Document:

Exhibit 10.1

Exhibit 10.1

PREMIER EXHIBITIONS, INC.

ANNUAL INCENTIVE PLAN

1. Purpose. The purpose of this Annual Incentive Plan (this “Plan”) is to reward designated
executives of Premier Exhibitions, Inc. (the “Company”) and its Subsidiaries for the achievement of
each year’s business plan objectives and individual performance goals in a manner consistent with
the Company’s strategy of achieving long-term shareholder value.

2. Definitions. The following capitalized words as used in this Plan shall have the following
meanings:

“Award Opportunity” means a cash award opportunity established under the Plan for a
Participant by the Committee pursuant to such terms, conditions, restrictions and/or limitations,
if any, as the Committee may establish.

“Board” means the Board of Directors of the Company.

“Chief Executive Officer” means the Chief Executive Officer of the Company.

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

“Committee” means the Compensation Committee of the Board.

“Company” has the meaning given such term in Section 1 of this Plan.

“Discretionary Bonus” has the meaning given such term in Section 7 of this Plan.

“Employee” means any person employed by the Company or its Subsidiaries, whether such Employee
is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of
the Plan.

“Participant” means, as to any Performance Period, any Employee who is selected by the
Committee to be eligible to participate in the Plan for that Performance Period, as provided
herein.

“Payout Formula” means the formula established by the Committee for determining Award
Opportunities for a Performance Period based on the level of achievement of the Performance
Objectives for the Performance Period.

 

 

 

“Performance Objectives” means the measurable or subjective performance objective or
objectives established pursuant to this Plan for Participants who have received Award
Opportunities. Performance Objectives may be described in terms of Company-wide objectives or
objectives that are related to the performance of the individual Participant or of a Subsidiary,
division, business unit, department, region or function within the Company or Subsidiary in which
the Participant is employed and may be based on the following criteria: revenues, weighted average revenue per unit, earnings from operations, operating income,
earnings before or after interest and taxes, operating income before or after interest and taxes,
net income, cash flow, earnings per share, debt to capital ratio, economic value added, return on
total capital, return on invested capital, return on equity, return on assets, total return to
shareholders, earnings before or after interest, taxes, depreciation, amortization or extraordinary
or special items, operating income before or after interest, taxes, depreciation, amortization or
extraordinary or special items, return on investment, free cash flow, cash flow return on
investment (discounted or otherwise), net cash provided by operations, cash flow in excess of cost
of capital, operating margin, profit margin, contribution margin, stock price and/or strategic
business criteria consisting of one or more objectives based on meeting specified product
development, strategic partnering, research and development, market penetration, geographic
business expansion goals, cost targets, customer satisfaction, gross or net additional customers,
employee satisfaction, management of employment practices and employee benefits, supervision of
litigation and information technology, and goals relating to acquisitions or divestitures of
subsidiaries, affiliates and joint ventures. The Performance Objectives may be made relative to
the performance of other corporations or entities.

“Performance Period” means the Company’s fiscal year or such other period as determined by the
Committee in its discretion, within which the Performance Objectives relating to an Award
Opportunity are to be achieved. The Committee may establish different Performance Periods for
different Participants, and the Committee may establish concurrent or overlapping Performance
Periods.

“Plan” means this Premier Exhibitions, Inc. Annual Incentive Plan, as amended from time to
time.

“Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose
outstanding shares or securities (representing the right to vote for the election of directors or
other managing authority) are, or (ii) which does not have outstanding shares or securities (as may
be the case in a partnership, joint venture or unincorporated association), but more than 50
percent of whose ownership interest representing the right generally to make decisions for such
other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.

3. Administration. The Committee shall be responsible for administration of the Plan. The
Committee, by majority action, is authorized to interpret the Plan, to prescribe, amend, and
rescind regulations relating to the Plan, to provide for conditions and assurances deemed necessary
or advisable to protect the interests of the Company and its Subsidiaries, and to make all other
determinations necessary or advisable for the administration of the Plan, but only to the extent
not contrary to the express provisions of the Plan. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes and upon all Participants. No member of the Committee
shall be liable for any such action or determination made in good faith. The Board (acting solely
by the independent directors as identified under the applicable exchange listing standards) may
perform any function of the Committee hereunder, in which case the term “Committee” shall refer to
the Board.

 

 

 

4. Eligibility. The Committee, in its sole discretion, shall determine which Employees will be
eligible to participate in the Plan for any given Performance Period. When making this
determination, the Committee shall consider the recommendations of the Chief Executive Officer.
Eligible Participants shall be designated by the Committee either before or after the beginning of
the Performance Period. An Employee who is a Participant for a given Performance Period is neither
guaranteed nor assured of being selected for participation in any subsequent Performance Period.

5. Award Opportunities

a. Before or after the beginning of each Performance Period, the Committee shall establish the
Award Opportunity for each Participant, including the applicable Performance Objectives and Payout
Formula. Each Performance Objective will be weighted by the Committee to reflect its relative
importance to the Company in the applicable Performance Period. The Payout Formulas, Performance
Objectives and weighting of the Performance Objectives need not be uniform with respect to any or
all Participants. The Committee shall consider the recommendations of the Chief Executive Officer
in determining the applicable Payout Formulas, Performance Objectives or weighting of the
Performance Objectives with respect to Participants other than the Chief Executive Officer. The
Committee may also establish Award Opportunities for newly hired or newly promoted employees
without compliance with such timing and other limitations as provided herein, which Award
Opportunities may be based on performance during less than the full Performance Period and may be
pro rated in the discretion of the Committee.

b. Participants must achieve the Performance Objectives established by the Committee in order
to receive payment of an Award Opportunity under the Plan. However, the Committee may determine
that only a threshold level relating to a Performance Objective must be achieved for Award
Opportunities to be paid under the Plan. Similarly, the Committee may establish a minimum
threshold performance level, a maximum performance level, and one or more intermediate performance
levels or ranges, with target award levels or ranges that will correspond to the respective
performance levels or ranges included in the Payout Formula.

c. The Committee may in its sole discretion modify the Payout Formulas, Performance Objectives
or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable (i) to reflect a change in the business, operations, corporate structure
or capital structure of the Company or its Subsidiaries, the manner in which it conducts its
business, or other events or circumstances or (ii) in the event that a Participant’s
responsibilities materially change during a Performance Period or the Participant is transferred to
a position that is not designated or eligible to participate in the Plan.

 

 

 

6. Determination of Award Opportunities.

a. Within the first 90 days following the end of each Performance Period, the Committee shall
determine in writing whether and to what extent the Performance Objectives with respect to each
Participant for the applicable Performance Period have been achieved and, if such Performance Objectives have been achieved, to approve actual payment of each Award
Opportunity under the Plan pursuant to the applicable Payout Formulas. The Committee shall
consider the recommendations of the Chief Executive Officer when determining whether the
Performance Objectives have been achieved with respect to Participants other than the Chief
Executive Officer.

b. In the event a Participant terminates employment with the Company and its Subsidiaries for
any reason prior to the payment of the award, the Participant shall not be entitled to payment of
an Award Opportunity with respect to that Performance Period; provided that in the case of
termination of employment by reason of death, disability or normal or early retirement, or in the
case of other special circumstances, the Committee may, in it sole discretion, pay all or any
portion of the Award Opportunity to the Participant (or to the Participant’s estate in the event of
his or her death) as the Committee deems appropriate and equitable.

c. Notwithstanding anything in this Plan to the contrary, the Committee may, in its sole
discretion, reduce (but not increase) the resulting Award Opportunity otherwise payable to any
Participant for a particular Performance Period, regardless of the level of attainment of the
Performance Objectives, at any time prior to the payment of the Award Opportunity, in light of such
Participant’s individual performance during the Performance Period or such other factors as the
Committee deems relevant, including changed or special circumstances that arose during the
Performance Period; provided that the amount of any such reduction may not exceed fifty percent
(50%) of the Participant’s target Award Opportunity for the Performance Period. The Committee
shall consider the recommendations of the Chief Executive Officer when determining whether to
reduce an Award Opportunity under this Section 6(c), and the amount of any such reduction, with
respect to Participants other than the Chief Executive Officer.

7. Discretionary Bonus. Notwithstanding anything in this Plan to the contrary, after the end
of each Performance Period, the Committee may, in its sole discretion, make a discretionary bonus
award (a “Discretionary Bonus”) to any Participant in light of such Participant’s individual
performance during the Performance Period or such other factors as the Committee deems relevant,
including changed or special circumstances that arose during the Performance Period; provided that
a Discretionary Bonus shall not be awarded for purposes of replacing amounts that were not
otherwise earned under this Plan. The amount of the Discretionary Bonus that may be payable to any
such Participant with respect to a Performance Period may not exceed fifty percent (50%) of the
Participant’s target Award Opportunity for that Performance Period. The Committee shall consider
the recommendations of the Chief Executive Officer when determining whether to award a
Discretionary Bonus under this Section 7, and the amount of any such award, with respect to
Participants other than the Chief Executive Officer.

 

 

 

8. Payment. Any Award Opportunity or Discretionary Bonus earned by a Participant for a
particular Performance Period shall be paid in cash after the end of the Performance Period. The
Committee may, in its sole discretion, determine that all or part of an Award Opportunity or
Discretionary Bonus shall be paid in the form of an equivalent amount of Company common shares; provided that the shares shall be issued under the Company’s equity
compensation plans in existence at the time of grant.

9. Tax Withholding. The Company and its Subsidiaries shall have the right to deduct from all
payments made to any person under the Plan any federal, state, local, foreign or other taxes which,
in the opinion of the Company and its Subsidiaries, are required to be withheld with respect to
such payments.

10. No Employment Contract. Nothing contained in this Plan shall confer upon a Participant
any right with respect to continuance of employment by the Company and its Subsidiaries, nor limit
or affect in any manner the right of the Company and its Subsidiaries to terminate the employment
or adjust the compensation of a Participant. For purposes of the Plan, the transfer of employment
of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries)
shall not be deemed a termination of the Participant’s employment.

11. Transferability. No right or benefit under this Plan will be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge such right or benefit will be void. No such
right or benefit will in any manner be liable for or subject to the debts, liabilities, or torts of
a Participant.

12. Successors. All obligations of the Company under the Plan shall be binding on any
successor to the Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business
or assets of the Company.

13. Governing Law. The Plan and all Award Opportunities shall be construed in accordance with
and governed by the laws of the State of Georgia, but without regard to its conflict of law
provisions.

14. Amendment or Termination. The Board reserves the right, at any time, to amend, suspend or
terminate the Plan, in whole or in part, in any manner, and for any reason, and without the consent
of any Participant, Eligible Employee or other person; provided, that no such amendment, suspension
or termination shall adversely affect the payment of any amount for a Performance Period ending
prior to the action of the Board amending, suspending or terminating the Plan.

 

 

 

15. Participation by Employees of Subsidiaries. Any Subsidiary may, by action of its board of
directors or equivalent governing body and with the consent of the Board, adopt the Plan; provided
that the Board may waive the requirement that such board of directors or equivalent governing body
effect such adoption. By its adoption of or participation in the Plan, the adopting Subsidiary
shall be deemed to appoint the Company its exclusive agent to exercise on its behalf all of the
power and authority conferred by the Plan upon the Company and accept the delegation to the
Committee of all the power and authority conferred upon it by the Plan. The authority of the
Company to act as such agent shall continue until the Plan is terminated as to the participating
Subsidiary. Any amount payable pursuant to this Plan to a Participant employed by a participating Subsidiary shall be paid in accordance with the Plan solely by that Subsidiary,
unless the Board otherwise determines that the Company shall be responsible for payment. Amounts
that may become payable under the Plan shall be paid solely from the general assets of the Company
or the Subsidiary responsible for payment thereof. Nothing in this Plan shall be construed to
create a trust or to establish or evidence any Participant’s claim of any right to payment of an
amount under this Plan other than as an unsecured general creditor with respect to any payment to
which he or she may be entitled.

IN WITNESS WHEREOF, Premier Exhibitions, Inc. has caused this Plan to be executed by its duly
authorized officer on this 18th day of November, 2010.

	 	 	 	 	 
	 	PREMIER EXHIBITIONS, INC.

 	 
	 	By:  	/s/  Christopher Davino
 	 
	 	 	Chief Executive Officerdf_apa.htm

 

ASSET PURCHASE AGREEMENT

Between

DXP ENTERPRISES, INC.

(“Buyer”)

and

D&F DISTRIBUTORS, INC.

(“Seller”)

and

THE SHAREHOLDERS

NOVEMBER 22, 2010

	
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TABLE OF CONTENTS

 Page

	
  

	
ARTICLE I PURCHASE AND SALE OF ASSETS

 

	
  

	
1.01

	
Transferred Assets

 

	
  

	
1.02

	
Excluded Assets

 

	
  

	
1.03

	
Consideration

 

	
  

	
1.04

	
Assumed Liabilities

 

	
  

	
1.05

	
Liabilities Not Assumed by the Buyer

 

	
  

	
1.06

	
Prorations of Expenses and Certain Property Taxes.

 

	
  

	
1.07

	
Transfer Taxes; Recording Fees; Tax Reimbursement.

 

	
  

	
1.08

	
Allocation of Purchase Price.

 

	
  

	
1.09

	
Right to Control Payment

 

	
  

	
1.10

	
Accounts Receivable

 

	
  

	
ARTICLE II CLOSING 

 

	
  

	
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER AND THE SHAREHOLDERS 

 

	
  

	
3.01

	
Corporate Matters.

 

	
  

	
3.02

	
Validity of Agreement and Conflict with Other Instruments.

 

	
  

	
3.03

	
Approvals, Licenses and Authorizations.

 

	
  

	
3.04

	
Title to and Condition of Transferred Assets

 

	
  

	
3.05

	
Contracts and Commitments

 

	
  

	
3.06

	
Financial Statements

 

	
  

	
3.07

	
Taxes

 

	
  

	
3.08

	
No Violations or Litigation

 

	
  

	
3.09

	
No Adverse Changes or Events

 

	
  

	
3.10

	
Environmental Matters

 

	
  

	
3.11

	
Related Party Transactions

 

	
  

	
3.12

	
Undisclosed Liabilities

 

	
  

	
3.13

	
Warranties, Product Liability and Insurance

 

	
  

	
3.14

	
Employee Matters

 

	
  

	
3.15

	
Banks

 

	
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3.16           Customers and Suppliers                                            

	
  

	
3.17

	
Definition of Knowledge

 

	
  

	
3.18

	
Brokers

 

	
  

	
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER 

 

	
  

	
4.01

	
Corporate Matters

 

	
  

	
4.02

	
Conflicts

 

	
  

	
4.03

	
Litigation

 

	
  

	
ARTICLE V ACCESS TO INFORMATION BY THE BUYER 

 

	
  

	
5.01

	
Prior to Closing

 

	
  

	
5.02

	
Public Information

 

	
  

	
ARTICLE VI EMPLOYEE MATTERS 

 

	
  

	
6.01

	
Hiring of Transferred Employees

 

	
  

	
6.02

	
Employee Benefits.

 

	
  

	
6.03

	
Severance Benefits; Employment Termination

 

	
  

	
6.04

	
Reporting of Data

 

	
  

	
6.05

	
Employment Related Claims

 

	
  

	
ARTICLE VII ADDITIONAL AGREEMENTS 

 

	
  

	
7.01

	
Conduct of the Business

 

	
  

	
7.02

	
Information and Consents

 

	
  

	
7.03

	
Compliance.

 

	
  

	
7.04

	
Delivery of Corporate Documents

 

	
  

	
7.05

	
Further Assurances

 

	
  

	
7.06

	
Cooperation After Closing.

 

	
  

	
7.07

	
Covenants of Nondisclosure of Proprietary Information.

 

	
  

	
7.08

	
Real Property

 

	
  

	
7.09

	
Warranty Claims

 

	
  

	
7.10

	
Covenant Not to Compete With the Business

 

	
  

	
7.11

	
Continuation of Business by the Buyer

 

	
  

	
7.12

	
Issuance of Buyer’s Stock

 

	
  

	
ARTICLE VIII CONDITIONS TO THE BUYER’S OBLIGATION TO CONSUMMATE THE TRANSACTIONS 

 

	
  

	
8.01

	
Representations and Warranties

 

	
  

	
8.02

	
Good Standing and Corporate Authorizations

 

	
  

	
8.03

	
Closing Instruments

 

	
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          8.04           Amendment to Articles of Incorporation    

                                                             

	
  

	
8.05

	
No Litigation.

 

	
  

	
8.06

	
Employment Agreements

 

	
  

	
8.07

	
Leases

 

	
  

	
8.08

	
Other Legal Matters

 

	
  

	
8.09

	
Licenses, Consents and Approvals by the Buyer

 

	
  

	
8.10

	
Release of Liens

 

	
  

	
ARTICLE IX CONDITIONS TO THE SELLER’S OBLIGATION TO CONSUMMATE THE TRANSACTIONS 

 

	
  

	
9.01

	
Representations, Warranties and Covenants

 

	
  

	
9.02

	
Receipt of the Purchase Price

 

	
  

	
9.03

	
Licenses, Consents and Approvals

 

	
  

	
9.04

	
No Litigation.

 

	
  

	
9.05

	
Closing Instruments

 

	
  

	
9.06

	
Other Legal Matters

 

	
  

	
ARTICLE X INDEMNIFICATION 

 

	
  

	
10.01

	
Indemnification by the Seller and the Shareholders

 

	
  

	
10.02

	
Intentionally Omitted.

 

	
  

	
10.03

	
Indemnification by the Buyer

 

	
  

	
10.04

	
Procedure

 

	
  

	
10.05

	
Payment

 

	
  

	
10.06

	
Failure to Pay Indemnification

 

	
  

	
10.07

	
Adjustment of Liability

 

	
  

	
10.08

	
Limitations of Indemnity.

 

	
  

	
10.09

	
Mitigation, Subrogation

 

	
  

	
ARTICLE XI NATURE OF STATEMENTS AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES 

 

	
  

	
ARTICLE XII EXPENSES 

 

	
  

	
ARTICLE XIII TERMINATION 

 

	
  

	
13.01

	
Best Efforts to Satisfy Conditions

 

	
  

	
13.02

	
Termination

 

	
  

	
13.03

	
Liability Upon Termination

 

	
  

	
13.04

	
Notice of Termination

 

	
  

	
ARTICLE XIV DEFINITIONS OF CERTAIN TERMS 

 

	
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14.01           “Accounts Receivable”                                            

	
  

	
14.02

	
“Agreement”

 

	
  

	
14.03

	
“AICPA”

 

	
  

	
14.04

	
“Assumed Liabilities”

 

	
  

	
14.05

	
“Business”

 

	
  

	
14.06

	
“Business Day”

 

	
  

	
14.07

	
“Buyer”

 

	
  

	
14.08

	
“Closing”

 

	
  

	
14.09

	
“Closing Date”

 

	
  

	
14.10

	
“Code”

 

	
  

	
14.11

	
“Contracts and Other Agreements”

 

	
  

	
14.12

	
“Damages”

 

	
  

	
14.13

	
“Disclosure Schedule”

 

	
  

	
14.14

	
“Documents and Other Papers”

 

	
  

	
14.15

	
“Employment Agreements”

 

	
  

	
14.16

	
“Environmental Laws”

 

	
  

	
14.17

	
“Environmental Liabilities”

 

	
  

	
14.18

	
“Environmental Permit”

 

	
  

	
14.19

	
“Equipment”

 

	
  

	
14.20

	
“ERISA”

 

	
  

	
14.21

	
“Excluded Assets”

 

	
  

	
14.22

	
“Facilities”

 

	
  

	
14.23

	
“Final Net Working Capital”

 

	
  

	
14.24

	
“Financial Statements”

 

	
  

	
14.25

	
“General Buyer Losses”

 

	
  

	
14.26

	
“Governmental Entity”

 

	
  

	
14.27

	
“Hazardous Materials”

 

	
  

	
14.28

	
“Indemnitee”

 

	
  

	
14.29

	
“Indemnitor”

 

	
  

	
14.30

	
“Inventories”

 

	
  

	
14.31

	
“Lien”

 

	
  

	
14.32

	
“Losses”

 

	
  

	
14.33

	
“Net Working Capital”

 

	
  

	
14.34

	
“Permits”

 

	
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          14.35           “Permitted Liens”        

                         

	
  

	
14.36

	
“Person”

 

	
  

	
14.37

	
“Pre-Closing Obligations”

 

	
  

	
14.38

	
“Proprietary Information”

 

	
  

	
14.39

	
“Proprietary Rights”

 

	
  

	
14.40

	
“Related Party Leases”

 

	
  

	
14.41

	
“Retained Liabilities”

 

	
  

	
14.42

	
“Seller”

 

	
  

	
14.43

	
“Seller Purchase Price”

 

	
  

	
14.44

	
“Shareholders”

 

	
  

	
14.45

	
“Subsidiary”

 

	
  

	
14.46

	
“Tax Consideration”

 

	
  

	
14.47

	
“Tax Returns”

 

	
  

	
14.48

	
“Taxes”

 

	
  

	
14.49

	
“Third Party Claims”

 

	
  

	
14.50

	
“Third Party Leases”

 

	
  

	
14.51

	
“Trade Payables”

 

	
  

	
14.52

	
“Transferred Assets”

 

	
  

	
14.53

	
“Transferred Employees”

 

	
  

	
14.54

	
“Vehicles”

 

	
  

	
ARTICLE XV MISCELLANEOUS 

 

	
  

	
15.01

	
Notices

 

	
  

	
15.02

	
Bulk Transfer Laws

 

	
  

	
15.03

	
Assignment

 

	
  

	
15.04

	
Successors

 

	
  

	
15.05

	
Entire Agreement

 

	
  

	
15.06

	
Governing Law

 

	
  

	
15.07

	
Waiver

 

	
  

	
15.08

	
Severability

 

	
  

	
15.09

	
No Third Party Beneficiaries

 

	
  

	
15.10

	
Counterparts

 

	
  

	
15.11

	
Headings

 

	
  

	
15.12

	
Negotiated Transaction

 

	
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          15.13           Negotiation with Others      

                                      

	
  

	
15.14

	
Prevailing Party

 

	
  

	
15.15

	
Disclosure Schedules

 

EXHIBITS:

EXHIBIT A:                      Form of Seller Note (Section 1.03(a))

EXHIBIT B:                      Form of Lease (Section 7.08)

EXHIBIT C:                      Form of General Conveyance, Transfer, Assignment & Assumption (Sections 8.03 and 9.05)

EXHIBIT D:                      Form of Employment Agreement (Section 8.06)

EXHIBIT E:                      Form of Landlord Assignment and Estoppel Certificate (Section 7.08)

EXHIBIT F:                      Form of Escrow Agreement (Section 8.03)

EXHIBIT G:                      Tax Allocation (Section 1.08(a))

EXHIBIT H:                      Form of Subordination Agreement (Section 1.05(i))

EXHIBIT I:                      Form of Assignment of Lease (Section 7.08)

EXHIBIT J:                      Form of Termination of lease (Section 7.08)

EXHIBIT K:                      Net Working Capital Calculation

	
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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 22nd day of November, 2010  (“the Effective Date”), by and among D&F DISTRIBUTORS, INC., an Indiana corporation (the “Seller”), the SHAREHOLDERS and DXP ENTERPRISES, INC., a Texas corporation (the “Buyer”).

W I T N E S S E T H:

WHEREAS, the Seller desires to transfer to the Buyer the Business and all of the Transferred Assets and the Assumed Liabilities and the Buyer desires to acquire such Business, Transferred Assets and Assumed Liabilities, all upon the terms and subject to the conditions set forth herein; and

WHEREAS, the parties hereto desire to set forth certain representations, warranties, covenants and agreements, all as more fully set forth below;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

 

PURCHASE AND SALE OF ASSETS

 

1.01 Transferred Assets.

 

(a) Subject to the terms and conditions of this Agreement and in consideration of the obligations of the Buyer as provided herein, and except for the Excluded Assets as provided in Section 1.02 hereof, at the Closing, the Seller shall sell, assign, transfer, grant, bargain, deliver and convey to the Buyer, free and clear of all Liens, other than Permitted Liens, all of Seller’s right, title and interest in, to and under the Business, as a going concern, and all assets owned or leased and used by the Seller in connection with or arising out of the Business of every type and description, real or personal, tangible and intangible, wherever located and whether or not reflected on the books and records of the Seller (hereinafter sometimes collectively referred to as the “Transferred Assets”), including, but not limited to:

 

	
(i)  

	
all tangible personal property, including but not limited to the Equipment and vehicles set forth in Schedule 1.01(a)(i) to the Disclosure Schedule;

 

	
(ii)  

	
all Inventories, including the Inventories set forth in Schedule 1.01(a)(ii) to the Disclosure Schedule;

 

	
(iii)  

	
all accounts receivable and other rights to payment from customers of Seller, including the accounts receivable set forth in Schedule 1.01(a)(iii) to the Disclosure Schedule (“Accounts Receivable”);

 

	
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1

  

	
(iv)  

	
the Proprietary Information, including but not limited to the name “D&F Distributors” or any derivatives thereof, and the names of the customers and suppliers of the Business;

 

	
(v)  

	
to the extent assignable, all Contracts and Other Agreements, including but not limited to (A) all rights of Seller under non-disclosure or confidentiality agreements, non-compete or non-solicitation agreements with former employees, Transferred Employees and agents of Seller or with third Persons to the extent relating to the Business or the Transferred Assets and (B) all rights of Seller under or pursuant to all warranties, representations and guarantees made by suppliers, manufacturers and contractors to the extent relating to products sold and services provided to Seller or to the extent affecting any Transferred Assets or the Business (but specifically excluding warranties, representations and guaranties specifically and solely relating to any Excluded Assets or Retained Liabilities);

 

	
(vi)  

	
cash and cash equivalents;

 

	
(vii)  

	
to the extent assignable, all prepaid expenses, deposits and similar assets of Seller, including but not limited to customer deposits, security for rent, electricity, telephone or other utilities and prepaid charges and expenses including prepaid rent and any prepaid items shown on Seller’s August 31, 2010 Financial Statements relating to the Transferred Assets and the Business subject to adjustment due to the passage of time;

 

	
(viii)  

	
all documents that are related to the Business, including but not limited to documents relating to products, services, marketing, advertising, promotional materials, Proprietary Information, personnel files of the Transferred Employees and all files, customer files and related documents (including credit information), supplier lists, records, literature and correspondence, to the extent permitted by law to be assigned and transferred (“Documents and Other Papers”);

 

	
(ix)  

	
to the extent assignable, all permits, including but not limited to environmental permits used by Seller in the Business and all permits necessary to conduct the Business as currently conducted, and all rights, and incidents of interests therein (“Permits”);

 

	
(x)  

	
all supplies and computer equipment owned by Seller and used or held for use in connection with the Transferred Assets and the Business;

 

	
(xi)  

	
to the extent not used to repair or replace any Transferred Assets, all rights to third-party property and casualty insurance proceeds to the extent receivable in respect of property or assets that would otherwise be Transferred Assets; and

 

	
(xii)  

	
all other intangible assets of Seller, if any, associated with the Transferred Assets and the Business.

 

	
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 (b) The Seller shall use its reasonable efforts to obtain, or as the case may be assist the Buyer in obtaining, such consents of third parties as are necessary for the assignment of the Transferred Assets; provided, however, that Seller shall not be required to pay any amounts in respect of obtaining such consents.  To the extent that any of the Transferred Assets are not assignable or consents to the assignment thereof cannot be obtained as herein provided, such Transferred Assets shall be held by the Seller in trust for the Buyer and any obligations with respect thereto shall be performed by the Buyer in the name of the Seller and all benefits and obligations derived thereunder shall be for the action of the Buyer.  The Seller shall, at the request of the Buyer, enforce in a reasonable manner, at the cost of and for the account of the Buyer, any and all rights of the Seller against such third party relating to any such Transferred Assets.  Seller shall promptly pay over to the Buyer all money or other consideration received by it in respect of such entitlement.

 

(c) The Seller shall also notify each Person which may have possession of the Transferred Assets on the Closing Date of the transfer of such Transferred Assets to the Buyer.

 

1.02 Excluded Assets.  There shall be excluded from the Transferred Assets (the “Excluded Assets”): (i) cash or cash equivalents, including, without limitation, checks or drafts received by Seller in connection with the Business for which Seller received funds prior to the Closing Date, certificates of deposit, time deposits and marketable securities, (ii) the minute books, organizational documents, stock registers and such other books and records of Seller pertaining to ownership, organization or existence of Seller as a corporation, provided, however, duplicate copies of such records shall be provided to Buyer as are reasonably necessary to enable Buyer to file tax returns and file information with the Securities and Exchange Commission, and (iii) those assets of listed or described on Schedule 1.02 of the Disclosure Schedule.

 

1.03 Consideration

 

(a) The consideration for Buyer’s purchase of the Transferred Assets and the Business shall be: Thirteen Million Four Hundred Thousand Dollars ($13,400,000) (“Seller Purchase Price”)  subject to adjustment as otherwise provided under this Section 1.03, paid as follows: (i) the amount that equals 48.56% of the net purchase price after payment of the Seller’s bank debt and Shareholder debt (the “Seller Cash Payment”), (ii) the amount that equals 26.455% of the net purchase price after payment of the Seller’s bank debt and Shareholder debt in shares of the unregistered common stock of Buyer as determined in Section 1.03(g) below (the “Stock”), (iii) a promissory note in the form of Exhibit “A” in an original principal amount equal to (24.985% of the net purchase price after payment of the Seller’s bank debt and the Shareholder debt) minus the principal amount of the Seller Escrow Note (the “Seller Note”); (iv) a promissory note in the form of Exhibit “A” in an original principal amount equal to 95.01% of the Escrow Amount  (the “Seller Escrow Note”), which along with the assumption of the Assumed Liabilities shall be the “Seller Consideration”; (v) the amount necessary to satisfy in full the Seller’s bank debt and Shareholder debt.  On the Closing Date, Buyer shall (x) pay the Seller Cash Payment to Seller (i) by wire transfer of  same day funds into an account(s) designated by Seller in an amount necessary to satisfy the Seller’s bank debt and Shareholder debt; (ii) by wire transfer of  same day funds into account(s) designated by Seller in the sum equal to the Seller Cash Payment reduced by the wire transfer amounts in (i) and

 

	
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(b) (iii) hereof; and (iii) by wire transfer equal to 3.99% of the Escrow Amount to the escrow account as specified in the Escrow Agreement as defined in Section 8.03; (y) deliver to Seller the duly executed Seller Note and the Stock; and (z) deliver to the Escrow Agent the Seller Escrow Note pursuant to the Escrow Agreement.  The Escrow Amount (the “Escrow Amount”) shall be five percent of the Seller Purchase Price after payment of bank debt and the Shareholders’ debt.

 

(c) In consideration of the Shareholders covenants and agreements as set forth in Section 7.07 and 7.10 hereof, on the Closing Date Buyer shall execute and deliver the Seller Note.  In the event Buyer were to seek damages for any breach of Section 7.07 or 7.10, the amount specified in the immediately preceding sentence or otherwise allocated by the parties to the covenants set forth in Section 7.07 and 7.10 shall not be considered a measure of or limit on such damages.

 

(d) Not later than sixty (60) days after the Closing Date, Buyer shall cause to be prepared and delivered to Seller and the Shareholders a statement setting forth Buyer’s calculation of Final Net Working Capital as of the end of business on the  Closing Date (the "Closing Statement"), which shall be prepared by Buyer in accordance with Exhibit K.

 

(e) If Seller disagrees with Buyer’s calculations in the Closing Statement, Seller may, within fifteen (15) days after delivery of the Closing Statement, deliver a notice to Buyer disagreeing with such calculation and setting forth Seller’s calculation of such amounts (a "Dispute Notice").  Any such Dispute Notice shall specify those items or amounts as to which Seller disagrees, and Seller shall be deemed to have agreed with all other calculations and amounts contained in the Closing Statement.  If a Dispute Notice shall be duly delivered by Seller to Buyer, Buyer and Seller shall, during the fifteen (15) days following such delivery, use their good faith efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the Final Net Working Capital as of the Closing Date, as applicable, which amount shall not be less than the amount thereof shown in the Closing Statement nor more than the amount thereof shown in Seller’s Dispute Notice.  If the parties so resolve all disputes, the computation of the Final Net Working Capital as of the Closing Date, as amended to the extent necessary to reflect the resolution of the dispute, shall be conclusive and binding on all parties.  If during such period, Buyer and Seller are unable to reach an agreement, they shall within five (5) days thereafter cause BKD, LLP, Evansville, Indiana (the “Firm”) to review this Agreement and the disputed items or amounts for the purpose of calculating the Final Net Working Capital as of the Closing Date (it being understood that in making such disputed calculation, the Firm shall be functioning as an expert and not as an arbitrator).  In making such disputed calculation, the Firm shall consider only those items or amounts in the Closing Statement and the Dispute Notice to which Seller has disagreed.  The Firm shall deliver to Buyer and Seller, as promptly as practicable (but in any case no later than thirty (30) days from the date of engagement of the Firm), a report setting forth the calculations of the Final Net Working Capital as of the Closing Date.  Such report shall be final and binding upon Buyer, Seller and the Shareholders and judgment may be entered to enforce such report in any court of competent jurisdiction.  The fees, costs and expenses of the Firm (“the Expenses”) shall be  paid as follows: (i) if the event the Firm agrees with Buyer’s calculation of the Final Net Working Capital, then Seller shall pay the Expenses, (ii) if the Firm agrees with Seller’s calculation of the Final Net Working Capital, then Buyer will pay the Expenses, or (iii) if the Firm does not agree with Buyer’s or Seller’s calculation of Final Net Working Capital, then the Expenses shall be prorated between Buyer and Seller based on the percentage of adjustment for each parties’ Final Net Working Capital calculation.

 

	
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(f) Buyer and Seller shall, and shall cause their respective representatives to, cooperate and assist in the preparation of the Closing Statement and the calculation of the Final Net Working Capital and in the conduct of the review thereof, including the making available to the extent necessary books, records, work papers and personnel.

 

(g) If the Final Net Working Capital is more than Three Million and No/100 Dollars ($3,000,000.00), then Buyer shall pay Seller the amount in excess of $3,000,000.00.  If the Final Net Working Capital is less than Two Million Seven Hundred Thousand and No/100 Dollars ($2,700,000.00), then Seller shall pay Buyer the difference between the Final Net Working Capital and $2,700,000.00.  Such payments shall be made by wire transfer within ten (10) business days from the receipt of the notice, as required by this Agreement, requesting the payment to the account designated in the notice.  In the event Seller fails to timely make such payment, then Buyer may offset the amount of said payment against the principal amount of the Seller Note.  In the event Buyer fails to timely make such payment, the Seller shall have the right, upon prior written notice to the Seller, to increase the principal amount of the Seller Escrow Note or the Seller Note, and the amount of the periodic payments of principal and interest shall be increased by the amount required to allow for the full payment of Seller Escrow Note or Seller Note over the term of the Seller Escrow Note or Seller Note.

 

(h) The number of shares of Stock to be issued by Buyer at Closing shall be calculated by dividing the amount that equals 26.455% of the net purchase price after payment of the Seller’s bank debt and Shareholder debt by the per share average of the daily closing prices of Buyer’s common stock for the thirty (30) consecutive trading days on the NASDAQ Stock Exchange immediately preceding the Effective Date of this Agreement.

 

(i) Buyer will take such action as may reasonably be requested in writing by Seller so as to permit resale of the Stock and any shares issued upon conversion of the Note or the Escrow Note, pursuant to Rule 145 of the United States Securities and Exchange Commission.

 

(j) The Seller Note shall be subject to that one certain Subordination Agreement substantially similar to Exhibit “H”, which is attached hereto.

 

1.04 Assumed Liabilities.  On the terms and subject to the conditions set forth in this Agreement, at the Closing the Buyer will assume, effective as of the Closing Date, the following liabilities of Seller (collectively, the “Assumed Liabilities”):

 

(a) all liabilities of Seller under the Contracts and Other Agreements that arise out of or relate to the performance thereof for the period from and after the Closing Date and the other obligations and liabilities associated with the operation of the Business from and after the Closing Date;

 

(b) all Trade Payables of the Seller as of the Closing Date arising out of the ordinary course of the Business prior to the Closing Date;

 

(c) all obligations of Seller with respect to unpaid payroll and sales taxes as of the Closing Date arising in the ordinary course of Business prior to the Closing Date;

 

(d) the liabilities set forth in Article 6 specifically assumed by Buyer;

 

	
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(e) the warranty claims provided in Section 7.09; and

 

(f) those liabilities listed on Schedule 1.04(f).

 

1.05 Liabilities Not Assumed by the Buyer.  Except for the Assumed Liabilities and the warranty claims as provided in Section 7.09 hereof, the Seller shall pay and discharge in due course all of its liabilities, debts and obligations, whether known or unknown, now existing or hereafter arising, contingent or liquidated, including, without limitation, those listed in Schedule 1.05 of the Disclosure Schedule (the “Retained Liabilities”), and the Buyer shall not assume, or in any way be liable or responsible for, any of such Retained Liabilities.  Without limiting the generality of the foregoing, the Retained Liabilities shall include the following:

 

(a) any liability or obligation of the Seller arising out of or in connection with this Agreement and the consummation and performance of the transactions contemplated hereby, whether or not such transactions are consummated, including but not limited to, and except as otherwise provided herein, any liability for Taxes so arising;

 

(b) any liability or obligation for any and all Taxes of, or pertaining or attributable to, (i) the Seller for any period that ends on or before, or includes, the Closing Date, or (ii) the Business and/or the Transferred Assets for any period or portion thereof that ends on or before the Closing Date (including, but in no way limited to, any and all Taxes described in clauses (i) and (ii) of this Section 1.05(b) for which liability is or may be sought to be imposed on the Buyer under any successor liability, transferee liability or similar provision of any applicable foreign, federal, state or local law);

 

(c) except for the warranty claims as provided in Section 7.09 hereof, all other liabilities and obligations to any Person arising prior to the Closing or related to the conduct or operation of the Transferred Assets or the Business prior to the Closing Date, including, but not limited to, the Pre-Closing Obligations and the specific liabilities, obligations or litigation listed on Schedule 1.05(c) of the Disclosure Schedule;

 

(d) all environmental costs and liabilities, to the extent arising out of or otherwise related to:  (i) the ownership or operation by Seller of the Transferred Assets or the Business, including but not limited to the Facilities, prior to the Closing Date, and (ii) the Excluded Assets or any other real property formerly owned, operated, leased or otherwise used by Seller;

 

(e) except as set forth in Article 6, all liabilities arising out of, relating to or with respect to (i) the employment or performance of services, or termination of employment or services by Seller of any individual (including any Transferred Employee) on or before the Closing Date, (ii) worker’s compensation claims against Seller that relate to the conduct of the Business or the operation of the Transferred Assets on or before the Closing Date, irrespective of whether such claims are made prior to or after the Closing or (iii) any employee benefit plan of the Seller;

 

(f) all liabilities arising out of, under or in connection with any indebtedness of Seller, not specifically assumed by Buyer in this Agreement, including but not limited to notes payable to the Shareholders or to notes payable to any employee or employees of the Seller;

 

	
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(g) all liabilities in respect of:  (i) any pending or threatened legal proceeding or any claim arising out of, relating to or otherwise in respect of the operation of the Business prior to the Closing Date or (ii) any Excluded Asset;

 

(h) except as provided in Section 7.09, all liabilities relating to any dispute with any client or customer of the Business existing as of the Closing Date or based upon, relating to or arising out of events, actions, or failures to act prior to the Closing Date; provided, however, the Buyer agrees to reasonably assist Seller in satisfying such dispute at Seller's cost, including by providing services of Buyer and the Transferred Employees and Transferred Assets; and

 

(i) The Seller Note shall be subject to that one certain Subordination Agreement substantially similar to Exhibit “H”, which is attached hereto.

 

1.06 Prorations of Expenses and Certain Property Taxes.

 

(a) Any general property Tax assessed against or pertaining to the Transferred Assets, including pursuant to the leases for the Facilities, for the taxable period that includes the Closing Date shall be prorated between the Buyer (after the Closing Date) and the Seller (prior to and including the Closing Date) as of the Closing Date.  In the event the amount of any such general property Tax cannot be ascertained as of the Closing Date, proration shall be made on the basis of the preceding year and to the extent that such proration may be inaccurate the Seller and the Buyer agree to make such payment to the other after the tax statements have been received as are necessary to allocate such general property Tax properly between the Seller and the Buyer as of the Closing Date.

 

(b) Except as otherwise provided in this Agreement, the Seller and the Buyer agree that amounts payable with respect to utility charges, insurance premiums and other items of expense attributable to the conduct of the Business shall be prorated as of the Closing Date (with Seller responsible for the period up to and including the Closing Date and Buyer responsible for the period after the Closing Date) to the extent the charges and expenses cannot be identified as to the party who received the benefits to which such charges and expenses relate.

 

1.07 Transfer Taxes; Recording Fees; Tax Reimbursement.

 

(a) The Buyer and the Seller acknowledge and agree that the Purchase Price does not include any sales tax imposed as a result of the transfer of equipment and motor vehicles.  The Buyer hereby agrees to indemnify the Seller and the Shareholders against, and agrees to protect, save and hold the Seller and Shareholders harmless from, any loss, liability, obligation or claim (whether or not ultimately successful) for sales, transfer or other similar Taxes (and any interest, penalties, additions to tax and fines thereon or related thereto) imposed as a result of the consummation of the transactions contemplated by this Agreement.

 

(b) The Buyer shall pay any and all recording, filing or other governmental fees relating to documenting the transfer of the Transferred Assets from the Seller to the Buyer.

 

	
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(c) Seller shall timely file all Tax Returns relating to the operation of the Transferred Assets and conduct of the Business prior to the Closing Date.  If Seller remits any income taxes that are Assumed Liabilities of Buyer pursuant to Section 1.04(f) hereof, then Buyer shall promptly reimburse Seller for such payment upon provision by Seller of reasonable written evidence of such remittance.

 

1.08 Allocation of Purchase Price.

 

(a) Seller, the Shareholders and Buyer have prepared an initial written statement setting forth the allocation of the consideration (including, without limitation, the Seller Purchase Price and any adjustments thereto) deemed to have been paid for federal income tax purposes by the Buyer to the Seller and the Shareholders pursuant to this Agreement (the “Tax Consideration”) among the Transferred Assets and the other covenants and rights arising hereunder (the “Allocation”) and a copy of such written statement is attached hereto as Exhibit “G”.

 

(b) For federal income tax purposes (including, without limitation, Buyer’s, each Shareholder’s and the Seller’s compliance with the reporting requirements of Section 1060 of the Code), each of the Seller, Shareholders and the Buyer hereby agree to use the Allocation and to cooperate in good faith with each other in connection with the preparation and filing of any information required to be furnished to the Internal Revenue Service under Section 1060 of the Code (including, without limitation, Section 1060(b) and (e) of the Code) and any applicable regulations thereunder.  Without limiting the generality of the preceding sentence, the Buyer, Shareholders and the Seller agree to (i) report the Allocation to the Internal Revenue Service on Form 8594 and, if required, supplemental Forms 8594, in accordance with the instructions to Form 8594 and the provisions of Section 1060 of the Code and the applicable regulations thereunder, and (ii) coordinate their respective preparation and filing of each such Form 8594 and any other forms or information statements or schedules required to be filed under Section 1060 of the Code and the applicable regulations thereunder so that the Allocation and information reflected on such forms, statements and schedules shall be consistent.

 

(c) Notwithstanding the foregoing provisions of this Section 1.08, Buyer shall prepare and deliver to Seller and Shareholders from time to time revised statements of any Allocation to the extent that any matters need updating (including, without limitation, in respect of any adjustments under Section 1.03 hereof), which such revised statements shall be substantially consistent with the manner of allocation previously agreed to by the Seller, Shareholders and the Buyer.

 

1.09 Right to Control Payment.  Buyer shall have the right, but not the obligation, to make any payment due from Seller with respect to any Retained Liabilities which are not paid by Seller within five (5) Business Days following written request for payment from Buyer; provided, however, that if Seller advises Buyer in writing during such five (5) Business Day-period that a good faith payment dispute exists or Seller has valid defenses to non-payment with respect to such Retained Liability, then Buyer shall not have the right to pay such Retained Liability as long as Seller continues to diligently proceed to resolve such dispute or valid defense.  Seller agrees to reimburse Buyer promptly and in any event within five (5) Business Days following written notice of such payment by Buyer for the amount of any payment made by Buyer pursuant to this Section 1.09.

 

	
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1.10 Accounts Receivable.  Following the Closing Date, Seller and Shareholders shall provide reasonable assistance to Buyer in the collection of the accounts receivable.  If Seller shall receive payment in respect of the accounts receivable, then Seller shall forward such payment to Buyer in not less than thirty (30) days from receipt of such payment.

 

ARTICLE II

 

CLOSING

 

Subject to the conditions set forth in this Agreement, the Closing shall take place at the offices of Johnson Carroll Norton Kent & Straus, P.C., located in Evansville, Vanderburgh County, Indiana, or by electronic transmission of all closing documents between the counsels for Seller and for Buyer, at 10:00 a.m. on or before December 3, 2010 or at such other time, date and place as the parties hereto shall mutually agree upon in writing (the “Closing Date”) with the effective date on November 30, 2010.  Except as set forth in Article 13, failure to consummate the transactions contemplated hereby on such date shall not result in a termination of this Agreement or relieve any party hereto of any obligation hereunder.  Title to, ownership of, control over and risk of loss of the Transferred Assets shall pass to the Buyer on the Closing Date at 11:59:59 PM, Evansville, Indiana time.

ARTICLE III

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

OF THE SELLER AND THE SHAREHOLDERS

 

The Seller and the Shareholders, hereby represent and warrant to the Buyer and covenant and agree as follows:

3.01 Corporate Matters.

 

(a) The Seller is a corporation organized, validly existing and in good standing under the laws of the State of Indiana.  The Seller is duly authorized, qualified and licensed and has all requisite power and authority under all applicable laws, ordinances and orders of public authorities to own, operate and lease its properties and assets and to carry on its business in the places and in the manner currently conducted.  The Seller is qualified to do business as a foreign corporation in Kentucky, Illinois, Ohio and Tennessee.  There is no other jurisdiction in which the nature and extent of the Seller’s business or the character of its assets makes qualification to transact business as a foreign corporation necessary.  The Seller has all requisite corporate power and authority to enter into this Agreement and to perform its obligations under this Agreement.

 

(b) The Seller has no Subsidiaries.

 

(c) The Seller does not do business in any state or commonwealth under any name other than the corporate name set forth in the first paragraph of this Agreement.

 

(d) The Seller and the Shareholders represent and warrant to the Buyer that (i) the Shareholders hold of record and own beneficially 53,000 shares of the capital stock which is all of the issued and outstanding capital stock of the Seller free and clear of any Liens, except encumbrances on transfer generally imposed under applicable securities law; and (ii)

 

	
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(e) no other form of stock of the Seller has been issued by the Seller.  Set out in Schedule 3.01(d) are the names of the parties that hold of record and own beneficially all of the common stock of the Seller and the number of shares of capital stock owned by each party.  Neither the Shareholders nor, to the Seller’s knowledge, any other Persons owning capital stock of the Seller are party to an option, warrant, purchase right, or other contract or commitment that could require the Shareholders or such other owners of the capital stock to sell, transfer, or otherwise dispose of any common stock of the Seller (other than in this Agreement).  The Shareholders or the other owners of the common stock are not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any shares of the capital stock of the Seller.  All of the common stock of the Seller has been duly authorized and validly issued.  Set out in Schedule 3.01(d) are copies of the Articles of Incorporation and Bylaws of the Seller and all amendments thereto.

 

3.02 Validity of Agreement and Conflict with Other Instruments.

 

(a) This Agreement has been duly authorized by the Shareholders and directors of the Seller.  No further corporate action is necessary on the part of the Seller to execute and deliver this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly executed and delivered by the Seller and the Shareholders and is a legal, valid and binding obligation of the Seller and the Shareholders enforceable against the Seller and the Shareholders 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.

 

(b) The covenants set out in Sections 7.07 and 7.10 hereof have been approved by all necessary corporate action on the part of Seller and, when executed and delivered at the Closing as contemplated by this Agreement, shall be legal, valid and binding obligations of the Seller and the Shareholders, enforceable against the Seller and the Shareholders 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.

 

(c) The execution, delivery and performance of this Agreement and the other agreements and documents to be delivered by the Seller to the Buyer, the consummation of the transactions contemplated hereby or thereby, and the compliance with the provisions hereof or thereof, by the Seller will not, with or without the passage of time or the giving of notice or both to the best of Seller’s knowledge:

 

	
(i)  

	
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 of the Contracts and Other Agreements to which the Seller is a party or by which any of them is bound, other than, in each case, such that would not materially and adversely affect the ability of the Seller to consummate the transactions contemplated hereby or thereby;

 

	
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(ii)  

	
result in an acceleration or increase of any amounts due with respect to the Trade Payables;

 

	
(iii)  

	
conflict with or violate the Articles of Incorporation or Bylaws of the Seller;

 

	
(iv)  

	
result in the creation or imposition of any Lien on any of the Transferred Assets; or

 

	
(v)  

	
violate any law, statute, ordinance, regulation, judgment, writ, injunction, rule, decree, order or any other restriction of any kind or character applicable to the Seller or any of their respective properties or assets.

 

(d) Except as set forth in Schedule 1.04(f) and 3.05(a), the execution, delivery and performance of this Agreement and the other agreements and documents to be delivered by the Shareholders, the consummation of the transactions contemplated hereby and thereby, and the compliance with the provisions hereof and thereof, by the Shareholders will not, with or without the passage of time or the giving of notice or both:

 

	
(i)  

	
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 contract or other agreement to which the Shareholders are a party or by which any of them is bound, other than, in each case, such that would not materially and adversely affect the ability of each Shareholder to consummate the transactions contemplated hereby or thereby; or

 

	
(ii)  

	
to the best of Seller’s knowledge, violate any law, statute, ordinance, regulation, judgment, writ, injunction, rule, decree, order or any other restriction of any kind or character applicable to the Shareholders or any of their respective properties or assets.

 

 

(e) Attached as Schedule 3.02(e) of the Disclosure Schedule are true, correct and complete copies of all resolutions adopted by the directors and shareholders of Seller with respect to the Seller approving this Agreement and the transactions contemplated hereby.  Such resolutions were adopted at meetings duly called and convened at which a quorum was present and acting throughout or by unanimous written consents.  Such resolutions are in full force and effect without amendment or modification.

 

3.03 Approvals, Licenses and Authorizations.

 

(a) Except as set forth on Schedule 3.03(a), no order, license, consent, waiver, authorization or approval of, or exemption by, or the giving of notice to, or the registration with, or the taking of any other action in respect of, any Person not a party to this Agreement, including any Governmental Entity, and no filing, recording, publication or registration in any public office or any other place is now, or under existing law in the future will be, necessary on behalf of the Seller to

 

	
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(b) authorize the execution, delivery and performance of this Agreement or any other agreement contemplated hereby to be executed and delivered by them and the consummation of the transactions contemplated hereby or thereby (including, but not limited to, assignment of the Transferred Assets), or to effect the legality, validity, binding effect or enforceability thereof.

 

(c) Schedule 3.03(b) contains a list of all licenses, permits, concessions, warrants, franchises and other governmental authorizations and approvals of all Governmental Entities required or necessary to carry on the Business in the places and in the manner currently conducted have been duly obtained, are in full force and effect.  Except as set forth on Schedule 3.03(b), no violations are in existence or have been recorded since December 31, 2009 with respect to such licenses, permits or other authorizations and no proceeding is pending or, to the best knowledge of the Seller, threatened with respect to the revocation or limitation of any of such licenses, permits or other authorizations.  The Seller has complied with all laws, rules, regulations and orders applicable to the Business, and all rules, regulations and orders respecting the provision of services by the Seller.

 

3.04 Title to and Condition of Transferred Assets.

(a) The Seller currently leases all of the Facilities.  All of the Transferred Assets are located at one of the Facilities.

 

(b) The Seller has good and marketable title to all Equipment free and clear of all Liens other than those Liens set forth on Schedule 3.04(b) of the Disclosure Schedule and Permitted Liens.  All of the Equipment is in the Seller’s possession and control and in good condition and repair, ordinary wear and tear accepted, and is suitable for the purposes used.

 

(c) All Inventories are set forth on Schedule 1.01(a)(ii) of the Disclosure Schedule.  The Seller has valid title to all Inventories free and clear of all Liens other than those Liens set forth on Schedule 3.04(c) of the Disclosure Schedule and Permitted Liens, which Liens shall be released on or prior to the Closing.  The Inventories are in good and marketable condition and are saleable in the ordinary course of business.  The Inventories constitute sufficient quantities for the normal operation of the Business and the Inventories will be in such sufficient quantities on the Closing Date.  There are not any slow moving or obsolete Inventories except as reserved in the November 30, 2010 Financial Statements.

 

(d) The accounts receivable comprising part of the Transferred Assets are owned by the Seller free and clear of all Liens (other than those Liens set forth in Schedule 3.04(d) of the Disclosure Schedule, which Liens shall be released on or prior to the Closing and Permitted Liens) and relate to receivables owed to the Seller.  All accounts receivable were generated in the ordinary course of business pursuant to bona fide transactions and are payable on ordinary trade terms.  The Seller is unaware of any existing facts or circumstances that could reasonably be expected to increase uncollectible accounts receivable beyond the allowance for bad debt reflected in the November 30, 2010 Financial Statements.

 

(e) The Seller owns or possesses licenses or other rights to use, and will at the Closing transfer to the Buyer, all rights to all Proprietary Information necessary for the conduct of the Business as currently conducted, except for standard "shrink wrapped, off the shelf" or "click-wrap" software.  Set forth in Schedule 3.04(e) of the Disclosure Schedule is a complete and accurate list of all patents, trademarks, copyrights and licenses that Seller owns

 

	
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(f) or possesses or otherwise has rights to use pertaining to the Business, except for standard "shrink wrapped, off the shelf" or "click-wrap" software including the jurisdictions in which each such item has been issued or registered and the registration date.  No licenses, sublicenses, covenants or agreements have been granted or entered into by the Seller in respect of the items listed in Schedule 3.04(e) of the Disclosure Schedule except as noted thereon.  The Seller has not received any notice of infringement, misappropriation or conflict from any other Person with respect to such Proprietary Information except as noted in Schedule 3.04(e) of the Disclosure Schedule, and, to Seller's knowledge, the conduct of the Business has not infringed, misappropriated or otherwise conflicted with any Proprietary Rights of any such Person.  The Seller has not given indemnification for patent, trademark, service mark or copyright infringements except to licensees or customers in the ordinary course of business.  All of the Proprietary Information that is owned by the Seller is owned free and clear of all Liens except as set forth in Schedule 3.04(e) of the Disclosure Schedule and Permitted Liens.  All Proprietary Rights that are licensed by the Seller to third parties are licensed pursuant to valid and existing license agreements and such interests are not subject to any Liens other than those under the applicable license agreements.  The consummation of the transactions contemplated by this Agreement will not result in the loss of any Proprietary Information.  To Seller's knowledge, the present business practices, methods and operations of Seller regarding the Proprietary Information does not infringe, constitute an unauthorized use of, misappropriation or violate any copyright, mark, patent, trade secret or other similar right of any Person.  Except with respect to licenses of commercial off-the-shelf software Seller is not obligated, required or under any liability whatsoever to make any payments by way of royalties, fees or otherwise regarding the Proprietary Information.

 

(g) Other than the Facilities, there is no real property or interest in real property owned or leased by Seller for use in the Business or in connection with the Transferred Assets.  Schedule 14.20 of the Disclosure Schedule sets forth a complete list of the Facilities leased by Seller, including a legal description of the Facilities (including the name of the lessor and the date of the lease and all amendments thereto).  There is not any event of default regarding said Facilities.  To Seller's knowledge, said leased real property is not subject to any rights of first refusal or options to purchase except as set out in the leases.

 

(h) Except for the current leases for the Facilities, the Seller owns or has rights to use, and is transferring to the Buyer hereunder, all tangible assets necessary for the conduct of the Business in the ordinary course.  The conduct of the Business in the ordinary course is not dependent upon the right to use the property of others, except such property as is leased or licensed by Seller and assignable to Buyer pursuant to and included in the Transferred Assets.

 

3.05 Contracts and Commitments.

 

(a) Other than leases for the Facilities and as otherwise set forth in Schedule 1.04(f) and Schedule 3.05(a) of the Disclosure Schedule, none of the Transferred Assets are subject to, and the Seller is not a party to or bound by:

 

	
(i)  

	
any agreement, contract or commitment requiring the expenditure or series of related expenditures of funds in excess of $10,000 in any fiscal year (other than purchase orders in the ordinary course of business for goods necessary for the Seller to complete then existing contracts or purchase orders);

 

	
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(ii)  

	
any agreement, contract or commitment requiring the payment for goods or services whether or not such goods or services are actually provided or the provision of goods or services at a price less than the Seller’s cost of producing or supplying such goods or providing such services;

 

	
(iii)  

	
any loan or advance to, or investment in, any Person or any agreement, contract, commitment or understanding relating to the making of any such loan, advance or investment;

 

	
(iv)  

	
any contract, agreement, indenture, note or other instrument relating to the borrowing of money or any guarantee or other contingent liability in respect of any indebtedness or obligation of any Person (other than the endorsement of negotiable instruments for deposit or collection in the ordinary course of business);

 

	
(v)  

	
any management service, employment, consulting or other similar type contract or agreement;

 

	
(vi)  

	
any agreement, contract or commitment that would limit the freedom of the Buyer or any affiliate thereof following the Closing Date to engage in any line of business, to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any of the Transferred Assets or to compete with any Person or to engage in any business or activity in any geographic area;

 

	
(vii)  

	
any agreement, lease, contract or commitment or series of related agreements, leases, contracts or commitments not entered into in the ordinary course of business or, except for agreements to purchase or sell goods and services entered into in the ordinary course of business of the Seller, not cancelable by the Seller without penalty to the Seller within 30 calendar days;

 

	
(viii)  

	
other than in respect of the Seller’s customary general warranty for goods sold as described on Schedule 3.13(a) to the Disclosure Schedule, any agreement or contract obligating the Seller or that would obligate or require any subsequent owner of the Business or any of the Transferred Assets to provide for indemnification or contribution with respect to any matter;

 

	
(ix)  

	
any sales, distributorship or similar agreement relating to the products sold or services provided by the Seller;

 

	
(x)  

	
any license, royalty or similar agreement;

 

	
(xi)  

	
any contract requiring performance by Seller for a period of one year or more or requiring Seller to purchase or sell a stated portion of its requirements or outputs.

 

(b) To Seller’s knowledge, Seller is not in breach of any provision of, or is in default (or knows of any event or circumstance that with notice, or lapse of time or both, would constitute an event of default) under the terms of any of the Contracts and Other Agreements that constitute a part of the Transferred Assets.  All of the Contracts and Other Agreements that constitute a part of the Transferred Assets are

 

	
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(c) in full force and effect.  To Seller's knowledge, there are no pending or threatened disputes with respect to any of the Contracts and Other Agreements.

 

(d) Except as shown on Schedule 3.05(a) and Schedule 1.04(f), the enforceability of the Contracts and Other Agreements that constitute a part of the Transferred Assets will not be affected in any manner by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby and none of the Contracts and Other Agreements that constitute a part of the Transferred Assets require the receipt of the consent or waiver of any Person or Governmental Entity prior to the sale, assignment, transfer, conveyance or delivery thereof pursuant to this Agreement.

 

3.06 Financial Statements.

 

(a) Attached as Schedule 3.06 to the Disclosure Schedule are true, correct and complete copies of (i) the reviewed Statement of Assets, Liabilities and Stockholder’s Equity-Income Tax Basis of the Business as of December 31, 2008 and December 31, 2009 (“Annual Financials”) and the internally prepared balance sheet of Business as of July 31, 2010 and August 31, 2010, and (ii) the reviewed statements of Revenue, Expenses and Retained Earnings-Income Tax Basisi of the Business for the annual periods ended December 31, 2008 and December 31, 2009, and the internally prepared monthly and year-to-date statements of income of the Business for the applicable periods ended July 31, 2010 and August 31, 2010.  No later than three (3) days prior to the Closing Date, Seller shall deliver to Buyer the internally prepared balance sheet and statement of income for the Business for the period ended August 31, 2010 and September 30, 2010 (such balance sheet and statement of income, collectively with each of the balance sheets and statements of income described in clauses (i) and (ii) of this Section 3.06(a), referred to herein as the “Financial Statements”).

 

The Financial Statements:

 

	
(i)  

	
the internally prepared Financial Statements fairly present the financial position of the Business as of their respective dates and the results of operations of the Business for the periods indicated therein;

 

	
(ii)  

	
the Annual Financials have been reviewed or compiled, as applicable, by Brown, Smith & Settle, LLC in accordance with the Statements and Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants based on generally accepted accounting principles applied on a consistent basis throughout the periods covered by the Financial Statements ; and

 

	
(iii)  

	
the Annual Financials reflect all liabilities or obligations, whether accrued, absolute, contingent or otherwise, of the Seller that are Assumed Liabilities as required under generally accepted accounting principles consistently applied other than those liabilities incurred since December 31, 2009, in the ordinary course of business consistent with past practice.

 

	
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The values at which the Inventories and accounts receivable are carried on the Financial Statements are net of write-offs for uncollectable accounts receivable and absolute Inventories and reflect normal and consistent inventory valuation policies of the Seller.

 

3.07 Taxes.

 

(a) All Tax Returns that are required to be filed (taking into account all extensions) on or before the Closing Date for, by, on behalf of or with respect to the Seller, including, but not limited to, those relating to the Business, the Transferred Assets and the Assumed Liabilities, and those which include or should include the Seller, the Business, the Transferred Assets or the Assumed Liabilities, have been or will be timely filed with the appropriate foreign, federal, state and local authorities on or before the Closing Date, and all Taxes shown to be due and payable on such Tax Returns or related to such Tax Returns have been or will be timely paid in full on or before the Closing Date;

 

(b) All such Tax Returns and the information and data contained therein have been or will be properly and accurately prepared and completed in all respects, fairly present or will fairly present the information purported to be shown therein, and reflect or will reflect all liabilities for Taxes for the periods covered by such Tax Returns;

 

(c) None of such Tax Returns are now under audit or, to the Seller’s knowledge, examination by any foreign, federal, state or local authority and there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment or collection of any Tax or deficiency of any nature against the Seller, the Business or the Transferred Assets, or with respect to any such Tax Return, or any suits or other actions, proceedings, investigations or claims now pending or threatened against the Seller, the Business or the Transferred Assets with respect to any Tax, or any matters under discussion with any foreign, federal, state or local authority relating to any Tax, or any claims for any additional Tax asserted by any such authority;

 

(d) All Tax Returns that are required to be filed on behalf of or with respect to the Seller, the Business, the Transferred Assets and the Assumed Liabilities will be timely filed with the appropriate federal, state and local authorities on or before their due date.  All Taxes due and owing from the Seller or assessed and due and owing against the Business or the Transferred Assets on or before the Closing Date have been or will be timely paid in full on or before their due date;

 

(e) The Transferred Assets are not, and on the Closing Date will not be, subject to or liable for any special assessments or similar types of impositions; and

 

(f) All withholding Tax and Tax deposit requirements imposed on the Seller and applicable to the Business for any and all periods prior to and including the Closing Date have been or will be timely satisfied in full (consistent with Buyer’s obligation in Section 1.04 (c) hereof).

 

3.08 No Violations or Litigation.

 

(a) To Seller’s knowledge, Seller is currently not in violation of, and the consummation of the transactions contemplated hereby will not cause any violation of, any order of any Governmental Entity or any law, ordinance, regulation, order,

 

	
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(b) requirement, statute, rule, permit, concession, grant, franchise, license or other governmental authorization relating or applicable to the Seller, the Business or to any of the Seller’s properties, assets or operations, including without limitation, the Transferred Assets.

 

(c) Except as set out in Schedule 3.08(b), there is no action, suit, claim, investigation or legal, administrative, arbitration or other proceeding, or governmental investigation or examination, or any change in any zoning or building ordinance pending or, to the Seller’s knowledge, threatened against or affecting the Seller, the Business or any of the Transferred Assets, at law or in equity, before or by any Governmental Entity and, to Seller's knowledge, no basis exists for any such action, suit, claim, investigation or proceeding.

 

3.09 No Adverse Changes or Events.  Other than as set forth on Schedule 3.09 to the Disclosure Schedule, since December 31, 2009, the Business has been consistently operated only in the ordinary course and there has not been:

 

(a) any adverse change or any occurrence, circumstance or combination thereof that might reasonably be expected to have an adverse change in the financial condition, assets, liabilities (contingent or otherwise), results of operations, business or prospects of the Seller before or after the Closing Date;

 

(b) any damage, destruction or loss, whether or not covered by insurance, adversely affecting the Transferred Assets or the Business having a replacement cost of more than $5,000 for any single loss or $25,000 for all such losses;

 

(c) except for ordinary salary increases and year end bonuses that have been disclosed in writing to the Buyer at least fifteen (15) days prior to the Closing, any increase in the compensation or rate of compensation or commissions or bonuses payable or to become payable by the Seller to any Transferred Employee on or after August 31, 2010, agent or representative that is not consistent with past practice, any payment or accrual of, or commitment with respect to, any bonus plan, vacation pay, sick leave, deferred compensation, insurance, pension, salary continuation for disability or severance or termination arrangement that is not consistent with past practice or any change or modification to any severance arrangement or any agreement to increase the coverage or benefits available under any employee benefit plan or arrangement;

 

(d) any debt, obligation, mortgage, security interest or liability incurred by the Seller, any assumption, guarantee, endorsement or other responsibility by the Seller for the liability or obligation of any other Person (whether absolute, accrued, contingent or otherwise), or any engagement in any other transaction by the Seller other than in the ordinary course of business;

 

(e) any mortgage, pledge or creation of any Lien with respect to any of the Transferred Assets other than Permitted Liens;

 

(f) any sale, assignment, transfer or other disposition or lapse of any Proprietary Rights or disclosure to any Person (other than employees of the Seller in the scope of their employment) of any Proprietary Rights;

 

	
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(g) any write up or write down in the value of any Equipment or Inventories;

 

(h) any cancellation or compromise of any claims, or any waiver of any other rights relating to the Business, or any sale, transfer or other disposition of any properties or assets, real, personal or mixed, tangible or intangible, of the Business (other than sales of Inventories in the ordinary course of business);

 

(i) any change in the Seller’s method of accounting for financial, Tax or other purposes;

 

(j) any change in the customary methods used in operating the Business (including the pricing practices) or any change in the sales operations, including but not limited to promptly paying or discharging current liabilities;

 

(k) any commitment to make any capital expenditures in respect to the Business;

 

(l) instituted or settled any legal proceeding;

 

(m) any grant of a license or sublicense of any rights under or with respect to any Proprietary Information; or

 

(n) any settlement or compromise of any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes.

 

3.10 Environmental Matters.

 

(a) To Seller’s knowledge, Seller has not caused or allowed the generation, use, treatment, storage, or disposal of Hazardous Materials at any site or facility owned, leased or operated by the Seller including but not limited to the Facilities or used in the Business except in accordance with all applicable Environmental Laws and would not result in any liability, contingent or otherwise, to the Buyer or its affiliates;

 

(b) the Seller does not own or lease any real property, improvements or related assets that form a part of the Transferred Assets or the Business that have been subject to the release of any Hazardous Materials;

 

(c) the Seller has secured all Environmental Permits necessary to the conduct of the Business and the operations and the Seller is in compliance with such permits;

 

(d) the Seller has not received any notice concerning any proposal to amend, revoke or replace any Environmental Permit, or requiring the issuance of any additional Environmental Permit, and to the Seller’s knowledge no such proposal exists;

 

(e) the Seller has not received inquiry or notice and, to its knowledge, has no reason to suspect or believe it will receive inquiry or notice of any actual or potential proceedings, claims, lawsuits or losses related to or arising under any Environmental Law;

 

(f) the Seller is not currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, and/or corrective action decree, order or agreement issued or entered into under any federal,

 

	
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(g) state or local statute, regulation or ordinance regarding the environment and/or health or safety in the work place;

 

(h) the Seller has not transported, arranged for the transportation of or disposed of any substance in a manner that may lead to claims against the Buyer for clean-up costs, remedial work, damages to natural resources or for personal injury claims; and

 

(i) Seller has provided to Buyer all environmentally related audits, studies, reports, analyses and results of investigations that have been performed with respect to any currently or previously owned, leased or operated properties of Seller or of the Business.

 

3.11 Related Party Transactions.  Excpt as specifically set out in this Agreement or on Schedules 1.02 or 3.11 to the Disclosure Schedule, no employee, officer, director, partner, member or shareholder of Seller, any member of his or her immediate family or any of their respective Affiliates (i) owes any amount to Seller nor does Seller owe any amount to or has Seller committed to make any loan or extend or guarantee credit to or for the benefit of such persons, (ii) is involved in any business arrangement or other relationship with Seller, (iii) owns any property or right, tangible or intangible, that is used by Seller, (iv) has any claim or cause of action against Seller or the Business, or (v) owns any direct or indirect interest of any kind in, or controls or is a director, officer, employee or partner of, or consultant to, or lender to or borrower from or has the right to participate in the profits of, any Person which is a competitor, supplier, customer, creditor or debtor of Seller or the Business.

 

3.12 Undisclosed Liabilities.  The Seller does not have any liabilities or obligations of any nature, whether accrued, absolute, contingent, unliquidated, civil, criminal or otherwise, and whether due or to become due, other than liabilities that (a) are reflected or reserved against in the December 31, 2009 Balance Sheet, (b) are disclosed in any Schedule (or in any plan, instrument, lease or agreement referred to therein) or Exhibit hereto, (c) are liabilities incurred since August 31, 2010 in the ordinary course of business.

 

3.13 Warranties, Product Liability and Insurance.

 

(a) Except for warranties implied by law and the Seller’s customary warranty for goods sold as described on Schedule 3.13(a), the Seller has not given or made any warranties in connection with the sale or rental of goods or services, including, without limitation, warranties covering the customer’s consequential damages.  To Seller's knowledge, there are no facts or the occurrence of any event forming the basis of any present claim against the Seller with respect to warranties relating to products manufactured, sold or distributed by the Seller or services performed by or on behalf of the Seller.  Seller has not sold any products or delivered any services that included a warranty for a period longer than one year.  To Seller's knowledge, Seller has not committed any act or failed to commit any act which would result in, and there has been no occurrence which would give rise to or form the basis of, any product liability or liability for breach of warranty on the part of Buyer with respect to the products designed, manufactured, assembled, repaired maintained, delivered sold or installed or services rendered by or on behalf of Seller or the Business.

 

(b) To Seller's knowledge, there is no state of facts or any event forming the basis of any present claim against the Seller not fully covered by insurance, except for deductibles and

 

	
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(c) self-insurance retentions, for personal injury or property damage alleged to be caused by products shipped or services rendered by or on behalf of the Seller.

 

(d) Seller has insurance policies in full force and effect (i) for such amounts as are sufficient for all legal requirements to which Seller is a party or by which it’s bound and (b) which are in such amounts, with such deductibles and against such risks and losses, as is reasonable for the Business, assets and properties of Seller.  Set out in Schedule 3.13.(c) to the Disclosure Schedule is a list of all insurance policies held by or applicable to Seller.

 

3.14 Employee Matters.

 

(a) There are no collective bargaining or other labor union agreements to which the Seller is a party or by which it is bound.  To Seller’s knowledge, neither Seller nor the Business has encountered any labor union organizing activity or had any actual or threatened employee strikes, work stoppages, slowdowns or walkouts.

 

(b) The Seller does not contribute to or have an obligation to contribute to, and has not at any time within six years prior to the Closing Date contributed to or had an obligation to contribute to, a multi-employer plan within the meaning of Section 3(37) of ERISA.

 

(c) The Seller does not have any defined benefit pension that is subject to Title IV or Section 412 of the Code.  Seller does have employee benefit plan(s) established pursuant to Section 401(k) of the Code and such plan(s) has been maintained in all respects in accordance with its terms and the provisions of applicable law.  Seller does have a profit sharing plan and such plan has been maintained in all respects in accordance with its terms and the provisions of applicable law.  Other than the foregoing, Seller does not maintain any other employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended.

 

(d) No lawsuit, complaint or investigation or governmental audit has been noticed, initiated or filed with respect to any employee benefit plan.  The Seller has not incurred any liability to the PBGC or any liability under ERISA.  There has not been any reportable event as defined in ERISA which would require the giving of notice or any event requiring the giving of notice to be provided.

 

(e) Schedule 3.14.(e) to the Disclosure Schedule sets forth a complete and correct list of all employee benefit plans and all other employee benefit arrangements or payroll practices maintained by Seller or to which Seller contributed or is obligated to contribute thereunder for current or former employees of the Seller or that cover employees of Seller.  All items listed on Schedule 3.14.(e) to the Disclosure Schedule have been maintained in all material respects in accordance with their terms and the provisions of applicable law.

 

(f) Any individual who performs services for Seller and who is not treated as an employee for federal income tax purposes by Seller is not an employee for such purposes.

 

3.15 Banks.  Schedule 3.15 to the Disclosure Schedule contains a complete and correct list of (a) the names and locations of all banks in which Seller has accounts or safe deposit boxes, and (b) the account numbers of all such accounts.

 

3.16 Customers and Suppliers.  Except as set out in Schedule 3.16, since December 31, 2009, no customer or supplier of the Business has terminated its relationship with the Business or

 

	
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3.17 has reduced or changed the pricing or has changed any other terms of its business with the Business and no customer or supplier of the Business has notified Seller that it intends to terminate or reduce or change the pricing or other terms of its business with the Business.

 

3.18 Definition of Knowledge.  For purposes of this Agreement and any document delivered at Closing, whenever the phrase (i) "to the Seller's knowledge" or the "knowledge" of the Seller or words of similar import are used, they shall be deemed to mean and are limited to the actual knowledge of the directors and officers of the Seller, upon Seller’s inquiry of such officers’ and directors’ actual knowledge, at the times indicated only, and not any implied, imputed or constructive knowledge of such individual, the Seller or the Shareholders.

 

3.19 Brokers.  Neither Seller nor the Shareholders has employed any broker or finder or incurred any liability for any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the sale or transfer of the Business, the Transferred Assets or Assumed Liabilities.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Seller and the Shareholders as follows:

4.01 Corporate Matters.  The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas.  The Buyer has the requisite corporate power and authority to enter into this Agreement and to perform its obligations under this Agreement.  This Agreement and all other agreements and documents specified herein have been duly authorized, executed and delivered by the Buyer and is a legal, valid and binding obligation of the Buyer, enforceable against the 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.  Buyer has the absolute and unrestricted right, power and authority to execute and deliver the Agreement and the Seller Note and the other agreement and documents and to perform its obligations under this Agreement and such actions have been duly authorized by all necessary corporate action.  The execution and delivery of this Agreement, the Seller Note and the other agreements and documents to be delivered by the Buyer, the consummation of the transactions contemplated hereby and thereby and the compliance with the provisions hereof and thereof, by the Buyer will not, with or without the passage of time or the giving of notice or both, violate any provision of, or constitute a default under, any contract or other agreement to which the Buyer is a party or by which it is bound, conflict with its articles of incorporation or bylaws, other than violations, defaults or conflicts that would not affect the ability of the Buyer to consummate the transactions provided for in this Agreement or in any other agreement or document specified herein.  Buyer is not and will not be required to obtain consent or approval from any Person in connection with the execution and delivery of this Agreement or the communication or performance of any transactions contemplated hereby.

 

4.02 Conflicts.  The execution, delivery and performance of this Agreement and the other agreements and documents to be delivered by the Buyer to the Seller and the Shareholders, the consummation of the transactions contemplated hereby or thereby, and the compliance with the provisions hereof or thereof, by the Buyer will not, with or without the 

 

	
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passage of time or the giving of notice or both violate any law, statute, ordinance, regulation, judgment, writ, injunction, rule, decree, order or any other restriction of any kind or character applicable to the Buyer or any of its respective properties or assets.

 

4.04 Litigation.  There is no action, claim, suit or proceeding pending, or to the Buyer’s knowledge threatened, by or against or affecting Buyer that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the transaction contemplated by this Agreement or of any action taken or to be taken in connection herewith or the consummation of the transaction contemplated hereby.

 

ARTICLE V

 

ACCESS TO INFORMATION BY THE BUYER

 

5.01 Prior to Closing.  Until the Closing and pursuant to the terms and conditions of the Confidentiality Agreement executed by Seller, Buyer and the Shareholders (“the CA”), the Seller will furnish the Buyer and its employees, officers, accountants, attorneys, agents, investment bankers and other authorized representatives with all books, records, financial information, contracts, and other data and information concerning the Business, commitments, personnel and properties and Facilities of the Seller as the Buyer shall from time to time reasonably request and will afford the Buyer and its employees, officers, accountants, attorneys, agents, investment bankers and other authorized representatives reasonable access during normal business hours to the Seller’s offices, properties, books, records, financial information, contracts and documents (including Tax Returns filed and those in preparation) and will be given the opportunity to ask questions of, and receive answers from, representatives of the Seller with respect to the Business, the Transferred Assets and the other properties of the Seller (“the Inspection”).  All investigation on Seller’s property or with employees of Seller must be conducted in the presence of a Shareholder (each Shareholder shall use their good faith efforts to be available as requested by Buyer) or with a Shareholder’s prior approval (not to be unreasonably withheld, delayed, denied or conditioned).  No investigations by the Buyer or its employees, representatives or agents shall reduce or otherwise affect the obligation or liability of the Seller with respect to any representations, warranties, covenants or agreements made herein or in any Exhibit, Schedule or other certificate, instrument, agreement or document, including the Disclosure Schedule, executed and delivered in connection with this Agreement.  The Seller will cooperate with the Buyer and its employees, officers, accountants, attorneys, agents and other authorized representatives in the preparation of any documents or other materials that may be required by any Governmental Entity.

 

5.02 Public Information.  Until the Closing or termination hereof, the Buyer and the Seller will consult in advance on the necessity for, and the timing and content of, any communications to be made to the public and to the form and content of any application or report to be made to any Governmental Entity that relates to the transactions contemplated by this Agreement, except with respect to public announcements or disclosures in response to legal requirements (including, without limitation, requirements under the Federal securities laws).

 

	
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ARTICLE VI

 

EMPLOYEE MATTERS

 

 

6.01 Hiring of Transferred Employees.  The Buyer shall offer employment (on an “at will basis”) to all of the Seller’s active hourly employees and other active salaried employees (except the Shareholders) as of the Closing (all individuals who accept such offer are collectively, the “Transferred Employees”).  The Buyer shall not assume any liabilities or obligations of the Seller with respect to its employees except as specifically set forth in this Agreement, and the Buyer will have complete discretion as to the terms of employment that are offered to the Transferred Employees.  Nothing contained in this Section 6.01 is intended to confer upon any of the Seller’s employees any right to continued employment after the Closing Date.  Notwithstanding any other provision of this Agreement, the parties hereto do not intend to create any third-party beneficiary rights respecting any of the Seller’s employees or former employees as a result of the provisions herein and specifically hereby negate any such intention.

 

6.02 Employee Benefits.

 

(a) Except as set forth in Section 6.03 and otherwise provided herein, the Buyer shall not be liable or obligated under any employee benefit plan or for any other employee benefits that may have been established by the Seller for the Seller’s employees prior to the Closing, and the Seller expressly acknowledges that it has sole liability for all employee benefit costs accrued as of the Closing whether or not any or all of such employees are subsequently hired by the Buyer.  Without limiting the generality of the foregoing, the Seller acknowledges and agrees that the Buyer does not assume the sponsorship of, the responsibility of contributions to, or any liabilities in connection with any employee benefit plan maintained by the Seller for active employees, retirees, former employees, their beneficiaries or any other Person, including any employee pension benefit plan within the meaning of ERISA, employee welfare plan within the meaning of ERISA and any personnel policy, stock option plan, bonus or profit sharing plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy or agreement, deferred compensation agreement arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement and each other employee benefit plan, agreement, arrangement, program, practice or understanding.

 

(b) With respect to the Transferred Employees the Seller will remain responsible for medical expenses covered under its plans (i) actually incurred prior to the Closing Date (as required under such plans) or (ii) actually incurred with respect to any hospitalization that began prior to the Closing Date until such hospitalization ends (as required under such plans), and the Buyer will be responsible for all other medical expenses incurred on or after the Closing Date to the extent covered under its plans without the application of any waiting period for coverage generally applicable to newly hired employees.  To the fullest extent permitted under its applicable policies of insurance and to the extent required by applicable law, the Seller shall maintain medical, health, hospitalization, life, travel and accident insurance coverage for the Transferred Employees in effect for so long as Buyer shall request in order to avoid any lapses in such coverages; provided, however, that Buyer shall be responsible for all costs (if any) of maintaining such policies for all applicable periods following the Closing Date.  Seller’s cost of such insurance coverage from and after the

 

	
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(c) Closing Date shall be borne by the Buyer and, to the extent applicable, Buyer agrees to reimburse Seller for such costs or expenses within thirty (30) days after receipt from Seller of proof of payment of such costs or expenses.  The Seller shall cooperate with the Buyer to provide continuity of such insurance coverage to the Transferred Employees.  Set out in Schedule 6.02(b) of the Disclosure Schedule is the list of all employees, their salary or hourly rate (as applicable), annual vacation and sick days and their outstanding balances in Seller’s 401(k) plan.

 

6.03 Severance Benefits; Employment Termination.  Buyer and Seller hereby agree that Buyer shall assume Seller’s obligation to make COBRA Coverage (as hereinafter defined) available to all of Seller’s qualified beneficiaries, as such term is defined by COBRA (26 U.S.C. § 4980B(g)(1) and 29 U.S.C. § 1167(3)) (the “M+A Qualified Beneficiaries”) in accordance with the provisions of COBRA (as hereinafter defined) and, accordingly, Buyer shall cause its group health plan to make COBRA Coverage available to the M+A Qualified Beneficiaries.  For purposes of this Section, the term “COBRA Coverage” means the health insurance coverage required to be offered pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), 26 U.S.C. §§ 4980B et seq., and 29 U.S.C. §§ 1162 –1167.  The Buyer agrees to provide severance benefits, only in accordance with Buyer’s policies and procedures, to the Transferred Employees.

 

6.04Reporting of Data.  The Buyer and the Seller shall complete and furnish to each other such other employee data as shall be reasonably required from time to time for each party to perform and fulfill its obligations under this Article 6.  Seller and Buyer shall report on a predecessor/successor basis as set forth under any IRS revenue procedure including the filing of Form W-2 for each Transferred Employee.

 

6.05 Employment Related Claims.  Except as provided in Section 6.03, the Seller agrees that the Seller and not the Buyer shall be solely responsible for all liability, costs and expenses (including attorneys’ fees) for all existing employment claims that have been filed by any employee or former employee of the Seller prior to the Closing Date relating to arbitrations, unfair labor practice charges, employment discrimination charges, wrongful termination claims, workers’ compensation claims, any employment-related tort claim or other claims or charges of or by employees of the Seller, or any thereof filed after the Closing Date but arising as a result of conditions, actions or events or series of actions or events which occurred prior to the Closing Date.  The Buyer agrees that it shall be responsible for all liability, costs and expenses (including attorneys’ fees) for all employment claims that are filed by any Transferred Employee relating to arbitrations, unfair labor practice charges, employment discrimination charges, wrongful termination claims, workers’ compensation claims, any employment-related tort claim or other claims or charges of or by the Transferred Employees to the extent, but only to the extent, that the same result from the employment relationship between the Buyer and the Transferred Employee and conditions, actions or events or series of actions or events occurring subsequent to the Closing Date.  Seller shall pay Transferred Employees their accrued and unused vacation through the Closing Date; provided, however, that Buyer shall accept, assume and accommodate the unused vacation of Transferred Employees that are hired by Buyer to allow such vacation by the respective Transferred Employees subsequent to Closing and prior to January 1, 2011.  Buyer represents that it uses a calendar year basis for the determination of vacation for its employees and the Transferred Employees and the Buyer will not be detrimentally effected by the use of remaining accrued vacation in 2010. Effective as of the Closing Date, Seller shall cause the tax-qualified 401(k) plans in which the Transferred Employees were eligible to participate immediately prior to the Closing Date to fully vest such employees’ accrued benefit through the Closing Date thereunder.

	
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ARTICLE VII                            

 

ADDITIONAL AGREEMENTS

 

7.01 Conduct of the Business.  The Seller and the Shareholders covenant and agree with the Buyer that from and after the Effective Date until the Closing, except as expressly authorized by this Agreement or expressly consented to in writing by the Buyer, the Seller and the Shareholders (as applicable) shall, and to the extent the same would affect the Proprietary Rights:

 

(a) operate the Business and the Transferred Assets only in the usual, regular and ordinary course of business with a view to maintaining the goodwill that the Seller now enjoys and, to the extent consistent with such operation, will use all reasonable efforts to preserve intact its present business organization, keep available the services of its employees and preserve its relationships with its customers, suppliers, jobbers, distributors and other Persons having business relations with it;

 

(b) use all reasonable efforts to maintain the Transferred Assets in a state of repair, order and condition consistent with its ordinary course of business in connection with the Business;

 

(c) maintain its books of account and records relating to the Business in the ordinary course of business, in accordance with the Seller’s usual accounting practices applied on a consistent basis;

 

(d) comply with all statutes, laws, orders and regulations applicable to it and to the conduct of the Business;

 

(e) not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights, Equipment or any of the other Transferred Assets except for dispositions of Inventories for value in the usual and ordinary course of business or other than to the Buyer pursuant to the terms of this Agreement;

 

(f) preserve and maintain all rights that it now enjoys in and to the Proprietary Rights and not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights other than to the Buyer pursuant to the terms of this Agreement;

 

(g) not mortgage, pledge or otherwise create a security interest in any of the Transferred Assets or permit there to be created or exist any Liens thereon other than Permitted Liens;

 

(h) not enter into any contract, commitment or lease in relation to the Business that is out of the ordinary course of the Business or, if effective on the date hereof, would be required to be disclosed in Schedule 3.05(a) of the Disclosure Schedule;

 

(i) not amend or modify any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or any other contract, commitment, lease or other agreement that would, if entered into on the date hereof, be required to be disclosed on any Schedule to this Agreement, including the Disclosure Schedule;

 

	
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(j) not consent to the termination of any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of the Disclosure Schedule or waive any of the Seller’s rights with respect thereto;

 

(k) not grant any increase in the compensation or rate of compensation or commissions or bonuses payable to or severance obligations for any of employees or in any bonus plan and not transfer or otherwise change any of the terms or conditions of employment of any of the employees except the bonuses contemplated in Section 6.02;

 

(l) not permit any insurance policy naming it as a beneficiary or a loss payee relating to the Business or the Transferred Assets to be canceled or terminated or any of the coverage thereunder to lapse unless simultaneously with such termination or cancellation replacement policies providing substantially the same coverage are in full force and effect; and

 

(m) pay when due all accounts payable, all payments required by any of the Contracts and Other Agreements, and all Taxes other than Taxes that are being contested in good faith and for which adequate reserves against the Transferred Assets exist and which would not result in a Lien being imposed on any of the Transferred Assets.

 

7.02 Information and Consents.  During the period from the date of this Agreement to the Closing Date, the Buyer and the Seller will promptly inform the other in writing of (a) any claim, action or any proceeding commenced against such party with respect to the transactions contemplated by this Agreement or any assets or property of the Seller or the Business or (b) any other fact, change, condition, circumstance, event or occurrence that has caused or is reasonably likely to cause any representation or warranty in this Agreement made by the Seller or the Shareholders to be untrue or inaccurate in any respect.  Seller shall use its reasonable efforts to obtain at the earliest practicable date all consents, waivers, approvals and notices that are required to consummate, or in connection with the transactions contemplated by this Agreement.  All such consents, waivers, approvals and notices shall be in a form and substance reasonably satisfactory to Buyer.

 

7.03 Compliance.

 

(a) The Seller and each Shareholder shall use their commercially reasonable efforts (i) to cause the obligations imposed upon it or them in this Agreement to be duly complied with, and all conditions precedent to such obligations to be satisfied and (ii) to obtain any and all consents, waivers, amendments, modifications, approvals, authorizations, notations and licenses necessary to the consummation of the transactions contemplated by this Agreement.

 

(b) Except for Permitted Liens or as otherwise specifically set out in this Agreement, the Seller and each Shareholder shall cause all Liens on the Transferred Assets to be released as of the Closing Date.

 

7.04 Delivery of Corporate Documents.  On the Closing Date, Seller shall deliver to the Buyer all Documents and Other Papers relating to the Transferred Assets, the Assumed Liabilities and the current and proposed operations of the Business (other than Excluded Assets), including, without limitation, all files relating to the Trade Payables, computer programs, files, disks reflecting any books or records, documents or other papers, or other information or data relating to the operation of the Business or the Transferred Assets or customer records and sales history stored on any electronic media, including computers in its possession.  The Seller, however, shall be entitled to retain the historical books and 

 

	
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 records relating to the Business to the extent such books and records are not necessary for the ongoing operations of the Business by the Buyer.  The Seller agrees that so long as the corporation, accounting, auditing and tax books, records (including work papers) and other books and records relating to the Seller, the Business and the Transferred Assets, the Transferred Employees and the Assumed Liabilities remain in existence and in the possession of the Seller or its affiliates, the Buyer and its authorized representatives shall have the right to inspect and, at the Buyer’s expense, to copy the same at any time during regular business hours for any proper purpose.  For a period of five (5) years following the Closing Date, the Seller agrees that it will not destroy any of such books and records without having first offered to deliver the same to the Buyer.

 

7.05 Further Assurances.  Prior to and on and after the Closing Date, Seller and the Shareholders shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered to the Buyer such bills of sale, assignments and other instruments of transfer, assignment and conveyance, in form and substance reasonably satisfactory to counsel for the Buyer, as shall be necessary to vest in the Buyer all the right, title and interest in and to the Transferred Assets free and clear of all Liens (including the release of all Liens of record) and shall use its reasonable efforts to cause to be taken such other action as the Buyer reasonably may require to more effectively consummate, implement and carry into effect the transactions contemplated by this Agreement.

 

7.06 Cooperation After Closing.

 

(a) The Seller, each Shareholder and the Buyer shall cooperate with each other after the Closing hereunder in clearing the title to any of the Transferred Assets to the Buyer pursuant hereto in the event that the Seller’s title to any such property, as the case may be, as of the Closing Date, shall be defective, not marketable or nonassignable.  In this connection, the Seller shall take all commercially reasonable action, including, but not limited to, the furnishing of documents and evidences of title and assistance in the preparation and trial of any necessary litigation, to clear title to any such property, all of which shall be at the expense of the Seller.

 

(b) For the greater of eight (8) years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Buyer shall permit, the Seller, each Shareholder and their respective representatives reasonable access to the business records and files of the Seller that are transferred to the Buyer in connection herewith in anticipation of, or preparation for, existing or future litigation or claims or any Tax audit which the Seller or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Buyer’s principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Business, (ii) the 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, and (iii) the Buyer shall not be required

 

	
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(c) to provide access to any confidential record or records, the disclosure of which would cause the Buyer or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege, it being understood and agreed that the records delivered by the Seller to the Buyer shall not be deemed to be restricted from the Seller or each Shareholder pursuant to either clause (ii) or (iii) above.  The Buyer shall also provide the Seller with (i) reasonable access to the Facilities for the purpose of complying with applicable Environmental Laws provided that such access does not interfere with the normal conduct of the Business and (ii) reasonable access to the accounting records and schedules necessary for the preparation of financial reports and tax returns for the year ended December 31, 2010, and for the 2010 accounting period ending on the Closing Date.

 

(d) For the greater of eight (8) years from the Closing Date and such period as may be required by any statute, regulation or Governmental Entity or any then pending litigation, the Seller shall retain the general business records and files of Seller and shall permit the Buyer and its representatives reasonable access to the general business records and files of the Seller in anticipation of, or preparation for, existing or future litigation or any Tax audit or other reasonable purposed in which the Buyer or any of its affiliates is involved and which is related to the Business or the Transferred Assets, during regular business hours and upon reasonable notice at the Seller’s principal places of business or at any location where such records are stored; provided, however, that (i) any such access shall be had or done in such a manner so as to not interfere with the normal conduct of the Seller’s business, (ii) the Seller 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, and (iii) the Seller shall not be required to provide access to any confidential record or records, the disclosure of which would cause the Seller or any of its Affiliates to waive its attorney-client privilege or attorney work product privilege.

 

(e) The Seller, if requested by the Buyer (and at Buyer’s expense), shall cooperate and assist in preparing such financial statements of the Business that the Buyer may reasonably require in order to permit Buyer to timely file any report required by the Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder in connection with the transactions contemplated thereby and to comply with any other financial statement requirements with respect to the Business applicable to Buyer under the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and the rules and regulations thereunder.  The Seller shall cause its accountant to provide the Buyer with reasonable access to such firm’s work papers in support of the Business.  The cost of such accounting work shall be borne by the Buyer, but the Seller shall use its reasonable efforts to cause its accountant to provide the Buyer with an estimate of its costs.  The Seller will also cooperate with and assist the Buyer in preparing, and, if requested, shall use reasonable efforts to cause its accountant to cooperate, at Buyer’s expense, in preparing, such other financial statements for the Business as may be specified by the Buyer.

 

	
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(f) In furtherance of Sections 1.03(a) hereof, Seller and Buyer shall enter into the Escrow Agreement, as defined in Section 8.03.

 

7.07 Covenants of Nondisclosure of Proprietary Information. The Seller and the Shareholders covenant and agree that, from and after the Closing Date, they and their respective affiliates shall hold in confidence and will not directly or indirectly at any time reveal, report, publish, disclose or transfer to any Person other than the Buyer any of the Proprietary Information that is not generally known to the public or utilize any of the Proprietary Information for any purpose.  The Seller and the Shareholders hereby agree that, upon the Closing and as between Buyer, Seller, the Shareholders and each of their respective affiliates, Buyer shall have the sole right to use the name “D&F Distributors” or similar names and any service marks, trademarks, trade names, d/b/a names, fictitious names, identifying symbols, logos, emblems or signs containing or comprising the foregoing or otherwise used in the Business and owned by Seller or the Shareholders (and Seller and the Shareholders shall not, and shall not permit any of their respective affiliate to, use such name or any variation or simulation thereof).  As soon as legally practicable after the Closing (but not later than twenty (20) Business Days after the Closing Date) Seller shall, and shall cause its affiliates to, remove any mark from its legal name by appropriate legal proceedings in the jurisdiction of its incorporation and each jurisdiction where such entity has registered to do business.

 

Notwithstanding the foregoing, the Seller, each Shareholder and their affiliates may disclose information that is (i) required to be disclosed by applicable State or federal tax or securities laws to the extent, and only to the extent, such laws require such disclosure and, to the extent practicable, the Seller provides the Buyer prior written notice of its intent to provide such disclosure and the general text of such disclosure, and (ii) required to be disclosed by final order of a court of competent jurisdiction; provided that, in the event Seller or a Shareholder is served or threatened with litigation that would require the Seller or a Shareholder to disclose such information, the Seller or a Shareholder shall tender to the Buyer the opportunity to defend, at its cost, against such disclosure.

(a) The Seller acknowledges that all documents and objects containing or reflecting any Proprietary Information, whether developed by the Seller or by someone else for it or any of its affiliates, will after the Closing Date become the exclusive property of the Buyer and be delivered to the Buyer.

 

(b) Because of the unique nature of the Proprietary Information, if any, the Seller understands and agrees that the breach or anticipated breach of its or its affiliates obligations under this Section 7.07 will result in immediate and irreparable harm and injury to the Buyer and its affiliates, for which it will not have an adequate remedy at law, and that the Buyer and its affiliates and their successors and assigns shall be entitled to an injunction, restraining order or other equitable relief to enjoin such breach or anticipated breach and to seek any and all other legal and equitable remedies to which they may be entitled.  In the event that Buyer were to seek damages for any breach of this Section 7.07, the portion of the consideration which is allocated by the parties to this covenant shall not be considered a measure or limit on such damages. The Seller and each Shareholder acknowledge that this covenant regarding Proprietary Information is being provided as an inducement to the Buyer to acquire the Business and Transferred Assets.  The parties agree that if any court of competent jurisdiction determines that any relevant feature of this Section 7.07 is determined to be unreasonable, arbitrary or against public policy then such relevant feature which is determined by the court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

 

	
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    7.08 Real Property.  On or prior to the Closing Date, Seller shall obtain and deliver to Buyer an executed Landlord Assignment and Estoppel Certificate, substantially in the form attached hereto as Exhibit “F”, from each of the third party lessors of the four (4) Facilities located in Cleveland, Ohio, Columbus, Ohio, Indianapolis, Indiana, and Louisville, Kentucky (“Third Party Leases”) as of the Closing Date and Seller and Buyer shall execute the Assignment of Lease substantially in the form attached hereto as Exhibit “H”.  Seller shall obtain and deliver a lease executed by the Landlord for the Evansville, Indiana and Nashville, Tennessee Facilities (“Related Party Leases”) in the form attached as Exhibit “B” (the “Lease”) and a Termination of Lease in the form attached hereto as Exhibit “I” executed by the Seller and the Landlord, as of such date, upon such terms and conditions reasonably acceptable to Buyer.

 

7.09 Warranty Claims.  With respect to any claims made pursuant to warranties to third Persons in connection with products manufactured, sold or distributed or services provided by the Seller prior to the Closing Date that relate to the Business and that are covered by valid and existing warranties of the Seller, the Buyer agrees to assume and pay for such claims to the extent, but only to the extent, that the Buyer’s Damages with respect to all such claims do not exceed in the aggregate Ten Thousand Dollars ($10,000).  Any claims in excess of such amount shall remain part of the Retained Liabilities.  The Buyer agrees to provide to Seller, at prices equal to Buyer’s out-of-pocket cost, the necessary services so Seller can satisfy any claims made pursuant to warranties of third Persons in connection with products manufactured, sold or distributed or services provided by the Seller prior to the Closing Date that relate to the Business and that are covered by valid and existing warranties of the Seller and not assumed by Buyer pursuant to this Section 7.09.  The foregoing limitations, however, shall not be deemed in any way to limit the right of the Buyer to seek indemnification from the Seller for any Damages in connection with products manufactured, sold or distributed or services provided by the Seller prior to the Closing Date to the extent the Buyer incurs any monetary liability to any third Person with respect to such matters or is obligated to take any action other than that expressly covered by this Section 7.09.

 

7.10 Covenant Not to Compete With the Business.  The Seller and the Shareholders covenant and agree that, effective as of the Closing Date and for a period of three (3) year thereafter, the Seller and the Shareholders shall not, without the consent of the Buyer, directly or indirectly, (i) design, develop, market, produce, manufacture or provide any product, good or service that competes with the Business in Indiana, Illinois, Ohio, Kentucky and Tennessee, (ii) make any contact with, for the purpose of transacting any business competitive to the Business, with any Person which was a customer of Seller at any time in the five (5) years prior to the Closing Date (“Company’s Customers”), (iii) attempt to direct or take away the business or patronage of any of the Company’s Customers or suppliers, (iv) attempt to have any dealings with the Company’s Customers or suppliers for the purpose of attempting to secure such customers or suppliers or their patronage in competition with the Business, (v) solicit, hire away or attempt to solicit or hire away to any firm or entity engaged in the Business, any person presently employed by Seller, (vi) engage in the Business, (vii) interfere with or molest the business, trade, goodwill, suppliers or customers of the Seller, (viii) directly or indirectly, own, invest in, manage, operate, control, be employed by, consult with or be an agent for, engage  or participate in the ownership, management, operation, control or any other engagement of, any business, whether in corporate, proprietorship or partnership form or any other business form, engage in the business of distribution of industrial products or in any business that competes with the Business, or (ix) use for Seller’s or Shareholders’ own benefit or the benefit of another or disclose, disseminate, or distribute to another, any trade secrets of the Business. The seller and the Shareholders acknowledge that a remedy at law for any breach or attempted breach of this Section 7.10 will be inadequate 

 

	
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and they further agree that any breach of this Section 7.10 will result in irreparable harm to the Business and to the Buyer and in addition to any other remedy that may be available to Buyer, Buyer shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach. The Seller and the Shareholders acknowledge that this covenant not to compete is being provided as an inducement to the Buyer to acquire the Business and the Transferred Assets and that this Section 7.10 contains reasonable limitations as to time, geographical area and scope of activity to be restrained that do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the Buyer. Whenever possible, each provision of this Section 7.10 shall be interpreted in such a manner as to be effective and valid under applicable law but if any provision of this Section 7.10 shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Section 7.10. If any provision of this Section 7.10 shall, for any reason, be judged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Section 7.10 but shall be confined in its operation to the provision of this Section 7.10 directly involved in the controversy in which such judgment shall have been rendered. In the event that the provisions of this Section 7.10 should ever be deemed to exceed the time or geographic limitations permitted by applicable laws, then such provision shall be reformed to the maximum time or geographic limitations permitted by applicable law.

 

7.11 Continuation of Business by the Buyer.  Nothing in this Section 7.11, in any other provision of this Agreement, in any Exhibit or Section hereto, or in any agreement, instrument, or other document executed or delivered in connection with this Agreement shall require the Buyer to continue its business or operations or to manage and operate the Business with any duty or standard of care to the Seller and the Shareholders.  The Seller and each Shareholder acknowledge and agree that the Buyer in its sole discretion may continue, manage, modify or discontinue the operations of the Business, liquidate or otherwise change or cease its operations.

 

7.12 Issuance of Buyer’s Stock.  Seller and the Shareholders hereby represent and warrant to the Buyer and covenant and agree to be bound by the terms and conditions set out below regarding Buyer’s Stock.

 

(a) Seller and the Shareholders are each capable of evaluating the merits and risks of its investment in the Stock hereunder.  The Seller and each Shareholder is an “accredited investor” as defined in Rule 501 of Regulation D promulgated pursuant to the Securities Act.  The Seller and the Shareholders are each taking the Stock for their own account and not with a view to or for sale in connection with any distribution of such securities as such terms are defined under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”).  The Seller and the Shareholders have each reviewed Buyer’s Annual Report on Form 10-K for the year ended December 31, 2009 and any Form 8-Ks filed subsequent to December 31, 2009 and prior to the date of this Agreement and the proxy statement relating to Buyer’s 2009 annual meeting of stockholders (the “Buyers SEC Reports”).  The Seller and the Shareholders are each familiar with the business and financial condition, properties, operations and prospects of Buyer and has had the opportunity to discuss Buyer’s business and financial condition,

 

	
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(b) properties, operations and prospects with Buyer’s management and to ask questions of officers of Buyer, which questions, if any, were answered to their satisfaction.

 

(c) The Seller and the Shareholders each understands that (i) the Stock will be “restricted securities” under the applicable federal securities laws, (ii) that the Securities Act provides in substance that such shareholder may dispose of the Stock only pursuant to an effective registration statement under the Securities Act or in a transaction exempt from the registration requirements of the Securities Act, (iii) that Buyer has no obligation or intention to register the sale of the Stock pursuant to the Securities Act, and that, accordingly, the Seller and the Shareholders may be required to bear the economic risk of the investment in the Stock for a period of time, and (iv) such Stock shall be subject to appropriate stop-transfer instructions to be given by Buyer to its transfer agents and shall have endorsed thereon a legend substantially as follows:

 

           THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ELECTRONIC ENTRY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY APPLICABLE STATE LAW AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE LAW UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE THEREUNDER UNLESS THE BUYER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE BUYER, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.

 

(d) None of the Seller or the Shareholders (or its trustee on behalf of such plan), or any of their respective affiliates, (i) are parties to any agreement or plan that provides for dissolution of the Seller or (ii) are parties to any agreement or plan that provides for a pro rata or similar distribution of any of the Stock to the security holders of the Seller.

 

(e) The board of directors of the Seller has not and will not, adopt resolutions or otherwise approve any dissolution of the Seller or a pro rata or similar distribution of any of the Stock prior to one year from the date hereof.

 

(f) The transactions contemplated by this Agreement are not part of any pre-existing plan or agreement to provide for the distribution of any of the Stock to the security holders of the Seller.

 

(g) The Seller will not transfer, sell or otherwise distribute the Stock prior to six (6) months from the date hereof, unless it shall have delivered to the Buyer an opinion of counsel, in form and substance and from counsel reasonably satisfactory to the Buyer, that such transfer, sale or distribution is not a sale under Rule 145 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended.  Six (6) months after the Closing Date, the Buyer, at its expense, shall cause its counsel to provide an appropriate opinion letter to remove any legend or restriction and shall take such other action as shall be necessary to allow the Stock to be transferable without restriction.

 

	
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(h) Whenever the restrictions imposed by this Section 7.12 shall terminate, as herein provided, the holder of the Stock as to which such restriction have terminated shall be entitled to receive from Buyer, without expense to Seller (or the Shareholders), a new certificate not bearing the restrictive legend set forth in this Section 7.12 and not containing any other reference to the restrictions imposed by this Section 7.12.

 

7.13           Exchange of Seller Note and Seller Escrow Note.  Eighteen (18) months after the Closing Date, Purchaser shall cumulate the outstanding balance, principal and accrued and unpaid interest due pursuant to the Escrow Seller Note and the Seller Note and then the Purchaser shall exchange the Seller Note and the Seller Escrow Note for separate promissory notes, in the form of Exhibit A, and deliver one Promissory Note to each of the Shareholders in the respective principal amount directed by the Company, which total principal amount of all replacement notes shall equal to outstanding principal amount and accrued and unpaid interest due under both the Escrow Seller Note and the Seller Note. Notwithstanding the foregoing, all interest due for payment pursuant to the Seller Note and the Seller Escrow note, respectively, shall be paid when due on or before the expiration of said eighteen (18) months after the Closing Date..

 

ARTICLE VIII

 

CONDITIONS TO THE BUYER’S OBLIGATION

 

TO CONSUMMATE THE TRANSACTIONS

 

The obligation of the Buyer to purchase the Transferred Assets, to assume the Assumed Liabilities and to consummate the transactions contemplated by this Agreement is, at the option of the Buyer, subject to the satisfaction on or before the Closing Date of the fulfillment of the conditions set forth below, any of which may be waived by the Buyer in writing.

8.01 Representations and Warranties.  The representations and warranties of the Seller and the Shareholders contained in this Agreement shall be true, correct and complete in all respects, and shall be true, correct and complete in all respects, on and as of the Closing Date with the same force and effect as though such representations and warranties had been made or given on and as of such date; each and all of the agreements and covenants of the Seller and the Shareholders to be performed or complied with by it on or before the Closing Date pursuant to this Agreement shall have been performed or complied with and Buyer shall have received copies of such documents evidencing such performance as Buyer may reasonably request; and Seller shall have delivered to the Buyer a certificate, in a form reasonably acceptable to Buyer, signed by its President and its Treasurer, dated the Closing Date, to all such effects.

 

8.02 Good Standing and Corporate Authorizations.  The Seller shall have delivered to the Buyer certificates issued by appropriate Governmental Entities evidencing the good standing of the Seller, as of a date not more than ten (10) calendar days prior to the Closing Date, in the State of Indiana and in the states in which Seller is qualified to do business as a foreign corporation.  Seller shall have delivered to Buyer a certified copy of the resolutions adopted by Seller’s board of directors authorizing the execution, delivery and performance of this Agreement and the resolutions duly adopted by the Shareholders approving the performance of this Agreement and the consummation of the transactions contemplated hereby.

 

	
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8.03 Closing Instruments.  The Seller and the Shareholders, as applicable, shall have executed, acknowledged and delivered to the Buyer (i) the General Conveyance, Transfer, Assignment and Assumption, in substantially the form attached hereto as Exhibit “C”, (ii) the Escrow Agreement in the form attached hereto as Exhibit “F”, (iii) the Employment Agreements in the form attached hereto as Exhibit “D”, (iv) the Landlord Assignment and Estoppel Certificate (Exhibit “E”), (v) the Assignment of Lease (Exhibit “H”), (vi) the Termination of Lease (Exhibit “I”), and (vii) any other documents necessary in the reasonable opinion of counsel to Buyer to transfer and assign the Transferred Assets to Buyer and the Employment Agreement.  The escrow agent under the Escrow Agreement shall have executed and delivered to Buyer such agreement and the Escrow Agreement shall be in full force and effect as of the Closing.

 

8.04 Amendment to Articles of Incorporation.  The Seller shall have prepared, obtained all necessary corporate authorizations, executed and delivered to the Buyer documents, in form and substance reasonably satisfactory to counsel for the Buyer, sufficient to change the Seller’s corporate name to one bearing no resemblance to the Seller’s current corporate name and sufficient to assign and insure to the Buyer the continuing right to use the present corporate name of the Seller and all variations thereof.

 

8.05 No Litigation.

 

a) No preliminary or permanent injunction or other order of any court or other Governmental Entity shall be in effect nor shall there be in effect any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

 

(b) No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or threatened seeking to prevent the consummation of the transactions contemplated by this Agreement.

 

8.06 Employment Agreements.  Each of the Shareholders shall have executed and delivered to Buyer an employment agreement with Buyer in the form attached hereto as Exhibit “D” (the “Employment Agreements”).

 

8.07 Leases.  The applicable lessors for each of the Third Party Facilities shall have executed and delivered to Buyer, the Landlord’s Assignment and Estoppel Certificate and the Assignment of Lease as provided in Section 7.08 hereof and the applicable lessors for each of the Related Party Leases shall have executed and delivered to Buyer the Lease and the Termination of Lease as provided in Section 7.08.

 

8.08 Other Legal Matters.  All Exhibits, Schedules, certificates, documents and legal matters in connection with this Agreement and the transactions contemplated hereby shall be in the forms required by this Agreement.

 

8.09 Licenses, Consents and Approvals by the Buyer.  Other than as contemplated by Section 8.07, the Buyer shall have received each of the licenses, consents, approvals and other authorizations from Governmental Entities and third parties that are set forth on Schedule 8.09 hereto.

 

	
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8.10 Release of Liens.  Seller shall have delivered to the Buyer releases of all Liens, other than Permitted Liens, regarding the Transferred Assets in form and substance reasonably satisfactory to the Buyer.

 

ARTICLE IX

 

CONDITIONS TO THE SELLER’S OBLIGATION

 

TO CONSUMMATE THE TRANSACTIONS

 

The obligation of the Seller to transfer the Transferred Assets as contemplated hereby is, at the option of the Seller, subject to the satisfaction on or before the Closing Date of the conditions set forth below, any of which may be waived by the Seller in writing.

9.01 Representations, Warranties and Covenants.  The representations and warranties of the Buyer contained in this Agreement shall be true, correct and complete in all respects, and correct and complete in all respects, on and as of the Closing Date with the same force and effect as though such representations and warranties had been made or given on and as of such date, and the Buyer shall have performed and complied in all respects with all covenants, obligations and agreements required in this Agreement to be performed or complied with by Buyer on or prior to the Closing Date.  Buyer will deliver to the Seller a certificate signed by its President dated the Closing Date, to all such effect.

 

9.02 Receipt of the Purchase Price.  The Seller shall have received the Seller Cash Payment, the Stock and the Seller Note and the Escrow Agent shall have received the Seller Escrow Note and the Escrow Amount.

 

9.03 Licenses, Consents and Approvals.  The Seller shall have received each of the licenses, consents, approvals and other authorizations from Governmental Entities necessary or appropriate for the Seller to consummate the transactions contemplated by this Agreement.

 

9.04 No Litigation.

 

(a) No preliminary or permanent injunction or other order of any court or other Governmental Entity shall be in effect nor shall there be any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity that, in any such case, prevents the consummation of the transactions contemplated by this Agreement.

 

(b) No suit, action, claim, proceeding or investigation before any court or other Governmental Entity shall have been commenced or threatened seeking to prevent the consummation of the transactions contemplated by this Agreement.

 

9.05 Closing Instruments.  The Buyer shall have executed, acknowledged and delivered to the Seller or the Shareholders, as applicable, (i) the General Conveyance, Transfer, Assignment and Assumption, in substantially the form attached hereto as Exhibit “C”, (ii) the Seller Note and the Seller Escrow Note both in the form attached hereto as Exhibit “A”, (iii) the Assignment of Lease in the form attached as Exhibit “H”, (iv) an irrevocable letter to its transfer agent directing transfer agent to deliver the Stock to the Shareholders and (v) any other documents, in the reasonable opinion of counsel to Seller, regarding the assumption of the Assumed Liabilities by Buyer.  Buyer shall have executed and delivered to each of the 

	
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Shareholders, respectively, the Employment Agreements in the form attached hereto as Exhibit “D”.  The Seller, Buyer and the escrow agent under the Escrow Agreement shall have executed and delivered said Escrow Agreement and the Escrow Agreement shall be in full force and effect as of the Closing.  The Buyer and the Landlord shall have executed and delivered the Lease for each Related Party Lease.  The Seller, Buyer and each Landlord shall have executed and delivered the Landlord Assignment and Estoppel Certificate.  The Seller and the applicable Landlord shall have executed and delivered the Termination of Lease.

 

9.06 Other Legal Matters.  All Exhibits, Schedules, certificates, documents and legal matters in connection with this Agreement and the transactions contemplated hereby shall be in the forms required by this Agreement.

 

ARTICLE X

 

INDEMNIFICATION

 

10.01 Indemnification by the Seller and the Shareholders.  Except as otherwise limited by this Article 10 and Article 11 hereof, the Seller and the Shareholders agree to indemnify, defend and hold the Buyer and each of its officers, directors, stockholders, and controlling Persons and their respective representatives, successors and assigns (“Buyer Group”) harmless from and against and in respect of Damages actually suffered, incurred or realized by such party (collectively, “General Buyer Losses”), arising out of or resulting from or relating to:

 

(a) any misrepresentation or breach of warranty made by the Seller and/or the Shareholders in this Agreement or any misrepresentation in or breach of warranty under any other agreement to which Seller and/or the Shareholders are a party, certificate, Schedule, Exhibit or writing delivered by Seller and/or Shareholders to the Buyer pursuant to this Agreement, including but not limited to the Disclosure Schedule;

 

(b) any breach of any covenant or other agreement made or undertaken by the Seller in this Agreement or in any other agreement to which Seller is a party, certificate, Schedule, Exhibit or writing delivered by the Seller or Shareholders to the Buyer pursuant to this Agreement, including the Disclosure Schedule;

 

(c) any Retained Liability or Excluded Asset; or

 

(d) any fees, commissions or like payments by any Person having acted or claiming to have acted, directly or indirectly, as a broker, finder or financial advisor for Seller and/or the Shareholders in connection with the transactions contemplated by this Agreement.

 

10.02 Intentionally Omitted.

 

10.03 Indemnification by the Buyer.  Except as otherwise limited by this Article 10 and Article 11 hereof, the Buyer agrees to indemnify, defend and hold the Seller and each of its officers, directors, employees, agents, stockholders and controlling Persons and its successors and assigns (“Seller Group”) harmless from and against and in respect of Damages 

 

	
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actually suffered, incurred or realized by such party (collectively, “Seller Losses”), arising out of or resulting from:any misrepresentation or breach of warranty made by the Buyer in this Agreement or any misrepresentation in or breach of warranty under any other agreement, to which Buyer is a party, certificate, Schedule, Exhibit or writing delivered by Buyer to the Seller pursuant to this Agreement;

 

(a) any breach of any covenant or other agreement made or undertaken by the Buyer in this Agreement or in any other agreement to which Buyer is a party, certificate, Schedule, Exhibit or writing delivered by the Buyer to the Seller and the Shareholders pursuant to this Agreement, including the Disclosure Schedule

 

(b) any Assumed Liability or the Buyer’s operation of the Business or the Transferred Assets or the use of the Facilities after the Closing Date; provided, however, that the Buyer shall in no event be liable for or be required to provide indemnity pursuant to this Section 10.03 for the Buyer’s failure to detect or remedy any Environmental Liabilities arising on or prior to the Closing Date; or

 

(c) any fees, commissions or like payments by any Person having acted or claiming to have acted, directly or indirectly, as a broker, finder or financial advisor for Buyer in connection with the transactions contemplated by this Agreement.

 

10.04 Procedure.  All claims for indemnification under this Article 10 shall be asserted and resolved as follows:

 

(a) An Indemnitee shall promptly give the Indemnitor notice of any matter which an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement, stating the amount of the Loss, if known, and method of computation thereof, all with reasonable particularity, and stating with particularity the nature of such matter.  Failure to provide such notice shall not affect the right of the Indemnitee to indemnification except to the extent such failure shall have resulted in liability to the Indemnitor that could have been actually avoided had such notice been provided within such required time period.

 

(b) The obligations and liabilities of an Indemnitor under this Article 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Article 10 (“Third Party Claims”) shall be governed by and contingent upon the following additional terms and conditions: if an Indemnitee shall receive notice of any Third Party Claim, the Indemnitee shall give the Indemnitor prompt notice of such Third Party Claim and the Indemnitor may, at its option, assume and control the defense of such Third Party Claim at the Indemnitor’s expense and through counsel of the Indemnitor’s choice reasonably acceptable to Indemnitee.  In the event the Indemnitor assumes the defense against any such Third Party Claim as provided above, the Indemnitee shall have the right to participate at its own expense in the defense of such asserted liability, shall cooperate with the Indemnitor in such defense and will attempt to make available on a reasonable basis to the Indemnitor all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor.  In the event the Indemnitor does not elect to conduct the defense against any such Third Party Claim, the Indemnitor shall pay all reasonable

 

	
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(c) costs and expenses of such defense as incurred and shall cooperate with the Indemnitee (and be entitled to participate) in such defense and attempt to make available to it on a reasonable basis all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee.  Except for the settlement of a Third Party Claim that involves the payment of money which Indemnitor shall pay and only for which the Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be settled without the written consent of the Indemnitee.

 

10.05 Payment.  Payment of any amounts due pursuant to this Article 10 shall be made within ten (10) Business Days after notice of a final determination of any Third Party Claims is sent by the Indemnitee.

 

10.06 Failure to Pay Indemnification.  If and to the extent the Indemnitee shall make written demand upon the Indemnitor for indemnification pursuant to this Article 10 and the Indemnitor shall refuse or fail to pay in full within ten (10) Business Days of such written demand the amounts demanded pursuant hereto and in accordance herewith, then the Indemnitee shall be paid out of the escrow account to the extent of the monies existing in the escrow account, then Indemnitee may utilize any legal or equitable remedy to collect from the Indemnitor the amount of Indemnitee Losses.  Nothing contained herein is intended to limit or constrain the Indemnitee’s rights against the Indemnitor for indemnity, the remedies herein being cumulative and in addition to all other rights and remedies of the Indemnitee.  Notwithstanding the foregoing, while any amount of the Seller Note remains unpaid, Buyer will, upon an occurrence of an indemnification obligation owing to Buyer under this Agreement, as determined by a final order in any adjudication, have the right to set-off and apply against the Seller Escrow Note or Seller Note, as determined in the sole discretion of Buyer, to the payment of any indemnification obligation, provided, however, the Buyer shall set off first against the Seller Escrow Note.

 

10.07 Adjustment of Liability.  The amount which an Indemnitee shall be entitled to receive from an Indemnitor with respect to any indemnifiable Loss under this Article 10 shall be net of any insurance recovery by the Indemnitee on account of such Loss from an unaffiliated party.

 

10.08 Limitations of Indemnity.

 

(a) Notwithstanding anything to the contrary contained herein, (i) none of Seller, the Shareholders or the Buyer shall make a payment under Section 10.01(a) or Section 10.03(a), as applicable, unless and until the aggregate amount to be paid by Seller and the Shareholders, on the one hand, or the Buyer, on the other hand, in the absence of this clause, exceeds $50,000 (the "Basket"), in which event all such amounts in excess of the Basket shall be paid and (ii) in no event shall the aggregate liability of Seller and the Shareholders, on the one hand, or Buyer, on the other hand, under Section 10.01(a) or Section 10.03(a), as applicable, exceed five percent (5%) of the Seller Purchase Price (the "Cap"); provided, however, that (x) the Cap shall not apply to any liability arising out of, resulting from or relating to the actual fraud (excluding constructive knowledge, gross negligence or recklessness) of Seller and/or the Shareholders and (y) neither the Basket nor the Cap limitation shall apply in respect of indemnification under Sections 10.01(a), 10.03(a), Sections 3.01,

 

	
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(b) 3.02(a), 3.02(b), the first sentence of each of 3.04(b), 3.04(d), 3.04(e) and 3.04(f), the second sentence of 3.04(c), 3.07, 3.10 and 4.01.

 

(c) The remedies provided in this Article 10 shall constitute the sole and exclusive source of satisfaction of Buyer with respect to any Damages arising after the Closing, and Buyer shall not have any other remedies against Seller, except as specifically otherwise provided in this Agreement.

 

10.09 Mitigation, Subrogation.  Seller, Shareholders and the Buyer, as applicable, shall take all reasonable steps to mitigate indemnifiable damages upon and after having actual knowledge of any event that gives rise to a legal right to indemnification hereunder, including incurring costs and expenses only to the extent necessary to remedy the breach which gives rise to the damage or remedy.  To the extent that an indemnifying party has discharged any claim for indemnification hereunder, the indemnifying party shall be subrogated to all rights of the indemnified party against any third party.

 

10.10 Good Faith.  All acts and action by the parties to this Agreement shall be taken only in good faith by the respective party and in a manner to mitigate General Buyer Losses and Seller Losses, as applicable.

 

ARTICLE XI

 

NATURE OF STATEMENTS AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES

 

The representations and warranties of the parties to this Agreement shall survive the Closing Date and shall remain in full force and effect for a period of eighteen (18) months following the Closing Date (except that (i) the representations and warranties set forth in Sections 3.01, 3.02(a), 3.02(b), the first sentence of each of 3.04(b), 3.04(d), 3.04(e) and 3.04(f), the second sentence of 3.04(c) and 4.01 shall survive the Closing Date without limitation and (ii) the representations and warranties contained in Section 3.07 hereof shall survive the Closing Date and shall not terminate until twenty (20) days after the expiration of all applicable statutes of limitations therefor (including any and all extensions thereof)).  The respective 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 the Survival Period shall further be effective with respect to any respective representation or warranty (and a claim for indemnification under Article 10 hereof may be made thereon) if a written notice asserting the claim shall have been duly given in accordance with Article 10 hereof 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 not withstanding such claim may not be resolved within the Survival Period.  All representations and warranties made by the parties shall not be affected by any investigation heretofore or hereafter made by and on behalf of any of them and shall not be deemed merged into any instruments or agreements delivered in connection with the Closing or otherwise in connection with the transactions contemplated hereby.

ARTICLE XII

 

EXPENSES

 

Except as otherwise set forth herein, and whether or not the transactions contemplated by this Agreement shall be consummated, each party agrees to pay, without right of reimbursement from any other party, the costs incurred by such party incident to the preparation and execution of this Agreement and performance of its obligations hereunder, including without limitation the fees and disbursements of legal counsel, accountants and consultants employed by such party in connection with the transactions contemplated by this 

	
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Agreement (“Transactional Expenses”).  Seller and the Shareholders represent and warrant that no Transactional Expenses are accrued on the August 31, 2010 Financial Statements nor will they be included in the calculation of Net Working Capital or Final Working Capital, rather all of the Seller and Shareholders’ Transactional Expenses shall only be paid from the Seller Purchase Price.

ARTICLE XIII

 

TERMINATION

 

13.01 Best Efforts to Satisfy Conditions.  Subject to the provisions of this Agreement, the Buyer, the Shareholders and the Seller agree to use their good faith efforts to bring about the satisfaction of their respective conditions specified in Articles 8 and 9 hereof.

 

13.02 Termination.  The obligation to close the transactions contemplated by this Agreement may be terminated by:

 

(a) mutual agreement of the Buyer and the Seller;

 

(b) the Buyer, if a default shall be made in the observance or in the due and timely performance by the Seller or the Shareholders of any agreements and covenants of the Seller or the Shareholders  herein contained, or if there shall have been a breach by the Seller or the Shareholders of any of the warranties and representations of the Seller or the Shareholders herein contained, and such default or breach has not been cured (if capable of cure) or has not been waived within ten (10) days after notice thereof;

 

(c) the Seller, if a default shall be made by the Buyer in the observance or in the due and timely performance by the Buyer of any agreements and covenants of the Buyer herein contained, or if there shall have been a breach by the Buyer of any of the warranties and representations of the Buyer herein contained, and such default or breach has not been cured (if capable of cure) or has not been waived within 10 days after notice thereof; or

 

(d) the Buyer or the Seller (provided the terminating party has not breached any of its agreements, covenants or representations and warranties) if the Closing shall not have occurred on or before December 31, 2010.

 

13.03 Liability Upon Termination.  If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to Section 13.02(a) or (d), then this Agreement shall, forthwith become null and void and there shall not be any liability or obligation with respect to the terminated provisions of this Agreement on the part of the Seller or the Buyer.  If this Agreement is terminated pursuant to Section 13.02(b) or (c), then the terminating party’s sole and exclusive remedy shall be able to either (i) specifically enforce the terms of this Agreement or (ii) the terminating party shall be entitled to receive all filing and other fees paid by the terminating party and all out-of-pocket expenses incurred by the terminating party including but not limited to the fees and expenses of any attorney or other adviser of the terminating party which in no event shall exceed $50,000; provided in no event shall either Shareholder have any personal liability to Buyer prior to the Closing Date.

 

	
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13.04 Notice of Termination.  The parties hereto may exercise their respective rights of termination under this Article 13 only by delivering written notice to that effect to the other party or parties, and such notice is received on or before the Closing Date.

 

ARTICLE XIV

 

DEFINITIONS OF CERTAIN TERMS

 

In addition to terms defined elsewhere in this Agreement, the following terms shall have the meanings assigned to them herein, unless the context otherwise indicates, both for purposes of this Agreement and all Exhibits and Schedules hereto:

14.01 “Accounts Receivable”  shall have the meaning given such term in Section 1.01(a)(iii) hereof.

 

14.02 “Agreement” shall mean this Asset Purchase Agreement between the Seller, the Buyer and the Shareholders, as amended from time to time by the parties hereto.

 

14.03 [Intentionally omitted]

 

14.04 “Assumed Liabilities” shall have the meaning given such term in Section 1.04 hereof.

 

14.05 “Business” shall mean the existing businesses and operations of the Seller including, but not limited to, the purchase and sale of pumps, pump parts, pump packages and repair services.

 

14.06 “Business Day” shall mean any day other than a Saturday, Sunday or any other day on which nationally banking institutions in the States of Texas or of Indiana are authorized by law to close.

 

14.07 “Buyer” shall mean DXP Enterprises, Inc., a Texas corporation.

 

14.08 “Closing” shall mean the transfer by the Seller to the Buyer of the Transferred Assets, the assumption by the Buyer of the Assumed Liabilities and the transfer by the Buyer to the Seller of the other considerations set forth herein, which shall all be deemed to have occurred on the Closing Date.

 

14.09 “Closing Date” shall mean the time and date of the Closing as specified in Article 2 hereof.

 

14.10 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

14.11 “Contracts and Other Agreements” shall have the meaning given such term in Section 1.01(a)(v) hereof and shall mean all purchase orders, leases of equipment, contracts, agreements, understandings, indentures, notes, bonds, loans, instruments, leases (including of real property), mortgages, franchises, licenses, commitments or other arrangements, understandings, undertakings, obligations, or other engagements whether express or implied, oral or written, to which the Seller is a party or bound.

 

	
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14.12  “Damages” shall mean any and all liabilities, losses, damages, demands, assessments, claims, costs, obligations, deficiencies, judgments and expenses (excluding incidental, punitive and consequential damages), including interest, awards, judgments, penalties, settlements, fines, claims, suits, actions, causes of action, assessments, awards, costs of remediation, diminutions in value, reasonable costs and expenses incurred in connection with investigating and defending any claims or causes of action (including, without limitation, reasonable  attorneys’ fees and expenses and all fees and expenses of consultants and other professionals).

 

14.13 “Disclosure Schedule” shall mean the disclosure schedule of even date delivered to the Buyer and updated as set out in Section 15.15.

 

14.14 “Documents and Other Papers” shall have the meaning given such term in Section 1.01(a)(viii) hereof and shall mean and include any document, paper, book, report, record, tape, photograph, budget, forecast, ledger, journal, customer list, supplier list, regulatory filings, operating data, plans, technical documentation, marketing documentation, agreement, instrument, certificate, writing, notice, consent, affidavit, letter, telegram, telex, statement, file, computer disk or file or program, microfilm, microfiche or other document in electronic format, schedule, exhibit or any other paper or record whatsoever.

 

14.15 “Employment Agreements” shall have the meaning given such term in Section 8.06 hereof.

 

14.16 “Environmental Laws” shall mean all federal, state, or municipal laws, rules, regulations, statutes, ordinances, or orders of any Governmental Entity relating to (a) the control of any potential pollutant or protection of the air, water, or land, (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation and (c) exposure to hazardous, toxic or other substances alleged to be harmful.  “Environmental Laws” shall include, but not be limited to, the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33  U.S.C. § 1251 et seq., the Resource Conservation Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 11001, et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. App & 1801 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq.  The term “Environmental Laws” shall also include all state, local and municipal laws, rules, regulations, statutes, ordinances and orders dealing with the same subject matter or promulgated by any governmental or quasi-governmental agency thereunder or to carry out the purposes of any federal, state, local and municipal law.

 

14.17 “Environmental Liabilities” shall mean any and all liabilities, responsibilities, claims, suits, losses, costs (including remedial, removal, response, abatement, clean-up, investigative, and/or monitoring costs and any other related costs and expenses), other causes of action recognized now or at any later time, damages, settlements, expenses, charges, assessments, liens, penalties, fines, pre-judgment and post-judgment interest, attorney’s fees and other legal fees, costs of experts, consultants, investigations and feasibility studies, sanctions (a) incurred as a result of any agreement, claim, demand, order, notice, or responsibility, directive (including directives embodied in Environmental Laws), injunction, judgment, or similar documents (including settlements); or (b) pursuant to any claim by a Governmental Entity or other Person for personal injury, property damage, damage to natural resources, remediation, or payment or reimbursement of response costs incurred or expended by such Governmental Entity or Person pursuant to any Environmental Law, common law or statute. 
 

	
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 14.18 “Environmental Permit” shall mean any permit, license, approval, registration, identification number or other authorization with respect to the Transferred Assets or the operations or businesses of the Seller under any applicable law, regulation or other requirement of the United States or any other country or of any state, municipality or other subdivision thereof relating to the control of any pollutant or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic materials or wastes into ambient air, surface water, groundwater or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminants or hazardous or toxic materials or wastes.

 

14.19 “Equipment” shall mean all machinery, transportation equipment, tools, equipment, furnishings, furniture, office equipment and fixtures owned, leased or subject to a contract of purchase and sale, or lease commitment by the Seller.

 

14.20 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, and the related regulations, as amended from time to time.

 

14.21 “Excluded Assets” shall have the meaning given such term in Section 1.02 hereof.

 

14.22 “Facilities” shall mean the six (6) real properties and interests in real properties that are leased by Seller and are described in Schedule 14.22 to the Disclosure Schedule.  Facilities shall include all fixtures, improvements and other appurtenances erected or located on or affixed to all said real property and all interests in said real property.

 

14.23 “Final Net Working Capital” means the Net Working Capital (i) as shown in Buyer’s Closing Statement, if no Dispute Notice is duly delivered; or (ii) if such a Dispute Notice is delivered, (A) as agreed by Buyer and Seller or (B) in the absence of such agreement, as shown in the Firm’s calculation.

 

14.24 “Financial Statements” shall have the meaning given such term in Section 3.06(a) hereof.

 

14.25 “General Buyer Losses” shall have the meaning given such term in Section 10.01 hereof.

 

14.26 “Governmental Entity” shall mean any arbitrator, court, administrative or regulatory agency, commission, department, board or bureau or body or other government or authority or instrumentality or any entity or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government whether foreign, federal, state, county, city or local.

 

14.27 “Hazardous Materials” shall mean any chemical, material, substance or waste that is regulated, classified or otherwise characterized by any Governmental Entity under or pursuant to any Environmental Law.

 

	
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14.28 “Indemnitee” shall mean the Person or Persons indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant to the provisions of Sections 10.01 or 10.03 hereof, as the case may be.

 

14.29 “Indemnitor” shall mean the Person or Persons having the obligation to indemnify pursuant to the provisions of Sections 10.01 or 10.03 hereof, as the case may be.

 

14.30 “Inventories”  shall have the meaning given such term in Section 1.01(a)(ii) hereof and shall mean all inventories of including, but not limited to, pumps, pump parts, pump packages, goods, supplies and other inventories of Seller relating to the Business, wherever situated.

 

14.31 “Lien” shall mean any lien, pledge, claim, charge, mortgage, deed of trust, lease, right of first refusal, security interest or other encumbrance, option, defect or other restriction, limitation or rights of any third Person of any nature whatsoever.

 

14.32 “Losses” shall mean Seller Losses or General Buyer Losses, as the case may be.

 

14.33 “Net Working Capital” is the current assets of the Business (excluding cash) reduced by the current liabilities of the Business both determined in accordance with AICPA principles and in accordance with the adjustments thereto that have been agreed to by Seller and Buyer.  The Transactional Expenses shall not be accrued in the financial statements.  Exhibit K sets forth the parties’ agreement to the calculation of Net Working Capital of the Seller as applied to the December 31, 2009 financial statements.  Transactional Expenses shall not be included in the calculation of Net Working Capital.

 

14.34 “Permits” shall have the meaning given such term in Section 1.01(a)(ix) hereof.

 

14.35 “Permitted Liens” shall mean (a) Liens created by this Agreement, (b) Liens for current taxes and assessments not yet due, (c) title of a lessor under an operating lease, (d) inchoate mechanic, materialmen, workmen, repairmen, warehousemen, customer, employee and carriers Liens arising in the ordinary course of business that are not resulting from a breach, default or violation of any contract, agreement or law, (e) zoning, entitlement or other land use and environmental regulations by any Governmental Entity, provided that such regulations have not been violated prior to the Closing Date.

 

14.36 “Person” shall mean a corporation, an association, a partnership, an organization, a business, an individual or a Governmental Entity.

 

14.37 “Pre-Closing Obligations” shall mean all obligations of the Seller (including indemnification and other contingent obligations) relating to (i) acts, events or omissions by any Person or circumstances existing at or prior to the Closing, (ii) goods or services provided to or for the benefit of the Seller or any of its affiliates prior to the Closing, (iii) goods or services provided by or on behalf of the Seller or any of its affiliates or licensees prior to the Closing, (iv) any pending or threatened litigation or claims made or threatened prior to the Closing, (v) any of the matters listed on Schedule 1.05 hereto, (vi) the conduct of the Business, the Seller or operation of the Transferred Assets or any benefit realized by the Seller prior to the Closing, (vii) contracts, agreements and other commitments that were required to be scheduled in Schedule 3.05(a) of the Disclosure Statement but were not scheduled and (viii) the employees of the Seller under any contracts, agreements, arrangements or understandings with such employees entered into or existing at or prior to the Closing and all other obligations of the Seller or any of its affiliates with respect to its employees at or prior to the Closing.

 

	
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14.38 “Proprietary Information” shall mean collectively (a) Proprietary Rights and (b) any and all other information proprietary to the Seller, owned, possessed or used by the Seller, whether or not such information is embodied in writing or other physical form, and which is not generally known to the public, that (i) relates to financial information regarding the Seller or the Business, including, without limitation, (x) accounting and inventory systems (y) business plans and (z) sales, financing, pricing and marketing procedures or methods of the Seller or (ii) relates to specific business matters concerning the Seller, including, without limitation, the identity of or other information regarding sales personnel, suppliers or customers of the Seller.

 

14.39 “Proprietary Rights” means all patents, inventions, shop rights, internet domain names, computer programs, databases, compilations, descriptions, flow-charts, accounting and inventory systems, know how, trade secrets, designs, plans, manuals, computer software, specifications, confidentiality agreements, confidential information and other proprietary technology and similar information; all registered and unregistered trademarks, service marks, identifying symbols, logos, emblems, corporate names, trade names and all other trademark rights; all registered and unregistered copyrights; and all registrations for, and applications for registration of, any of the foregoing, that are used in the conduct of the Business.

 

14.40 “Related Party Leases” shall have the meaning given such term in Section 7.08 hereof.

 

14.41 “Retained Liabilities” shall have the meaning given such term in Section 1.05 hereof.

 

14.42 “Seller” shall mean D&F Distributors, Inc., an Indiana corporation.

 

14.43 “Seller Purchase Price” shall have the meaning given such term in Section 1.03(a) hereof.

 

14.44 “Shareholders” shall mean the individuals executing this Agreement as shareholders.

 

14.45 “Subsidiary” shall mean, as to a Person or other entity or organization in which such Person owns (directly or indirectly) any equity or other similar corporate interest.

 

14.46 “Tax Consideration” shall have the meaning given such term in Section 1.08(a) hereof.

 

14.47 “Tax Returns” shall mean all returns, declarations, reports, statements and other documents of, relating to, or required to be filed in respect of, any and all Taxes.

 

14.48 “Taxes” shall mean all federal, state, local, foreign and other taxes, charges, fees, duties, levies, imposts, customs or other assessments, including, without limitation, all net income, gross income, capital, transfer, inventory, capital stock, license, social security, unemployment, estimated taxes, gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit share, icense, lease, service, service use, value added, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, premium, property, windfall profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or charges of any kind whatsoever, together with any interests, penalties, additions to tax, fines or other additional amounts imposed thereon or related thereto.

 

	
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14.49“Third Party Claims” shall have the meaning given such term in Section 10.04(b) hereof.

 

14.50 “Third Party Leases” shall have the meaning given such term in Section 7.08 hereof.

 

14.51 “Trade Payables” shall mean those obligations of the Seller relating to the provision of goods and services to the Seller for the conduct of the Business in the ordinary course of business of the Seller that relate to the Transferred Assets and that are classified as Trade Payables in accordance with GAAP and are shown on Seller’s financial statements.

 

14.52 “Transferred Assets” shall have the meaning given such term in Section 1.01(a) hereof.

 

14.53 “Transferred Employees” shall have the meaning given such term in Section 6.01 hereof.

 

14.54 “Vehicles” shall have the meaning given such term in Section 1.01(a)(i) hereof.

 

 

ARTICLE XV

 

MISCELLANEOUS

 

15.01 Notices.  All notices, requests, consents, directions and other instruments and communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person, by courier, by overnight delivery service with proof of delivery or by prepaid registered or certified United States first-class mail, return receipt requested, addressed to the respective party at the address set forth below, or if sent by facsimile or other similar form of communication (with receipt confirmed) to the respective party at the facsimile number set forth below:

 

If to the Seller, to:      

 

D&F Distributors, Inc.

800 Canal Street

Evansville, IN 47725

Attn:  Dan Fuquay         

(V) (812) 867-2441

(F) (812) 867-6822

 

Ciopies to: 

 

Brian K. Carroll

Johnson Carroll Morton Kent & Strauss

2230 West Franklin Street

Evansville, Indiana 47712

(V) (812) 425-4466

(F) (812) 425-4233

	
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Marc D. Fine

Rudolph, Fine, Porter & Johnson, LLP

221 N.W. Fifth Street

P.O. Box 1507

Evansville, Indiana 47706-1507

(V) (812) 422-9444

(F) (812) 421-7459

                            

                            

If to the Buyer, to:                                   

 

DXP Enterprises, Inc. 

7272 Pinemont

Houston, Texas 77040

Attn:  David R. Little, CEO

(V) (713) 996-4755

(F) (713) 996-6570

 

Copies to: 

 

Gary A. messersmith

Looper, Reed & McGraw, P.C.

1300 Post Oak Blvd., Suite 2000

Houston, Texas 77056

(V) (713) 986-7216

(F) (713) 986-7100

 

 

 

or to such other address or facsimile number and to the attention of such other Person(s) as either party may designate by written notice.  Any notice mailed shall be deemed to have been given and received on the third Business Day following the day of mailing.

15.02 Bulk Transfer Laws.  Seller has advised Buyer there is not any bulk sales provisions of the Indiana statutes and/or codes applicable to this Agreement.

 

15.03 Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  No party to this Agreement may sell, transfer, assign, pledge or hypothecate its rights, interests or obligations under this Agreement without the prior written consent of the other parties, except that the Buyer may assign its rights to any affiliate of the Buyer (provided Buyer remains as an obligor under the Seller Note.  No assignment of this Agreement or any of the rights, interests or obligations hereof by the Buyer shall relieve the Buyer of its obligations under this Agreement and, upon any such assignment occurring prior to the Closing, the representations, warranties, covenants and agreements contained in this Agreement shall be deemed to have been made by the Buyer’s assignee as well as by the Buyer.

 

15.04 Successors.  This Agreement shall inure to the benefit of, be binding upon and be enforceable by the parties hereto and their respective successors and assigns.

 

15.05 Entire Agreement.  This Agreement and the Exhibits and Schedules hereto and the Disclosure Schedule constitute the entire agreement and understanding between the parties relating to the subject matter hereof and thereof and supersedes all prior representations, endorsements, premises, agreements, memoranda communications, negotiations, discussions, understandings and arrangements, whether oral, written or inferred, between the parties relating to the subject matter hereof.  This Agreement may not be modified, amended, rescinded, canceled, altered or supplemented, in whole or in part, except upon the execution and delivery of a written instrument executed by a duly authorized representative of each of the parties hereto.  No action taken pursuant to this Agreement, including without limitation, any investigation by or behalf of any party, shall be deemed to constitute a

 

	
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waiver by the party taking such action of compliance with any representation, warranty, covenant, or agreement contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver or any other subsequent breach.

 

15.06 Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without giving effect to choice of law principles.  The parties submit to the non-exclusive jurisdiction of the courts of the State of Texas.  Venue of any dispute arising out of this Agreement shall be in Houston, Harris County, Texas or Evansville, Vanderburgh County, Indiana.

 

15.07 Waiver.  The waiver of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition.

 

15.08 Severability.  If any term or other provision of this Agreement is invalid, illegal, incapable of being enforced by any law or public policy, prohibited or unenforceable all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

15.09 No Third Party Beneficiaries.  Any agreement contained, expressed or implied in this Agreement shall be only for the benefit of the parties hereto and their respective legal representatives, successors and assigns, and such agreements shall not inure to the benefit of the obligees of any indebtedness of any party hereto, it being the intention of the parties hereto that no Person shall be deemed a third party beneficiary of this Agreement, except to the extent a third party is expressly given rights herein.

 

15.10 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original copy of this Agreement and all of which, when taken together shall constitute one and the same Agreement.

 

15.11 Headings.  Each statement set forth in the Disclosure Schedule with respect to a particular section herein shall be deemed made solely with respect to such section and not with respect to any other section hereof unless specifically set forth in the Disclosure Schedule as also being made with respect to such other section.  The headings of the Articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof or affect in any way the meaning or interpretation of this Agreement.

 

15.12 Negotiated Transaction  The provisions of this Agreement were negotiated by the parties hereto, and this Agreement shall be deemed to have been drafted by all of the parties hereto.

 

	
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15.13 Negotiation with Others.  The Seller agrees that from the date hereof until the Closing Date or the termination of this Agreement pursuant to Article XIII, it will not, directly or indirectly, negotiate with any Person not a party hereto or not affiliated with a party hereto with respect to a merger, consolidation, asset purchase or any similar transaction with any such Person regarding the Business or the Transferred Assets.

 

15.14 Prevailing Party.  In the event there is any legal action commenced to enforce or interpret this Agreement, the prevailing party shall be entitled to collect all reasonable costs incurred from the other party, including but not limited to court costs, expert witness fees and attorneys’ fees.

 

15.15 Disclosure Schedules.  Seller certifies the accuracy of the Disclosure Schedules and the material disclosures required on the date shown thereon or the date of this Agreement if no other date is shown on the respective Disclosure Schedule  and shall have no further obligation to update any Disclosure Schedule or the material disclosures required after such date except in the event of a material change in the information provided or material disclosures that should be set forth therein.  Seller will immediately update the respective Disclosure Schedule in the event of a material change in the information provided in such Disclosure Schedule..  So as not to require Seller or Shareholders to repetitively list the same information or items to be disclosed hereunder on numerous schedules, disclosures made by Seller or Shareholders in this Agreement, on any schedule, exhibit or any other document, attachment, report, certificate or statement furnished to Buyer, shall constitute sufficient disclosure or such information or item disclosed with respect to all representations and warranties of Seller or Shareholders herein which requires such information or item to be disclosed.  The headings contained in the Schedules are for convenience of reference only and shall not be deemed to modify the interpretation of the information contained in the Schedules or this Agreement.  All disclosures in the Schedules made against the representations and warranties in this Agreement are made generally, and none of such disclosures relate to a particular section.  Accordingly, any numbering or references herein to sections of this Agreement are for convenience only and do not in any way limited, and shall not be regarded as limited, the disclosure concerning such numbered or referred section.

 

(The remainder of this page is intentionally left blank.  The next page is the signature page.)

 

 

 

 

 

 

 

 

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

SELLER:

D&F DISTRIBUTORS, INC.

By:  /s/Daniel M. Fuquay, President

            Daniel M. Fuquay, President

 

 

SHAREHOLDERS

s/Daniel M. Fuquay

    Daniel M. Fuquay

 

 

/s/Joel D. Sauter

    Joel D. Sauter

 

 

/s/Mark S. Blackwelder

    Mark S. Blackwelder

 

 

/s/Steven L. Thielen

    Steven L. Thielen

 

 

/s/Timothy J. Hudson

    Timothy J. Hudson

 

 

/s/Mark P. Sharp

    Mark P. Sharp

 

 

/s/Brad N. Powell

    Brad N. Powell

 

 

/s/Aaron B. Fuquay

    Aaron B. Fuquay

 

 

/s/Robert K. Embry

Robert K. Embry

 

BUYER:

DXP ENTERPRISES, INC.

By:  /s/Mac McConnell                                                                           

Name: Mac McConnell 

Title:  Senior Vice President & CFO                                                                           

	
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