonably with Sellers and Sellers’
counsel, make available their personnel, assist in preparing and making
filings, and provide such access to their books and records as shall be
reasonably requested in connection with the closing, termination,
de-registration or other activities associated with Sellers’ closing of


 


51





















 


the foreign branches or offices of the Business that are registered or
otherwise held in the name of or on behalf of any Seller or its Affiliates.


 


10.8                           BUYER ACKNOWLEDGMENT


 


Buyer acknowledges and understands that, except to the
extent expressly set forth in the Transition Services Agreement and the Supply
Agreement, benefits that the Business realizes as a result of arrangements that
Parent and its Subsidiaries have with third parties will not be available to
Buyer after the Closing Date.


 


11.                                 Indemnification;
Remedies


 


11.1                           SURVIVAL


 


All representations, warranties, covenants and
obligations in this Agreement, the Seller Disclosure Letter, the amendment(s)
or supplement(s) to the Seller Disclosure Letter, the Buyer Disclosure Letter,
the certificates delivered pursuant to Section 2.9 and any other certificate or
document delivered pursuant to this Agreement shall survive the Closing and the
consummation of the Contemplated Transactions, subject to Section 11.6. The
waiver of any condition based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement or
other remedy based upon such representations, warranties, covenants and
obligations.


 


11.2                           INDEMNIFICATION AND REIMBURSEMENT BY SELLERS


 


Sellers will jointly and severally indemnify, defend
and hold harmless Buyer, and its Representatives, shareholders, subsidiaries
and Related Persons (collectively, the “Buyer Indemnitees”), and will reimburse
Buyer Indemnitees for any loss, Liability, claim, damage, expense (including
costs of investigation and defense and reasonable attorneys’ fees and
expenses), whether or not involving a Third Party Claim (collectively, “Damages”),
arising from or in connection with:


 


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


 


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


 


(c)                                  if
the Closing occurs, any Liability arising out of the ownership or operation of
the Assets prior to the Effective Time, except to the extent such Liability
arises out of or relates to an Assumed Liability;


 


52





















 


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


 


(e)                                  if
the Closing occurs, any Seller Benefit Plan; or


 


(f)                                    if
the Closing occurs, any Retained Liabilities.


 


11.3                           INDEMNIFICATION AND REIMBURSEMENT BY BUYER


 


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


 


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


 


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


 


(c)                                  if
the Closing occurs, any Liability arising out of the ownership or operation of
the Business or Assets following the Effective Time except to the extent such
Liability constitutes a Retained Liability;


 


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


 


(e)                                  if
the Closing occurs, any Assumed Liabilities; or


 


(f)                                    if
the Closing occurs, except with respect to any Proceeding arising out of or
relating to the Liabilities retained pursuant to Section 2.4(b)(iii), any
Liability arising out of any Proceeding (including the obligation to handle
such Proceeding) commenced after the Effective Time and arising out of or
relating to any occurrence or event happening at or after the Effective Time.


 


11.4                           LIMITATIONS ON AMOUNT — SELLERS


 


From and after the Closing, Sellers shall have no
liability (for indemnification or otherwise) with respect to claims under
Section 11.2(a) until the total of all Damages with respect to such matters
exceeds [***] in the aggregate and then only for the amount by which


 


53





















 


such Damages exceed [***]; provided, however,
that in no event shall Sellers’ aggregate liability (for indemnification or
otherwise) with respect to claims under Section 11.2(a) exceed [***].  Notwithstanding anything to the contrary
herein, the limitations set forth in this Section 11.4 will not apply if the
Closing does not occur or to a breach of any representation or warranty set
forth in Section 3.1, 3.2, 3.7, 3.11(a) or 3.22.


 


11.5                           LIMITATIONS ON AMOUNT — BUYER


 


From and after Closing, Buyer shall have no liability
(for indemnification or otherwise) with respect to claims under Section 11.3(a)
until the total of all Damages with respect to such matters exceeds [***] in
the aggregate and then only for the amount by which such Damages exceed [***]; provided,
however, that in no event shall Buyer’s aggregate liability (for
indemnification or otherwise) with respect to claims under Section 11.3(a)
exceed [***].  Notwithstanding anything
to the contrary herein, the limitations set forth in this Section 11.5 will not
apply if the Closing does not occur or to a breach of any representation or
warranty set forth in Section 4.1, 4.2 or 4.5.


 


11.6                           TIME LIMITATIONS


 


The several representations and warranties of the
parties to this Agreement shall survive the Closing Date for a period of
eighteen (18) months from the Closing Date; provided, that the (a) the
representations and warranties set forth in (a) Sections 3.1, 3.2, 3.22, 4.1,
4.2 and 4.5 shall survive the Closing Date without limitation, (b) Section 3.11
and Section 3.13 shall survive for 180 days following the expiration of any
statutes of limitation under applicable law and (c) Section 3.19 shall survive
for five years from the Closing Date (the period during which the
representations and warranties shall survive being referred to herein with
respect to such representations and warranties as the “Survival Period”), and
shall be effective with respect to any inaccuracy therein or breach thereof
(and a claim for indemnification under Article 11 hereof may be made thereon)
if a written notice asserting the claim and specifying the factual basis of the
claim in reasonable detail to the extent then known by the notifying party
shall have been given within the Survival Period with respect to such matter.  Any claim for indemnification made during the
Survival Period shall be valid and the representations and warranties relating
thereto shall remain in effect for purposes of such indemnification
notwithstanding such claim may not be resolved within the Survival Period.  The agreements and covenants set forth herein
shall survive without limitation.


 


11.7                           PROCEDURE


 


All claims for indemnification under this Article 11
shall be asserted and resolved as follows:


 


(a)                                  A
Person entitled to indemnification under Section 11.2 or 11.3 (an “Indemnitee”),
promptly after it becomes aware of facts giving rise to a right of
indemnification under this Agreement, shall give written notice thereof to the
Person obligated to indemnify under such section (an “Indemnitor”), stating the
amount of the Damages, if known, and method of computation thereof, all with
reasonable particularity, and stating with particularity the nature


 


54





















 


of the matter and basis of the claim for indemnity under this
Agreement.  For purposes of this Section
11.7(a), receipt by a party of written notice of any demand, assertion, claim,
action or proceeding (judicial, administrative or otherwise) by or from any
Person other than a party to this Agreement that gives rise to Damages on behalf
of the party shall constitute the awareness of facts giving rise to a right of
indemnification by it under this Agreement and shall require prompt notice of
the receipt of such matter as provided in the first sentence of this Section
11.7(a).  Failure to provide the notice
shall not affect the right of the Indemnitee to indemnification except to the
extent the Indemnitor is materially prejudiced by the Indemnitee’s failure to
give such notice.


 


(b)                                 If
an Indemnitee should have Damages against any Indemnitor hereunder that does
not involve a Third Party Claim, the Indemnitee shall provide the Indemnitor a
written notice with respect to the Damages. 
If the Indemnitor does not notify the Indemnitee within 30 calendar days
from its receipt of the written notice of Damages that the Indemnitor disputes
the Damages, the Damages specified by the Indemnitee in the claim notice shall
be deemed a liability of the Indemnitor hereunder.  If the Indemnitor has timely disputed the
Damages as provided above, such dispute shall be resolved subject to the
provisions of this Agreement.


 


(c)                                  If
an Indemnitee shall have a Third Party Claim asserted against it, the
Indemnitee shall provide the Indemnitor written notice of the Damages relating
to the Third Party Claim (a “Third Party Claim Notice”).  Within 15 Business Days following receipt by
an Indemnitor of a Third Party Claim Notice (the “Election Period”), the
Indemnitor shall advise the Indemnitee in writing (i) whether the Indemnitor
disputes its potential liability to the Indemnitee under this Article 11 with
respect to the Third Party Claim and (ii) whether the Indemnitor elects, at its
sole cost and expense, to defend the Indemnitee against such Third Party Claim.


 


(d)                                 If
the Indemnitor notifies the Indemnitee within the Election Period of its
election to assume the defense of the Third Party Claim in accordance with
Section 11.7(c) above, the Indemnitor shall have the obligation to defend, at
its sole cost and expense, the Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted diligently by the Indemnitor to a final
conclusion or settled at the discretion of the Indemnitor in accordance with
this Section 11.7(d); provided, that the Indemnitor shall not settle or
compromise any such Third Party Claim without the prior consent of the
Indemnitee (which consent shall not be unreasonably withheld conditioned or
delayed) unless (i) the terms of such compromise or settlement require no more
than the payment of money (i.e. such settlement or compromise shall not require
the admission of wrongdoing by the Indemnitee, impose any obligations upon the
Indemnitee or deprive the Indemnitee of any rights), (ii) the full amount of
such monetary settlement or compromise will be paid by the Indemnitor, and (iii)
the Indemnitee receives as part of such settlement or compromise a legal,
binding and enforceable unconditional satisfaction and/or release from any and
all further actions or liabilities relating to the subject matter of the Third
Party Claim.  The Indemnitor shall have
full control of such defense and proceedings, including, subject to the
preceding sentence, any compromise or settlement thereof.  The Indemnitee is hereby authorized to file,
during the Election Period, any motion, answer or other pleadings that the
Indemnitee shall, in good faith, deem necessary or appropriate to protect its
interest or those of the Indemnitor and not prejudicial to the Indemnitor (it
being understood and agreed that if the Indemnitee takes any such action that
is prejudicial and conclusively causes a


 


55





















 


final adjudication adverse to the Indemnitor, the Indemnitor shall be
relieved of its obligations hereunder with respect to the Third Party Claim to
the extent so adjudicated).  If requested
by the Indemnitor, the Indemnitee agrees, at the sole cost and expense of the
Indemnitor, to cooperate with the Indemnitor and its counsel in contesting any
Third Party Claims, including by making of any related counterclaim against the
Person asserting the Third Party Claim or any cross-complaint against any
Person.  The Indemnitee shall have the
right to participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnitor pursuant to this Section
11.7(d), and shall bear its own costs and expenses with respect to any such
participation.


 


(e)                                  If
an Indemnitor fails to notify an Indemnitee within the Election Period that the
Indemnitor elects to defend the Indemnitee pursuant to Section 11.7(c) or if
the Indemnitor fails to diligently defend or settle the Third Party Claim or to
prosecute any appropriate counterclaim against the Person making the Third
Party Claim or any cross-complaint against any Person, or if the Indemnitee
reasonably objects to such election on the grounds that counsel for such
Indemnitee cannot represent both the Indemnitor and the Indemnitee because such
representation would be reasonably likely to result in a conflict of interest,
then the Indemnitee shall have the right but not the obligation to defend, at
the sole cost and expense of the Indemnitor (but only if the Indemnitee
actually is entitled to indemnification hereunder), the Third Party Claim by
such proceedings deemed reasonably appropriate by the Indemnitee and its
counsel.  The Indemnitee shall have full
control of such defense and proceedings, including any compromise or settlement
of the Third Party Claim; provided, that the Indemnitee shall not enter into
any compromise or settlement of such Third Party Claim without the Indemnitor’s
consent, which shall not be unreasonably withheld or delayed.  If requested by the Indemnitee, the
Indemnitor shall, at the sole cost and expense of the Indemnitor, cooperate
with the Indemnitee and its counsel in contesting any Third Party Claim that
the Indemnitee 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.  Notwithstanding the foregoing in this Section
11.7(e), if the Indemnitor has delivered a written notice to the Indemnitee to
the effect that the Indemnitor disputes its potential liability to the
Indemnitee under this Article 11 and if such dispute is resolved in favor of
the Indemnitor, the Indemnitor shall not be required to bear the costs and
expenses of the Indemnitee’s defense pursuant to this Article 11 or of the
Indemnitor’s participation therein at the Indemnitee’s request, and the
Indemnitee shall reimburse the Indemnitor in full for all reasonable costs and
expenses of the Indemnitor in connection with the Third Party Claim, excluding,
however, any litigation with respect to its indemnity obligation
hereunder.  The Indemnitor shall have the
right to participate in, but not control, any defense or settlement controlled
by the Indemnitee pursuant to this Section 11.7(e), and the Indemnitor shall
bear its own costs and expenses with respect to any such participation.


 


11.8                           PAYMENT


 


(a)                                  Payments
of all amounts owing by an Indemnitor as a result of a Third Party Claim shall
be made within five Business Days after the earlier of (i) the settlement of
the Third Party Claim and (ii) the expiration of the period of appeal of a
final adjudication of the Third Party Claim.  Payments of all amounts owing by an Indemnitor
other than as a result of a


 


56





















 


Third Party Claim shall be made within five Business Days after the
later of (i) 30 days after the expiration of the Election Period or (ii) if
contested through dispute resolution proceedings, the expiration of the period
for appeal of a final adjudication of the Indemnitor’s liability to the
Indemnitee under this Agreement. 
Notwithstanding the foregoing, if the Indemnitor has not contested its
indemnity obligations hereunder and has not elected to assume the defense of a
Third Party Claim, the Indemnitor shall reimburse (promptly after the receipt
of each invoice therefor) the Indemnitee for the reasonable and documented
out-of-pocket costs and expenses incurred by the Indemnitee in contesting the
Third Party Claim.


 


11.9                           NO SET-OFF


 


Neither Buyer nor any Seller shall have any right to
setoff any Damages against any payments to be made by either of them pursuant
to this Agreement, any other Transaction Agreement or otherwise.


 


11.10                     INSURANCE


 


The Indemnitor shall be subrogated to the rights of
the Indemnitee in respect of any insurance relating to Damages to the extent of
any indemnification payments made hereunder for such Damages.


 


11.11                     NO DUPLICATION


 


Any Liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such Liability constituting a breach of more than one
representation, warranty, covenant or agreement.


 


11.12                     REMEDIES


 


(a)                                  The
parties agree that, except as provided in Section 13.5, the sole and exclusive
remedy of any party hereto or their respective Affiliates with respect to this
Agreement and in any other agreement delivered by any Seller or Buyer in
connection with the Contemplated Transactions (collectively, the “Transaction
Agreements”) or any other claims relating to the Business, the events giving
rise to this Agreement and the other Transaction Agreements and the
Contemplated Transactions shall be limited to the indemnification provisions
set forth in this Article 11; provided that this limitation shall not
apply in the event of fraud; and provided further that if an Indemnitor
shall breach or threaten to commit a breach of any of its restrictive covenants
set forth in this Agreement or any other Transaction Agreement (the “Restrictive
Covenants”), any Indemnitee shall have the right in addition to, and not in
lieu of, any other rights and remedies available to such Indemnitee, under law
or in equity, to have the Restrictive Covenants specifically enforced by any
court, including the right to seek entry against such Indemnitor, any of its
Affiliates and any shareholder, officer, director, employee of each of the
foregoing of restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) against violations, threatened or actual, and whether
or not then continuing, of the Restrictive Covenants, it being acknowledged and
agreed that money damages will not provide such Indemnitee an adequate remedy.


 


57





















 


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


 


11.13                     NO SPECIAL DAMAGES


 


IN NO EVENT SHALL ANY PARTY BE LIABLE UNDER THIS
ARTICLE 11 OR OTHERWISE IN RESPECT OF THIS AGREEMENT FOR EXEMPLARY, SPECIAL,
PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES EXCEPT TO THE
EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD PARTY IN CONNECTION
WITH A THIRD PARTY CLAIM, IN WHICH EVENT SUCH DAMAGES SHALL BE RECOVERABLE.


 


12.                                 Confidentiality


 


12.1                           DEFINITION OF CONFIDENTIAL INFORMATION


 


(a)                                  As
used in this Article 12, the term “Confidential Information” includes any and
all of the following information of any Seller or Buyer that has been or may
hereafter be disclosed in any form, whether in writing, orally, electronically
or otherwise, or otherwise made available by observation, inspection or
otherwise by either party (Buyer on the one hand or Sellers on the other hand)
or its Representatives (collectively, a “Disclosing Party”) to the other party
or its Representatives (collectively, a “Receiving Party”):


 


(i)                                           all
information that is a trade secret under applicable trade secret or other law;


 


(ii)                                        all
information concerning product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer hardware, Software and database
technologies, systems, structures and architectures;


 


(iii)                                     all
information concerning the business and affairs of the Disclosing Party (which
includes historical and current financial statements, financial projections and
budgets, tax returns and accountants’ materials, historical, current and projected
sales, capital spending budgets and plans, business plans, strategic plans,
marketing and advertising plans, publications, client and customer lists and
files, contracts, the names and backgrounds of key personnel and personnel
training techniques and materials, however documented), and all information
obtained from review of the Disclosing Party’s documents or property or
discussions with the Disclosing Party regardless of the form of the
communication; and


 


58





















 


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


 


(b)                                 Any
trade secrets of a Disclosing Party shall also be entitled to all of the
protections and benefits under applicable trade secret law and any other
applicable law. If any information that a Disclosing Party deems to be a trade
secret is found by a court of competent jurisdiction not to be a trade secret
for purposes of this Article 12, such information shall still be considered
Confidential Information of that Disclosing Party for purposes of this Article
12 to the extent included within the definition.  In the case of trade secrets, each Disclosing
Party, hereby waives any requirement that the other party submit proof of the
economic value of any trade secret or post a bond or other security.


 


12.2                           RESTRICTED USE OF CONFIDENTIAL INFORMATION


 


(a)                                  Each
Receiving Party acknowledges the confidential and proprietary nature of the
Confidential Information of the Disclosing Party and agrees that such
Confidential Information (i) shall be kept confidential by the Receiving Party;
(ii) shall not be used for any reason or purpose other than to evaluate and
consummate the Contemplated Transactions; and (iii) without limiting the
foregoing, shall not be disclosed by the Receiving Party to any Person, except
in each case as otherwise expressly permitted by the terms of this Agreement or
with the prior written consent of an authorized Representative of Sellers with
respect to Confidential Information of Sellers (each, a “Seller Contact”) or an
authorized Representative of Buyer with respect to Confidential Information of
Buyer (each, a “Buyer Contact”). Each of Buyer and Sellers shall disclose the
Confidential Information of the other party only to its Representatives who
require such material for the purpose of evaluating the Contemplated
Transactions and are informed by Buyer or Sellers, as the case may be, of the
obligations of this Article 12 with respect to such information.  Each of Buyer and Sellers shall (A) enforce
the terms of this Article 12 as to its respective Representatives; (B) take
such action to the extent necessary to cause its Representatives to comply with
the terms and conditions of this Article 12; and (C) be responsible and liable
for any breach of the provisions of this Article 12 by it or its
Representatives.


 


(b)                                 Unless
and until this Agreement is terminated, Sellers shall maintain as confidential
any Confidential Information (including for this purpose any information of
Sellers of the type referred to in Sections 12.1(a)(i), (ii) and (iii), whether
or not disclosed to Buyer) of Sellers relating to any of the Assets or the Assumed
Liabilities. Notwithstanding the preceding sentence, Sellers may use any
Confidential Information of Sellers before the Closing in the ordinary course
of the Business consistent with past practices in connection with the
transactions permitted by Section 6.2.


 


(c)                                  From
and after the Closing, the provisions of Section 12.2(a) above shall not apply
to or restrict in any manner Buyer’s use of any Confidential Information of
Sellers relating solely to any of the Assets or the Assumed Liabilities.


 


59





















 


12.3                           EXCEPTIONS


 


Sections 12.2(a) and (b) do not apply to that part of
the Confidential Information of a Disclosing Party that a Receiving Party
demonstrates (a) was, is or becomes generally available to the public other
than as a result of a breach of this Article 12 or the Confidentiality
Agreement by the Receiving Party or its Representatives; (b) was or is
developed by the Receiving Party independently of and without reference to any
Confidential Information of the Disclosing Party; or (c) was, is or becomes
available to the Receiving Party on a nonconfidential basis from a Third Party
not bound by a confidentiality agreement or any legal, fiduciary or other
obligation restricting disclosure. Sellers shall not disclose any Confidential
Information of Sellers relating to any of the Assets or the Assumed Liabilities
in reliance on the exceptions in clauses (b) or (c) above.


 


12.4                           LEGAL PROCEEDINGS


 


If a Receiving Party becomes compelled in any
Proceeding or is requested by a Governmental Body having regulatory
jurisdiction over the Contemplated Transactions to make any disclosure that is
prohibited or otherwise constrained by this Article 12, that Receiving Party
shall provide the Disclosing Party with prompt notice of such compulsion or
request so that it may seek an appropriate protective order or other
appropriate remedy or waive compliance with the provisions of this Article 12.
In the absence of a protective order or other remedy, the Receiving Party may
disclose that portion (and only that portion) of the Confidential Information
of the Disclosing Party that, based upon advice of the Receiving Party’s
counsel, the Receiving Party is legally compelled to disclose or that has been
requested by such Governmental Body, provided, however, that the
Receiving Party shall use reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded by any Person to whom any Confidential
Information is so disclosed. The provisions of this Section 12.4 do not apply
to any Proceedings between the parties to this Agreement.  Notwithstanding anything to the contrary in
this Article 12 or elsewhere in this Agreement, any Seller may disclose any
Confidential Information to the extent it reasonably believes such disclosure
is required to comply with the requirements of any applicable Legal
Requirement, including the rules and regulations of the New York Stock
Exchange.


 


12.5                           RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION


 


If this Agreement is terminated, each Receiving Party
shall (a) destroy all Confidential Information of the Disclosing Party prepared
or generated by the Receiving Party without retaining a copy of any such
material; (b) promptly deliver to the Disclosing Party all other Confidential
Information of the Disclosing Party, together with all copies thereof, in the
possession, custody or control of the Receiving Party or, alternatively, with
the written consent of a Seller Contact or a Buyer Contact (whichever
represents the Disclosing Party) destroy all such Confidential Information; and
(c) certify all such destruction in writing to the Disclosing Party, provided,
however, that the Receiving Party may retain a list that contains
general descriptions of the information it has returned or destroyed to
facilitate the resolution of any controversies after the Disclosing Party’s
Confidential Information is returned.


 


60





















 


12.6                           ATTORNEY-CLIENT PRIVILEGE


 


The Disclosing Party is not waiving, and will not be deemed
to have waived or diminished, any of its attorney work product protections,
attorney-client privileges or similar protections and privileges as a result of
disclosing its Confidential Information (including Confidential Information
related to pending or threatened litigation) to the Receiving Party, regardless
of whether the Disclosing Party has asserted, or is or may be entitled to
assert, such privileges and protections. The parties (a) share a common legal
and commercial interest in all of the Disclosing Party’s Confidential
Information that is subject to such privileges and protections; (b) are or may
become joint defendants in Proceedings to which the Disclosing Party’s
Confidential Information covered by such protections and privileges relates; (c)
intend that such privileges and protections remain intact should either party
become subject to any actual or threatened Proceeding to which the Disclosing
Party’s Confidential Information covered by such protections and privileges
relates; and (d) intend that after the Closing the Receiving Party shall have
the right to assert such protections and privileges. No Receiving Party shall
admit, claim or contend, in Proceedings involving either party or otherwise,
that any Disclosing Party waived any of its attorney work-product protections,
attorney-client privileges or similar protections and privileges with respect
to any information, documents or other material not disclosed to a Receiving
Party due to the Disclosing Party disclosing its Confidential Information
(including Confidential Information related to pending or threatened
litigation) to the Receiving Party.


 


13.                                 General
Provisions


 


13.1                           EXPENSES


 


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


 


13.2                           PUBLIC ANNOUNCEMENTS


 


Except as may be required to comply with the
requirements of any applicable Legal Requirement or the rules and regulations
of any stock exchange or national market system upon which the securities of
any Seller or Buyer are listed, no party will issue any press release or other
public announcement relating to the subject matter of this Agreement or the
Contemplated Transactions without the prior approval (which approval will not
be unreasonably withheld or delayed) of the other party; provided, however,
that, after the Closing, any Seller or Buyer will be entitled to issue any such
press release or make any such other public announcement without obtaining such
prior approval if it has previously provided a copy of the press release or
other public announcement to the other party for a reasonable period of time
for review and comment.


 


61





















 


13.3                           NOTICES


 


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


 


	
  Sellers:

  	
  Stewart & Stevenson
  Services, Inc.

  
	
   

  	
  2707 North Loop West,
  Suite 800

  
	
   

  	
  Houston, Texas 77008

  
	
   

  	
  Attention: General
  Counsel

  
	
   

  	
  Facsimile: (713)
  868-2130

  
	
   

  	
  Confirm:  (713) 868-7700

  
	
   

  	
   

  
	
  with a mandatory
  copy to:

  	
  Fulbright &
  Jaworski L.L.P.

  
	
   

  	
  1301 McKinney, Suite
  5100

  
	
   

  	
  Houston, Texas
  77010-3095

  
	
   

  	
  Attention: Charles H.
  Still

  
	
   

  	
  Facsimile: (713)
  651-5246

  
	
   

  	
  Confirm:  (713) 651-5151

  
	
   

  	
   

  
	
  Buyer:

  	
  c/o Parman Capital
  Group, LLC

  
	
   

  	
  Attention: Hushang
  Ansary

  
	
   

  	
  1000 Louisiana, Suite
  5900

  
	
   

  	
  Houston, Texas 77002

  
	
   

  	
  Facsimile:  713-659-3137

  
	
   

  	
  Confirm:  713-650-0071

  
	
   

  	
   

  
	
  with a mandatory
  copy to:

  	
  Jones Day

  
	
   

  	
  Attention: William F.
  Henze II

  
	
   

  	
  222 East 41st Street

  
	
   

  	
  New York, NY 10017

  
	
   

  	
  Facsimile: 212-755-7306

  
	
   

  	
  Confirm: 212-326-3939

  
	
   

  	
   

  



 


13.4                           DISPUTE RESOLUTION


 


In the event of any dispute or controversy (except for
any dispute or controversy arising out of (i) the allocation of related and
personal property Taxes that is to be resolved in accordance with Section 2.5
or (ii) the calculation of Closing Net Asset Value that is to be resolved in
accordance with Section 2.11) arising out of or relating to this Agreement, or
any matter relating hereto or the Contemplated Transactions (the “Dispute”),
the parties shall first try


 


62





















 


to resolve the dispute by mutual agreement.  If the parties are unable to resolve the
Dispute by entering into a written settlement agreement within 30 days
following a party’s delivery of a written notice of a Dispute, setting forth in
reasonable detail the circumstances and basis for the Dispute (“Notice of
Dispute”), the Dispute shall be determined by binding arbitration in accordance
with the rules for commercial arbitration of the American Arbitration
Association then in effect (subject to any contrary provision in this
Agreement).  Judgment upon the award
shall be final and may be entered in any court having jurisdiction thereof.  The place of arbitration shall be Houston,
Texas.  The arbitrators shall determine
the arbitrability of any and all Disputes arising out of or related to this
Agreement, including the existence, validity, and scope of this agreement to
arbitrate.  The arbitrator(s) shall be
qualified by education, experience, or training to decide the matters in the
Dispute.  The arbitrator(s) shall apply
any statutes of limitations applicable under Texas law to the claims and
defenses asserted in the Dispute Delivery of the Notice of Dispute shall toll
the running of any applicable statutes of limitations.  Notwithstanding the foregoing, in the event
that a Dispute requires emergency relief before the matter may be resolved
pursuant to the arbitration provisions provided herein, the provisions of this
Section 13.4 shall not prohibit an action for injunctive or other forms of
ancillary relief or a writ of mandamus filed in connection with such Dispute; provided,
however, the arbitration provisions provided herein shall still govern the
resolution of the Dispute.


 


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


 


13.5                           ENFORCEMENT OF AGREEMENT


 


(a)                                  Each
Seller acknowledges and agrees that Buyer would be irreparably damaged if any
of the provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by such Seller could not
be adequately compensated in all cases by monetary damages alone. Accordingly,
in addition to any other right or remedy to which Buyer may be entitled, at law
or in equity, it shall be entitled to enforce any provision of this Agreement
by a decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of any of the
provisions of this Agreement, without posting any bond or other undertaking.


 


(b)                                 Buyer
acknowledges and agrees that Sellers would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by Buyer could not be
adequately compensated in all cases by monetary damages alone. Accordingly, in
addition to any other right or remedy to which any Seller may be entitled, at
law or in equity, it shall be entitled to enforce any provision of this
Agreement by a decree of specific performance and to temporary,


 


63





















 


preliminary and permanent injunctive relief to prevent breaches or
threatened breaches of any of the provisions of this Agreement, without posting
any bond or other undertaking.


 


13.6                           WAIVER; REMEDIES CUMULATIVE


 


The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither any failure nor any delay
by any party in exercising any right, power or privilege under this Agreement
or any of the documents referred to in this Agreement will operate as a waiver
of such right, power or privilege, and no single or partial exercise of any
such right, power or privilege will preclude any other or further exercise of
such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or any of the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of that party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.


 


13.7                           ENTIRE AGREEMENT AND MODIFICATION


 


This Agreement supersedes all prior agreements,
whether written or oral, between the parties with respect to its subject matter
(including any letter of intent, exclusivity agreement and any confidentiality
agreement between Buyer and any one or more of the Sellers) and constitutes
(along with the Seller Disclosure Letter, the Buyer Disclosure Letter, the
Exhibits and other documents delivered pursuant to this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter.  None of
this Agreement, the Seller Disclosure Letter or the Buyer Disclosure Letter may
be amended, supplemented, or otherwise modified except by a written agreement
executed by the party to be charged with the amendment.


 


13.8                           ASSIGNMENTS, SUCCESSORS AND NO THIRD PARTY RIGHTS


 


No party may assign any of its rights or delegate any
of its obligations under this Agreement without the prior written consent of
the other parties; provided, however that Buyer may assign its
rights or delegate its obligations hereunder to any Person that is directly or
indirectly controlled by him, and upon the later of any such Assignment or the
payment of the Purchase Price (including the Adjustment Amount) be released
from all obligations under this Agreement. 
Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon and inure to the benefit of the successors and
permitted assigns of the parties.  Except
such rights as shall inure to a successor or permitted assignee pursuant to
this Section 13.8, nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy or claim under or with respect to this Agreement or
any provision of this Agreement, including, with respect to any Transferred
Employee or legal representative thereof, any right to employment for any
specified period or of any nature or kind whatsoever.


 


64





















 


13.9                           SEVERABILITY


 


If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.


 


13.10                     CONSTRUCTION


 


The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to “Articles,” and “Sections”
refer to the corresponding Articles and Sections of this Agreement, the Seller
Disclosure Letter and the Buyer Disclosure Letter.


 


13.11                     TIME OF ESSENCE


 


With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.


 


13.12                     GOVERNING LAW


 


Except as set forth in the next sentence, this
Agreement will be governed by and construed under, and any Dispute determined
in accordance with, the laws of the State of Texas without regard to
conflicts-of-laws principles that would require the application of any other
law.


 


13.13                     EXECUTION OF AGREEMENT


 


This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties transmitted by
facsimile shall be deemed to be their original signatures for all purposes.


 


65





















 


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


 


 


	
   

  	
   /s/ Hushang Ansary

  	
   

  
	
   

  	
  Hushang Ansary

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson Services, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John B. Simmons

  	
   

  
	
   

  	
  Name: John B. Simmons

  
	
   

  	
  Title: Senior Vice President, Chief Financial
  Officer and

  
	
   

  	
   Treasurer

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson Petroleum Services, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John B. Simmons

  	
   

  
	
   

  	
  Name: John B. Simmons

  
	
   

  	
  Title: Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson International, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John B. Simmons

  	
   

  
	
   

  	
  Name: John B. Simmons

  
	
   

  	
  Title: President and Treasurer

  
	
   

  	
   

  
	
   

  	
  Sierra
  Detroit Diesel Allison, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John B. Simmons

  	
   

  
	
   

  	
  Name: John B. Simmons

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  S&S
  Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Don Mueller

  	
   

  
	
   

  	
  Name: Don Mueller

  
	
   

  	
  Title: President

  



 


66





















 


Schedules are omitted in
accordance with Item 601(b)(2) of Regulation S-K. Schedules will be provided by
the Company to the Securities and Exchange Commission upon request.


 


67