Document:

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.

 

31

 

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.

 

36

 

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.

 

45

 

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;

 

46

 

(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.

 

67Exhibit 10.2

 

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.,

CERTAIN SUBSIDIARIES

OF

STEWART & STEVENSON SERVICES, INC.

AND

HUSHANG ANSARY

DATED AS OF OCTOBER 24, 2005

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and Usage

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  USAGE

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Sale and Transfer of
  Assets; Closing

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  ASSETS TO BE SOLD

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  EXCLUDED ASSETS

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  CONSIDERATION

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  LIABILITIES

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  PRORATIONS OF CERTAIN
  PROPERTY TAXES

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  SALES AND TRANSFER TAXES;
  RECORDING FEES

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  ALLOCATION

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  CLOSING

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  CLOSING OBLIGATIONS

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
  ADJUSTMENT AMOUNT AND
  PAYMENT

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
  ADJUSTMENT PROCEDURE

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.12

  	
  PURCHASED SUBSIDIARIES

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [***]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Representations and
  Warranties of Sellers

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  ORGANIZATION AND GOOD
  STANDING

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  ENFORCEABILITY; AUTHORITY;
  NO CONFLICT

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  FINANCIAL STATEMENTS

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  BOOKS AND RECORDS

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  CONDITION AND SUFFICIENCY
  OF ASSETS

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
  DESCRIPTION OF BUSINESS
  PROPERTY

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.7

  	
  TITLE TO ASSETS;
  ENCUMBRANCES

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
  ACCOUNTS RECEIVABLE

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
  INVENTORIES

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
  INTENTIONALLY DELETED

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.11

  	
  TAXES

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.12

  	
  LABOR MATTERS; COMPLIANCE

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.13

  	
  EMPLOYEE BENEFITS

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.14

  	
  COMPLIANCE WITH LEGAL
  REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.15

  	
  LEGAL PROCEEDINGS; ORDERS

  	
  34

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  3.16

  	
  ABSENCE OF CERTAIN CHANGES
  AND EVENTS

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.17

  	
  CONTRACTS; NO DEFAULTS

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.18

  	
  INSURANCE

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.19

  	
  ENVIRONMENTAL MATTERS

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.20

  	
  INTELLECTUAL PROPERTY

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.21

  	
  RELATED PARTY TRANSACTIONS

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.22

  	
  BROKERS OR FINDERS

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.23

  	
  LETTERS OF CREDIT

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.24

  	
  PURCHASED SUBSIDIARIES

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Representations and
  Warranties of Buyer and Buyer Entity

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  ORGANIZATION AND GOOD
  STANDING

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  ENFORCEABILITY; AUTHORITY;
  NO CONFLICT

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  CERTAIN PROCEEDINGS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  INVESTIGATION

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  BROKERS OR FINDERS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Covenants of Buyer and
  Sellers Prior to Closing

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  REQUIRED APPROVALS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  NOTIFICATION

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  COMMERCIALLY REASONABLE
  EFFORTS

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  BULK SALES LAWS

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  LETTERS OF CREDIT

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  UPDATING

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Covenants of Sellers Prior
  to Closing

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  ACCESS AND INVESTIGATION

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  OPERATION OF THE BUSINESS

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  NEGATIVE COVENANT

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  CURRENT EVIDENCE OF TITLE

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  LOUISIANA FACILITIES

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Conditions Precedent to
  Buyer’s Obligation to Close

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  ACCURACY OF
  REPRESENTATIONS; SELLERS’ PERFORMANCE

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  HSR ACT

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  ADDITIONAL DOCUMENTS

  	
  52

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  NO PROCEEDINGS

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  NO CONFLICT

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Conditions Precedent to
  each Seller’s Obligation to Close

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  ACCURACY OF
  REPRESENTATIONS; BUYER’S PERFORMANCE

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  HSR ACT

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  ADDITIONAL DOCUMENTS

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  NO PROCEEDINGS

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  NO CONFLICT

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Termination

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  TERMINATION EVENTS

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  EFFECT OF TERMINATION

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Additional Covenants

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  EMPLOYEES AND EMPLOYEE
  BENEFITS

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  NONSOLICITATION

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  CUSTOMER AND OTHER
  BUSINESS RELATIONSHIPS

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  RETENTION OF AND ACCESS TO
  RECORDS

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  FURTHER ASSURANCES

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  INTENTIONALLY DELETED

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.7

  	
  PROVISIONS RELATING TO
  CERTAIN ASSETS

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.8

  	
  SUPPORT

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Indemnification; Remedies

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  SURVIVAL

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  INDEMNIFICATION AND
  REIMBURSEMENT BY SELLERS

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  INDEMNIFICATION AND
  REIMBURSEMENT BY BUYER

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  LIMITATIONS RELATED TO
  ENVIRONMENTAL MATTERS

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  LIMITATIONS ON AMOUNT —
  SELLERS

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  LIMITATIONS ON AMOUNT —
  BUYER

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.7

  	
  TIME LIMITATIONS

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.8

  	
  PROCEDURE

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.9

  	
  PAYMENT

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.10

  	
  NO SET-OFF

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.11

  	
  INSURANCE

  	
  66

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  11.12

  	
  NO DUPLICATION

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13

  	
  REMEDIES

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.14

  	
  NO SPECIAL DAMAGES

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.15

  	
  EXPRESS NEGLIGENCE

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Confidentiality

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  DEFINITION OF CONFIDENTIAL
  INFORMATION

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.2

  	
  RESTRICTED USE OF
  CONFIDENTIAL INFORMATION

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.3

  	
  EXCEPTIONS

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.4

  	
  LEGAL PROCEEDINGS

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.5

  	
  RETURN OR DESTRUCTION OF
  CONFIDENTIAL INFORMATION

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.6

  	
  ATTORNEY-CLIENT PRIVILEGE

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  General Provisions

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  EXPENSES

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  PUBLIC ANNOUNCEMENTS

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3

  	
  NOTICES

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.4

  	
  DISPUTE RESOLUTION

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.5

  	
  ENFORCEMENT OF AGREEMENT

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.6

  	
  WAIVER; REMEDIES
  CUMULATIVE

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.7

  	
  ENTIRE AGREEMENT AND
  MODIFICATION

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.8

  	
  ASSIGNMENTS, SUCCESSORS
  AND NO THIRD PARTY RIGHTS

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.9

  	
  SEVERABILITY

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.10

  	
  CONSTRUCTION

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.11

  	
  TIME OF ESSENCE

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.12

  	
  GOVERNING LAW

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.13

  	
  EXECUTION OF AGREEMENT

  	
  75

  

 

iv

 

	
  Exhibits

  
	
  Exhibit 2.9(a)(i)

  	
   

  	
  Form of Bill of Sale,
  Assignment and Assumption Agreement

  
	
  Exhibit 2.9(a)(iii)

  	
   

  	
  Form of Assignment and
  Assumption of Lease

  
	
  Exhibit 2.9(a)(iv)

  	
   

  	
  Form of Assignment of
  Registered Intellectual Property

  
	
  Exhibit 2.9(a)(xiii)

  	
   

  	
  Form of Confirmation of
  Closing

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sections
  of Seller Disclosure Letter

  
	
  Section 1.1(A)

  	
   

  	
  IT Employees

  
	
  Section 1.1(B)

  	
   

  	
  Knowledge

  
	
  Section 1.1(C)

  	
   

  	
  Purchased Subsidiaries

  
	
  Section 2.1(j)

  	
   

  	
  Internet Domain Names

  
	
  Section 2.1(l)

  	
   

  	
  Certain Information
  Technology Assets

  
	
  Section 2.1(m)

  	
   

  	
  Bank Accounts with Money
  to be Transferred

  
	
  Section 2.2(c)

  	
   

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

  
	
  Section 2.2(e)

  	
   

  	
  Excluded Seller Contracts

  
	
  Section 2.2(o)

  	
   

  	
  Excluded Claims Against
  Third Parties

  
	
  Section 2.2(p)

  	
   

  	
  Excluded Business Property

  
	
  Section 2.2(q)

  	
   

  	
  Other Excluded Assets

  
	
  Section 2.4(a)(vi)

  	
   

  	
  Other Assumed Liabilities

  
	
  Section 2.9(a)(xvi)

  	
   

  	
  Resignations

  
	
  Section 2.13(a)

  	
   

  	
  [***]

  
	
  Section 3.2(b)

  	
   

  	
  Conflict

  
	
  Section 3.2(c)

  	
   

  	
  Notices or Consents

  
	
  Section 3.3

  	
   

  	
  Financial Statements

  
	
  Section 3.5(a)

  	
   

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

  
	
  Section 3.5(b)

  	
   

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

  
	
  Section 3.5(c)

  	
   

  	
  Sufficiency of Assets

  
	
  Section 3.5(d)

  	
   

  	
  Condition of Assets

  
	
  Section 3.6

  	
   

  	
  Description of Business
  Property

  
	
  Section 3.7(a)(1)

  	
   

  	
  Real Estate Encumbrances

  
	
  Section 3.7(a)(2)

  	
   

  	
  Permitted Real Estate
  Encumbrances

  
	
  Section
  3.7(c)(1)

  	
   

  	
  Non-Real
  Estate Encumbrances

  
	
  Section 3.7(c)(2)

  	
   

  	
  Permitted Non-Real Estate
  Encumbrances

  
	
  Section 3.8

  	
   

  	
  Accounts Receivable as of
  September 3, 2005

  
	
  Section 3.9

  	
   

  	
  Inventories

  
	
  Section 3.11

  	
   

  	
  Taxes

  
	
  Section 3.12(a)

  	
   

  	
  Labor Disputes; Compliance

  
	
  Section 3.12(b)

  	
   

  	
  Compensation of Affected
  Employees and Purchased Subsidiary Employees

  
	
  Section 3.13(a)

  	
   

  	
  Seller Benefit Plans

  
	
  Section 3.13(b)

  	
   

  	
  ERISA Matters

  
	
  Section 3.13(d)

  	
   

  	
  Purchased Subsidiary Plans

  
	
  Section 3.14(a)

  	
   

  	
  Compliance with Legal
  Requirements

  
	
  Section 3.14(b)

  	
   

  	
  Governmental
  Authorizations

  
	
  Section 3.15(a)

  	
   

  	
  Legal Proceedings

  
	
  Section 3.15(b)

  	
   

  	
  Orders

  

 

 

	
  Section 3.15(c)

  	
   

  	
  Compliance with Orders

  
	
  Section 3.16

  	
   

  	
  Certain Changes and Events

  
	
  Section 3.17(a)

  	
   

  	
  List of Certain Seller
  Contracts

  
	
  Section 3.17(b)

  	
   

  	
  Enforceability of Certain
  Seller Contracts

  
	
  Section 3.17(c)

  	
   

  	
  Compliance with Certain
  Seller Contracts

  
	
  Section 3.17(d)

  	
   

  	
  Warranty Claims

  
	
  Section 3.18(a)

  	
   

  	
  List of Insurance Policies

  
	
  Section 3.18(c)

  	
   

  	
  Self Insurance; Third
  Party Insurance Arrangements

  
	
  Section 3.18(d)

  	
   

  	
  Loss Experience

  
	
  Section 3.19

  	
   

  	
  Environmental Matters

  
	
  Section 3.20(a)(i)

  	
   

  	
  Owned Intellectual
  Property

  
	
  Section 3.20(a)(ii)

  	
   

  	
  Intellectual Property
  Encumbrances

  
	
  Section 3.20(b)(ii)

  	
   

  	
  Licenses

  
	
  Section 3.21

  	
   

  	
  Related Party Transactions

  
	
  Section 3.23

  	
   

  	
  Letters of Credit

  
	
  Section 3.24(b)

  	
   

  	
  Outstanding Equity
  Securities of the Purchased Subsidiaries

  
	
  Section 3.24(d)

  	
   

  	
  Undisclosed Liabilities of
  Purchased Subsidiaries

  
	
  Section 3.24(e)

  	
   

  	
  Purchased Subsidiaries’
  Bank Account Information

  
	
  Section 6.1(b)

  	
   

  	
  Phase II ESAs

  
	
  Section 7.3(d)

  	
   

  	
  OEM Consents

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sections of Buyer
  Disclosure Letter

  
	
  Section 1.1

  	
   

  	
  Knowledge

  
	
  Section 4.2(c)

  	
   

  	
  Conflicts

  
	
  Section 4.2(d)

  	
   

  	
  Notices or Consents

  
	
   

  	
   

  	
   

  

 

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase
Agreement (“Agreement”) is dated October 24, 2005, by and among Hushang Ansary
(“Buyer”), Stewart & Stevenson Services, Inc., a Texas corporation (“Parent”),
and the Subsidiaries (as defined below) of Parent that are signatories to this
Agreement (together with Parent, “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 and the Purchased Subsidiaries 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 and Purchased Subsidiary, (b) all other accounts or
notes receivable of each Seller and Purchased Subsidiary related to the
Business and the full benefit of all security for such accounts or notes and
(c) any claim, remedy or other right of any Seller or Purchased Subsidiary
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 the IT Employees, 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 and the
Purchased Subsidiary Employees.

 

“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.

 

1

 

“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.

 

“Assets” — as defined in
Section 2.1.

 

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

 

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

 

“ASTM” means the American
Society for Testing and Materials.

 

“ASTM Standards” means the
then-current, published, applicable ASTM guidelines relating to the
characteristics referenced.

 

“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; provided, that for the avoidance of doubt the term “Business”
excludes the DES Business, the TVS Business and the EPD Business.

 

“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.

 

“Buyer Group” — as defined
in Section 6.1.

 

“Buyer Indemnitees” — as
defined in Section 11.2.

 

2

 

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

 

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

 

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

 

“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)(xiii).

 

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

 

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

 

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

 

“Customer 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 or a Purchased Subsidiary) 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
and which is separately managed from the Business.  The DES Business includes (i) the
manufacturing, packaging and marketing of reciprocating diesel and natural gas
engine generator sets, including the engineering, procurement and construction
activities related thereto, (ii) the completion of construction projects and
(iii) the satisfaction of customer warranty obligations and operations and
maintenance obligations of this discontinued operation.

 

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

 

3

 

“Dispute” — as defined in
Section 13.4.

 

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

 

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

 

“Encumbrance” — any charge,
claim, condition, equitable interest, lien, option, pledge, security interest,
mortgage, right of way, easement, encroachment, servitude, right of 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.

 

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

 

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

 

“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, or any common law theories or provisions, pertaining to the
protection of human health or the Environment, including but not limited to 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., the Occupational Safety and Health Act,
29 U.S.C. §651  et seq. and the standard
promulgated thereunder by the Occupational Safety and Health Administration,
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.

 

4

 

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

 

“EPD Business” — the Engineered
Products Division of Parent, including (i) the design, manufacturing, service
and sale of equipment for coiled tubing, acidizing, fracturing, pumping
(including nitrogen pumping equipment), railcar movers, silicon controlled
rectifiers and switchgear equipment, and other related well servicing products
and equipment, (ii) contract manufacturing of seismic equipment, (iii) the
Hybrid Bus Business, (iv) the Snow Blower Business, and (v) the furnishing of
advisory, consulting and aftermarket activities related to any of the
foregoing.

 

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

 

“ERISA Affiliate”  — any other entity that, together with any
Seller or, prior to the Closing, any Purchased Subsidiary, 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.

 

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

 

“Financial Statements” — as
defined in Section 3.3.

 

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

 

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

 

5

 

“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 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 under
Environmental Laws, including any material, substance or waste which is defined
as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely
hazardous waste,” “restricted hazardous waste” or “toxic substance” under any
provision of Environmental Law, and including petroleum, petroleum products and
byproducts, friable asbestos 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 11.8(a).

 

“Indemnitor” — as defined in
Section 11.8(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.

 

6

 

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

 

“Initial Net Asset Value” — [***],
which is the excess of total assets over 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).

 

“Inventories” — all
inventories of Sellers and the Purchased Subsidiaries 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 or the Purchased Subsidiaries 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.

 

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

 

“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(B) 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 or Purchased Subsidiary 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.

 

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

 

7

 

“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.

 

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

 

“Net Asset Value” — the
excess of total assets over current liabilities of the Business, as reflected
on the Initial Balance Sheet or on the Closing Balance Sheet, as required by
the context; provided, that, for this purpose the net asset value
of the assets and liabilities of the Purchased Subsidiaries shall be used
rather than the net asset value of Outstanding Equity Securities and all inter-company
accounts of the Purchased Subsidiaries shall be excluded.

 

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

 

“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.

 

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

 

“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.

 

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

 

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

 

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

 

“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.

 

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

 

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

 

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

 

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

 

8

 

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

 

“Purchase Price” — as
defined in Section 2.3.

 

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

 

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

 

“Purchased Subsidiary
Employees” — all employees of the Purchased Subsidiaries.

 

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

 

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

 

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

 

“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, a Purchased Subsidiary or owned by a Third
Party who has granted a right of any sort with respect to such Intellectual
Property to a Seller or a Purchased Subsidiary, 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 of 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).

 

9

 

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 twenty percent (20%)
of the outstanding voting power of a Person or equity securities or other
equity interests representing at least twenty percent (20%) 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.

 

“Remedial Action” or “Remediate”
— all actions required under applicable Environmental Laws or the provisions of
a Lease that are necessary to: (a) investigate, study, assess, measure, clean
up, remove, treat or in any other way address the Release, or minimize the
further Release, of any Hazardous Materials, including use of monitoring and
natural attenuation; (b) prevent the Release of any Hazardous Material where
such action is required under applicable Environmental Laws; (c) perform
pre-remedial studies and investigations or post-remedial monitoring and care;
or (d) bring all Facilities that are Assets and the operations conducted
thereon into compliance with Environmental Laws; provided, however, in no event
shall this be deemed to include the cleanup, investigation, study, assessment,
measurement, removal, or treatment of any Hazardous Materials that are
determined by the relevant Governmental Body to be present in
naturally-occurring levels for that location, or in any concentration in
landfills, landfarms, or other disposal areas that are permitted or authorized
pursuant to any applicable Environmental Law.

 

“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 11.13(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,

 

10

 

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 or Purchased Subsidiary 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, Purchased Subsidiary Employees
or their respective 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, Purchased Subsidiary Employees or their respective
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 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 or Purchased Subsidiary has or may acquire any rights or
benefits; (b) under which any Seller or Purchased Subsidiary has or may become
subject to any obligation or liability; or (c) by which any Seller or Purchased
Subsidiary 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.

 

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

 

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

 

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

 

“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

 

11

 

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.

 

“Survival Period” — as
defined in Section 11.7.

 

“Tangible Personal Property”
— all machinery, equipment (including machinery and equipment held for rental
to Third Parties), tools, furniture, office equipment, computer hardware,
supplies, materials, vehicles and other items of tangible personal property
(other than Inventories) of every kind owned or leased by any Seller or
Purchased Subsidiary 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.

 

“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.

 

“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 11.13(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).

 

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

 

12

 

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;

 

(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

 

13

 

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 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 and Owned Property
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 or any Purchased Subsidiary 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 and
Purchased Subsidiary 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 owned
by 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 and the Purchased Subsidiaries 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

 

14

 

recover damages for any and
all infringements, misappropriations or dilutions of any Business Intellectual
Property;

 

(i)                                     all rights of Sellers and the Purchased
Subsidiaries 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;

 

(k)                                  the Outstanding Equity Securities;

 

(l)                                     the assets listed or described in Section
2.1(l) of the Seller Disclosure Letter;

 

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

 

(n)                                 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 Power Products Division of
Sellers that is reported in Parent’s publicly disclosed consolidated financial
statements as the Power Products Segment, including the Power Products Segment’s
sale and rental of various industrial equipment; sale of components,
replacement parts, accessories and other materials supplied by independent
manufacturers; provision of in-shop and on-site repair services for industrial,
transportation, marine, construction, power generation and material handling
equipment; fabrication, marketing and packaging of engine-driven equipment; and
the business of the Purchased Subsidiaries; 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(m);

 

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

 

15

 

(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 and other 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, except to the extent reflected
on the Closing Balance Sheet;

 

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

 

(j)                                     all Governmental 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 the licensed rights
granted pursuant to Section 2.13, each Seller’s and Purchased Subsidiary’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

 

16

 

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 TVS Business and the EPD 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 Closing
Payment 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, and the Adjustment Amount shall be paid in
accordance with Section 2.10.

 

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;

 

17

 

(v)                                 any Liability of any Seller arising out of or
relating to the Freightliner Indebtedness; and

 

(vi)                              any Liability of any Seller expressly
described in Section 2.4(a)(vi) 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)                                     all Liabilities,
claims, damages or losses for or related to (A) Taxes imposed on the Assets,
the Business or the Purchased Subsidiaries, or the ownership or operations
thereof, accruing or imposed with respect to periods or operations prior to the
Closing, including but not limited to Liabilities, claims, damages or losses
(i) resulting from failure to timely file Tax Returns in respect of, or pay,
such Taxes (except for any Tax Returns required to be filed by a Purchased
Subsidiary after the Closing Date, which shall be the responsibility of the
Buyer), or (ii) in the nature of interest or penalties and (B) Taxes relating
to or caused by any Liability of a Purchased Subsidiary accruing or imposed
with respect to periods or operations prior to the Closing to the extent such
Liability exceeds the reserve for such Taxes on the Closing Balance Sheet, (w)
as a transferee or successor, (x) by contract or (y) otherwise;

 

(ii)                                  any Liability under any Contract or Bid 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, 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;

 

(iv)                              any Liability under or relating to the Seller
Benefit Plans (other than Purchased Subsidiary Plans), any Liabilities accruing
under Purchased Subsidiary Plans prior to the Closing, and any Liability
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 or relating to the employment of any individual by any Seller or any of its
Related Persons (other than employment by a Purchased Subsidiary after Closing),
including, but not limited to, sponsorship of any Seller Benefit Plan (other
than Liabilities accruing under a Purchased Subsidiary Plan after Closing);

 

18

 

(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 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 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

 

All sales and use, motor
vehicle sales and use, transfer, mortgage, recording, documentary or similar
Taxes, if any, payable in connection with the sale, conveyances, assignments,
transfers

 

19

 

and
deliveries to be made to Buyer hereunder shall be borne fifty percent (50%) by
Buyer and fifty percent (50%) by Sellers.  Buyer and Sellers shall work together in good
faith to minimize any such Taxes.  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.  Buyer
agrees to assist with any such audit and provide Sellers with sufficient access
to customers in order to obtain either reimbursements for such Taxes or an
applicable exemption certificate.

 

2.7                                 ALLOCATION

 

Buyer and Sellers shall have
agreed 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. 
The parties will use commercially reasonable efforts to cause the
Closing to take place within sixty (60) days of the date hereof.

 

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:

 

20

 

(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)                                  for each interest in Owned Property that is
part of the Assets, a recordable deed with special warranty of title or such
other appropriate document or instrument of transfer, subject to the Permitted
Real Estate Encumbrances, as the case may require, each in form and substance
reasonably satisfactory to Buyer and its counsel and executed by the applicable
Seller;

 

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

 

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

 

(v)                                 such other deeds, bills of sale, assignments,
documents (including the estimates of transfer tax obligations of Buyer based
on the Allocation Schedule, which shall, subject to the provisions of Section
2.6, be paid by Buyer to Sellers at Closing) 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, its legal counsel and its
title insurer (in the case of the Owned Property) and executed by the
applicable Seller;

 

(vi)                              the Estimated Closing Balance Sheet;

 

(vii)                           the Transition Services Agreement in form and
substance agreed to by the Parties (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 10.7(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)                                   certificates representing the Outstanding
Equity Securities, registered in the name of Buyer or duly endorsed for
transfer to Buyer any other documents that are necessary to transfer to the Buyer
good and valid title to the Outstanding Equity Securities, with any necessary
transfer tax stamps affixed or accompanied by evidence that all stock transfer
taxes have been paid;

 

(xi)                                copies of resolutions or equivalent
instruments duly adopted by the governing body of each Seller and, if required,
the partners or members of such Seller, authorizing and approving the execution
and delivery of this Agreement and the consummation of the Contemplated
Transactions, certified as true and in full force and

 

21

 

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

 

(xii)                             certificates of incumbency or evidence of
appropriate power of attorney for the respective directors or officers of each
Seller executing the Agreement and other Transaction Agreements;

 

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

 

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

 

(xv)                            a certificate signed by each Seller stating
that such Seller is not a “foreign person” as defined in Section 1445 of the
Code and that no Purchased Subsidiary is a United States real property holding
corporation; and

 

(xvi)                         written resignations of those directors and
officers of the Purchased Subsidiaries listed on Section 2.9(a) of the Seller
Disclosure Letter.

 

(b)                                 Buyer shall deliver to Sellers:

 

(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, each in form and substance reasonably satisfactory to
Sellers and their legal counsel and executed by Buyer;

 

(iv)                              the Sublease Agreement in form and substance
agreed to by the Parties (the “Sublease Agreement”);

 

(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

 

22

 

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

 

(ix)                                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.

 

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

 

23

 

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)                                 For purposes of the Closing Balance Sheet, no
earlier than sixty (60) days prior to the Closing Date, Parent shall conduct a
physical inventory of the Inventory and shall perform the related physical
inventory reconciliation as to the Inventory as of the Closing Date, based on a
full physical count (the “Closing Physical Inventory Count”).  Buyer and each party’s independent auditors
and other Representatives shall have the right to observe the Closing Physical
Inventory Count taken by Parent pursuant to the preceding sentence.  The Closing Physical Inventory Count taken in
accordance with this Section 2.11(b) shall be the sole physical inventory count
used in the preparation of the Closing Balance Sheet, and neither Buyer nor
Sellers (nor the Independent Accountants to the extent hereinafter provided
for) shall be required to, and none of them shall, except as provided below in
connection with a dispute as to inventory reconciliation, use any physical
inventory count other than the Closing Physical Inventory Count for purposes of
preparing the Closing Balance Sheet (or in the case of the Independent
Accountants for resolving any dispute with respect thereto).  The parties agree that any dispute between
the parties arising in the course of the physical inventory count shall be
resolved by the parties, acting in good faith, immediately upon the dispute
arising, including, to the extent necessary, asking the senior Representatives
of each party present to review the dispute and resolve it by reasonable means
taken in good faith.  Any dispute between
the parties arising in connection with the physical inventory reconciliation
contemplated above shall likewise be resolved, to the extent reasonably
possible, at the time of the reconciliation activities in the same manner as
with respect to resolving a dispute in the physical inventory count as provided
above.  Should, however, such efforts not
result in a resolution of such dispute as to inventory reconciliation, then, as
soon after the failure of such resolution as to inventory reconciliation as is
practicable, there shall be undertaken a physical inventory recount as to the
inventory affected by the dispute as to which the foregoing procedures for
dispute resolution shall be applied. 
Either party may, at its sole expense, ask the Independent Accountants
to observe any such physical inventory recount following an inventory
reconciliation dispute, which Independent Accountants shall thereafter, if they
so observe such physical inventory recount, have complete and final authority
to resolve finally any dispute arising by reason of the physical recount or the
reconciliation following thereafter.

 

(c)                                  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.

 

(d)                                 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

 

24

 

that
party or its agents and shall be afforded the opportunity to present to the
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.

 

2.12                           PURCHASED SUBSIDIARIES

 

Notwithstanding any other
provision of this Agreement, other than Sections 2.2(g), 2.2(h), 2.2(l), 2.2(m),
and 2.4(b)(i), it is understood that Buyer is purchasing the Outstanding Equity
Securities, and as such (a) Buyer shall not be required to purchase or assume
any of the assets or liabilities of the Purchased Subsidiaries, (b) the assets
and liabilities of each Purchased Subsidiary shall remain the assets and
obligations of such Purchased Subsidiary, (c) the assets and liabilities of the
Purchased Subsidiaries shall not be deemed to be Excluded Assets or Retained
Liabilities, respectively and (d) the Purchased Subsidiary Employees on the day
immediately prior to the Closing Date shall remain employees of the Purchased
Subsidiaries at and immediately after the Effective Time.

 

[***]

 

3.                                       Representations and Warranties of Sellers

 

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

 

3.1                                 ORGANIZATION AND GOOD STANDING

 

Each Seller is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization or incorporation, as the case may be.  Each Seller has the requisite 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 is duly qualified to do business
as a foreign corporation or other entity, as applicable, and, to the extent
applicable, 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 and each Purchased Subsidiary has
all requisite corporate or other 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

 

25

 

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 by each Seller’s board of directors or other governing body, as
applicable.  No further corporate, other
governing body 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 constituent
documents of any Seller or Purchased Subsidiary;

 

(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 any of the Outstanding Equity Securities; or

 

(v)                                 To the Knowledge of Sellers, contravene,
conflict with or result in a violation or breach of any Governmental
Authorization, Legal Requirement or Order applicable to Sellers, the Purchased
Subsidiaries, the Business or the Assets or to which Sellers, the Purchased
Subsidiaries, 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 or Purchased Subsidiary is required to give
any notice to or obtain any Consent or Governmental Authorization from any (i)
Third Party under any Seller Contract with a current value in excess of
$25,000, (ii) any original equipment manufacturer or other vendor of Inventory,
(iii) any lessor under a Real Property Lease or (iv) any Governmental Body 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.

 

26

 

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 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 and the Purchased Subsidiaries.

 

3.4                                 BOOKS AND RECORDS

 

The Business Records of
Sellers and the Purchased Subsidiaries, 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 or Purchased Subsidiary
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 Properties) used in the Business that are leased by any Seller or
Purchased Subsidiary and that involve payments by such Seller or Purchased
Subsidiary 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 and the Purchased Subsidiaries.

 

(d)                                 Except as set forth on Section 3.5(d) of the
Sellers Disclosure Letter, all equipment, vehicles, furniture and other
Tangible Personal Property comprising part of the Assets or owned or leased by
any of the Purchased Subsidiaries, currently used in the operation of the
Business and having a net book value as of the Effective Time of $5,000 or
more, and all real and Tangible Personal Property leased by any of the Sellers
or Purchased Subsidiaries, currently used in the operation of the Business and
having a fair market value as of the Effective Time of $5,000 or more, 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

 

27

 

of maintenance or repairs
except for ordinary, routine maintenance and repairs consistent with past
practice.

 

3.6                                 DESCRIPTION OF BUSINESS PROPERTY

 

(a)                                  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 or Purchased Subsidiary 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 or Purchased Subsidiary and that are used in
the operation 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 (i) all deeds, title policies, title reports and surveys in Sellers’
or the Purchased Subsidiaries’ possession for the Owned Properties and (ii) the
Real Property Leases, together with all amendments, modifications or
supplements, if any, thereto.

 

(b)                                 To Sellers’ Knowledge, the use of the
Business Properties for the various purposes for which they are presently being
used is permitted as of right under all applicable zoning legal requirements
and is not subject to “permitted nonconforming” use or structure
classifications.  All improvements are in
compliance in all material respects with all applicable Legal Requirements,
including those pertaining to zoning, building and the disabled.  No part of any improvement encroaches on any
real property not included in the applicable Business Property, and there are
no buildings, structures, fixtures or other improvements primarily situated on
adjoining property which encroach on any part of the land, except as would not
have a material adverse effect on the Business. 
To Sellers’ Knowledge, the land for each Owned Property abuts on and has
direct vehicular access to a public road or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting such land and
comprising a part of the Owned Property, is supplied with public or
quasi-public utilities and other services appropriate for the operation of the
Facilities located thereon and is not located within any flood plain or area
subject to wetlands regulation or any similar restriction.  To Sellers’ Knowledge, there is no existing
or proposed plan to modify or realign any street or highway or any existing or
proposed eminent domain proceeding that would result in the taking of all or
any part of any Facility or that would prevent or hinder the continued use of
any Facility as heretofore used in the conduct of the Business.

 

3.7                                 TITLE TO ASSETS; ENCUMBRANCES

 

(a)                                  The applicable Seller or Purchased Subsidiary
owns good title to the Owned Property free and clear of any Encumbrances, other
than:

 

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

 

28

 

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

 

At Closing, the Business
Property described in Section 3.6 of the Seller Disclosure Letter and
comprising part of the Assets shall be free and clear of all Encumbrances other
than (i) those Real Estate Encumbrances identified in Section 3.7(a)(2) of the
Seller Disclosure Letter and (ii) such additional Encumbrances as shall not
materially and adversely affect Buyer’s ownership, use and enjoyment of the
Business Property in the manner in which such Business Property was used and
enjoyed in the conduct of the Business prior to the Closing Date (collectively,
“Permitted Real Estate Encumbrances”).

 

(b)                                 The applicable Seller or Purchased Subsidiary
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 or Purchased Subsidiary is in
default of any material covenant to be performed by such Seller or Purchased
Subsidiary under the Real Property Leases. 
To Sellers’ Knowledge no landlord under real property Leases is in
default of any material covenant to be performed by such landlord.  To Seller’s Knowledge no event has occurred
which with passage of time and notice would constitute a default under a Real
Property Lease.

 

(c)                                  Sellers or Purchased Subsidiaries 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(c)(1) of the
Seller Disclosure Letter (“Non-Real Estate Encumbrances”).  At Closing, all such Tangible Personal
Property shall be free and clear of all Encumbrances other than (i) those
Non-Real Estate Encumbrances identified in Section 3.7(c)(2) of the Seller
Disclosure Letter, (ii) Encumbrances or other rights of Governmental Bodies or
other Persons in respect of property or assets delivered by any Seller or
Purchased Subsidiary for repair, maintenance or other improvements and (iii)
rights of Third Parties to use and possess all machinery and equipment held for
rental to Third Parties pursuant to leases or rental agreements relating
thereto (“Permitted Non-Real Estate Encumbrances” and, together with the
Permitted Real Estate Encumbrances, “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 or the
Purchased Subsidiaries 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 3, 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 and Purchased Subsidiaries, none of which are Related Persons of any
Seller or any Purchased Subsidiary.

 

29

 

3.9                                 INVENTORIES

 

Except as set forth on
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 and reasonable future expectations, except for
obsolete items, slow moving items and items of 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 and the Purchased Subsidiaries
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 Purchased Subsidiaries and 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 or
Purchased Subsidiary as a result of the sale of the Business.

 

3.12                           LABOR MATTERS; COMPLIANCE

 

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

 

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

 

(ii)                                  each Seller and Purchased Subsidiary and its
Related Persons are in substantial compliance with all Legal Requirements
applicable to the Affected Employees or the Purchased Subsidiary Employees with
regard to employment and employment practices, terms and conditions of
employment, wages, and occupational safety and health laws; 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 Purchased Subsidiary or any of its Related
Persons involving or related to Affected Employees or Purchased Subsidiary
Employees pending (with service of process

 

30

 

having been made, or written notice of
investigation or inquiry having been served, on such Seller or Purchased
Subsidiary 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;

 

(iv)                              for the past five years, no Seller or
Purchased Subsidiary 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 or Purchased Subsidiary involving the
Affected Employees or the Purchased Subsidiary Employees; and

 

(vi)                              no union certification or decertification
petition has been filed (with service of process having been made on any Seller
or Purchased Subsidiary or any of its Related Persons), or to Sellers’
Knowledge, threatened, that relates to Affected Employees or the Purchased
Subsidiary 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 and Purchased Subsidiary 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.  Except as set forth in Section 3.12(b) of the
Seller Disclosure Letter, any of the Affected Employees or the Purchased
Subsidiary 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.  Except as set forth in Section 3.12(b) of the
Seller Disclosure Letter, to Sellers’ Knowledge, none of the Affected Employees
or the Purchased Subsidiary 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, Purchased
Subsidiary or any ERISA Affiliate or with respect to which any Seller,
Purchased Subsidiary 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

 

31

 

Section 3.13(b) of the Seller Disclosure Letter, none of the Sellers,
Purchased Subsidiaries or the ERISA Affiliates 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, Purchased Subsidiaries
or the ERISA Affiliates.  None of the
Sellers, Purchased Subsidiaries or the ERISA Affiliates 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.

 

(c)                                  No Seller, Purchased Subsidiary 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.

 

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

 

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 and the Purchased Subsidiaries 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 or Purchased Subsidiary of, or a failure
on the part of any Seller or Purchased Subsidiary to comply with, any Legal
Requirement relating to the Business or the Assets; and

 

(iii)                               No Seller or Purchased Subsidiary 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 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 or Purchased Subsidiary 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:

 

32

 

(i)                                     Each Seller and Purchased Subsidiary 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 or Purchased Subsidiary has
received, at any time since January 31, 2003, 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 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 and Purchased
Subsidiary to lawfully conduct and operate the Business in the manner in which
it currently conducts and operates such Business and to permit each Seller and
Purchased Subsidiary 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 or Purchased
Subsidiary 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.

 

33

 

(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 any
Purchased Subsidiary, the Business or any of the Assets is subject; and

 

(ii)                                  to Sellers’ Knowledge, no Affected Employee
or Purchased Subsidiary Employee is subject to any Order that prohibits such
Affected Employee or Purchased Subsidiary 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 and Purchased Subsidiary 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;

 

(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), Purchased
Subsidiary or any of the Assets is subject; and

 

(iii)                               no Seller or Purchased Subsidiary 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), such Purchased Subsidiary 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 and Purchased Subsidiary 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 or Purchased
Subsidiary 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)                                 damage, destruction, theft or loss affecting
the Assets, except in the ordinary course of business and 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

 

34

 

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 or Purchased Subsidiary (including the Business
Intellectual Property Assets) or the creation of any Encumbrance (other than a
Permitted Encumbrance) on any Asset in excess of $50,000 in the aggregate, 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 whose business with the Business in the last twelve
(12) months exceeds $100,000 of an intention to discontinue or materially
change the terms of its overall relationship with the Business;

 

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

 

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

 

3.17                           CONTRACTS; NO DEFAULTS

 

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

 

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

 

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

 

(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
or Purchased Subsidiary 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

 

35

 

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 or
Purchased Subsidiary with any other Person;

 

(vii)                           each Seller Contract containing covenants
that restrict any Seller’s or Purchased Subsidiary’s business activity or limit
the freedom of such Seller or Purchased Subsidiary 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 or
Purchased Subsidiary 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;

 

(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 or Purchased Subsidiary 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; 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 or
transferable to Buyer without the Consent of any other Person except as
disclosed in or pursuant to Section 3.2(c).

 

36

 

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

 

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

 

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

 

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

 

(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.

 

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

 

(e)                                  Each of the Seller Contracts or Bids 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 and Purchased Subsidiary 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

 

37

 

of the two (2) preceding policy years (i) any
self-insurance arrangement by or affecting any Seller or Purchased Subsidiary,
including any reserves established thereunder, and (ii) all obligations of any
Seller or Purchased Subsidiary 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:

 

(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 and Purchased Subsidiary is in compliance in all
respects with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of all Environmental Laws applicable
to the Business.

 

(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 any Person or before any court or any other
Governmental Body directed against any Seller or Purchased Subsidiary or the
Business that pertain or relate to (i) any obligations of any Seller or
Purchased Subsidiary under any applicable Environmental Law, (ii) violations by
any Seller or Purchased Subsidiary of any Environmental Law, (iii) personal
injury, property, or natural resources damages 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 environmental permits required under applicable
Environmental Laws that are necessary for the lawful operation of the Business
by any Seller or Purchased Subsidiary have been obtained and are in full force
and effect and there is no basis for revocation or suspension of any such
environmental permits.

 

38

 

(d)                                 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 portion of any Business 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 or Purchased Subsidiary has disposed or Released any
Hazardous Materials on, at, or under any Business Property other than in
compliance with applicable Environmental Laws, and to Sellers’ Knowledge there
are no Environmental Conditions on, at, or underlying any Facility other than
such Environmental Conditions that do not require Remedial Action.

 

(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 pertaining
to the Business or any Facility 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 or
Purchased Subsidiaries 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 Purchased Subsidiary, or (ii) pursuant to which
the use by any Seller or Purchased Subsidiary 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 Purchased Subsidiary) 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)

 

39

 

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.

 

3.21                           RELATED PARTY TRANSACTIONS

 

Except as set forth in
Section 3.21 of the Seller Disclosure Letter, none of the Sellers, Purchased
Subsidiaries or any of their respective Related Persons, nor, to Sellers’
Knowledge, any current director, officer or employee of any Seller, any
Purchased Subsidiary or any of 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 or Purchased Subsidiary in the conduct of the Business, or (b) is a
party to any agreement or transaction with any Seller or Purchased Subsidiary
relating to the Business.

 

3.22                           BROKERS OR FINDERS

 

Except for Merrill Lynch
& Co., no Seller or Purchased Subsidiary 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 Purchased Subsidiary or any of their 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.

 

3.24                           PURCHASED SUBSIDIARIES

 

(a)                                  Each of the Purchased Subsidiaries is duly
organized, validly existing and, to the extent applicable, in good standing
under the laws of its jurisdiction of organization or incorporation, as the
case may be.  Each of the Purchased
Subsidiaries has the requisite power and

 

40

 

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 of the Purchased Subsidiaries is qualified to do business as a
foreign corporation or other entity, as applicable, and, to the extent
applicable, is in good standing of 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 Purchased Subsidiary or the Business.

 

(b)                                 Section 3.24(b) of the Seller Disclosure
Letter sets forth all the authorized and outstanding Outstanding Equity
Securities.  All of such outstanding
securities are owned by the Sellers or another Purchased Subsidiary as set
forth on Section 3.24(b) of the Seller Disclosure Letter and no rights to
purchase any equity securities of any Purchased Subsidiary exist except as
disclosed in Section 3.24(b) of the Seller Disclosure Letter.  None of the Purchased Subsidiaries has any obligation
or commitment, contingent or otherwise, to issue any equity securities.  All of the Outstanding Equity Securities are
duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance with all applicable laws. 
There are no agreements, commitments or contracts relating to the sale,
transfer or voting of any Outstanding Equity Securities).  Except as disclosed in Section 3.24 of the
Seller Disclosure Letter, all of the Outstanding Equity Securities may be
freely transferred by Sellers to Buyer pursuant to this Agreement without
restriction.

 

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

 

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

 

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

 

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:

 

41

 

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 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

 

42

 

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.

 

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

 

43

 

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 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.

 

44

 

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 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

 

(a)                                  Between the date of this Agreement and the
Closing Date, and upon reasonable advance notice received from Buyer, each
Seller shall (i) afford Buyer and its Representatives (collectively, “Buyer
Group”) reasonable access, during regular business hours, to Sellers’ and the
Purchased Subsidiaries’ 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; (ii) 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; (iii) 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 (iv)
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, subject to Section 6.1(b),
Buyer shall have the right to have any Facility and Tangible Personal Property
inspected by Buyer Group, at

 

45

 

Buyer’s sole cost and
expense, for purposes of determining the physical condition and legal
characteristics of any Facility and Tangible Personal Property.

 

(b)                                 Sellers have retained HBC Terracon as their
environmental consultant (hereinafter the “Environmental Consultant”) to
conduct Phase I Site Assessments (“Phase I ESA”) on the Facilities and surface
or subsurface investigation or invasive or destructive sampling (hereinafter a “Phase
II ESA”) on the Facilities listed in Section 6.1(b) of the Seller Disclosure
Letter, such Phase I ESAs and Phase II ESAs to be in accordance with ASTM Standards.  Buyer agrees that the only Phase II ESAs to
be conducted shall be on the Facilities listed in Section 6.1(b) of the Seller
Disclosure Letter, unless Sellers, in their sole discretion, determine
otherwise.  Sellers will bear the costs
of the Phase I ESAs and the Phase II ESAs. 
Sellers will provide Buyer with a copy of all Phase I ESAs and Phase II
ESAs prepared by the Environmental Consultant in connection with this
transaction.  Each Seller, Buyer and each
officer, employee, Representative, consultant, and adviser of Buyer shall have
the right to be present during any environmental assessment of the Assets, and
shall comply with the conditions set forth in this Section 6.1.  Buyer shall maintain, and shall cause its
officers, employees, Representatives, consultants and advisors to maintain, all
information obtained by Buyer 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 applicable Environmental Laws to make such
disclosure, in which case Buyer shall so notify Sellers and (x) allow Sellers a
reasonable time to make such disclosure if such disclosure may be delegated or
(y) consult with Sellers regarding such disclosure if such disclosure may not
be delegated.

 

(c)                                  Subject to Sections 6.1(a) and (b) and upon
reasonable prior notice, Sellers shall permit Buyer Group to consult with
Sellers’ employees during reasonable business hours (including 7:00 a.m. to
6:00 p.m., Monday through Friday) and to conduct, at Buyer’s sole risk and
expense, any other visual inspections of the Facilities and to examine the
environmental records at such Facilities. 
Sellers shall also coordinate with Buyer to allow site visits and
inspections at the field sites on Saturdays to the reasonable extent such
access can be made available.  Buyer
agrees to protect, defend, indemnify and hold the Seller Indemnitees harmless
from and against any and all Liabilities occurring on or to the Facilities
caused by the acts or omissions of Buyer Group or any Person (other than the
Environmental Consultant) acting on Buyer’s behalf in connection with any due
diligence, including any site visits and environmental sampling.  Buyer Group agrees to comply fully with all
rules, regulations and instructions issued by Sellers (to the extent reasonable
notice thereof has been given to Buyer Group) regarding Buyer’s actions while
upon, entering or leaving any Facility, including any insurance requirements
that the Seller may impose on contractors authorized to perform work on any
property owned or operated by Seller.

 

46

 

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, and shall cause each
Purchased Subsidiary to:

 

(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
or Purchased Subsidiary Employee, other than in the ordinary course of business
or pursuant to Legal Requirement;

 

(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;

 

(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 except to the extent Sellers have used their reasonable
commercial efforts to have such Governmental Authorization renewed;

 

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

 

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

 

47

 

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

 

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

 

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

 

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

 

6.3                                 NEGATIVE COVENANT

 

Except as otherwise
expressly permitted herein, between the date of this Agreement and the Closing
Date, each Seller shall not, and shall not permit any Purchased Subsidiary to,
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 outside the ordinary course of business.

 

6.4                                 CURRENT EVIDENCE OF TITLE

 

(a)                                  As soon as is reasonably possible, Sellers
shall furnish to Buyer for each parcel, tract or subdivided land lot of Owned
Property:

 

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

 

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

 

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

 

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

 

48

 

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

 

(B)                                such survey reflects the locations of all
building lines, easements and areas affected by any recorded documents
affecting such Owned Property as disclosed in the Title Commitment (identified
by issuer, commitment number, and an effective date after the date hereof) as
well as any encroachments onto the Owned Property or by the Improvements onto
any easement area or adjoining property (each a “Survey”); and

 

(iii)                               complete and current searches in the name of
Sellers and other appropriate parties of all Uniform Commercial Code Financing
Statements records maintained by the Secretary of State of the states in which
any Seller is incorporated, the state in which any Seller maintains its
principal place of business, each state in which a Facility is located, each
jurisdiction in which a filing would be required in order to perfect a security
interest in the Assets, the clerk or recorder of deeds (or other governmental
office where real property documents are filed for recording) of each county in
which any Facility is located and wherever else Sellers or Buyer, based upon
its investigation, is aware that a Uniform Commercial Code Financing Statement
relating to any of the Assets has been filed, together with such releases,
termination statements and other documents as may be necessary to provide
reasonable evidence that all items of intangible personal property, Tangible
Personal Property and fixtures to be sold under this Agreement are free and
clear of Encumbrances, other than as permitted under this Agreement.

 

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

 

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

 

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

 

(ii)                                  any title exception is disclosed in Schedule
B to any Title Commitment that is not one of the Permitted Real Estate
Encumbrances or one that Sellers specify when delivering the Title Commitment
to Buyer as one that Sellers will cause to be deleted from the Title Commitment
concurrently with the Closing, including (A) any exceptions that pertain to
Encumbrances securing any loans that do not constitute an Assumed Liability and
(B) any exceptions that Buyer reasonably believes could materially and
adversely affect Buyer’s use and enjoyment of the Owned Property described
therein

 

49

 

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

 

(iii)                               any Survey discloses any matter that Buyer
reasonably believes could materially and adversely affect Buyer’s use and
enjoyment of the Owned Property described therein in the manner in which such
Owned Property was used and enjoyed in the conduct of the Business prior to
Closing, then Buyer shall notify Parent in writing (“Buyer’s Notice”) of such
matters within ten (10) business days after receiving all of the Title
Commitment, Survey and copies of Recorded Documents for the Facility covered
thereby.

 

(d)                                 Sellers shall use commercially reasonable
efforts to cure each Title Objection and take all steps required by the Title
Insurer to eliminate each Title Objection as an exception to the Title
Commitment. Any Title Objection that the Title Company is willing to insure
over on terms acceptable to Sellers and Buyer is herein referred to as an “Insured
Exception.” The Insured Exceptions, together with any title exception or
matters disclosed by the Survey not objected to by Buyer in the manner
aforesaid shall be deemed to be acceptable to Buyer.  Notwithstanding the foregoing, Sellers may
notify Buyer in writing that Sellers are not prepared to undertake efforts to
cure any or all such Title Objections as are specified in such notice, in which
case Buyer shall be entitled to terminate this Agreement pursuant to Section
9.2(f) by written notice thereof to Sellers delivered within five Business Days
of the date of its receipt of Sellers’ notice, whereupon this Agreement shall
terminate without further liability to Sellers or Buyer.  If Buyer does not elect to terminate this
Agreement within such period, then all such uncured Title Objections shall be
deemed to be acceptable to Buyer.

 

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

 

6.5                                 LOUISIANA FACILITIES

 

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

 

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
other than the supplement contemplated by the second sentence of Section
3.17(d)), as of the Closing Date as though made on and as of the Closing Date

 

50

 

(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.

 

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

 

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

 

(c)                                  all balances owed between any Affiliate or
Related Person of a Purchased Subsidiary, on the one hand, and a Purchased
Subsidiary, on the other hand, shall be canceled without any payment of funds
and all agreements, whether written, or otherwise, that are solely between any
Affiliate or Related Person of a Purchased Subsidiary, on the one hand, and a
Purchase Subsidiary, on the other hand, shall have been terminated and of no
further effect without any further action or liability on the part of such
Purchased Subsidiary or Buyer;

 

(d)                                 Consents, in form and substance reasonably
satisfactory to Buyer, from the Persons listed in Section 7.3(d) of the Seller
Disclosure Letter; and

 

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

 

(i)                                     evidencing the accuracy of any 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

 

51

 

(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.

 

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.

 

52

 

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)                                  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.

 

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,

 

53

 

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;

 

(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 restrained, enjoined or otherwise
prohibited by force of law;

 

(e)                                  by either Representative Party in the event
that the Closing shall not have been consummated by January 31, 2006; 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; or

 

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

 

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 available under this Agreement will survive such termination
unimpaired.

 

54

 

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 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.

 

55

 

(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 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 between Buyer and any
Purchased Subsidiary 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

 

56

 

benefit
of Buyer those business relationships of such Seller or of any Purchased
Subsidiary 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 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                           INTENTIONALLY DELETED

 

10.7                           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

 

57

 

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, the failure by any Seller to obtain any such approval, consent 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.

 

10.8                           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,

 

58

 

occurrence, event, incident,
action, failure to act, or transaction relating to the Business (including any
matter disclosed in Section 3.15(a), (b) or (c) of the Seller Disclosure
Letter) or to the DES 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 10.8(a) is not
intended to alter applicable discovery procedures in connection with any
litigation between or among the parties hereto.

 

(b)                                 Without limiting Section 10.8(a), and in
recognition of the fact that Sellers are retaining the operations and
obligations of the DES Business, and will continue to defend at Sellers’ cost
the DES Business and pre-Closing Business related litigation and pre-Closing
Proceedings, Buyer agrees that it will, after the Effective Time, cooperate
with Sellers to the fullest extent necessary (subject to Section 10.8(c)) to
enable Sellers to satisfy the DES Business obligations, carry out the DES
Business operations and defend the DES Business and Business related litigation
and Proceedings.  Specifically, without
limitation, Buyer agrees that (i) it will assist Sellers in the defense of DES
Business and pre-Closing Business related litigation and pre-Closing
Proceedings, (ii) that it will assist Sellers, through Buyer’s power products
distribution activities, in dealing with suppliers of equipment and services
necessary for Sellers to carry out the DES Business related obligations,
including assisting Sellers in obtaining equipment on the same terms as to
which Sellers could acquire equipment at present (but subject to a mutually
agreed price), and (iii) that it will assist Sellers in obtaining technical
support and other support from suppliers regarding solutions for DES Business
contract related issues on existing projects. 
Buyer’s obligation to cooperate will not require it to provide direct
financial support to Sellers but will, in general, be limited to the reasonable
commitment of Buyer’s personnel to assist Sellers in the above regards and to
provide access to books and Records and necessary or appropriate personnel,
which personnel shall in all respects cooperate with Sellers in such
matters.  Sellers will continue to wind
down all activities of the DES Business, and, in that regard, Buyer will use
its reasonable best efforts to offer employment (on terms similar to those
offered to other Affected Employees) to current DES Business personnel upon the
completion of their activities on behalf of Sellers.  Nothing in this Section 10.8(b) shall
obligate Sellers to purchase equipment or contract for services from Buyer or any
other Person.

 

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

 

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

 

(ii)                                  compensate Buyer at its standard rates for
time and materials provided to Sellers or at their request to the extent
covered by such standard rates; and

 

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

 

59

 

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

 

(e)                                  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 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.

 

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 11.7. Except as otherwise provided in this Agreement, 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

 

60

 

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 and, subject to Section 3.24(d), except for any Liability of a
Purchased Subsidiary other than pre-closing Taxes described in Section 2.4(b)(i);

 

(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, (i) any Seller Benefit
Plan other than a Purchased Subsidiary Plan, and (ii) any pre-Closing Liability
under any Purchased Subsidiary 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;

 

61

 

(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;

 

(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; or

 

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

 

11.4                           LIMITATIONS RELATED TO ENVIRONMENTAL MATTERS

 

(a)                                  Notwithstanding the provisions of Section
11.2, Sellers shall not be required to pay any amount to Remediate any Business
Property (i) not required to obtain from the state environmental agency in
which such Business Property is located at “no further action” letter,
certificate of completion, or similar document indicating that no further
action (including (x) monitoring and (y) operation and maintenance of any
installed engineering controls and/or containment measures, such as a cap) is
required.  Buyer may be required to
consent to (i) deed restrictions or restrictive covenants and/or
(ii) institutional controls, including but not limited to limitations on
the use of ground water, restrictions to industrial use of such Business
Property, use of asphalt or other solid surfaces as caps, fencing, and
construction or use of above-ground buildings and structures; provided,
however, that such restrictions or institutional controls shall not
unreasonably interfere in Buyer’s business or impose unreasonable costs on
Buyer or limit the use of such Business Property in the Business as currently
conducted; or (ii) in excess of the cost of commercially reasonable and
cost effective measures (including industry-standard risk-based corrective
action measures), determined in Buyer’s reasonable judgment, unless any Lease
requires a more stringent level of (higher level of) remedial action.  Buyer will not accelerate any remedial action
except to the extent a commercially reasonable responsible party would do so,
unless appropriate to mitigate harm or damage to any third party or the
Environment or otherwise.

 

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

 

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11.5                           LIMITATIONS ON AMOUNT — SELLERS

 

From and after the Closing,
Sellers shall have no liability (for indemnification or otherwise) with 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 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 11.5 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 or 3.22. 
Costs expended in conducting the Phase I ESAs and the Phase II ESAs
under this Agreement will not be included as Damages subject to the deductible
under this Section 11.5.

 

11.6                           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 11.6 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 4.6.

 

11.7                           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 Sections 3.1, 3.2, 3.22,
4.1, 4.2 and 4.6 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 this Article 11 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.

 

11.8                           PROCEDURE

 

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

 

63

 

(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 of the matter and basis of the claim for
indemnity under this Agreement.  For
purposes of this Section 11.8(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 11.8(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 11.8(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 11.8(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

 

64

 

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 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 11.8(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 11.8(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
11.8(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 11.8(e), and the Indemnitor shall bear its
own costs and expenses with respect to any such participation.

 

11.9                           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

 

65

 

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 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.

 

11.10                     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.

 

11.11                     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.

 

11.12                     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.

 

11.13                     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 termination provisions set forth in Article 9 and 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.

 

66

 

(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.

 

11.14                     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.

 

11.15                     EXPRESS NEGLIGENCE

 

THE INDEMNITIES SET FORTH IN
THIS ARTICLE 11 ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN
ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS
EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE
LIMIT INDEMNITIES BECAUSE OF THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE,
CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE
INDEMNIFIED PARTIES.

 

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;

 

67

 

(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

 

(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

 

68

 

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 and not to any Excluded Asset or Assumed Liability.

 

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 by the Receiving Party or its
Representatives of this Article 12 or the confidentiality agreement entered
into between Buyer and Parent; (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

 

69

 

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.

 

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

 

70

 

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.

 

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):

 

Parent
or any other Seller:                                                       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, Esq.

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

 

71

 

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 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

 

72

 

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, 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.  Except as otherwise provided in Section 5.6
of this Agreement and the second sentence of Section 3.17(d), 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

 

73

 

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.

 

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.

 

74

 

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

 

	
   

  	
  Hushang
  Ansary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Hushang Ansary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson Services, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Max L. Lukens

  	
   

  
	
   

  	
  Name: Max L. Lukens

  
	
   

  	
  Title: President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IPSC
  Co. Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Carl B. King

  	
   

  
	
   

  	
  Name: Carl B. King

  
	
   

  	
  Title: Vice President and
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson Holdings, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Don Mueller

  	
   

  
	
   

  	
  Name: Don Mueller

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson De Las Americas, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Carl B. King

  	
   

  
	
   

  	
  Name: Carl B. King

  
	
   

  	
  Title: Vice President and
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Stewart
  & Stevenson International, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Carl B. King

  	
   

  
	
   

  	
  Name: Carl B. King

  
	
   

  	
  Title: Vice President and
  Secretary

  

 

75

 

	
   

  	
  Stewart
  & Stevenson Power, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Carl B. King

  	
   

  
	
   

  	
  Name: Carl B. King

  
	
   

  	
  Title:  Vice President and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  S&S
  Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Don Mueller

  	
   

  
	
   

  	
  Name: Don Mueller

  
	
   

  	
  Title: President

  

 

76

 

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.

 

77

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