Document:

Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

among

 

Summit Midstream Partners Holdings, LLC,

 

Red Rock Gathering Company, LLC

 

and

 

Summit Midstream Partners, LP,

 

dated as of March 8, 2014

 

 

Table of Contents

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE I
    	
 
    
	
 
    	
DEFINITIONS AND   CONSTRUCTION
    	
 
    
	
 
    	
 
    	
 
    
	
1.1
    	
Definitions
    	
1
    
	
1.2
    	
Rules of Construction
    	
9
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE II
    	
 
    
	
 
    	
CLOSING
    	
 
    
	
 
    	
 
    	
 
    
	
2.1
    	
Assignment of Company   Interests
    	
10
    
	
2.2
    	
Consideration
    	
10
    
	
2.3
    	
Closing
    	
10
    
	
2.4
    	
Closing Deliveries by SMP   Holdings to Summit MLP
    	
10
    
	
2.5
    	
Closing Deliveries by   Summit MLP to SMP Holdings
    	
10
    
	
2.6
    	
Working Capital Adjustment
    	
10
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE III
    	
 
    
	
 
    	
REPRESENTATIONS AND   WARRANTIES REGARDING THE COMPANY
    	
 
    
	
 
    	
 
    	
 
    
	
3.1
    	
Organization; Good Standing
    	
12
    
	
3.2
    	
Authority
    	
12
    
	
3.3
    	
Capitalization of the   Company
    	
12
    
	
3.4
    	
No Conflicts; Consents and   Approvals
    	
13
    
	
3.5
    	
Absence of Changes
    	
13
    
	
3.6
    	
Compliance with Applicable   Laws
    	
14
    
	
3.7
    	
Intellectual Property
    	
14
    
	
3.8
    	
Absence of Litigation
    	
14
    
	
3.9
    	
Real Property
    	
15
    
	
3.10
    	
Personal Property
    	
16
    
	
3.11
    	
Capital and Expense   Projects; Purchase Orders
    	
16
    
	
3.12
    	
Regulatory Status
    	
16
    
	
3.13
    	
Environmental Matters
    	
17
    
	
3.14
    	
Taxes
    	
17
    
	
3.15
    	
Contracts
    	
18
    
	
3.16
    	
Employees and Plans
    	
19
    

 

i

 

	
3.17
    	
Transactions with   Affiliates
    	
20
    
	
3.18
    	
Broker’s Commissions
    	
20
    
	
3.19
    	
Records
    	
20
    
	
3.20
    	
Surety Bonds and Credit
    	
20
    
	
3.21
    	
No Bankruptcy
    	
20
    
	
3.22
    	
No Undisclosed Material   Liabilities; Indebtedness
    	
20
    
	
3.23
    	
Insurance
    	
20
    
	
3.24
    	
Conflicts Committee Matters
    	
21
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE IV
    	
 
    
	
 
    	
REPRESENTATIONS AND   WARRANTIES OF SMP HOLDINGS
    	
 
    
	
 
    	
 
    	
 
    
	
4.1
    	
Organization; Good Standing
    	
21
    
	
4.2
    	
Authority
    	
21
    
	
4.3
    	
Ownership of the Company   Interests
    	
21
    
	
4.4
    	
No Conflicts; Consents and   Approvals
    	
22
    
	
4.5
    	
Broker’s Commissions
    	
22
    
	
4.6
    	
No Bankruptcy
    	
22
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE V
    	
 
    
	
 
    	
REPRESENTATIONS AND   WARRANTIES REGARDING SUMMIT MLP
    	
 
    
	
 
    	
 
    	
 
    
	
5.1
    	
Organization
    	
22
    
	
5.2
    	
Authority
    	
22
    
	
5.3
    	
No Conflicts
    	
22
    
	
5.4
    	
Legal Proceedings
    	
23
    
	
5.5
    	
Financial Resources
    	
23
    
	
5.6
    	
Opportunity for Independent   Investigation
    	
23
    
	
5.7
    	
Broker’s Commissions
    	
24
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE VI
    	
 
    
	
 
    	
COVENANTS
    	
 
    
	
 
    	
 
    	
 
    
	
6.1
    	
Indebtedness; Distributions
    	
24
    
	
6.2
    	
Tax Matters
    	
24
    
	
6.3
    	
Public Announcements
    	
27
    
	
6.4
    	
Further Assurances
    	
27
    
	
6.5
    	
Indemnification Under the   Original Acquisition Agreement
    	
27
    

 

ii

 

	
 
    	
ARTICLE VII
    	
 
    
	
 
    	
LIMITATIONS ON   LIABILITY, WAIVERS AND ARBITRATION
    	
 
    
	
 
    	
 
    	
 
    
	
7.1
    	
Survival of   Representations, Warranties and Agreements
    	
28
    
	
7.2
    	
Indemnification of Summit   MLP and the Company by SMP Holdings
    	
28
    
	
7.3
    	
Indemnification of SMP   Holdings by Summit MLP
    	
29
    
	
7.4
    	
Limitations
    	
29
    
	
7.5
    	
Claims Procedures
    	
30
    
	
7.6
    	
Waiver of Other   Representations
    	
31
    
	
7.7
    	
Waiver of Remedies
    	
31
    
	
7.8
    	
Access to Information
    	
32
    
	
7.9
    	
Dispute Resolution and   Arbitration
    	
32
    
	
7.10
    	
Arbitration Procedures
    	
33
    
	
7.11
    	
Determination of Amount of   Damages; Mitigation
    	
34
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE VIII
    	
 
    
	
 
    	
COVENANTS
    	
 
    
	
 
    	
 
    	
 
    
	
8.1
    	
Conduct of Operations
    	
35
    
	
8.2
    	
Commercially Reasonable   Efforts; Further Assurances
    	
35
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE IX
    	
 
    
	
 
    	
CONDITIONS TO   CLOSING
    	
 
    
	
 
    	
 
    	
 
    
	
9.1
    	
Conditions to Obligations   of All Parties
    	
35
    
	
9.2
    	
Conditions to Obligation of   Summit MLP
    	
35
    
	
9.3
    	
Conditions to Obligation of   SMP Holdings
    	
36
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE X
    	
 
    
	
 
    	
TERMINATION
    	
 
    
	
 
    	
 
    	
 
    
	
10.1
    	
Grounds for Termination
    	
36
    
	
10.2
    	
Effect of Termination
    	
37
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE XI
    	
 
    
	
 
    	
MISCELLANEOUS
    	
 
    
	
 
    	
 
    	
 
    
	
11.1
    	
Notices
    	
37
    
	
11.2
    	
Entire Agreement
    	
38
    
	
11.3
    	
Expenses
    	
38
    
	
11.4
    	
Disclosure
    	
39
    

 

iii

 

	
11.5
    	
Waiver
    	
39
    
	
11.6
    	
Amendment
    	
39
    
	
11.7
    	
No Third Party Beneficiary
    	
39
    
	
11.8
    	
Assignment; Binding Effect
    	
39
    
	
11.9
    	
Invalid Provisions
    	
39
    
	
11.10
    	
Counterparts; Facsimile
    	
39
    
	
11.11
    	
Governing Law; Enforcement,   Jury Trial Waiver
    	
40
    

 

iv

 

	
Exhibit A
    	
—
    	
Company Assignment and Contribution   Agreement
    
	
Exhibit B
    	
—
    	
Gathering System
    
	
Exhibit B-1
    	
—
    	
Rifle and DeBeque Subsystems
    

 

	
Schedule 1.1
    	
—
    	
Calculation of Net Working Capital
    
	
Schedule 1.1-PL
    	
—
    	
Permitted Liens
    
	
Schedule 2.6
    	
—
    	
Estimated Adjustments
    
	
Schedule 3.4(b)
    	
—
    	
Company Consents
    
	
Schedule 3.5
    	
—
    	
Absence of Changes
    
	
Schedule 3.6
    	
—
    	
Compliance with Applicable Laws
    
	
Schedule 3.6-P
    	
—
    	
Permits
    
	
Schedule 3.7(b)
    	
—
    	
Intellectual Property
    
	
Schedule 3.8
    	
—
    	
Absence of Litigation
    
	
Schedule 3.9(a)
    	
—
    	
Owned Real Property
    
	
Schedule 3.9(b)
    	
—
    	
Real Property Leases
    
	
Schedule 3.9(c)
    	
—
    	
Real Property Easements
    
	
Schedule 3.9(d)
    	
—
    	
Obligations to Dispose of Real Property
    
	
Schedule 3.9(e)
    	
—
    	
Gaps
    
	
Schedule 3.9(g)
    	
—
    	
Real Property that Constitutes Part of   the Business
    
	
Schedule 3.10
    	
—
    	
Personal Property
    
	
Schedule 3.11
    	
—
    	
Capital Projects and Purchase Orders
    
	
Schedule 3.13
    	
—
    	
Environmental Matters
    
	
Schedule 3.14
    	
—
    	
Taxes
    
	
Schedule 3.15
    	
—
    	
Material Contracts
    
	
Schedule 3.17
    	
—
    	
Transactions with Affiliates
    
	
Schedule 3.20
    	
—
    	
Surety Bonds and Credit
    
	
Schedule 3.22
    	
—
    	
Indebtedness
    
	
Schedule 3.23
    	
—
    	
Insurance
    
	
Schedule 4.4
    	
—
    	
SMP Holdings Approvals
    
	
Schedule 6.4
    	
—
    	
Affiliate Contracts
    

 

v

 

PURCHASE AND SALE AGREEMENT

 

This PURCHASE AND SALE AGREEMENT, dated as of March 8, 2014 (this “Agreement”), is made and entered into by and among Summit Midstream Partners Holdings, LLC, a Delaware limited liability company (“SMP Holdings”), Red Rock Gathering Company, LLC, a Delaware limited liability company (the “Company”), and Summit Midstream Partners, LP, a Delaware limited partnership (“Summit MLP”).

 

RECITALS

 

WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as of September 12, 2012 (the “Original Acquisition Agreement”) between La Grange Acquisition, L.P. (the “Original Seller”) and Summit Midstream Partners, LLC (the “Original Buyer”) the Original Buyer acquired all of the member interests in the Company, which owned the Gathering System (as defined herein) and related assets used in the Business (as defined herein);

 

WHEREAS, the Original Buyer conveyed all of the member interests in the Company to SMP Holdings;

 

WHEREAS, SMP Holdings desires to sell and assign to Summit MLP, and Summit MLP desires to purchase and receive from SMP Holdings and to contribute to Summit Midstream Holdings, LLC, a Delaware limited liability company and wholly-owned subsidiary of Summit MLP (“Summit Midstream”), and then to cause Summit Midstream to further contribute to Grand River Gathering, LLC, a Delaware limited liability company and wholly-owned subsidiary of Summit Midstream (“GRG”), all of the member interests in the Company, on the terms and subject to the conditions set forth herein.

 

AGREEMENT

 

Now, therefore, in consideration of the premises and the mutual representations, warranties, covenants and agreements in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

 

ARTICLE I
 DEFINITIONS AND CONSTRUCTION

 

1.1          Definitions.  As used in this Agreement, the following capitalized terms have the meanings set forth below:

 

“1933 Act” has the meaning given to it in Section 5.6.

 

“Affiliate” means, with respect to any Person, a Person directly or indirectly controlling, controlled by or under common control with such Person.  In this context “control” means the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the United States Securities Exchange Act of 1934) of the power or authority, through ownership of voting securities, by contract or otherwise, to control or direct the management and policies of the entity; provided, however, that for

 

1

 

purposes of this Agreement and any other agreements and/or instruments entered into in connection herewith, (i) Summit MLP and its subsidiaries are not Affiliates of SMP Holdings and its other Affiliates and (ii) prior to the Closing, the Company is an Affiliate of SMP Holdings and at and after the Closing, the Company is a subsidiary of Summit MLP and thus not an Affiliate of SMP Holdings.

 

“Agreement” has the meaning given to it in the Preamble.

 

“Allocation Schedule” has the meaning given to it in Section 6.2(f).

 

“Asserted Liability” has the meaning given to it in Section 7.5(a).

 

“Assets” of any Person means all properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.

 

“Business” means the ownership and operation of the Gathering System and other activities conducted by the Company that are incidental thereto.

 

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of New York or the State of Texas are authorized or obligated to close.

 

“Cash” means money, currency or a credit balance in a deposit account at a financial institution, net of checks outstanding as of the time of determination.

 

“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition, (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc., (c) commercial paper issued by any bank or any bank holding company owning any bank maturing no more than one year from the date of its creation and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc., and (d) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition issued by any commercial bank organized under the Laws of the United States of America having combined capital and surplus of not less than $500,000,000.

 

“Charter Documents” means with respect to any Person that is not a natural person, the articles of incorporation or organization, memorandum of association, articles of association and by-laws, the limited partnership agreement, the partnership agreement or the limited liability company agreement or such other organizational documents of such Person which establish the legal personality of such Person.

 

“Claim” means any demand, claim, action, investigation or Proceeding.

 

2

 

“Claims Notice” has the meaning given to it in Section 7.5(a).

 

“Closing” has the meaning given to it in Section 2.3.

 

“Closing Date” means the date on which Closing occurs.

 

“Closing Payment” has the meaning given to it in Section 2.2(c).

 

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

 

“Company” has the meaning given to it in the Preamble.

 

“Company Consents” has the meaning given to it in Section 3.4(b).

 

“Company Assignment and Contribution Agreement” means an agreement in the form attached hereto as Exhibit A evidencing the assignment to Summit MLP and the contribution and assignment to Summit Midstream, followed by the contribution and assignment to GRG, of the Company Interests.

 

“Company Interests” means 100% of the Equity Interests in the Company.

 

“Company Warranty Breach” has the meaning given to it in Section 7.2(a).

 

“Conflicts Committee” means the conflicts committee of the board of directors of SM GP.

 

“Consideration” has the meaning given to it in Section 2.2.

 

“Contract” means any legally binding contract, lease, license, evidence of indebtedness, mortgage, indenture, purchase order, binding bid, letter of credit, security agreement or arrangement, in each case, whether written or oral.

 

“Dispute” has the meaning given to it in Section 7.9(a).

 

“Due Diligence Information” has the meaning given to it in Section 5.8(b).

 

“Environmental Law” means any and all federal, state and local Laws pertaining to protection of the environment or the release, discharge or disposal of Hazardous Material, as in effect on the date hereof, in any and all jurisdictions in which the Gathering System operate or are located, including the Clean Air Act, the Federal Water Pollution Control Act, the Oil Pollution Act of 1990, the Rivers and Harbors Act of 1899, the Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Hazardous and Solid Waste Amendments Act of 1984, the Toxic Substances Control Act, and comparable state and local counterparts.

 

“Environmental Permits” means any Permit issued pursuant to Environmental Laws.

 

3

 

“Equity Interests” means capital stock, partnership or membership interests or units (whether general or limited), and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity.

 

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

 

“Estimated Working Capital Adjustment” means SMP Holdings’ good faith estimate of the Working Capital Adjustment as of the close of business on the Business Day immediately preceding the Closing Date.

 

“Financial Statements” has the meaning given to it in Section 3.24.

 

“Fundamental Representations” has the meaning given to it in Section 7.1.

 

“GAAP” means generally accepted accounting principles in the United States, applied on a consistent basis.

 

“Gathering System” means the gathering system described in Exhibit B.

 

“Gathering System Fee Property” has the meaning given to it in Section 3.9(a).

 

“Governmental Authority” means any applicable federal, state or local governmental authority, agency, board, commission, court or official in the United States.

 

“GRG” has the meaning given to it in the Recitals.

 

“Hazardous Material” means each substance designated or classified as a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law.

 

“Income Tax” means any federal, state, local or foreign Tax measured by or imposed on net income.

 

“Indebtedness” means, with respect to any Person, at any date, without duplication, (a) all obligations of such Person for borrowed money, including all principal, interest, premiums, fees, expenses, overdrafts and, to the extent required to be carried on a balance sheet prepared in accordance with GAAP penalties with respect thereto, whether short-term or long-term, and whether secured or unsecured, or with respect to deposits or advances of any kind (other than deposits and advances of any Person relating to the purchase of products or services from the Company in the ordinary course of business), (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or debt securities, (c) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or bankers’ acceptances or similar instruments, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all guarantees, whether direct or indirect, by such Person of indebtedness of others or indebtedness of any other Person secured by any assets of such Person, and (f) all other obligations of a Person which would be required to be shown as indebtedness on a balance sheet of such Person prepared in accordance with GAAP.

 

4

 

“Intellectual Property Rights” means material rights in any of the following to the extent subject to protection under applicable Law: (a) trademarks, service marks and trade names; (b) patents; (c) copyrights; (d) internet domain names; (e) trade secrets and other proprietary and confidential information; and (f) any registrations or applications for registration for any of the foregoing.

 

“Knowledge” when used in a particular representation or warranty in this Agreement with respect to the Company or SMP Holdings, means the actual knowledge (as opposed to any constructive or imputed knowledge) of any of Steve Newby, Brad Graves, Brock Degeyter, Matt Harrison and Rene Casadaban, after reasonable inquiry of the officers of the Company.

 

“Laws” means all laws, statutes, rules, regulations, ordinances, court orders and other pronouncements having the effect of law of any Governmental Authority.

 

“Lien” means any mortgage, pledge, deed of trust, assessment, security interest, charge, lien, encumbrance, option, warranty, purchase right, lease or other similar property interest.

 

“LLC Agreement” means the Second Amended and Restated Limited Liability Company Agreement of the Company dated as of October 22, 2012.

 

“Loss” means any and all judgments, losses, liabilities, amounts paid in settlement, damages, fines, penalties, deficiencies, expenses (including interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other Proceedings or of any Claim, default or assessment); provided, however, that any claim for Loss under the indemnities in Article VII (a) shall be reduced by any payment (including payments on account of insurance of the Company) actually received from a third party or otherwise actually recovered from third parties and (b) shall be net of any associated net benefits actually realized and arising in connection with such Loss, including any associated net Tax benefits described in Section 7.11.  For all purposes in this Agreement, the term “Losses” shall not include any Non-Reimbursable Damages.

 

“Material Adverse Effect” means any change, event, circumstance, development or occurrence that, individually or in the aggregate with all other changes, events, circumstances, developments and occurrences, is materially adverse to (a) the business, operations, Assets, liabilities or financial condition of the Company, (b) the validity or enforceability of this Agreement or (c) the rights and remedies of or benefits available to the Parties under this Agreement, but excluding any of the foregoing resulting from (i) general economic conditions, (ii) changes or conditions generally affecting the U.S. economy or financial markets, (iii) execution of this Agreement and the announcement thereof, (iv) any act or omission by the Company taken as required by or permitted under this Agreement or with prior written consent of Summit MLP or (v) any act or omission of Summit MLP, except to the extent any of the changes, events, circumstances, developments or occurrences referred to in clause (i) or (ii) above disproportionately impact the Company as compared to other companies in the industries and geographical area in which the Company operates.

 

“Material Contracts” has the meaning given to it in Section 3.15(a).

 

5

 

“Net Working Capital” means, as of a particular date or time, (a) the sum of the current assets of the Company other than Cash and Cash Equivalents less (b) the current liabilities of the Company.  Notwithstanding anything in this Agreement to the contrary, the following items will be excluded from the calculation of Net Working Capital:  (i) any accrued Tax payable that is not either (A) payable with respect to a Pre-Closing Period or (B) the portion of a Tax payable with respect to a Straddle Period that is allocated to the period ending on the Closing Date pursuant to Section 6.2(b), (ii) any current deferred revenue and (iii) any deferred Tax assets and deferred Tax liabilities.  For illustrative purposes only, attached as Schedule 1.1 is a sample calculation of Net Working Capital prepared by the Parties as of December 31, 2013.

 

“Net Working Capital Target” means $4,065,139.

 

“Non-Company Affiliate” means any Affiliate of SMP Holdings, except for the Company.

 

“Non-Reimbursable Damages” has the meaning given to it in Section 7.7(b).

 

“Original Acquisition Agreement” has the meaning given to it in the Recitals.

 

“Original Buyer” has the meaning given to it in the Recitals.

 

“Original Seller” has the meaning given to it in the Recitals.

 

“Parties” means each of Summit MLP and SMP Holdings.

 

“PBGC” has the meaning given to it in Section 3.16(c).

 

“Permits” means all permits, licenses or authorizations from any Governmental Authority.

 

“Permitted Lien” means (a) any Lien for Taxes not yet due or delinquent, (b) any Lien arising in the ordinary course of business by operation of Law with respect to a liability that is not yet due or delinquent, (c) all matters that are disclosed in the deed or instrument conveying such property that have been made available to Summit MLP, (d) purchase money Liens arising in the ordinary course of business, (e) any other imperfection or irregularity of title or other Lien that would not reasonably be expected to materially interfere with the conduct of the Business, (f) zoning, planning and other similar limitations and restrictions and all rights of any Governmental Authority to regulate a property, (g) the terms and conditions of the Permits or the Contracts of the Company, (h) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security Laws, (k) any Lien to be released on or prior to Closing and (l) the other matters identified on Schedule 1.1-PL.

 

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, unlimited liability corporation, proprietorship, other business organization, trust, union, association or Governmental Authority.

 

“Personal Property” has the meaning given to it in Section 3.10.

 

6

 

“Plan” means, whether written or oral, each “employee benefit plan” within the meaning of Section 3(3) of ERISA (including “multiemployer plans” within the meaning of Section 3(37) of ERISA) and any and all employment, deferred compensation, change in control, severance, termination, loan, employee benefit, retention, bonus, pension, profit sharing, savings, retirement, welfare, incentive compensation, stock or equity-based compensation, stock purchase, stock appreciation, collective bargaining, fringe benefit, vacation, paid time off, sick leave or other similar agreements, plans, programs, policies, understandings or arrangements.

 

“Pre-Closing Period” means any Tax period ending on or before the Closing Date.

 

“Previous ERISA Affiliate Plans” has the meaning given to it in Section 3.16(c).

 

“Proceeding” means any complaint, lawsuit, action, suit or other proceeding at Law or in equity or order or ruling, in each case by or before any Governmental Authority or arbitral tribunal.

 

“Real Property” means the real property owned in fee or leased, used or held for use by the Company.

 

“Records” has the meaning given to it in Section 7.8.

 

“Release” means any release, spill, emission, leaking, pumping, injection, disposal or discharge of any Hazardous Materials into the environment, to the extent prohibited under applicable Environmental Laws.

 

“Representatives” means, as to any Person, its officers, directors, employees, managers, members, partners, shareholders, owners, counsel, accountants, financial advisers and consultants.

 

“Rifle and DeBeque Subsystems” means the portions of the Gathering System described on Exhibit B-1.

 

“Scheduled Easement Property” has the meaning given to it in Section 3.9(c).

 

“Scheduled Leased Property” has the meaning given to it in Section 3.9(b).

 

“Scheduled Real Property” means the Gathering System Fee Property, the Scheduled Leased Property and the Scheduled Easement Property.

 

“Schedules” means the disclosure schedules prepared by SMP Holdings and attached to this Agreement.

 

“SMP Holdings” has the meaning given to it in the Preamble.

 

“SMP Holdings Approvals” has the meaning given to it in Section 4.4(b).

 

“SMP Holdings Group” means SMP Holdings and any of its Affiliates.

 

7

 

“SMP Holdings Taxes” means any and all Taxes imposed on the Company or for which the Company may otherwise be liable for any Pre-Closing Period and for the portion of any Straddle Period ending on the Closing Date (determined in accordance with Section 6.2(b); provided that no such Tax will constitute a SMP Holdings Tax (a) to the extent such Tax was included as a current liability in the final determination of Net Working Capital or (b) for which Summit MLP will be liable under Section 6.2(c).

 

“SMP Holdings Warranty Breach” has the meaning given to it in Section 7.2(b).

 

“Straddle Period” means any period relating to the computation of Taxes that begins on or before and ends after the Closing Date.

 

“Summit Midstream” has the meaning given to it in the Recitals.

 

“Summit MLP” has the meaning given to it in the Preamble.

 

“Summit MLP Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of Summit MLP dated as of October 3, 2012.

 

“Summit MLP Warranty Breach” has the meaning given to it in Section 7.3(a).

 

“Taxes” means (a) all taxes, charges, fees, imposts, levies or other assessments or fees of any kind, including income, corporate, capital, excise, property, sales, use, turnover, unemployment, social security, disability, withholding, real property, personal property, environmental, transfer, registration, value added and franchise taxes, deductions, withholdings and customs duties, imposed by any Governmental Authority, and including any interest or penalty imposed with respect thereto; and (b) any liability for the payment of any amounts of the type described in clause (a) as a result of the operation of law or any express or implied obligation to indemnify any other Person.

 

“Tax Claim” means any action, suit, arbitration, investigation, inquiry, hearing, request for information or filing, audit, examination, claim, demand, dispute, assessment, proposed adjustment or proceeding (whether administrative, regulatory or otherwise, or whether oral or in writing) with respect to Taxes or any Tax Returns of the Company.

 

“Tax Returns” means any return, report, rendition, claim for refund, statement, information return or other document (including any related or supporting information or schedule attached thereto, or amendment thereof) filed or required to be filed with any Governmental Authority in connection with the determination, assessment, collection or administration of any Taxes.

 

“Taxing Authority” means, with respect to any Tax, the Governmental Authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with collection of such Tax for such entity or subdivision.

 

“Warranty Breach” means any Summit MLP Warranty Breach, Company Warranty Breach or SMP Holdings Warranty Breach.

 

8

 

“Working Capital Adjustment” means the difference between Net Working Capital as of the close of business on the Business Day immediately preceding the Closing Date and the Net Working Capital Target.

 

1.2          Rules of Construction.

 

(a)         The exhibits and Schedules attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.  All article, section, subsection and exhibit references used in this Agreement are to articles, sections, subsections and exhibits to this Agreement unless otherwise specified.

 

(b)         The headings preceding the text of articles and sections included in this Agreement and the headings to the Schedules attached to this Agreement are for convenience only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement.

 

(c)          If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa.  The words “includes” or “including” shall mean “including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear.  All currency amounts referenced herein are in United States Dollars unless otherwise specified. The singular shall include the plural and the plural shall include the singular wherever and as often as may be appropriate.

 

(d)         Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.  Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.

 

(e)          All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

 

(f)          Any reference herein to any Law, statute, rule or regulation shall be construed as referring to such Law, statute, rule or regulation as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time and references to particular provisions of a Law include a reference to the corresponding provisions of any prior or succeeding Law.

 

(g)          Each Party acknowledges that it and its attorneys have been given an equal opportunity to negotiate the terms and conditions of this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party or any similar rule operating against the drafter of an agreement shall not be applicable to the construction or interpretation of this Agreement.

 

9

 

ARTICLE II
 CLOSING

 

2.1          Assignment of Company Interests.  On the terms and subject to the conditions set forth in this Agreement, SMP Holdings agrees to assign to Summit MLP, and Summit MLP agrees to receive and accept from SMP Holdings, at Closing, all of the Company Interests free and clear of all Liens other than those arising under state or federal securities Laws or the LLC Agreement.

 

2.2          Consideration.  The consideration for the sale of the Company Interests is equal to a cash payment (the “Closing Payment”) to SMP Holdings equal to (i) $305,000,000; (ii) plus (if positive) or minus (if negative) the Estimated Working Capital Adjustment; and (iii) plus the amount of Cash and Cash Equivalents held by the Company as of the close of business on the Business Day immediately preceding the Closing Date, subject to adjustment as provided in Section 2.6 (the “Consideration”):

 

2.3          Closing.  The consummation of the purchase and sale of the Company Interests (the “Closing”) shall take place at the offices of Vinson & Elkins L.L.P., 2001 Ross Avenue, Suite 3700, Dallas, Texas 75201 at 10:00 A.M. local time, as soon as possible, but in no event later than three Business Days after satisfaction or waiver of all of the conditions set forth in Article IX (other than those that are to be satisfied or waived at Closing), or at such other time or place as the Parties may agree in writing.  All actions listed in Sections 2.4 or 2.5 that occur on the Closing Date shall be deemed to occur simultaneously at the Closing.

 

2.4          Closing Deliveries by SMP Holdings to Summit MLP.  At the Closing, SMP Holdings shall deliver, or shall cause to be delivered, to Summit MLP the following:

 

(a)         a counterpart duly executed by SMP Holdings of the Company Assignment and Contribution Agreement; and

 

(b)         a certification of non-foreign status in the form prescribed by Treasury Regulation Section 1.1445-2(b)(2).

 

2.5          Closing Deliveries by Summit MLP to SMP Holdings.  At the Closing, Summit MLP shall:

 

(a)         deliver a wire transfer or transfers of immediately available funds (to such account or accounts of SMP Holdings as SMP Holdings shall have notified Summit MLP of at least two Business Days prior to the Closing Date) in an amount or amounts in the aggregate equal to the Closing Payment; and

 

(b)         deliver to SMP Holdings a counterpart duly executed by Summit MLP, Summit Midstream and GRG of the Company Assignment and Contribution Agreement.

 

2.6          Working Capital Adjustment.

 

(a)         SMP Holdings and Summit MLP shall cooperate and provide each other access, including through electronic means, to SMP Holdings’ and the Company’s respective books

 

10

 

and records as are reasonably requested in connection with the matters addressed in this Section 2.6.  Attached as Schedule 2.6 is SMP Holdings’ good faith estimate of (i) the Estimated Working Capital Adjustment and its components and (ii) the amount of Cash and Cash Equivalents to be held by the Company as of the close of business on the Business Day immediately preceding the Closing Date.  For purposes of calculating Net Working Capital, all payments made at Closing pursuant to Section 6.1 shall be deemed to have been paid immediately prior to the close of business on the Business Day immediately preceding the Closing Date.

 

(b)         Within 45 days after Closing, SMP Holdings shall provide Summit MLP with its good faith final calculation of the actual amounts for each of the estimated amounts required by Section 2.6(a), which clearly delineates any differences from such estimates together with reasonable supporting documentation.  If Summit MLP disagrees with any of the calculations provided by SMP Holdings pursuant to the notice referenced in the foregoing sentence, then it shall provide SMP Holdings with written notice thereof within 30 days after receiving such referenced notice and shall include reasonable detail regarding such specific objections.  If Summit MLP and SMP Holdings working in good faith are unable to agree on such disputed items on or prior to the 90th day following the Closing Date, then either Party may refer such dispute to Grant Thornton LLP or, if that firm declines to act as provided in this Section 2.6(b), another firm of independent public accountants, mutually acceptable to the Conflicts Committee and SMP Holdings, which firm shall make a final and binding determination as to all matters in dispute on a timely basis and promptly shall notify the Parties in writing of its resolution.  Such accounting firm handling the dispute resolution shall not have the power to modify or amend any term or provision of this Agreement. Each of Summit MLP and SMP Holdings shall bear and pay one-half of the fees and other costs charged by such accounting firm. If Summit MLP does not object to SMP Holdings’s calculations within the time period and in the manner set forth in the first sentence of this Section 2.6(b) or accepts SMP Holdings’s calculations, then such calculations as set forth in SMP Holdings’s notice shall become final and binding upon the Parties for all purposes hereunder.

 

(c)          If the sum of the Working Capital Adjustment plus the amount of Cash and Cash Equivalents as of the close of business on the Business Day immediately preceding the Closing Date (in each case, as agreed between Summit MLP and SMP Holdings or as determined by the above-referenced accounting firm or otherwise) is a value that is (i) greater than the estimated amount as paid by Summit MLP at Closing, then Summit MLP shall pay to SMP Holdings within five Business Days after such amounts are so agreed or determined, by wire transfer of immediately available funds to an account or accounts of SMP Holdings designated by SMP Holdings, the amount of such difference plus interest (at The Wall Street Journal Prime Rate as published on the Closing Date) accrued thereon from the Closing Date through and including the date of such payment, or (ii) less than the estimated amount as paid by Summit MLP at Closing, then SMP Holdings shall pay to Summit MLP, within five Business Days after such amounts are agreed or determined, by wire transfer of immediately available funds to an account designated by Summit MLP, the amount of such difference plus interest (at The Wall Street Journal Prime Rate as published by The Wall Street Journal on the Closing Date) accrued thereon from the Closing Date through and including the date of such payment.

 

11

 

ARTICLE III
 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

 

SMP Holdings hereby represents and warrants (subject to any disclosures made on the date hereof in the Schedules) to Summit MLP as of the date hereof as follows:

 

3.1          Organization; Good Standing.

 

(a)         The Company is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware, and has all requisite limited liability company power and authority to own its properties and conduct the Business as it is now being conducted.  The Company is duly qualified or licensed to do business in each jurisdiction in which the ownership or operation of its Assets makes such qualification or licensing necessary, except in any jurisdiction where the failure to be so duly qualified or licensed would not reasonably be expected to result in a Material Adverse Effect.

 

(b)         True and complete copies of the Charter Documents of the Company and all amendments thereto have been furnished to Summit MLP.

 

3.2          Authority.  The Company has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by the Company of this Agreement, and the performance by the Company of its obligations hereunder, have been duly and validly authorized by all necessary limited liability company action.  This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms and conditions, except that the enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, arrangement or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.

 

3.3          Capitalization of the Company.

 

(a)         Except for the Company Interests, none of the following are issued, reserved for issuance or outstanding:

 

(i)            Equity Interests of the Company;

 

(ii)           interests of the Company convertible into, or exchangeable or exercisable for Equity Interests of the Company; or

 

(iii)          options, warrants, calls, rights, commitments or Contracts to which the Company is a party or by which it is bound, in any case obligating the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, Equity Interests of the Company, or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment or Contract.

 

(b)         The Company Interests are duly authorized, validly issued, fully paid (to the extent required by the LLC Agreement) and, subject to the Laws of the State of Delaware, non-

 

12

 

assessable (except as such non-assessability may be affected by Section 18-607 of the Delaware Limited Liability Company Act) and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right or other similar right.

 

(c)          There are no outstanding bonds, debentures, notes or other instruments or evidence of indebtedness of the Company having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote).

 

(d)         The Company has no subsidiaries, and owns no Equity Interests in any Person.

 

3.4          No Conflicts; Consents and Approvals.  The execution and delivery by the Company of this Agreement, and the performance by the Company and SMP Holdings of their respective obligations under this Agreement, do not:

 

(a)         violate or result in a breach of the Charter Documents of the Company;

 

(b)         assuming the consents disclosed on Schedule 3.4(b) (the “Company Consents”) have been made, obtained or given, violate or result in a material default under any Material Contract; or

 

(c)          assuming the Company Consents have been made, obtained or given, violate or result in a breach of any Law applicable to the Company, except for such violations or breaches as would not be material.

 

3.5          Absence of Changes.  Since December 31, 2013, (x) the Company has in all material respects (1) conducted the Business in the ordinary course consistent with past practices and (2) used commercially reasonable efforts to preserve intact their respective material relationships with third parties with regard to the Business; (y) no fact, event, change, occurrence or circumstance has occurred that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (z) except as set forth in Schedule 3.5:

 

(a)         the Company’s Charter Documents have not been modified in any manner;

 

(b)         the Company has not sold, transferred or disposed of any Assets used in the Business, including any right under any lease or Contract or any proprietary right or other intangible Asset, in each case having a value in excess of $400,000;

 

(c)          the Company has not waived, released, canceled, settled or compromised any debt, Claim or right relating to the Business having a value in excess of $100,000;

 

(d)         except as may be required to meet the requirements of applicable Law or GAAP, the Company has not changed any accounting method or practice relating to the Business in a manner that is inconsistent with past practice in a way that would materially and adversely affect the Business and/or the Company;

 

13

 

(e)          the Company has not failed to maintain its limited liability company, partnership or corporate existence, as applicable, or consolidated with any other Person or acquired all or substantially all of the Assets of any other Person;

 

(f)          the Company has not issued or sold any Equity Interests in itself;

 

(g)          the Company has not liquidated, dissolved, recapitalized, reorganized or otherwise wound up itself or the Business;

 

(h)         the Company has not purchased any securities of any Person, except for short-term investments made in the ordinary course of business; or

 

(i)           neither the Company nor SMP Holdings has agreed or committed to do any of the foregoing.

 

3.6          Compliance with Applicable Laws.  Except as set forth on Schedule 3.6, (a) since October 22, 2012, the Company has been (and the Company is) in material compliance with all Laws (and has not received any written or, to the Knowledge of the Company, oral notice of violation with respect to any Laws) applicable to the Business and (b) the Company holds all material Permits necessary for the lawful conduct of the Business and, to the Knowledge of the Company, a complete list of all such Permits is set forth on Schedule 3.6-P; provided, however, that this Section 3.6 does not address Environmental Laws, which are exclusively addressed by Section 3.13, matters relating to Taxes, which are exclusively addressed by Section 3.14, or employee matters, which are exclusively addressed by Section 3.16.

 

3.7          Intellectual Property.

 

(a)         No material registrations or applications for registration are included in any Intellectual Property Rights held by the Company.  To the Knowledge of the Company, the Company owns, licenses or otherwise has a valid right to use, free and clear of all Liens (other than Permitted Liens), all material Intellectual Property Rights necessary to conduct the Business as currently conducted.

 

(b)         Schedule 3.7(b) sets forth a list of all agreements (excluding licenses for commercially available, “off-the-shelf” software with annual fees of less than $100,000) pursuant to which any material Intellectual Property Right is licensed to the Company.

 

(c)          To the Knowledge of the Company, the conduct of the Business as currently conducted has not infringed or misappropriated any Intellectual Property Right of any third party in any material respect.

 

(d)         The consummation of the transactions contemplated hereby will not result in the loss or impairment of any material right of the Company to own, use, practice or exploit any Intellectual Property Rights held by or licensed to the Company (excluding licenses for commercially available, “off-the-shelf” software).

 

3.8          Absence of Litigation.  Except as set forth on Schedule 3.8, there is no Claim or Proceeding (1) pending against the Company or with respect to the Business by or before any

 

14

 

arbitrator or Governmental Authority, nor are there any reviews or investigations relating to the Company or the Business pending by or before any arbitrator or any Governmental Authority, or (2) to the Knowledge of the Company, threatened against the Company or with respect to the Business by or before any arbitrator or Governmental Authority that could be reasonably expected (due to the nature of the claims involved or the scope of their applicability to the Company’s business or operations) to involve amounts of $100,000 or more in value, nor are there any reviews or investigations relating to the Company or the Business threatened by or before any arbitrator or any Governmental Authority that could be reasonably expected (due to the nature of the claims involved or the scope of their applicability to the Company’s business or operations) to involve amounts of $100,000 or more in value, nor are there any reviews or investigations relating to the Company or the Business threatened by or before any arbitrator or any Governmental Authority that could be reasonably expected (due to the nature of the claims involved or the scope of their applicability to the Company’s business or operations) to involve amounts of $100,000 or more in value.

 

3.9          Real Property.

 

(a)         Set forth on Schedule 3.9(a) is a true and complete list of each parcel of Real Property owned in fee title by the Company (the “Gathering System Fee Property”).  The Company has provided Summit MLP with true and complete copies of the conveyance documents to the Company for each such parcel of Gathering System Fee Property owned in fee, including the legal description for each such parcel of Gathering System Fee Property owned in fee.  The Company has good and insurable fee title to all of the Gathering System Fee Property, free and clear of all Liens, except for Permitted Liens and those Liens set forth on Schedule 3.9(a).  As used herein, “good and insurable fee title” means title which a title company would be willing to insure, subject to standard exceptions listed in the policy, should the insured be willing to pay a commercially reasonable premium.

 

(b)         Set forth on Schedule 3.9(b) is a true and complete list of all leases pursuant to which the Company is granted a leasehold interest to use or occupy any real property on which all or any portion of the Rifle and DeBeque Subsystems is located (the “Scheduled Leased Property”).  The Company has provided Summit MLP with true and complete copies of such leases, and any amendments thereto.  Each lease set forth on Schedule 3.9(b) is a legal, valid and binding obligation of the Company.  Except as set forth on Schedule 3.9(b), (i)  the Company is not in material default under any lease set forth on Schedule 3.9(b), (ii) to the Knowledge of the Company, no landlord is in material default under any lease set forth on Schedule 3.9(b), and (iii) no event has occurred which constitutes a material default or, with lapse of time or giving of notice or both, would constitute a material default under any of the leases set forth on Schedule 3.9(b).

 

(c)          Set forth on Schedule 3.9(c) is a true and complete list of all easements on which any portion of the Rifle and DeBeque Subsystems is located (the “Scheduled Easement Property”).  The Company has provided Summit MLP with true and complete copies of the documents creating such easements, and any amendments thereto.  Each easement set forth on Schedule 3.9(c) is a legal, valid and binding obligation of the Company.  Except as set forth on Schedule 3.9(c), (i) the Company is not in material default under any easement set forth on Schedule 3.9(c), (ii) to the Knowledge of the Company, no owner of the Scheduled Easement Property is in material default under any such easement, and (iii) no event has occurred which

 

15

 

constitutes a material default or, with lapse of time or giving of notice or both, would constitute a material default under any of the easements set forth on Schedule 3.9(c).

 

(d)         Except as set forth on Schedule 3.9(d), the Company is not obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Real Property, or any interest therein.

 

(e)          Except for Permitted Liens and as set forth on Schedule 3.9(e), the Scheduled Leased Property and the Scheduled Easement Property (i) establish a continuous right of way for the Rifle and DeBeque Subsystems, (ii) the Rifle and DeBeque Subsystems and the buildings and improvements used in connection therewith are located entirely on the Scheduled Real Property and (iii) the Scheduled Real Property (including the fair market value of improvements owned by the Company and located thereon or thereunder) constitutes a substantial majority of the value of the Real Property (including the fair market value of improvements owned by the Company and located thereon or thereunder) as of the Closing Date.

 

(f)          No member of the SMP Holdings Group has received any written notice of any eminent domain Proceeding or taking, nor, to the Knowledge of the Company, is any such Proceeding or taking contemplated with respect to all or any material portion of the Real Property.

 

(g)          Except as set forth on Schedule 3.9(g), no member of the SMP Holdings Group other than the Company owns or leases any real property that constitutes part of the Business, and no member of the SMP Holdings Group has ever owned any real property that constitutes part of the Business.

 

3.10        Personal Property.  Schedule 3.10 lists all plants, processing units and other equipment (other than the individual components of any plants or processing units or installed pipeline) owned or leased by the Company or used or held for use in the conduct of the Business valued above $100,000 (if required to be listed on Schedule 3.10, the “Personal Property”).  Since October 22, 2012, the Company has maintained substantially in accordance with normal industry practice, all of the Personal Property.  The Company has good and valid title to all Personal Property, subject solely to Permitted Liens.

 

3.11        Capital and Expense Projects; Purchase Orders.  Schedule 3.11 sets forth a true and complete list and description of all capital projects of the Company related to the Company’s Assets and the Business that are in progress as of the date hereof and a good faith estimate as of the date hereof of the associated costs on a project by project basis.  Schedule 3.11 sets forth a true and complete list as of the date hereof of all orders for the purchase of goods or services by the Company in an amount in excess of $100,000.

 

3.12        Regulatory Status.

 

(a)         The Company is not currently regulated by the Federal Energy Regulatory Commission as a “natural gas company” under the Natural Gas Act or as a “public utility,” “public service company,” or similar designation(s) by any state public service commission or as a “holding company” or similar designation of such regulated entity or by the Department of Transportation under the Pipeline and Hazardous Materials Safety Administration Rules on Pipeline Integrity Management.  Without limiting the foregoing, the rates charged by the Company are not currently

 

16

 

regulated by the Federal Energy Regulatory Commission under the Interstate Commerce Act or the Natural Gas Policy Act of 1978.  The transfer of the Equity Interests of the Company as contemplated by this Agreement does not require the approval of the Colorado Public Utilities Commission.  Certain of the Company’s pipelines in Colorado are subject to pipeline safety regulation by the Colorado Public Utilities Commission.  The Company is not subject to pipeline safety regulation by the Utah Public Service Commission pursuant to Rule R746-409.

 

(b)         No rate refunds, rebates, offsets or like obligations are accrued or owed by the Company to the Colorado Public Service Utilities Commission with respect to services related to the Business or the Assets of the Company.

 

3.13        Environmental Matters.  Except as set forth in Schedule 3.13:

 

(a)         The Company is, and since October 22, 2012 the Company has been with respect to the Business, and to the Company’s Knowledge since October 5, 2007 the Business has been, in compliance with applicable Environmental Laws in all material respects, including timely possessing and complying in all material respects with the terms and conditions of all Environmental Permits;

 

(b)         (i) No member of the SMP Holdings Group has (and, to the Company’s Knowledge no predecessor in the Business has) received from any Governmental Authority any written notice of violation of, alleged violation of, non-compliance with, or liability or potential or alleged liability pursuant to, any Environmental Law involving the operations of the Gathering System or any other Assets of the Company other than notices with respect to matters that have been resolved to the satisfaction of any relevant Governmental Authority and for which the Company has no further material obligations outstanding and (ii) neither the Company nor the Gathering System is subject to any outstanding governmental order, “consent order” or other agreement;

 

(c)          Since October 22, 2012, there has been no material Release, discharge or disposal of Hazardous Materials on or from any Real Property by the Company in violation of any Environmental Laws or in a manner that could reasonably be expected to give rise to a material remedial or corrective action obligation pursuant to Environmental Laws; and

 

(d)         SMP Holdings has made available for inspection by Summit MLP copies of (i) all environmental assessment and audit reports and other material environmental studies and (ii) all Environmental Permits, in each case, relating to the Real Property or involving the Business and that are in the possession of the SMP Holdings Group.

 

3.14        Taxes.  Except as set forth on Schedule 3.14:

 

(a)         All material Tax Returns required to be filed by the Company have been duly and timely filed.  Each such Tax Return is true, correct and complete in all material respects.  All material Taxes owed by the Company (or for which the Company may be liable) that are or have become due have been timely paid in full.  All withholding Tax requirements imposed on the Company have been satisfied in all material respects.  There are no Liens (other than Permitted Liens) on any of the Assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax.

 

17

 

(b)         There is not in force any extension of time with respect to the due date for the filing of any Tax Return of or with respect to the Company or any waiver or agreement for any extension of time for the assessment or payment of any material Tax by the Company.  No outstanding material Tax Claim has been asserted in writing against the Company by any Taxing Authority.  There is no Tax Claim pending against, or with respect to, the Company.

 

(c)          There is no existing Tax sharing allocation, indemnity or similar agreement or arrangement that may or will require any payment be made by the Company on or after the Closing Date, and the Company is not liable for the Taxes of any other Person (except for joint and several liability for Texas franchise Taxes of the combined group of which the Company is a member) by virtue of Treasury Regulation Section 1.1502-6, any similar provision of state, local or foreign applicable Law, by contract, as successor or transferee, or otherwise.

 

(d)         The Company is, and has been since the time of its formation, a disregarded entity for U.S. federal Income Tax purposes.

 

(e)          The Company has not participated, within the meaning of Treasury Regulation Section 1.6011-4(c)(3), in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

 

Except as set forth in this Section 3.14 and in Section 3.16, no representations or warranties are being made (or shall be deemed to have been made) with respect to matters arising under or relating to Taxes, Tax Laws or other Tax matters.

 

3.15        Contracts.

 

(a)         Schedule 3.15 contains a true and complete listing of each of the following Contracts to which the Company is a party (the Contracts listed in Schedule 3.15 being “Material Contracts”):

 

(i)              each hydrocarbon purchase and sale, gathering, transportation, treating, dehydration, processing or similar Contract and any Contract for the provision of services relating to gathering, compression, collection, processing, treating or transportation of natural gas or other hydrocarbons involving annual expenditures or revenues in excess of $250,000;

 

(ii)             each Contract that constitutes a pipeline interconnect or facility operating agreement;

 

(iii)            each Contract involving a remaining commitment to pay capital expenditures in excess of $250,000 in the aggregate;

 

(iv)            each Contract for lease of personal property or Real Property involving aggregate payments in excess of $250,000 in any future calendar year;

 

(v)             each Contract between SMP Holdings or an Affiliate of SMP Holdings (other than the Company), on the one hand, and the Company, on the other hand, which will survive the Closing;

 

18

 

(vi)            each partnership or joint venture agreement;

 

(vii)           each agreement relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of Assets, or otherwise) or granting to any Person a right of first refusal, first offer or right to purchase any of the Assets material to the conduct of the Business;

 

(viii)          each Contract that provides for a limit on the ability of the Company to compete in any line of business or in any geographic area during any period of time after the Closing;

 

(ix)            each Contract evidencing indebtedness, whether secured or unsecured, including all loan agreements, line of credit agreements, indentures, mortgages, promissory notes, agreements concerning long and short-term debt, together with all security agreements or other lien documents related to or binding on the Assets of the Company; and

 

(x)             except for Contracts of the nature described in clauses (i) through (v) above, each Contract involving aggregate payments or receipts in excess of $250,000 or, if to an employee in excess of $100,000, in any future calendar year that cannot be terminated by such Person or the Company, as applicable, upon 30 days or less notice without payment of a penalty or other liability.

 

(b)         True and complete copies of all Material Contracts have been made available to Summit MLP.

 

(c)          Each of the Material Contracts is in full force and effect in all material respects and constitutes a legal, valid and binding obligation of the Company and, to the Knowledge of the Company, of the counterparties to such Material Contracts. Neither the Company nor, to the Knowledge of the Company, any counterparty thereto, is in (or has received written notice or, to its Knowledge, oral notice, that it is in) default or breach (or has taken or failed to take any action such that with notice, the passage of time or both it would be in default or breach) under the terms of any such Material Contract.

 

3.16        Employees and Plans.

 

(a)         The Company does not have, and has never had, any employees.

 

(b)         The Company does not currently maintain or contribute to, and has not in the past six years preceding the date hereof maintained or contributed to, any Plan, and is not currently and has not been in the past six years preceding the date hereof a participating employer in any Plan.

 

(c)          To the Company’s Knowledge, (i) except for the Plans set forth in Schedule 3.16 (the “Previous ERISA Affiliate Plans”), the Company does not have any liability, contingent or otherwise, for any Plan, and (ii) with respect to each Previous ERISA Affiliate Plan, (A) there has been no event or condition that presents a material risk of Plan termination; (B) no reportable event within the meaning of Section 4043 of ERISA (for which the disclosure requirements of regulation § 4043.1 et seq., promulgated by the Pension Benefit Guaranty Corporation (“PBGC”),

 

19

 

have not been waived) has occurred during the time such Plan was a Previous ERISA Affiliate Plan; (C) no proceeding has been instituted under Section 4042 of ERISA to terminate the Plan; (D) all required contributions have been made with respect to the applicable Plan; (E) no notice of intent to terminate such Previous ERISA Affiliate Plan has been given under Section 4041 of ERISA; (F) no liability to the PBGC has been incurred (other than with respect to required premium payments), which liability has not been satisfied; and (G) no withdrawal liability, within the meaning of 4201 of ERISA, for which the Company could be liable has been incurred, which withdrawal liability has not been satisfied.

 

3.17        Transactions with Affiliates.  Except as set forth on Schedule 3.17, the Company is not owed any amount from, and does not owe any amount to, guarantee any amount owed by, have any Contracts with or have any commitments to any Affiliate, officer or director of the Company or any member of a family group of any of the foregoing.

 

3.18        Broker’s Commissions.  No member of the SMP Holdings Group has, directly or indirectly, entered into any Contract with any Person that would obligate the Company to pay any commission, brokerage fee or “finder’s fee” in connection with the transactions contemplated herein.

 

3.19        Records.  The Records are located at the premises of the Company, have been maintained in all material respects in accordance with applicable Law and comprise in all material respects all of the books and records relating to the ownership and operation of the Company, the Business and the Assets of the Company.

 

3.20        Surety Bonds and Credit.  Except as listed on Schedule 3.20, the Company does not have any obligation to post any material surety bond, letter of credit, guarantee or other form of support (credit or otherwise) in respect of the Company or the Business.

 

3.21        No Bankruptcy.  There are no bankruptcy Proceedings pending against, being contemplated by or, to the Knowledge of the Company, threatened against the Company.

 

3.22        No Undisclosed Material Liabilities; Indebtedness.  Except as listed on Schedule 3.22, there are no liabilities of the Company or related to the Assets of any kind (whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable or otherwise), other than (a) liabilities that would not be required under GAAP to be disclosed, reflected, reserved against or otherwise provided for in the financial statements of the Company or disclosed in the notes thereto; (b) liabilities, other than Indebtedness, incurred in the ordinary course of business consistent with past practice since December 31, 2013; (c) liabilities set forth on the face of the balance sheet as of December 31, 2013 included in the Financial Statements; and (d) other undisclosed liabilities, other than Indebtedness, which individually or in the aggregate, are immaterial.  A true and complete list of all Indebtedness of the Company is set forth Schedule 3.22.

 

3.23        Insurance.  Schedule 3.23 sets forth summaries of all insurance policies covering the Business.  All such insurance policies are in full force and effect, all premiums with respect thereto have been paid, no written notice of cancellation or termination has been received with

 

20

 

respect to any such policy, and all such policies will continue to cover the Business after the Closing, without payment of an additional premium.

 

3.24        Conflicts Committee Matters.  The projections and budgets provided to the Conflicts Committee (including those provided to Evercore Group L.L.C., the financial advisor to the Conflicts Committee) as part of the Conflicts Committee’s review in connection with this Agreement have a reasonable basis and are consistent with the SMP Holdings Group’s management’s current expectations. The other financial and operational information provided to Evercore Group L.L.C. as part of its review of the proposed transaction for the Conflicts Committee is derived from and is consistent with the SMP Holdings Group’s books and records.  Copies of the unaudited balance sheet of the Company as of December 31, 2013, and the related unaudited statement of income of the Company for the year ended December 31, 2013 (collectively, the “Financial Statements”) have been provided to the Conflicts Committee. Each of the Financial Statements has been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and fairly presents, in all material respects, the financial position and results of operations of the Company as of the date thereof and for the period indicated therein, except as otherwise expressly noted therein.

 

ARTICLE IV
 REPRESENTATIONS AND WARRANTIES OF SMP HOLDINGS

 

SMP Holdings hereby represents and warrants (subject to any disclosures made on the date hereof in the Schedules) to Summit MLP as of the date hereof as follows:

 

4.1    Organization; Good Standing.  SMP Holdings is duly formed, validly existing and in good standing under the Laws of its jurisdiction of formation.

 

4.2    Authority.  SMP Holdings has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by SMP Holdings of this Agreement, and the performance by SMP Holdings of its obligations hereunder, have been duly and validly authorized by all necessary limited liability company action.  This Agreement has been duly and validly executed and delivered by SMP Holdings and constitutes the legal, valid and binding obligation of SMP Holdings enforceable against SMP Holdings in accordance with its terms and conditions, except that the enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, arrangement or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.

 

4.3    Ownership of the Company Interests.  The Company Interests are owned beneficially and of record by SMP Holdings, free and clear of all Liens other than those arising under state or federal securities Laws or the LLC Agreement.  The Company Interests are duly authorized, validly issued, fully paid (to the extent required by the LLC Agreement) and, subject to the Laws of the State of Delaware, non-assessable (except as such non-assessability may be affected by Section 18-607 of the Delaware Limited Liability Company Act) and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right or other similar right.

 

21

 

4.4    No Conflicts; Consents and Approvals.  The execution and delivery by SMP Holdings of this Agreement, and the performance by SMP Holdings of its obligations under this Agreement, do not:

 

(a)         violate or result in a breach of the Charter Documents of SMP Holdings; or

 

(b)         assuming all required filings, waivers, approvals, consents, authorizations and notices disclosed on Schedule 4.4 (collectively, the “SMP Holdings Approvals”) and any required consent or approval of any Governments Authority have been received, violate or result in a breach of the Original Acquisition Agreement or any Law applicable to SMP Holdings, except for such violations or breaches as would not be material.

 

4.5    Broker’s Commissions.  SMP Holdings has not, directly or indirectly, entered into any Contract with any Person that would obligate the Company to pay any commission, brokerage fee or “finder’s fee” in connection with the transactions contemplated herein.

 

4.6    No Bankruptcy.  There are no bankruptcy Proceedings pending against, being contemplated by or, to the knowledge of SMP Holdings, threatened against SMP Holdings.

 

ARTICLE V
 REPRESENTATIONS AND WARRANTIES REGARDING SUMMIT MLP

 

Summit MLP hereby represents and warrants to SMP Holdings as of the date hereof as follows:

 

5.1    Organization.  Summit MLP is a limited partnership duly formed, validly existing and in good standing under the Laws of the state of Delaware.

 

5.2    Authority.  Summit MLP has all requisite limited partnership power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by Summit MLP of this Agreement, and the performance by Summit MLP of its obligations hereunder, have been duly and validly authorized by all necessary limited partnership action on behalf of Summit MLP.  This Agreement has been duly and validly executed and delivered by Summit MLP and constitutes the legal, valid and binding obligation of Summit MLP enforceable against Summit MLP in accordance with its terms and conditions except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally or by general equitable principles.

 

5.3    No Conflicts.  The execution and delivery by Summit MLP of this Agreement, and the performance by Summit MLP of its obligations under this Agreement, do not:

 

(a)         violate or result in a breach of its Charter Documents;

 

(b)         violate or result in a default under any material Contract to which Summit MLP is a party, except for any such violation or default which would not reasonably be expected to result in a material impairment on Summit MLP’s ability to perform its obligations hereunder;

 

22

 

(c)          assuming the Company Consents have been made, obtained or given, violate or result in a breach of any Law applicable to Summit MLP, except for such violations or breaches as would not be material; or

 

(d)         assuming the Company Consents have been made, obtained or given, require any consent or approval of any Governmental Authority under any Law applicable to Summit MLP, other than immaterial consents or approvals.

 

5.4    Legal Proceedings.  There is no Proceeding pending or, to Summit MLP’s knowledge, threatened, against Summit MLP before or by any Governmental Authority, which seeks a writ, judgment, order or decree restraining, enjoining or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.

 

5.5    Financial Resources.  Summit MLP has, or will have on the Closing Date, sufficient cash on hand, available lines of credit or other sources of immediately available funds to enable it (a) to pay the Closing Payment and (b) to otherwise perform its obligations under this Agreement.

 

5.6    Opportunity for Independent Investigation.  Summit MLP is an experienced and knowledgeable investor in the United States.  Summit MLP has conducted its own independent review and analysis of the Business and of the Assets, liabilities, results of operations, financial condition, technology and prospects of the Company and acknowledges that Summit MLP has been provided access to personnel, properties, premises and records of the Company for such purpose.  In entering into this Agreement, Summit MLP has relied solely upon the representations, warranties and covenants contained herein and upon its own investigation and analysis of the Company and the Business (such investigation and analysis having been performed by Summit MLP), and Summit MLP:

 

(a)         acknowledges and agrees that it has not been induced by and has not relied upon any Due Diligence Information, representations, warranties or statements, whether oral or written, express or implied, made by SMP Holdings or the Company or any of their respective Representatives, Affiliates or agents except for the representations and warranties expressly set forth in this Agreement and those items delivered to Summit MLP pursuant to Section 2.4;

 

(b)         acknowledges and agrees that, except for the representations and warranties expressly set forth in this Agreement and those items delivered to Summit MLP pursuant to Section 2.4, none of SMP Holdings or the Company or any of their respective Representatives, Affiliates or agents makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Summit MLP or its Representatives, Affiliates or agents, including any information, document or material provided or made available, or statements made, to Summit MLP (including its Representatives, Affiliates and agents) during site or office visits, in any “data rooms,” management presentations or supplemental due diligence information provided to Summit MLP (including its Representatives, Affiliates and agents), in connection with discussions with management or in any other form in expectation of the transactions contemplated by this Agreement (collectively, the “Due Diligence Information”);

 

23

 

(c)          acknowledges and agrees that, except for the representations and warranties expressly set forth in this Agreement and those items delivered to Summit MLP pursuant to Section 2.4, (i) the Due Diligence Information includes certain projections, estimates and other forecasts and certain business plan information, (ii) there are uncertainties inherent in attempting to make such projections, estimates and other forecasts and plans and Summit MLP is aware of such uncertainties, and (iii) Summit MLP is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections, estimates and other forecasts and plans so furnished to it and any use of or reliance by Summit MLP on such projections, estimates and other forecasts and plans shall be at its sole risk; and

 

(d)         agrees, to the fullest extent permitted by Law, that none of SMP Holdings or the Company (except as expressly provided herein) or any of their respective Representatives, Affiliates or agents shall have any liability or responsibility whatsoever to Summit MLP or its Representatives, Affiliates or agents on any basis (including in contract or tort, under federal or state securities Laws or otherwise) resulting from the furnishing to Summit MLP, or from Summit MLP’s use of, any Due Diligence Information, except for liability or responsibility for the representations and warranties expressly set forth in this Agreement and those items delivered to Summit MLP pursuant to Section 2.4.

 

5.7          Broker’s Commissions.  Summit MLP has not, directly or indirectly, entered into any Contract with any Person that would obligate Summit MLP or any of its Affiliates to pay any commission, brokerage fee or “finder’s fee” in connection with the transactions contemplated herein.

 

ARTICLE VI
 COVENANTS

 

6.1          Indebtedness; Distributions.  Notwithstanding anything in this Agreement to the contrary, at or prior to Closing:

 

(a)         the Company will deliver reasonable and customary evidence demonstrating the release of all Liens on the Assets of the Company (other than Permitted Liens);

 

(b)         the Company may cause any accounts payable and/or accounts receivable between the Company, on the one hand, and a Non-Company Affiliate, on the other hand, to be paid in full; and

 

(c)          the Company may pay cash dividends, and/or make cash distributions, to SMP Holdings or its Affiliates.

 

6.2          Tax Matters.

 

(a)         With respect to any Tax Return that is required to be filed by the Company after the Closing Date with respect to a Pre-Closing Period, SMP Holdings shall prepare or cause to be prepared such Tax Return.  With respect to any Tax Return that is required to be filed by the Company after the Closing Date with respect to a Straddle Period, Summit MLP shall prepare or cause to be prepared such Tax Return.  Such Tax Returns shall be prepared on a basis consistent with past practice except to the extent otherwise provided in this Agreement or otherwise required

 

24

 

by applicable Laws.  Reasonably in advance of (and in the case of Income Tax Returns, not later than 30 days prior to the due date (including extensions) of each Tax Return for a Pre-Closing Period or for a Straddle Period, the Party responsible for preparing such Tax Return shall deliver a copy of such Tax Return to the other Party for its review and reasonable comment.  The Party responsible for preparing such Tax Return shall consider in good faith any such comments received from the other Party not less than 15 days prior to the due date (including extensions) for filing such Tax Return and shall deliver a final copy of such Tax Return to such other Party not less than seven days prior to such due date.  Summit MLP shall cause each such Tax Return to be timely filed and shall timely pay the Taxes shown due thereon; provided that not later than five Business Days prior to the due date for the payment of Taxes with respect to any such Tax Return, SMP Holdings shall pay to Summit MLP the amount of SMP Holdings Taxes owed with respect to such Tax Return.

 

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

 

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

 

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

 

(c)          Summit MLP shall be liable for and pay, and pursuant to Article VII shall indemnify and hold harmless SMP Holdings from and against any and all sales Tax, use Tax, stamp Tax, transfer Tax, conveyance, registration or other similar Tax imposed on the transactions contemplated by this Agreement.

 

(d)         After Closing, each of SMP Holdings and Summit MLP shall (and shall cause their respective Affiliates to):

 

(i)             timely sign and deliver such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or other reports with respect to, Taxes described in Section 6.2(c);

 

(ii)            assist the other party in preparing any Tax Returns which such other party is responsible for preparing and filing in accordance with Section 6.2(a), and in connection therewith, provide the other party with any necessary powers of attorney;

 

25

 

(iii)           cooperate fully in preparing for and defending any audits of, or disputes with Taxing Authorities regarding, any Tax Returns of the Company;

 

(iv)           make available to the other and to any Taxing Authority as reasonably requested all information, records, and documents relating to Taxes of the Company; and

 

(v)            furnish the other with copies of all correspondence received from any Taxing Authority in connection with any Tax audit or information request with respect to any such taxable period.

 

(e)          No amended Tax Return with respect to a Pre-Closing Period or Straddle Period shall be filed by or on behalf of the Company without the prior written consent (such consent not to be unreasonably conditioned, withheld or delayed) of SMP Holdings.

 

(f)          SMP Holdings shall prepare or cause to be prepared an allocation schedule (the “Allocation Schedule”), allocating the Consideration (plus any assumed liabilities that are treated as consideration for the sale contemplated under this Agreement for federal Income Tax purposes) among the Company’s assets based on the relative fair market values of the Company’s assets in a manner consistent with Section 1060 of the Code and Treasury Regulations thereunder.  SMP Holdings shall deliver the Allocation Schedule to Summit MLP as soon as practicable after the Closing Date for Summit MLP’s review and reasonable comments.  Within 30 days after receiving such Allocation Schedule, Summit MLP shall notify SMP Holdings in writing if Summit MLP has any objections to the allocations on the Allocation Schedule and shall specify the basis for any such objections.  If Summit MLP does not notify SMP Holdings of any objection to the Allocation Schedule, then it shall be deemed agreed to by SMP Holdings and Summit MLP and the Allocation Schedule shall be final and binding.  If Summit MLP objects to any allocations on the Allocation Schedule, then SMP Holdings and Summit MLP shall negotiate in good faith to resolve any disagreement regarding the Allocation Schedule as soon as practicable (taking into account the due date of any Tax Returns on which the allocation set forth in the Allocation Schedule is required to be reflected) and shall memorialize the agreed allocation in a final Allocation Schedule, which shall be final and binding.  The final Allocation Schedule shall be revised to take into account subsequent adjustments to the Consideration, including any Working Capital Adjustment and any indemnification payments (any of which shall be treated for Tax purposes as adjustments to the Consideration), in accordance with the provisions of Section 1060 of the Code and the Treasury Regulations thereunder.

 

(g)          Summit MLP and SMP Holdings shall report, act and file Tax Returns for Tax purposes in all respects consistent with the Allocation Schedule.  None of Summit MLP, SMP Holdings, the Company or their respective Affiliates shall take any position for Tax purposes (whether in audits, Tax Returns or otherwise) that is inconsistent with the Allocation Schedule unless required to do so by applicable Law.  If any Taxing Authority disputes the allocation set forth in the Allocation Schedule, the party receiving notice of the dispute shall promptly notify the other parties hereto of such dispute and the parties hereto shall cooperate in good faith in responding to such dispute in order to preserve the effectiveness of the allocation set forth in the Allocation Schedule.

 

26

 

(h)         Any refunds of SMP Holdings Taxes shall be for the account of SMP Holdings.  Summit MLP shall forward, and shall cause its Affiliates to forward, to SMP Holdings the amount of any such refund within 30 days after such refund is received, net of any costs or expenses incurred by Summit MLP or its Affiliates in procuring such refund.

 

(i)           To the extent permitted by applicable Law, Summit MLP and SMP Holdings agree to report each indemnification payment made in respect of a Loss as an adjustment to the Consideration for federal income Tax purposes.

 

6.3          Public Announcements.  The Parties will maintain the confidentiality of this Agreement and its terms except that any Party may disclose this Agreement or any of its terms to any of the following if advised of the confidentiality obligations of such information: (a) any direct and indirect holders of Equity Interests in such Party or any Affiliate of such Party and (b) any potential lender to such Party.  The Parties will consult with each other prior to issuing any publication or press release of any nature with respect to this Agreement or the transactions contemplated hereby and shall not make or issue, or cause to be made or issued, any such publication or press release prior to such consultation and without the prior written consent of the other Party (which consent will not be unreasonably withheld or delayed) except to the extent, but only to such extent, that, in the opinion of the Party issuing such publication or press release, such announcement or statement may be required by Law, any listing agreement with any securities exchange or any securities exchange regulation, in which case the Party proposing to issue such publication or press release shall use its reasonable efforts to consult in good faith with the other Party before issuing any such publication or press release and shall reasonably cooperate with the other Party in good faith with respect to the timing, manner and content of disclosure.

 

6.4          Further Assurances.  Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at any Party’s request and without further consideration, the other Party shall (and in the case of Summit MLP, Summit MLP shall and shall cause the Company to) execute and deliver to such Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as such Party may reasonably request in order to consummate the transactions contemplated by this Agreement.

 

6.5          Indemnification Under the Original Acquisition Agreement.  To the extent that SMP Holdings or its Affiliate is owed indemnification or other payment under the Original Acquisition Agreement with respect to breaches of representations and warranties or covenants associated with the Business or any assets, liabilities or obligations comprising part of the Business, SMP Holdings will use commercially reasonable efforts to enforce such covenants and pursue such indemnification and/or other payment from the Original Seller in good faith, and (to the extent SMP Holdings owes an indemnification payment to Summit MLP, the Company or their Affiliates under Article VII and has not already made such payment to Summit MLP, the Company or their Affiliates under Article VII) will pay over any such amounts received to Summit MLP.

 

6.6          Non-Rifle and Debeque System Real Estate Rights.  To the extent that (a) the Company does not have a valid leasehold interest, easement, right of way or other right to

 

27

 

occupy the real property on which any portion of the Gathering System other than the Rifle and Debeque Subsystems is located, (b) the lack thereof has a material adverse effect on the Company’s ability to operate the applicable subsystem of the Gathering System in the manner that such applicable subsystem was operated during the year ended December 31, 2013, and (c) Summit MLP notifies SMP Holdings thereof within one year after the Closing, SMP Holdings will reimburse Summit MLP for the cost and expense to remedy the lack thereof reasonably promptly after receipt of such notice, to the extent, and only to the extent, that the aggregate cost and expense of all such remedies exceeds $500,000.

 

ARTICLE VII
 LIMITATIONS ON LIABILITY, WAIVERS AND ARBITRATION

 

7.1          Survival of Representations, Warranties and Agreements.  The representations and warranties of the Company, SMP Holdings and Summit MLP set forth in this Agreement and the right of an indemnified Person to assert any claim for indemnification related thereto pursuant to this Article VII shall survive Closing until the first anniversary of the Closing Date, after which date no Claims for indemnification may be asserted, regardless of when such right arose; provided that the representations and warranties set forth in (a) Sections 3.1(a), 3.2, 3.3, 4.1, 4.2, 4.3, 5.1 and 5.2 (the “Fundamental Representations”) shall survive the Closing indefinitely, and (b) Section 3.14, 3.18, 4.5 and 5.7 shall survive the Closing until 30 days following the expiration of the applicable statute of limitations, including any extension thereof, with respect to the particular matter that is the subject matter thereof.  The covenants and agreements of the Parties contained in this Agreement shall survive the Closing in accordance with their terms; provided that the right of any Party to make a claim for breach of any covenant of a Party that is to be performed or satisfied at or before the Closing shall survive until the first anniversary of the Closing Date.

 

7.2          Indemnification of Summit MLP and the Company by SMP Holdings.  Subject to the limitations on recourse and recovery set forth in this Article VII, from and after the Closing, SMP Holdings will indemnify, defend and hold harmless Summit MLP and the Company and their respective Affiliates from and against any and all Losses imposed upon or incurred after the Closing in connection with, arising out of or resulting from:

 

(a)         the inaccuracy or breach of any representation or warranty made by SMP Holdings in Article III (each such inaccuracy or breach, a “Company Warranty Breach”);

 

(b)         the inaccuracy or breach of any representation or warranty made by SMP Holdings in Article IV (each such inaccuracy or breach, a “SMP Holdings Warranty Breach”);

 

(c)          any nonfulfillment or breach by SMP Holdings or the Company of any covenant or agreement made by SMP Holdings or the Company under this Agreement; and

 

(d)         any and all SMP Holdings Taxes;

 

provided that for purposes of determining Losses under subsections (a) and (b) above and determining whether or not any Company Warranty Breach or SMP Holdings Warranty Breach has occurred, any qualification or exception contained therein relating to materiality (including Material Adverse Effect) shall be disregarded.

 

28

 

7.3          Indemnification of SMP Holdings by Summit MLP.  Subject to the limitations on recourse and recovery set forth in this Article VII, from and after the Closing, Summit MLP shall indemnify, defend and hold harmless SMP Holdings and its Affiliates from and against any and all Losses imposed upon or incurred after the Closing in connection with, arising out of or resulting from:

 

(a)         the inaccuracy or breach of any representation or warranty made by Summit MLP in Article V (each such inaccuracy or breach, a “Summit MLP Warranty Breach”);

 

(b)         any nonfulfillment or breach by Summit MLP of any covenant or agreement made by Summit MLP under this Agreement; and

 

(c)          any and all liabilities associated with the Business (except to the extent SMP Holdings as of such time has an indemnity obligation to Summit MLP with respect thereto);

 

provided that for purposes of determining Losses under subsection (a) above and determining whether or not any Summit MLP Warranty Breach has occurred, any qualification or exception contained therein relating to materiality (including Material Adverse Effect) shall be disregarded.

 

7.4          Limitations.

 

(a)         Except for a Warranty Breach with respect to a Fundamental Representation or Section 3.14, 3.18, 4.5 or 5.9, if any Claim for indemnification by Summit MLP, the Company or SMP Holdings relating to any Warranty Breach that is subject to indemnification under Sections 7.2(a), 7.2(b) or 7.3(a) results in aggregate Losses that do not exceed $50,000 then such Losses shall not be deemed to be Losses under this Agreement and shall not be eligible for indemnification under this Article VII.

 

(b)         Except for a Warranty Breach with respect to a Fundamental Representation or Section 3.14, 3.18, 4.5 or 5.9, Summit MLP, the Company and SMP Holdings shall be entitled to be indemnified pursuant to Sections 7.2(a), 7.2(b) or 7.3(a) for Losses incurred for any Warranty Breach (excluding any item or Loss below the threshold listed in Section 7.4(a)) only if and to the extent that the aggregate amount of all such Losses exceeds $3,100,000, subject to the other limitations on recovery and recourse set forth in this Agreement.

 

(c)          Except for a Warranty Breach with respect to a Fundamental Representation or Section 3.14, 3.18 or 4.5, SMP Holdings’ liability under Sections 7.2(a) and 7.2(b) will be limited, in the aggregate, to $46,500,000.  Under no circumstance will SMP Holdings’ liability for any Losses under Section 7.2, including Losses with respect to a Fundamental Representation or Section 3.14, 3.18 or 4.5, exceed the value of the proceeds received by SMP Holdings in the transactions contemplated by this Agreement.

 

(d)         No indemnifying Person shall be liable for any Losses that are subject to indemnification under Sections 7.2 or 7.3 unless a written demand for indemnification under this Agreement is delivered by the indemnified Person to the indemnifying Person with respect thereto prior to 5:00 P.M. on the final date pursuant to Section 7.1, to assert a Claim for indemnification on the basis asserted in such written demand.  Notwithstanding the foregoing, any Claim for

 

29

 

indemnification under this Agreement that is brought prior to such time will survive until such matter is resolved.

 

(e)          Notwithstanding anything to the contrary contained in this Agreement, under no circumstances shall any Party be entitled to double recovery under this Agreement, and to the extent a Party is compensated for a matter through the Working Capital Adjustment, any net Tax benefit actually realized or third party recovery or insurance recovery actually received, such Party shall not have a separate right to indemnification for such matter.

 

7.5          Claims Procedures.

 

(a)         Promptly after receipt by any indemnified Person of notice of the commencement or assertion of any Claim or Proceeding by a third party or circumstances which, with the lapse of time, such indemnified Person believes is likely to give rise to a Claim or Proceeding by a third party or of facts causing any indemnified Person to believe it has a Claim for breach hereunder (an “Asserted Liability”), such indemnified Person shall give prompt written notice thereof (the “Claims Notice”) to the relevant indemnifying Person, provided that in any event, such indemnified Person shall give the Claims Notice to the indemnifying Person no later than 30 days after becoming aware of such Asserted Liability.  So long as the Claims Notice is given within the applicable survival period set forth in Section 7.1, the failure to so notify the indemnifying Person shall not relieve the indemnifying Person of its obligations or liability hereunder, except to the extent such failure shall have actually prejudiced the indemnifying Person.  The Claims Notice shall describe the Asserted Liability in reasonable detail, and shall indicate the amount (estimated, if necessary) of the Loss that has been or may be suffered.  The indemnified Person and the indemnifying Person agree to keep each other reasonably appraised of any additional information concerning any Asserted Liability.

 

(b)         As to an Asserted Liability arising from a third party action, the indemnifying Person shall be, subject to the limitations set forth in this Section 7.5, entitled to assume control of and appoint lead counsel for such defense only for so long as it conducts such defense with reasonable diligence.  The indemnifying Person shall keep the indemnified Persons advised of the status of such third party action and the defense thereof on a reasonably current basis and shall consider in good faith the recommendations made by the indemnified Persons with respect thereto.  If the indemnifying Person assumes the control of the defense of any third party action in accordance with the provisions of this Section 7.5, the indemnified Person shall be entitled to participate in the defense of any such third party action and to employ, at its expense, separate counsel of its choice for such purpose, it being understood, however, that the indemnifying Person shall continue to control such defense; provided that notwithstanding the foregoing, the indemnifying Person shall pay the reasonable costs and expenses of such defense (including reasonable attorneys’ fees and expenses) of the indemnified Persons if (x) the indemnified Person’s outside counsel shall have reasonably concluded and advised in writing (with a copy to the indemnifying Person) that there are defenses available to such indemnified Person that are different from or additional to those available to the indemnifying Person, or (y) the indemnified Person’s outside counsel shall have advised in writing (with a copy to the indemnifying Person) the indemnified Person that there is a conflict of interest that would make it inappropriate under applicable standards of professional conduct to have common counsel for the indemnifying Person and the indemnified Person. Notwithstanding the foregoing, (i) the indemnifying Person shall obtain

 

30

 

the prior written consent of the indemnified Person before entering into any settlement, compromise, admission or acknowledgement of the validity of such Asserted Liability if the settlement requires an admission of guilt or wrongdoing on the party of the indemnified Person, subjects the indemnified Person to criminal liability or does not unconditionally release the indemnified Person from all liabilities and obligations with respect to such Asserted Liability or the settlement imposes injunctive or other equitable relief against, or any continuing obligation or payment requirement on, the indemnified Person and (ii) the indemnified Person shall be entitled to participate, at its own cost and expense, in the defense of such Asserted Liability and to employ separate counsel of its choice for such purpose.

 

(c)          Each Party shall cooperate in the defense or prosecution of any Asserted Liability arising from a third party action and shall furnish or cause to be furnished such records, information and testimony (subject to any applicable confidentiality agreement), and attend such conferences, discovery proceedings, hearings, trials or appeals as may be reasonably requested in connection therewith.

 

7.6          Waiver of Other Representations.

 

(a)         NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY, AND THE PARTIES HEREBY AGREE, THAT NEITHER SMP HOLDINGS NOR ANY OF ITS AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE COMPANY INTERESTS, THE ASSETS OF THE COMPANY OR THE COMPANY, OR ANY PART THEREOF, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN ARTICLE III AND ARTICLE IV.

 

(b)         EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN ARTICLE III AND ARTICLE IV, SMP HOLDINGS’S INTERESTS IN THE COMPANY ARE BEING TRANSFERRED THROUGH THE SALE OF THE COMPANY INTERESTS “AS IS, WHERE IS, WITH ALL FAULTS,” AND SMP HOLDINGS AND ITS AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE COMPANY AND ITS ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE COMPANY AND ITS ASSETS.

 

7.7          Waiver of Remedies.

 

(a)         Other than for instances of actual fraud, the Parties hereby agree that from and after Closing no Party shall have any liability, and neither Party nor any of their respective Affiliates shall make any Claim, for any Loss or any other matter, under, relating to or arising out of this Agreement (including breach of representation, warranty, covenant or agreement) or any other Contract or other matter delivered pursuant hereto, or the transactions contemplated hereby,

 

31

 

whether based on contract, tort, strict liability, other Laws or otherwise, except for a claim for indemnification pursuant to Article VII.

 

(b)         NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, EXCEPT IN THE CASE OF ACTUAL FRAUD, NO PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR THE FOLLOWING (“NON-REIMBURSABLE DAMAGES”): SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES, OR LOST OR DELAYED BUSINESS BASED ON VALUATION METHODOLOGIES ASCRIBING A DECREASE IN VALUE TO THE COMPANY, ON THE BASIS OF A MULTIPLE OF A REDUCTION IN A MULTIPLE-BASED OR YIELD-BASED MEASURE OF FINANCIAL PERFORMANCE), WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM THE OTHER PARTY’S OR ANY OF ITS AFFILIATES’ SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT, EXCEPT ONLY IN THOSE PARTICULAR CIRCUMSTANCES WHERE THE CONSEQUENTIAL DAMAGES ARE REASONABLY FORESEEABLE (SUCH AS THE TERMINATION OF A CONTRACT OR A DELAY OR INTERRUPTION IN REVENUES OR OPERATIONS RESULTING THEREFROM), IN WHICH CASE THE BREACHING PARTY SHALL BE LIABLE FOR THE NET PRESENT VALUE OF ANY SUCH CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) THAT ARE THE REASONABLY FORESEEABLE RESULT OF A BREACH OF THIS AGREEMENT BY SUCH PARTY, SUBJECT TO THE OTHER LIMITATIONS AND REQUIREMENTS SET FORTH HEREIN, INCLUDING SECTION 7.11; PROVIDED, HOWEVER, ANY AMOUNTS PAYABLE TO THIRD PARTIES PURSUANT TO A CLAIM BY A THIRD PARTY SHALL NOT BE DEEMED NON-REIMBURSABLE DAMAGES.

 

7.8          Access to Information.  After the Closing Date, the Company, SMP Holdings and Summit MLP shall grant each other (or their respective designees), and Summit MLP shall cause the Company to grant to SMP Holdings (or its designee), access at all reasonable times to all of the books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers and electronic files relating to the Business of the Company in SMP Holdings’ or SMP Holdings’ Affiliates possession or the possession of the Company (the “Records”), and shall afford such party the right (at such party’s expense) to take extracts therefrom and to make copies thereof, to the extent reasonably necessary to implement the provisions of, or to investigate or defend any Claims among the Parties and/or their Affiliates arising under, this Agreement.  Summit MLP shall maintain, and shall cause the Company to maintain, such Records until the seventh anniversary of the Closing Date (or for such longer period of time as SMP Holdings shall advise Summit MLP is necessary in order to have the Records available with respect to Tax matters), or if any of the Records pertain to any Claim or Dispute pending on the seventh anniversary of the Closing Date, Summit MLP shall maintain any of the Records designated by SMP Holdings or its Representatives until such Claim or Dispute is finally resolved and the time for all appeals has been exhausted.

 

7.9          Dispute Resolution and Arbitration.

 

(a)         In the event of any dispute, controversy or Claim among the Parties, or any of them, arising out of or relating to this Agreement, or the breach or invalidity thereof (collectively, a

 

32

 

“Dispute”), the Parties shall attempt in the first instance to resolve such Dispute through friendly consultations between senior management of the Parties.  The Parties agree to attempt to resolve all Disputes arising hereunder promptly, equitably and in a good faith manner.  The Parties further agree to provide each other with reasonable access during normal business hours to any and all non-privileged records, information and data pertaining to such Dispute, upon reasonable advance notice.

 

(b)         If such consultations do not result in a resolution of the Dispute within 30 Business Days after written notice by a Party to the other Parties describing the Dispute and requesting friendly consultation, then the Dispute may be submitted by any Party to binding arbitration pursuant to the terms of Section 7.10, irrespective of the magnitude thereof, the amount in dispute or whether such Dispute would otherwise be considered justifiable or ripe for resolution by any court or arbitral tribunal, by giving written notice thereof to the other Parties; provided, however, that in no event shall a Party have the right to submit the Dispute to arbitration if the institution of legal or equitable proceedings based on such Dispute would be barred by any applicable statute of limitations or Section 7.1.

 

(c)          Any Dispute shall be settled exclusively and finally by binding arbitration in accordance with the provisions of Section 7.10.

 

7.10        Arbitration Procedures.

 

(a)         Any Party electing to arbitrate a Dispute shall designate its nomination for an arbitrator in its notice to the other Party electing to submit the Dispute to arbitration.  Each Party receiving such notice shall, within ten Business Days thereafter, by return written notice to all Parties, state whether it will accept such nomination, or decline to accept it and designate its nomination for an arbitrator.  One arbitrator shall control the proceedings if such nomination of an arbitrator is accepted by all Parties or if the receiving Party fails to nominate an arbitrator within the required ten Business Day period.  If the receiving Party timely nominates an arbitrator, the arbitral tribunal shall consist of three arbitrators, with one arbitrator being selected by SMP Holdings and one arbitrator being selected by Summit MLP, within five Business Days after the expiration of the ten Business Day period reference above, and the two selected arbitrators choosing a third arbitrator, which third arbitrator must be a Person with the requisite knowledge and experience to make a fair and informed determination with respect to the matter in dispute, which Person shall not be an Affiliate of any Party, nor an employee, director, officer, shareholder, owner, partner, agent or a contractor of any Party or of any Affiliate of any Party, either presently or at any time during the previous two years.  In the event the arbitrators fail to appoint the third arbitrator within 30 days after they have accepted their appointment, the third arbitrator (meeting the qualifications specified in the preceding sentence) shall be appointed by the Houston office of the American Arbitration Association within ten Business Days after the expiration of such 30 day period.  The arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as supplemented to the extent necessary to determine any procedural appeal questions by the Federal Arbitration Act (Title 9 of the United Stated Code).  If there is an inconsistency between Section 7.10 and the Commercial Arbitration Rules or the Federal Arbitration Act, the provisions of this Section 7.10 shall prevail.

 

33

 

(b)     Within ten Business Days after the selection of the arbitrator(s), each Party shall submit to the arbitrator(s) such Party’s proposal for resolution of the Dispute, which such proposal shall not conflict with the terms and conditions of this Agreement, together with the supporting data, if any, that was used to determine such proposal.  Within 30 days after the proposals are submitted, the arbitrator(s) shall hold a hearing during which the Parties may present evidence in support of their respective proposals.  The arbitrator(s) (by majority rule if there are three arbitrators) will determine the outcome of the Dispute.  The cost of the arbitration shall be split between the Parties equally and each Party shall pay for one half of the costs.

 

(c)     The place of arbitration shall be Houston, Texas, unless in any particular case the Parties agree upon a different venue.

 

(d)     The arbitrator(s) shall have no right or authority to grant or award Non-Reimbursable Damages.

 

(e)     Any decision of the arbitrator(s) pursuant to this Section 7.10 shall be final and binding upon the Parties and shall be reached within 90 days after proposals for resolution of the Dispute have been submitted.  The Parties agree that the arbitral award may be enforced against the Parties to the arbitration proceeding or their Assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having competent jurisdiction thereof.  The Parties expressly submit to the jurisdiction of any such court.  The Parties hereby waive, to the extent permitted by Law, any rights to appeal or to review of such award by any court or tribunal.

 

(f)     When any Dispute occurs and is the subject of consultations or arbitration, the Parties shall continue to make payments of undisputed amounts in accordance with this Agreement, and the Parties shall otherwise continue to exercise their rights and fulfill their respective obligations under this Agreement.

 

7.11        Determination of Amount of Damages; Mitigation.  The Losses giving rise to any indemnification obligation hereunder shall be limited to the Losses suffered by the indemnified Person and shall be reduced by any insurance proceeds or other payment or monetary recoupment received or that are realized or retained (including the amount of any Tax benefits, net of any Tax detriments, actually realized or retained) by the indemnified Person as a result of the events giving rise to the claim for indemnification.  Any indemnified Person that becomes aware of Losses for which it intends to seek indemnification hereunder shall use commercially reasonable efforts to collect any amounts to which it may be entitled under insurance policies or from third parties (pursuant to indemnification agreements or otherwise) and shall use commercially reasonable efforts to mitigate such Losses; provided that the indemnified Person shall promptly notify either (a) SMP Holdings if such indemnified Person is Summit MLP or (b) Summit MLP if such indemnified Person is SMP Holdings, in each case, of any efforts to mitigate.  If any net Tax benefit, third party recovery or insurance recovery is realized after having previously received Indemnity Claim proceeds hereunder, such Party shall promptly tender to the respective Party an amount equal to such Tax benefit, third party recovery or insurance recovery.

 

34

 

ARTICLE VIII
 COVENANTS

 

8.1          Conduct of Operations. From the date of this Agreement until the Closing, except as contemplated by this Agreement, as required by Applicable Law or as consented to by Summit MLP (such consent not to be unreasonably withheld, conditioned or delayed), SMP Holdings shall cause the Company to: (i) conduct its business in the ordinary course consistent with past practice in all material respects; and (ii) use its commercially reasonable efforts to preserve intact its business organizations and material relationships with third parties.

 

8.2          Commercially Reasonable Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, each party hereto will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable, under applicable Law or otherwise, to consummate the Closing. The parties hereto agree, and SMP Holdings, prior to the Closing, and Summit MLP, after the Closing, agree to cause the Company to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated hereby in accordance with the terms of this Agreement.

 

ARTICLE IX
 CONDITIONS TO CLOSING

 

9.1          Conditions to Obligations of All Parties. The obligations of the parties hereto to consummate the Closing are subject to the satisfaction of the condition that no order, injunction or decree issued by a court of competent jurisdiction preventing the consummation of the Closing shall be in effect.

 

9.2          Conditions to Obligation of Summit MLP. The obligation of Summit MLP to consummate the Closing is subject to the satisfaction of the following further conditions:

 

(a) (i) The Fundamental Representations of SMP Holdings shall be true and correct in all material respects at and as of the Closing, as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specific time, which shall be true and correct in all material respects only as of such time) and (ii) all other representations and warranties of SMP Holdings contained in this Agreement (disregarding all materiality and Material Adverse Effect qualifications contained therein) shall be true and correct at and as of the Closing, as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specific time, which shall be true and correct in all respects only as of such time), except for any failures to be so true and correct that would not, individually or in the aggregate, reasonably be expected to constitute a Material Adverse Effect.

 

(b) SMP Holdings shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing.

 

35

 

(c) Summit MLP shall have received a certificate of SMP Holdings in form and substance reasonably satisfactory to Summit MLP, signed by an executive officer of SMP Holdings to the effect that the conditions set forth in the foregoing clauses (a) and (b) have been met.

 

(d)           Summit MLP shall have completed a public offering of its common units with net proceeds to Summit MLP of at least $200,000,000.

 

9.3          Conditions to Obligation of SMP Holdings. The obligation of SMP Holdings to consummate the Closing is subject to the satisfaction of the following further conditions:

 

(a) (i) The Fundamental Representations of Summit MLP shall be true and correct in all material respects at and as of the Closing, as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specific time, which shall be true and correct in all material respects only as of such time) and (ii) all other representations and warranties of Summit MLP contained in this Agreement (disregarding all materiality qualifications contained therein) shall be true and correct at and as of the Closing, as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specific time, which shall be true and correct in all respects only as of such time), except for any failures to be so true and correct that would not, individually or in the aggregate, reasonably be expected to have an adverse effect on Summit MLP’s ability to consummate the transactions contemplated to occur at Closing.

 

(b) Summit MLP shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing.

 

(c) SMP Holdings shall have received a certificate of Summit MLP, in form and substance reasonably satisfactory to SMP Holdings, signed by an executive officer of Summit MLP’s general partner, to the effect that the conditions set forth in the foregoing clauses (a) and (b) have been met.

 

ARTICLE X
 TERMINATION

 

10.1        Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:

 

(a) by mutual written agreement of the Parties;

 

(b) by any Party if the Closing shall not have been consummated on or before March 21, 2014 (the “Termination Date”); provided that the right to terminate this Agreement pursuant to this Section 10.01(b) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Closing to be consummated by such time;

 

36

 

(c) by SMP Holdings, if Summit MLP breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 9.3, (ii) cannot be cured or, if curable, has not been cured prior to the earlier of 30 days following receipt by Summit MLP of written notice of such breach or failure to perform or two (2) Business Days prior to the Termination Date, and (iii) has not been waived by SMP Holdings;

 

(d) by Summit MLP, if SMP Holdings breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 9.2, (ii) cannot be cured or, if curable, has not been cured prior to the earlier of 30 days following receipt by SMP Holdings of written notice of such breach or failure to perform or two (2) Business Days prior to the Termination Date, and (iii) has not been waived by Summit MLP; or

 

(g) by any Party if Closing would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction.

 

The Party desiring to terminate this Agreement pursuant to this Section 10.1 shall give written notice of such termination to the other parties.

 

10.2        Effect of Termination. If this Agreement is terminated as permitted by Section 10.1, this Agreement shall become void and of no effect without liability to any Person on the part of any party hereto (or any of its Representatives or Affiliates); provided, however, and notwithstanding anything in the foregoing to the contrary, that no such termination shall relieve any party hereto of any liability for damages to any other party hereto resulting from any material breach of this Agreement occurring prior to such termination or for liability for fraud. The provisions of this Section 10.2 and Article 11 shall survive any termination hereof pursuant to Section 10.1.

 

ARTICLE XI
 MISCELLANEOUS

 

11.1        Notices.

 

(a)         Unless this Agreement specifically requires otherwise, any notice, demand or request provided for in this Agreement, or served, given or made in connection with it, shall be in writing and shall be deemed properly served, given or made if delivered in person or sent by electronic delivery (including facsimile or delivery of a document in Portable Document Format), by registered or certified mail, postage prepaid or by a nationally recognized overnight courier service that provides a receipt of delivery, in each case, to the Parties at the addresses specified below:

 

If to SMP Holdings, to:

 

Summit Midstream Partners, LLC

2100 McKinney Avenue, Suite 1250

 

37

 

Dallas, TX 75201

Attn:  Brock Degeyter

Facsimile No.:  (214) 462-7716

Email:  mdavis@summitmidstream.com

 

If to the Company, prior to Closing, to:

 

Red Rock Gathering Company, LLC

2100 McKinney Avenue, Suite 1250

Dallas, TX 75201

Attn:  Brock Degeyter

Facsimile No.:  (214) 462-7716

Email:  mdavis@summitmidstream.com

 

If to Summit MLP, to:

 

Summit Midstream Partners, LP

2100 McKinney Avenue, Suite 1250

Dallas, TX 75201

Attn:  Brock Degeyter

Facsimile No.:  (214) 462-7716

Email:  bdegeyter@summitmidstream.com

 

With a copy to:

 

Summit Midstream GP, LLC Conflicts Committee

2100 McKinney Avenue, Suite 1250

Dallas, TX 75201

Attn:  Susan Tomasky

Email:  stomasky@me.com

 

(b)         Notice given by personal delivery, mail or overnight courier pursuant to this Section 8.1 shall be effective upon physical receipt.  Notice given by facsimile or other electronic transmission pursuant to this Section 8.1 shall be effective as of the date of confirmed delivery if delivered before 5:00 P.M. Central Time on any Business Day at the place of receipt or the next succeeding Business Day if confirmed delivery is after 5:00 P.M. Central Time on any Business Day or during any non-Business Day at the place of receipt.

 

11.2        Entire Agreement.  This Agreement supersedes all prior discussions and agreements between the Parties and/or their respective Affiliates with respect to the subject matter hereof and contains the sole and entire agreement between the Parties and their respective Affiliates hereto with respect to the subject matter hereof.

 

11.3        Expenses.  Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated hereby are consummated, each Party shall pay all costs and expenses it has incurred or will incur in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and consummation of the transactions contemplated hereby.

 

38

 

11.4        Disclosure.  The Company and SMP Holdings may, at their option, include in the Schedules items that are not material, and any such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgment or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement.  Information disclosed in any Schedule shall constitute a disclosure for all purposes under this Agreement notwithstanding any reference to a specific section, and all such information shall be deemed to qualify the entire Agreement and not just such section.

 

11.5        Waiver.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  No waiver by either Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.

 

11.6        Amendment.  This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Summit MLP and SMP Holdings; provided, however, that Summit MLP shall not execute any such amendment, supplement or modification without the consent or approval of the Conflicts Committee.

 

11.7        No Third Party Beneficiary.  The terms and provisions of this Agreement are intended solely for the benefit of the Parties and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third party beneficiary rights upon any other Person.

 

11.8        Assignment; Binding Effect.  Any Party may assign its rights and obligations hereunder to an Affiliate but such assignment shall not release such Party from its obligations hereunder.  Except as provided in the preceding sentence, neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Party without the prior written consent of the other Party, and any attempt to do so will be void, except for assignments and transfers by operation of Law.  Subject to this Section 8.8, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and permitted assigns.

 

11.9        Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any Party under this Agreement will not be materially and adversely affected thereby, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

 

11.10      Counterparts; Facsimile.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute

 

39

 

one and the same instrument.  Any facsimile or PDF copies hereof or signature hereon shall, for all purposes, be deemed originals.

 

11.11      Governing Law; Enforcement, Jury Trial Waiver.  THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OR CHOICE OF LAW PROVISION THAT WOULD RESULT IN THE IMPOSITION OF ANOTHER JURISDICTION’S LAW.  THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN ANY DISPUTE, CONTROVERSY, REMEDY OR CLAIM BETWEEN THE PARTIES ARISING OUT OF, RELATING TO, OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, INCLUDING THE EXISTENCE, VALIDITY, PERFORMANCE, OR BREACH THEREOF.  WITH RESPECT TO ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE ENFORCEMENT OF THE AGREEMENT TO ARBITRATE IN SECTIONS 7.9 AND 7.10 AND ANY ARBITRATION AWARD, BUT WITHOUT PREJUDICE TO THE TERMS OF SECTIONS 7.9 AND 7.10, EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY.

 

Signature Page Follows

 

40

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party as of the date first above written.

 

	
 
    	
Summit Midstream Partners Holdings, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Steven J. Newby
    
	
 
    	
Name:
    	
Steven J. Newby
    
	
 
    	
Title:
    	
President & Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Red Rock Gathering Company, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Steven J. Newby
    
	
 
    	
Name:
    	
Steven J. Newby
    
	
 
    	
Title:
    	
President & Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Summit Midstream Partners, LP
    
	
 
    	
 
    
	
 
    	
By:
    	
Summit Midstream GP, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brock M. Degeyter
    
	
 
    	
Name:
    	
Brock M. Degeyter
    
	
 
    	
Title:
    	
Senior Vice President, General   Counsel & Secretary
    

 

Signature Page — Purchase and Sale Agreement

 

 

EXHIBIT A
 COMPANY ASSIGNMENT AND CONTRIBUTION AGREEMENT

 

Attached.

 

 

COMPANY ASSIGNMENT AND CONTRIBUTION AGREEMENT

 

This Company Assignment and Contribution Agreement (this “Assignment”) is entered into this        day of March, 2014 by and among Summit Midstream Partners Holdings, LLC, a Delaware limited liability company (“SMP Holdings”), Summit Midstream GP, LLC, a Delaware limited liability company (“SM GP”), Summit Midstream Partners, LP, a Delaware limited partnership (“Summit MLP”), Summit Midstream Holdings, LLC, a Delaware limited liability company and wholly-owned subsidiary of Summit MLP (“Summit Midstream”), and Grand River Gathering, LLC, a Delaware limited liability company and wholly-owned subsidiary of Summit Midstream (“GRG”).  SMP Holdings, SM GP, Summit MLP, Summit Midstream and GRG are referred to collectively herein as the “Parties” and individually as a “Party”.

 

WHEREAS, SMP Holdings and Summit MLP entered into that certain Purchase and Sale Agreement dated March       , 2014 among SMP Holdings, Red Rock Gathering Company, LLC, a Delaware limited liability company (the “Company”) and Summit MLP (the “Purchase and Sale Agreement”), pursuant to which SMP Holdings agrees to sell and assign (directly and indirectly through SM GP) to Summit MLP, and Summit MLP agrees to purchase and receive (directly and indirectly through SM GP) from SMP Holdings, and to contribute to Summit Midstream, and then to cause Summit Midstream to further contribute to GRG, all of the member interests in the Company (the “Company Interests”), on the terms and subject to the conditions set forth in the Purchase and Sale Agreement; and

 

NOW, THEREFORE, in consideration of the foregoing, the Parties agree as follows:

 

1.     Contribution and Assignment under the Purchase and Sale Agreement.  SMP Holdings grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers (directly and indirectly through SM GP) to Summit MLP, its successors and assigns, for its and their own use forever, and Summit MLP hereby accepts such grant, contribution, bargain, conveyance, assignment, transfer, set over and delivery of, all of the Company Interests.

 

2.  Further Contribution and Assignment.   Summit MLP hereby further grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to Summit Midstream, its successors and assigns, for its and their own use forever, and Summit Midstream hereby accepts such grant, contribution, bargain, conveyance, assignment, transfer, set over and delivery of, all of the Company Interests.

 

3.     Further Contribution and Assignment.   Summit Midstream hereby further grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to GRG, its successors and assigns, for its and their own use forever, and GRG hereby accepts such grant, contribution, bargain, conveyance, assignment, transfer, set over and delivery of, all of the Company Interests.

 

4. Representations and Warranties.  This Assignment does not release or modify SMP Holdings’ or Summit MLP’s representations, warranties, duties or obligations to each other pursuant to the Purchase and Sale Agreement, which shall remain the direct obligations between SMP Holdings and Summit MLP.

 

Signature Page Follows

 

 

IN WITNESS WHEREOF, the Parties have executed this Assignment as of the date first set forth above.

 

	
 
    	
SUMMIT   MIDSTREAM PARTNERS HOLDINGS, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Steven   J. Newby
    
	
 
    	
 
    	
Title:
    	
President &   Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
SUMMIT   MIDSTREAM GP, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Steven   J. Newby
    
	
 
    	
 
    	
Title:
    	
President &   Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
SUMMIT   MIDSTREAM PARTNERS, LP
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   Summit Midstream GP, LLC, its general partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Brock   M. Degeyter
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President, General Counsel & Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
SUMMIT   MIDSTREAM HOLDINGS, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Brock   M. Degeyter
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President, General Counsel & Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
GRAND   RIVER GATHERING, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Brock   M. Degeyter
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President, General Counsel & Secretary
    
					

 

SIGNATURE PAGE TO

COMPANY CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

 

EXHIBIT B
 GATHERING SYSTEM

 

Attached.ASSET PURCHASE AGREEMENT

EXHIBIT 10.1

 

ASSET PURCHASE AGREEMENT

by and among

BLSCH ACQUISITION, LLC,

“Purchaser”

BLENDEDSCHOOLS.NET,

“Seller”

Dated: November 25, 2013

 

TABLE OF CONTENTS

			
	Section 1. 

	Purchase and Sale of Assets

	1

	Section 1.1

	Purchase of Assets.

	1

	Section 1.2

	Excluded Assets.

	2

	Section 1.3

	Assumption of Certain Liabilities.

	3

	Section 1.4

	Excluded Liabilities.

	3

	                              

	 
	 

	Section 2. 

	Purchase Price and Closing

	3

	Section 2.1

	Purchase Price.

	3

	Section 2.2

	Time and Place of Closing.

	3

	Section 2.3

	Deliveries at the Closing.

	3

	Section 2.4

	Allocation of Purchase Price.

	4

	Section 2.5

	Certain Consents.

	4

	 
	 
	 

	Section 3. 

	Representations and Warranties Of Seller

	4

	Section 3.1

	Organization and Qualification.

	4

	Section 3.2

	Authority.

	5

	Section 3.3

	Ownership.

	5

	Section 3.4

	Compliance with Laws.

	6

	Section 3.5

	Litigation.

	6

	Section 3.6

	Brokers and Finders.

	6

	Section 3.7

	Contracts.

	7

	Section 3.8

	Governmental Approval and Consents.

	7

	Section 3.9

	Labor Matters.

	7

	Section 3.10

	Financial Statements.

	7

	Section 3.11

	Accounts Receivable.

	8

	Section 3.12

	Correctness of Representations.

	8

	 
	 
	 

	Section 4. 

	Representations and Warranties of Purchaser

	8

	Section 4.1

	Organization and Qualification.

	8

	Section 4.2

	Authority.

	8

	Section 4.3

	Litigation.

	9

	Section 4.4

	Brokers and Finders.

	9

	Section 4.5

	Disclosure and Absence of Undisclosed Liabilities.

	9

	 
	 
	 

	Section 5. 

	Covenants of Seller

	9

	Section 5.1

	Conduct of Business Prior to Closing.

	9

	Section 5.2

	Access to Properties and Records, Etc.

	10

	Section 5.3

	Actions Prior to Closing.

	10

	Section 5.4

	Certain Governmental Approvals.

	11

	Section 5.5

	Other Transactions.

	12

	Section 5.6

	Consents.

	12

	Section 5.7

	Supplemental Disclosure.

	12

	Section 5.8

	Additional Reports.

	12

	Section 5.9

	Capital Expenditures.

	13

	Section 5.10

	Discharge of Liens and Encumbrances.

	13

	 
	 
	 

	 
	 
	 

	 
	 
	 

			
	Section 6. 

	Conditions Precedent to the Obligations of Purchaser

	13

	Section 6.1

	Representations True at Closing.

	13

	Section 6.2

	Compliance by Seller.

	13

	Section 6.3

	No Injunction, Etc.

	13

	Section 6.4

	Operation in the Ordinary Course.

	14

	Section 6.5

	Consents and Waivers.

	14

	Section 6.6

	Governmental Authorizations and Approvals.

	14

	Section 6.7

	Condition of Purchased Assets.

	14

	Section 6.8

	Financing.

	14

	Section 6.9

	Incumbency.

	14

	Section 6.10

	Certified Resolutions.

	14

	Section 6.11

	Release of Certain Liens.

	15

	Section 6.12

	No Material Adverse Change.

	15

	Section 6.13

	Accuracy of Schedules.

	15

	Section 6.14

	Instruments of Transfer.

	15

	 
	 
	 

	Section 7. 

	Indemnification

	15

	Section 7.1

	Survival of Warranties.

	15

	Section 7.2

	Agreement of Seller to Indemnify Purchaser.

	16

	Section 7.3

	Agreement of Purchaser to Indemnify Seller.

	17

	Section 7.4

	Procedures for Indemnification.

	17

	Section 7.5

	Defense of Third Party Claims.

	18

	 
	 
	 

	Section 8. 

	Post Closing Matters

	18

	Section 8.1

	Employment of Employees.

	18

	Section 8.2

	Seller’s Benefit Plans.

	19

	Section 8.3

	Employee Files.

	19

	Section 8.4

	Assistance in Hiring.

	19

	Section 8.5

	Discharge of Business Obligations.

	19

	Section 8.6

	Maintenance of Books and Records.

	20

	Section 8.7

	Payments Received.

	20

	Section 8.8

	UCC Matters.

	20

	Section 8.9

	Certain Expenses.

	20

	Section 8.10

	Further Assurances.

	21

	Section 8.11

	Assignment and Ownership of Intellectual Property Rights.

	21

	Section 8.12

	Winding Up of Seller.

	21

	 
	 
	 

	Section 9. 

	Restrictive Covenants

	21

	Section 9.1

	Definitions.

	21

	Section 9.2

	Non-Solicitation of Employees.

	22

	Section 9.3

	Non-Solicitation of Customers.

	22

	Section 9.4

	Covenant Not to Compete by Seller.

	22

	Section 9.5

	Trade Secrets.

	22

	Section 9.6

	Remedies.

	23

	Section 9.7

	Blue Penciling.

	23

	 
	 
	 

	Section 10. 

	General Provisions

	23

	Section 10.1

	Bulk Sales Law Waiver.

	23

	Section 10.2

	Expenses.

	23

	Section 10.3

	Notice.

	24

	Section 10.4

	Assignment; Binding Effect.

	25

	Section 10.5

	Headings.

	25

			
	Section 10.6

	Counterparts.

	25

	Section 10.7

	Governing Law.

	25

	Section 10.8

	Arbitration.

	25

	Section 10.9

	Partial Invalidity.

	26

	Section 10.10

	Survival.

	26

CROSS REFERENCES TO DEFINED TERMS

		
	Term

	Page on Which Defined

	Accounts Receivable

	2

	Acquisition Proposal

	11

	Affiliate

	19

	Agreement

	1

	Applications

	1

	Area

	19

	Assumed Liabilities

	3

	Books and Records

	2

	bugs

	5

	Business

	1

	Closing

	3

	Closing Date

	1, 3

	Closing Date Receivables

	7

	Code

	1

	Competing Enterprise

	19

	Content

	1

	Contract

	2

	Contracts

	2

	Control

	19

	Employees

	6

	Excluded Claims

	16

	Excluded Information

	19

	Excluded Liabilities

	3

	Financial Statements

	7

	Fundamental Representation

	14

	GAAP

	7

	Hired Employees

	17

	Indemnification Claim

	15

	Indemnitee

	15

	Indemnitor

	15

	Intellectual Property

	2

	Loss

	14

	Losses

	14

	Negotiation Period

	16

	Net Cash

	2

	Payee

	18

	Payor

	18

	Post Closing Payments

	18

	Purchase Price

	3

	Purchased Assets

	2

	Purchaser

	1

	Reference Balance Sheet

	7

	Seller

	1

	Settlement Amount

	18

	Shrink-wrap Software

	2

	Third Party Claim

	16

	Trade Secrets

	19

	Warranty Survival Period

	14

	Web Sites

	1

Asset Purchase Agreement

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of this 25th day of November, 2013 (the “Effective Date”), by and between BLSCH ACQUISITION, LLC, a Georgia limited liability company (“Purchaser”) and BLENDEDSCHOOLS.NET, a Pennsylvania non-profit corporation (“Seller”). 

Background

Seller is a nonprofit corporation exempt from taxation under Section 501(a) of the Internal Revenue Code of 1986, as amended (the “Code”), as an organization described in Section 501(c)(3) of the Code and in the business of on-line blended learning (the “Business”).  Purchaser desires to acquire the Business and assets of Seller on and subject to the terms and conditions of this Agreement.  

Agreement

For and in consideration of the mutual representations, warranties, covenants, and agreements contained herein and for other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties agree:

Section 1.   Purchase and Sale of Assets

Section 1.1

Purchase of Assets.  

In reliance upon the representations, warranties, covenants, and agreements contained in this Agreement, at the Closing, Purchaser shall purchase and Seller shall sell, assign, grant, transfer, and convey to Purchaser upon the terms and subject to the conditions of this Agreement, free and clear of all liabilities (fixed or contingent), obligations, security interests, liens, claims, or encumbrances of any nature or kind whatsoever except for Assumed Liabilities, all of the assets, properties, and rights of Seller of every type and description, tangible and intangible, wherever located and whether or not reflected on the books of Seller or carried thereon at zero value, including without limitation the following, provided however, that Seller shall not sell and Purchaser shall not purchase the Excluded Assets described in Section 1.2 of this Agreement:

(a)

All world wide web sites and domain names owned or licensed by Seller together with all documentation related thereto, and all related java applets and scripts, HTML pages, and back end software (collectively, the “Web Sites”), including, without limitation, the Web Sites listed on Section 1.1(a) of the Disclosure Schedule;

(b)

all training and education courses in both on-line and live classroom formats as same exist on the Closing Date (the “Content”), including, without limitation, the Web Sites listed on Section 1.1(b) of the Disclosure Schedule;

(c)

all software applications, tools, technologies, and components owned by Seller in both source code and object code versions with all versions, modifications, and enhancements thereto, together with all programming tools, libraries, and software to support and augment such software, and all flowcharts, logic diagrams, technical and descriptive documentation, materials, and specifications related thereto (collectively, the “Applications”), 

-1-

including, without limitation, the Applications listed on Section 1.1(c) of the Disclosure Schedule;

(d)

all patents, patent rights, patent applications and continuances, trade names and trade dress, trademarks (registered and unregistered), trademark applications, service marks (registered and unregistered), service mark applications (all marks to include all goodwill associated therewith), copyrights (registered and unregistered) and applications therefor, formulae, trade secrets, and know-how necessary or desirable to the conduct of the business as conducted by Seller and as proposed to be conducted by Purchaser (collectively, the “Intellectual Property”, including, without limitation, the Intellectual Property listed on Section 1.1(d) of the Disclosure Schedule;

(e)

All rights of Seller in all software licensed from third parties and used by Seller, including without limitation, development tools, third party components, third party content used in the Web Sites and Applications, and all other third party software used by Seller (collectively, the “Shrink-wrap Software”), including, without limitation, the software packages listed on Section 1.1(e) of the Disclosure Schedule;

(f)

The executory obligations of Seller arising under the contracts listed in Section 1.1(f) of the Disclosure Schedule (each individually, a “Contract” and collectively, “Contracts”), together with the right to receive income with respect to the Contracts after the Closing Date, to the extent assignable; and

(g)

All data, books, records, correspondence, accounts, records of sales, customer lists, files, papers, and related materials used by Seller in connection with the Purchased Assets (collectively, the “Books and Records”).

(h)

All Net Cash as of the Closing Date.  As used herein,  “Net Cash” means the amount of Seller’s cash on hand on the Closing Date after repayment of the then outstanding balance of the Kish Bank loan minus Seller’s accounts payable on the Closing Date;

(i)

All (x) trade accounts receivable and other rights to payment from customers of Seller representing amounts receivable in respect of products sold or services rendered to customers of Seller, (y) all other accounts or notes receivable of Seller, and (z) any claim, remedy or other right related to any of the foregoing (collectively, the “Accounts Receivable”);

(j)

The pre-paid expenses of Seller, determined in accordance with GAAP;

The assets, rights, and properties of Seller described in this Section 1.1 which are not Excluded Assets as defined in Section 1.2 hereof, are hereinafter collectively referred to as the “Purchased Assets.”

Section 1.2

Excluded Assets.  

Seller shall not sell and Purchaser shall not purchase or acquire and the Purchased Assets shall not include:

(a)

Seller’s corporate franchise, corporate interest record books, corporate books containing minutes of meetings of managers and members, tax returns and records, books of 

-2-

account and ledgers, and such other records as having to do with Seller’s organization or capitalization; and

(b)

Any rights which accrue to Seller under this Agreement.

Section 1.3

Assumption of Certain Liabilities.  

At the Closing, as additional consideration for the sale, conveyance, transfer, and delivery of the Purchased Assets, Purchaser shall assume, perform, discharge, and become obligated for, commencing and effective from and after the Closing Date, all of the executory obligations and liabilities of Seller arising from and after the Closing Date pursuant to the Contracts and the licenses related to the Shrink-Wrap Software, but excluding any obligations or liabilities arising from or relating to any breach or violation thereof, or a default thereunder, by Seller prior to Closing (the “Assumed Liabilities”).

Section 1.4

Excluded Liabilities.  

PURCHASER SHALL NOT ASSUME OR BECOME LIABLE FOR ANY OBLIGATIONS, COMMITMENTS, OR LIABILITIES OF SELLER, WHETHER KNOWN OR UNKNOWN, ABSOLUTE, CONTINGENT, OR OTHERWISE, AND WHETHER OR NOT RELATED TO THE PURCHASED ASSETS, EXCEPT FOR THE ASSUMED LIABILITIES (the obligations and liabilities of Seller not assumed by Purchaser are hereinafter referred to as the “Excluded Liabilities”).  

Section 2. Purchase Price and Closing

Section 2.1

Purchase Price.  

The purchase price for the Purchased Assets and the Restrictive Covenants shall be $550,000.00 (the “Purchase Price”).  Seller’s Net Cash as of the Closing Date shall be credited against the Purchase Price.  If Net Cash is less than the Purchase Price, Purchaser shall deliver the balance of the Purchase Price in cash at Closing.  If Net Cash is greater than the Purchase Price, Seller shall transfer an amount equal to Net Cash minus the Purchase Price to an account designated in writing by Purchaser.

Section 2.2

Time and Place of Closing.  

The closing of the purchase and sale of the Purchased Assets (the “Closing”) shall be held at the offices of Krevolin & Horst, LLC, 1201 W. Peachtree Street, Suite 3250, Atlanta, GA 30309, at 10:00 a.m. on the fifth (5th) business day immediately following the date on which the last of the conditions precedent to the obligations of Purchaser set forth in Section 6 have been satisfied or waived, or at such other time, date and place as the parties to this Agreement may otherwise agree.  The date the Closing actually occurs is hereinafter referred to as the “Closing Date”.  The effective time of the closing and the transfer of the Purchased Assets to Purchaser is 12:01 a.m. on the Closing Date.  The Closing will occur by a mutual electronic exchange of signature pages with originals to follow by overnight delivery and a wire transfer of the net Purchase Price.

Section 2.3

Deliveries at the Closing.  

(a)

At the Closing, Purchaser shall deliver the Purchase Price in the manner described in Section 2.1 hereof; and

-3-

(b)

At the Closing, Seller shall deliver the following:

(i)

Such bills of sale and assignments as were reasonably requested by Purchaser, each executed by Seller, all of which together effectively vest in Purchaser good and valid title to each of the Purchased Assets free and clear of all liens, restrictions, and encumbrances;

(ii)

Written consents of all third parties necessary to the Purchaser’s use and enjoyment of the Purchased Assets, in form, scope, and substance reasonably satisfactory to Purchaser; and

(iii)

A search of filings made pursuant to Section 9 of the Uniform Commercial Code (conducted through a date reasonably proximate in time to the Closing Date) in each jurisdiction in which any of the Purchased Assets are located.

Section 2.4

Allocation of Purchase Price.  

The consideration paid for the Purchased Assets shall be allocated among the Purchased Assets in accordance with the provisions contained in Treasury Regulation Section 1.1060-1T(d).  The parties agree to be bound by such allocation and to report the transaction contemplated herein for federal income tax purposes in accordance with such allocation.  In furtherance of the foregoing, the parties hereto agree to execute and deliver Internal Revenue Service Form 8594 reflecting such allocation.

Section 2.5

Certain Consents.  

To the extent that Seller’s rights under any agreement, Contract, commitment, lease, Permit, or other Purchased Asset to be acquired by Purchaser hereunder may not be assigned without the consent of another person which has not been obtained, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Seller, at its expense, shall use its best efforts to obtain any such required consent(s) as promptly as possible.  If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Purchaser’s rights under the Purchased Asset in question so that Purchaser would not in effect acquire the benefit of all such rights, Seller, to the maximum extent permitted by law and the Purchased Asset, shall act after the Closing as Purchaser’s agent in order to obtain for Purchaser the benefits thereunder, and Seller shall cooperate, to the maximum extent permitted by law, with Purchaser in any other reasonable arrangement designed to provide such benefits to Purchaser.

Section 3.  Representations and Warranties Of Seller

For the purpose of inducing the Purchaser to purchase the Purchased Assets and assume the Assumed Liabilities, Seller represents and warrants to Purchaser as follows:

Section 3.1

Organization and Qualification.  

Seller is a corporation duly organized, validly existing, and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to conduct its business, and to own, lease, or operate the Purchased Assets in the places where the business is conducted and the Purchased Assets are owned, leased, or operated.  The Purchased Assets are located at the addresses set forth on Section 3.1 of the Disclosure Schedule.  

-4-

Section 3.2

Authority.  

Seller has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery, and performance of this Agreement by Seller has been duly and validly authorized and approved by all necessary action on the part of Seller and its Board of Directors.  This Agreement is the legal, valid, and binding obligation of Seller enforceable against Seller in accordance with its terms, except as enforceability may be limited by applicable equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally, and to the exercise of judi­cial discretion in accordance with general equitable principles.  Neither the execution and delivery of the Agreement by Seller nor the consummation by Seller of the transactions contemplated hereby will (i) violate Seller’s Articles of Incorporation or bylaws, (ii) violate any pro­visions of law or any order of any court or any governmental unit to which Seller is subject, or by which any of the Purchased Assets are bound, or conflict with, result in a breach of, or constitute a default under any indenture, mortgage, lease, agreement, or other instrument to which Seller is a party or by which it or any of the Purchased Assets are bound, (iii) result in the creation of any lien, charge, or encumbrance upon any of the Purchased Assets; or (iv) result in the acceleration or increase in the amount of any liabilities related to Seller's use of the Purchased Assets.

Section 3.3

Ownership.  

Except as otherwise disclosed in Section 3.3 of the Disclosure Schedule:

(a)

Seller is the sole and exclusive owner of all right, title and interest in and to the Purchased Assets, free and clear of all liens, security interests, charges, encumbrances, equities or other adverse claims (including without limitation distribution rights). 

(b)

Seller has not granted any third party any right to resell, distribute, or market the Web Sites, the Content, or the Applications or create derivative works based upon the Web Sites or the Applications.

(c)

Prior to the Closing Date, Seller has the unfettered right and authority to use, and on and after the Closing Date Purchaser will have the unfettered right and authority to use, the Web Sites, the Content, the Applications, and the Intellectual Property in connection with the conduct of Purchaser’s business in the manner conducted by Seller prior to the Closing Date.

(d)

Purchaser’s ownership and use of the Web Sites, the Content, the Applications, and the Intellectual Property do not involve unfair competition with respect to any intellectual property or other proprietary right of any third person or entity;

(e)

The Web Sites, the Content, the Applications, and the Intellectual Property, do not infringe any patent, trademark, trade name, copyright, trade secret, or other intellectual property right of a third party.

(f)

The Purchased Assets are all of the assets required for Purchaser to conduct the business as presently conducted by Seller.

(g)

Seller has taken all steps reasonably necessary to protect its right, title, and interest in and to the Web Sites, the Content, the Applications, and the Intellectual Property and the continued use of the Web Sites, the Content, the Applications, and the Intellectual Property.  Without limiting the generality of the foregoing, all designs, drawings, specifications, source code, object code, documentation, flow charts and diagrams incorporating, embodying or 

-5-

reflecting any of the Web Sites, the Content, the Applications, and the Intellectual Property at any state of its development were written, developed, and created by employees of Seller within the scope of their regular duties or were created by third parties who assigned ownership of their rights to Seller in valid and enforceable agreements, which are included in the contracts to be assigned and transferred to Purchaser hereunder.  Seller has at all times used  reasonable efforts to protect its trade secrets and has not disclosed or otherwise dealt with such items in such a manner as to cause the loss of such trade secrets by release thereof into the public domain.  Seller has at all times used  reasonable efforts to protect the confidentiality of all of its other confidential and proprietary information and that of third parties which is or has been in its possession.  

(h)

To Seller’s knowledge, no employee of Seller is in violation of any term of any employment contract or confidentiality agreement or any other contract or agreement relating to the relationship of any such person with Seller. 

(i)

Except for product returns in the ordinary course of business, no product liability or warranty claim with respect to any product included among the Purchased Assets has been communicated to or overtly threatened against Seller nor, is there any specific situation, set of facts or occurrence that provides a basis for any such claim.  Seller has provided to Purchaser an accurate list of all material known errors or “bugs” in the Web Sites and the Applications.

Section 3.4

Compliance with Laws.  

Seller, to the best of its knowledge, is not subject to any judgment, order, writ, injunction, or decree that adversely affects, or might in the future reasonably be expected to adversely affect any of the Purchased Assets or its business.  Seller is, to the best of its knowledge, in substantial compliance with all laws applicable to its business and the Purchased Assets, including without limitation, all laws related to zoning, occupational safety, labor, wages, working hours, working conditions, environmental protection, and fair business practices.  Seller, to the best of its knowledge, has all permits, licenses, approvals, consents, and authorizations which are required for the operation of Seller’s business under federal, state, or local laws, rules, and regulations.

Section 3.5

Litigation.  

There are no formal or informal complaints, investigations, claims, charges, arbitration, grievances, actions, suits, or proceedings pending, or to the knowledge of Seller threatened against, or affecting Seller or any of the Purchased Assets at law or in equity or admiralty, or before or by any federal, state, municipal, or other governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, except that Seller has filed an appeal of an adverse decision related to Pennsylvania Sales Tax exemption that is currently pending. Seller will withdraw said appeal upon execution of this Agreement.  Seller is not subject to any order, writ, injunction, or decree of any federal, state, municipal court, or other governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting the Purchased Assets or Seller's business.

Section 3.6

Brokers and Finders.  

Seller has not incurred any obligation or liability to any party for any brokerage fees, agent’s commissions, or finder’s fees in connection with the transactions contemplated hereby.

-6-

Section 3.7

Contracts. 

(a)

Each Contract pursuant to which Seller has any obligation which extends past the Closing Date, the performance of which is to be assumed by Purchaser, is described on Section 1.1(f) of the Disclosure Schedule.  Except as disclosed on Section 3.7(a) of the Disclosure Schedule, there is no Contract which is not terminable by Seller without premium, penalty, or other obligation upon thirty (30) days notice or less;

(b)

Each of the Contracts is in full force and effect and there are no existing defaults or events of default, real or claimed, or events which with notice or lapse of time or both would constitute defaults, the consequences of which, severally or in the aggregate, would have an adverse effect on the Business or financial condition of Seller.  Except as reflected in Section 3.7(b) of the Disclosure Schedule, each of the Contracts may be assigned to Purchaser without the prior approval or consent of any other party;

(c)

Seller has fulfilled all obligations required pursuant to the Contracts to have been performed by Seller prior to the date hereof;

(d)

True, correct, and legible copies of all documents evidencing the Contracts have been provided to Purchaser.

Section 3.8

Governmental Approval and Consents.  

Seller has obtained all governmental approvals, authorizations, permits, and licenses required to permit the operation of its business as presently conducted.  Except for approvals of the Pennsylvania Attorney’s General’s office and the Mifflin County Court of Common Pleas, no authorization, consent, approval, designation or declaration by, or filing with, any public body, governmental authority, bureau, or agency is necessary or required as a condition to the validity of this Agreement and the consummation of the transactions contemplated hereby.

Section 3.9

Labor Matters.  

Section 3.9 of the Disclosure Schedule contains a true and correct list of all present employees of Seller (the “Employees”), their duties, their total remuneration for the year ended December 31, 2012, their current remuneration, and a brief narrative description of all perquisites and fringe benefits they receive or are eligible to receive.  Except as described in Section 3.9 of the Disclosure Schedule, all Employees are employees at-will and for indefinite terms and there is no outstanding agreement or arrangement with respect to severance payments.  All taxes required to be withheld on or prior to the Closing Date from employees for income taxes, social security taxes, unemployment taxes and other similar withholding taxes have been properly withheld and, if required on or prior to the Closing, have been deposited with the appropriate governmental agency.

Section 3.10

Financial Statements.  

Attached to the Disclosure Schedule are true, correct, and complete copies of the unaudited balance sheet of Seller dated September 30, 2013 (the “Reference Balance Sheet”), the unaudited income statement for the twelve months then ended, and the audited balance sheets of Seller as of December 31, 2012, 2011, and 2010, and audited statements of income, and cash flow for the periods then ended, together with the notes thereto (if any) (collectively, the “Financial Statements”).  The Financial Statements (a) are in accordance with the books and records of Seller, (b) present fairly the financial condition of Seller as of the respective dates 

-7-

indicated and the results of operations for such periods, (c) have been prepared in accordance with generally accepted accounting principles (“GAAP”) consistently applied throughout the periods involved, and (d) reflect adequate reserves for all liabilities and losses.  Seller has no material liabilities or obligations (secured or unsecured, whether accrued, absolute, direct, indirect, contingent, or otherwise, and whether due or to become due) that are not fully accrued or reserved against in the Financial Statements or described on Section 3.10 of the Disclosure Schedule.  The books, records, and accounts of Seller shown to Purchaser accurately and fairly reflect, in reasonable detail, all transactions, assets, and liabilities of Seller.  

Section 3.11

Accounts Receivable.  

All Accounts Receivable outstanding at the Closing (“Closing Date Receivables”) represent sales actually made or services actually performed in the ordinary course of business in bona fide transactions completed in accordance with the terms and provisions contained in any documents related thereto.  All Closing Date Receivables will be collectible, net of any reserves reflected on the Interim Balance Sheet, which reserves are in an amount consistent with past practice, within 180 days after Closing.

Section 3.12

Correctness of Representations.  

To the best of its knowledge, no representation or warranty of Seller in this Agreement or in any Exhibit, certificate, or Schedule attached hereto or furnished to Purchaser hereunder contains any untrue statement of fact, or omits to state any fact necessary in order to make the statements contained therein not misleading.  True copies of all mortgages, indentures, notes, leases, agreements, plans, contracts, and other instruments listed on or referred to in the Schedules delivered or furnished to Purchaser pursuant to this Agreement have been delivered to Purchaser.

Section 4.  Representations and Warranties of Purchaser

Purchaser hereby represents and warrants to Seller as follows:

Section 4.1

Organization and Qualification.  

Purchaser is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Georgia and has all necessary power and authority to conduct its business, to own, lease, or operate its properties in the places where such business is conducted and such properties are owned, leased, or operated.

Section 4.2

Authority.  

Purchaser has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery, and performance of this Agreement by Purchaser has been duly and validly authorized and approved by all necessary action on the part of Purchaser, and this Agreement is the legal, valid, and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, except as enforceability may be limited by applicable equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally, and by the exercise of judicial discretion in accordance with equitable principles.  Neither the execution and delivery of this Agreement by Purchaser nor the consummation by Purchaser of the transactions contemplated hereby will (a) violate Purchaser’s Articles of Organization or Operating Agreement, (b) violate any pro­visions of law or any order of any court or any governmental unit to which Purchaser is subject, or by which its assets may be bound, or (c) conflict with, result in a breach of, or 

-8-

constitute a default under any indenture, mortgage, lease, agreement, or other instrument to which Purchaser is a party or by which its assets or properties may be bound.

Section 4.3

Litigation.  

There is no suit, action, proceeding, claim or investigation pending, or, to Purchaser’s knowledge, threatened, against Purchaser which would prevent Purchaser from consummating the transactions contemplated by this Agreement.

Section 4.4

Brokers and Finders.  

Purchaser has not incurred any obligation or liability to any party for brokerage fees, agent’s commissions, or finder’s fees in connection with the transactions contemplated hereby.

Section 4.5

Disclosure and Absence of Undisclosed Liabilities.  

No representation or warranty by Purchaser contained in or made in connection with this Agreement or the transactions herein contemplated contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein not misleading.

Section 5.   Covenants of Seller

Seller covenants and agrees with Purchaser as follows:

Section 5.1

Conduct of Business Prior to Closing.  

From the Effective Date hereof to the Closing Date, and except to the extent that Purchaser shall otherwise consent in writing, Seller shall:

(a)

operate the Business substantially as previously operated and only in the regular and ordinary course, not make any purchase or sale, or introduce any new method of management or operation except in the ordinary course of business and in a manner consistent with past practices, and use its best efforts to maintain and preserve intact each of the goodwill, reputation, present business organization, and relationships of Seller with persons having business dealings with it, and will reasonably endeavor to maintain the services of its Employees;

(b)

maintain the Purchased Assets in good order and condition, reasonable wear and use excepted, and deliver the Purchased Assets to Purchaser on the Closing Date in such condition, and maintain all policies of insurance covering the Purchased Assets in amounts and on terms substantially equivalent to those in effect on the date of this Agreement;

(c)

take all steps reasonably necessary to maintain the Intellectual Property and other intangible assets of Seller;

(d)

pay all accounts payable when due in accordance with prudent business practices;

(e)

comply with all laws applicable to Seller where the failure to so comply would have a material adverse affect on the Business or the Purchased Assets;

-9-

(f)

maintain the Books and Records of Seller in the usual, regular, and ordinary manner, on a basis consistent with past practices and prepare and file all foreign, federal, state, and local tax returns and amendments thereto required to be filed by Seller after taking into account any extensions of time granted by such taxing authorities.

Section 5.2

Access to Properties and Records, Etc.  

Until the Closing or, if earlier, termination of this Agreement, Purchaser and its counsel, accountants, and other representatives will be given full access during normal business hours to all of the properties, personnel, books, tax returns, contracts, commitments, and records of Seller to the extent reasonably necessary for Purchaser’s due diligence investigation, and Purchaser will be furnished with all such additional documents and information with respect to the affairs of Seller as Purchaser or its counsel or accountants may from time to time reasonably request.

Section 5.3

Actions Prior to Closing.  

From the date of this Agreement through the Effective Time, Seller shall not without the prior written consent of Purchaser:

(a)

incur any obligations, liabilities, or expenses of any nature (whether absolute, accrued, contingent, or otherwise and whether due or to become due) that would constitute Assumed Liabilities other than items incurred in the ordinary course of business consistent with past practice;

(b)

permit, allow, or suffer any of the Purchased Assets to be subjected to any mortgage, pledge, lien, or encumbrances other than Permitted Encumbrances;

(c)

suffer any material adverse change in the Purchased Assets or in the operations, condition (financial or otherwise), liabilities, earnings, or prospects of the Business;

(d)

waive any claims or rights with respect to and materially and adversely affecting any of the Business, the Purchased Assets, or the Assumed Liabilities;

(e)

sell, transfer, or otherwise dispose of any of the Purchased Assets, other than Excluded Assets, except in the ordinary course of business consistent with past practice;

(f)

dispose of or permit to lapse any right to the use of any Intellectual Property, except for the expiration of any proprietary rights to use patents that may expire by law;

(g)

other than in accordance with and in amounts not greater than provided for in existing agreements between Seller and Employees, grant any increase in the salary and wages of any Employee or any increase in such salary and wages payable or to become payable at any time in the future to any of the Employees, except pursuant to promotions previously disclosed to Purchaser that will become effective on or prior to the Closing Date and except for Employees that Purchaser identifies on a written list delivered to Seller as Employees who will not receive an offer to become Hired Employees;

(h)

make any change in any material method of accounting or accounting principle, practice, or policy affecting or relating to the Purchased Assets or Assumed Liabilities including, without limitation, any extension of the useful lives of the Purchased Assets and consequent adjustments to the depreciation or valuation thereof on the books and records of Seller;

-10-

(i)

make any change (or change any assumption underlying or method of calculating) in the amount of any bad debt, contingency, or other reserve, other than in the ordinary course of business consistent with past practice;

(j)

write-down or write-up the value of any Inventory (including write-downs by reason of shrinkage or mark downs), except for write-downs, write-ups, and write-offs in the ordinary course of business consistent with past practice, none of which are or will be material in amount;

(k)

except consistent with past practices or existing programs, pay, loan, or advance any amount to, sell, transfer, or lease any properties or Purchased Assets (real, personal or mixed, tangible, or intangible) to, or enter into any agreement or arrangement with, any Employee, or any spouse or Affiliate of any such Person, except for routine travel advances to Employees, and compensation to Employees consistent with Section 5.3(a) hereof;

(l)

dispose of or permit to lapse any right to the use of any patent, trademark, assumed name, service mark, trade name, copyright, license, or application therefor or dispose of or disclose to any person not authorized to have such information, any trade secret, proprietary information, formula, process, or know-how not previously a matter of public knowledge or existing in the public domain;

(m)

waive, terminate, or commit any breach of any provision under or relating to any of the Contracts;

(n)

enter into any Contracts, Agreements, or transactions with respect to or affecting the Assumed Liabilities other than Contracts entered into in the ordinary course of business and consistent with past practices; 

(o)

with respect to the Purchased Assets, permit any option to renew any lease or any option to purchase any property to expire or exercise any such option;

(p)

omit to do any act or permit any act which could reasonably be expected to cause a breach of any material Contract or obligation of Seller with respect to or affecting the Purchased Assets or any breach of any representation, warranty, covenant, or agreement made by Seller herein;

(q)

default regarding the provisions of any insurance policy or fail to give notice or present any claim under any such policy in due and timely fashion if such default or failure to give notice would give the insurer the right to cancel any policy, deny claims, or limit coverage; or

(r)

take any other action not in the ordinary course of business consistent with past practice or omit to take any other action that would be taken in the ordinary course of business consistent with past practice if such action or omission to take action would materially and adversely affect the Business, the Purchased Assets, or the Assumed Liabilities.

Section 5.4

Certain Governmental Approvals.  

Seller shall take all action necessary to secure any approval of Pennsylvania Attorney’s General’s office and the Mifflin County Court of Common Pleas required for the consummation of the transactions 

-11-

contemplated hereby.  Seller shall keep Purchaser informed of the status of Seller’s efforts to secure such approvals and shall use best efforts to secure such approvals.

Section 5.5

Other Transactions.  

Seller shall deal exclusively and in good faith with Purchaser with regard to the sale of the Purchased Assets to Purchaser and will not, and will direct its officers, directors, financial advisors, accountants, agents, and counsel not to:  (a) solicit submission of proposals or offers from any person other than Purchaser relating to any acquisition of all or any material part of the Purchased Assets or the Business or solicit submission of proposals or offers from any person other than Purchaser and its representatives relating to any acquisition or purchase of all or a material portion of the Purchased Assets used in the Business (an “Acquisition Proposal”); (b) subject to fiduciary obligations under applicable law as advised in writing by counsel (with a copy of such advice contemporaneously being furnished to Purchaser and its counsel), participate in any discussions or negotiations regarding, or furnish any non-public information to any other person regarding Seller other than Purchaser and its representatives or otherwise cooperate in any way or assist, facilitate, or encourage any Acquisition Proposal by any person other than Purchaser; or (c) enter into any agreement or understanding, whether oral or in writing, that would have the effect of preventing the consummation of the transactions contemplated by this Agreement.  If, notwithstanding the foregoing, Seller, or its representatives or agents should receive any Acquisition Proposal or any inquiry regarding such proposal from a third party, such persons shall promptly inform Purchaser and its counsel thereof.

Section 5.6

Consents.  

Seller shall obtain, at its cost and expense, prior to the Closing all consents and estoppels which, in the reasonable judgment of Purchaser, are necessary or appropriate for the transfer of the Purchased Assets to Purchaser and the consummation of the transactions contemplated hereby.  All such consents and estoppels shall be in writing and in form and substance satisfactory to Purchaser, and executed counterparts thereof will be delivered to Purchaser promptly after receipt thereof but in no event later than the Closing.

Section 5.7

Supplemental Disclosure.  

Seller and Purchaser shall each have the continuing obligation up to and including the Closing Date to supplement promptly or amend the Schedules with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or listed in the Schedule.  Any such matter or information hereafter disclosed shall be deemed to amend the Schedules hereto (to the extent of such written disclosure) as of the date hereof unless Purchaser shall within five (5) business days after receipt of such written disclosure by Purchaser and its counsel, but in any event prior to the Closing, notify Sellers in writing that the matter or information so disclosed materially varies from, or materially and adversely to Purchaser’s interests changes, the information disclosed on the Schedules on the date hereof.  In such event, the Schedules hereto shall not be deemed amended or changed by the matter or information so disclosed, and, unless the acts or circumstances giving rise to the matter or information so disclosed is corrected prior to the Closing, the matter or information so disclosed shall constitute items at variance with the warranties and representations of Seller herein.

Section 5.8

Additional Reports.  

Promptly after they become available, Seller will deliver to Purchaser true and correct copies of all internal management and control reports (including aging of accounts receivables, listings of accounts 

-12-

payable, and inventory control reports) and financial statements related to the Business.  Each such report shall be in accordance with the books and records of Seller, and, in the case of financial statements shall present fairly the financial condition of Seller as of the dates indicated and the results of operations for the periods then ended.

Section 5.9

Capital Expenditures.  

Seller shall cause the management of Seller to discuss with Purchaser any proposed significant capital expenditure to be made by the Business after the Closing prior to entering into any contract or commitment for such capital expenditure.  No capital expenditure shall be made by Seller in respect of the Business prior to the Closing Date without the prior consent of Purchaser, which consent shall not be unreasonably withheld or delayed.  

Section 5.10

Discharge of Liens and Encumbrances.  

All liens, claims, charges, security interests, pledges, assignments, or encumbrances relating to the Purchased Assets shall be satisfied, terminated, and discharged by Seller on or prior to the Closing Date and evidence satisfactory to Purchaser and its counsel of such satisfaction, termination, and discharge shall be delivered to Purchaser at or prior to the Closing.

Section 6.   Conditions Precedent to the Obligations of Purchaser

The obligation of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions all or any of which may be waived in writing, in whole or in part, by Purchaser:

Section 6.1

Representations True at Closing.  

Each representation and warranty in Section 3 hereof shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though such representation and warranty had been made on and as of the Closing Date (except that such representations and warranties may be untrue or incorrect as a result of actions or transactions expressly permitted by this Agreement or actions or transactions of Seller made with the prior written consent of Purchaser), and Seller shall have delivered to Purchaser a certificate, executed by each of Seller, dated the Closing Date to such effect.

Section 6.2

Compliance by Seller.  

Seller shall have duly performed all of the covenants, agreements, acts, and undertakings to be performed by Seller on or prior to the Closing Date, and Seller shall have delivered to Purchaser a certificate, executed by each of Seller, dated the Closing Date to such effect.

Section 6.3

No Injunction, Etc.  

No action, proceeding, investigation, regulation, or legislation shall be pending or overtly threatened which seeks to enjoin, restrain, or prohibit consummation of the transactions contemplated hereby, or to obtain damages from Purchaser, in respect of the consummation of the transactions contemplated hereby, or which seeks to enjoin the operation of a substantial portion of the Purchased Assets, or, which in the reasonable judgment of Purchaser, would make it inadvisable to consummate the transactions contemplated by this Agreement.

-13-

Section 6.4

Operation in the Ordinary Course.  

Seller shall have operated the Business in the ordinary course (except as otherwise permitted by this Agreement or as agreed to by Purchaser as evidenced by Purchaser’s prior written consent) since October 1, 2013, and Purchaser shall have received a certificate dated as of the Closing Date, executed by each of Seller to such effect.

Section 6.5

Consents and Waivers.  

Purchaser shall have received a true and correct copy of each consent and waiver required for the assignment of the Contracts and Purchaser shall have received a certificate dated as of the Closing Date, executed by Seller to the foregoing effect, and Purchaser shall be satisfied with the terms, conditions, and restrictions, of and obligations under, each such consent and waiver.

Section 6.6

Governmental Authorizations and Approvals.  

Purchaser shall have received a true and correct copy of the approvals of the Pennsylvania Attorney’s General’s office and the Mifflin County Court of Common Pleas required for the consummation of the transactions contemplated hereby, and Purchaser shall have received a certificate dated as of the Closing Date, executed by Seller to the foregoing effect, and Purchaser shall be satisfied with the terms, conditions, and restrictions, of and obligations under, each such authorization, order, or approval.

Section 6.7

Condition of Purchased Assets.  

On the Closing Date, all of the Purchased Assets shall be in substantially the same condition as at the close of business on the date hereof, except for ordinary use and wear thereof, and changes occurring in the ordinary course of business between the date hereof and the Closing Date, and Purchaser shall have received a certificate of Seller dated the Closing Date to such effect.

Section 6.8

Financing.  

Purchaser shall have consummated financings under terms satisfactory to Purchaser, which financings, when taken in the aggregate with other funds available to Purchaser, shall be in an amount sufficient to pay the Purchase Price, the transaction costs of Purchaser associated with this Agreement and the transactions contemplated by this Agreement, and provide adequate working capital for the operation of the Business by Purchaser.

Section 6.9

Incumbency.  

Purchaser shall have received a certificate of incumbency of Seller executed by the President and Secretary of Seller listing the officers of Seller authorized to execute the Agreement and the instruments of transfer and conveyance on behalf of Seller, certifying the authority of each such officer to execute the agreements, documents, and instruments on behalf of Seller in connection with the consummation of the transactions contemplated herein.

Section 6.10

Certified Resolutions.  

Purchaser shall have received a certificate of the Secretary of Seller containing a true and correct copy of the resolutions duly adopted by the board of directors and shareholders of Seller, approving and authorizing this Agreement and the consummation of the transactions contemplated hereby.  The 

-14-

Secretary of Seller shall also certify that such resolutions have not been rescinded, revoked, modified, or otherwise affected and remain in full force and effect.

Section 6.11

Release of Certain Liens.  

Purchaser shall have received Uniform Commercial Code searches (which searches shall be made or caused to be made by and at the expense of Seller) of filings made pursuant to Article 9 thereof in all jurisdictions where any of the Purchased Assets are located, in form, scope, and substance reasonably satisfactory to Purchaser and its counsel, which searches shall reflect the release or termination of liens, claims, security interests, or encumbrances against any of the Purchased Assets disclosed thereby that are not Permitted Encumbrances, and to the extent any such release or termination is not reflected of record, Purchaser shall have received evidence satisfactory to it, that all such liens and encumbrances against the Purchased Assets other than Permitted Encumbrances have been released or terminated prior to or at the Closing; and Purchaser shall have received a certificate dated as of the Closing Date, executed by an authorized officer of Seller to such effect.

Section 6.12

No Material Adverse Change.  

There shall have been no material adverse change in the Business, the financial condition of Seller, or the Purchased Assets since October 1, 2013.

Section 6.13

Accuracy of Schedules.  

Examination by Purchaser shall not have disclosed any material inaccuracy in the representations and warranties of Seller, set forth in this Agreement or in the Schedules delivered to Purchaser pursuant hereto.

Section 6.14

Instruments of Transfer.  

Seller shall have delivered to Purchaser such bills of sale, endorsements, assignments, licenses, and other good and sufficient instruments of conveyance and transfer and any other instruments deemed appropriate by counsel to Purchaser all in form and substance satisfactory to counsel to Purchaser to vest in Purchaser all of Seller’s rights, title, and interest in and to the Purchased Assets, free and clear of all liens, charges, encumbrances, pledges, or claims of any nature except for Permitted Encumbrances.

Section 7. Indemnification

Section 7.1

Survival of Warranties.  

All representations and warranties of the parties contained in this Agreement shall survive the Closing until the first (1st) anniversary of the Closing Date; provided, however, that the representations and warranties of Seller contained in (a) Section 3.2 (Authorization), Section 3.3 (Ownership), and Section 3.6 (Brokers and Finders) (each a “Fundamental Representation”) shall survive until the ninetieth (90th) day after the expiration of the applicable statute of limitations, including any extensions, each of such periods is a “Warranty Survival Period”.  Any representation or warranty that would otherwise terminate in accordance with this Section 7.1 will continue to survive if a Claim Notice shall have been given under this Section 7 on or prior to such termination date until the related claim for indemnification has been satisfied or otherwise resolved as provided in this Section 7.  No cause of action based upon, or alleging, a breach of warranty may be commenced after the expiration of the applicable Warranty Survival Period.  For the purposes of this Section 7, the terms “Loss” and “Losses” shall 

-15-

mean any and all any loss, liability, claim, damage (excluding punitive damages other than damages awarded to third parties), tax, obligation, penalty, fine, judgment, cost and expense (including amounts paid in settlement, reasonable costs of investigation and defense, and reasonable attorneys’ fees) suffered by an Indemnified Party, whether or not involving a Third Party Claim and as the same are incurred.  All statements contained in any certificate, Exhibit or Schedule delivered by or on behalf of Purchaser or Seller pursuant to this Agreement shall be deemed representations and warranties hereunder by Purchaser or Seller, as the case may be.  Any inspection, preparation, or compilation of information or Schedules, or audit of the inventories, properties, financial condition, or other matters relating to Seller conducted by or on behalf of Purchaser pursuant to this Agreement shall in no way limit, affect, or impair the ability of Purchaser to rely upon the representations, warranties, covenants, and agreements of Seller set forth herein.  

Section 7.2

Agreement of Seller to Indemnify Purchaser.

(a)

Subject to the terms and conditions of this Section 7, Seller hereby agrees to indemnify, defend, and hold harmless Purchaser, and, to the extent named or involved in any Third-Party Claim, Purchaser’s officers, directors, employees and shareholders, and their respective successors and assigns, from, against, and in respect of any and all Losses which are based upon, arise out of, result from, or relate to:

(i)

the inaccuracy or untruth of any representation or warranty of Seller (other than a Fundamental Representation) contained in or made pursuant to this Agreement or in any certificate, Schedule, or Exhibit furnished by Seller, in connection with the execution and delivery of this Agreement and the closing of the transactions contemplated hereby, 

(ii)

the breach by Seller of any covenant or agreement made in or pursuant to this Agreement or any agreement executed by Seller, and delivered to Purchaser in connection with the Closing of the transactions contemplated hereby; and 

(iii)

the inaccuracy or untruth of any Fundamental Representation or any Excluded Liability, including without limitation the failure to comply with the bulk sales law.

(b)

Seller’s obligation to indemnify Purchaser for Losses is subject to the condition that Seller shall have received notice of the Losses for which indemnity is sought on or before the expiration of the applicable Warranty Survival Period.  

(c)

No claim may be made pursuant to Section 7.2 (other than with respect to a breach of a Fundamental Representation) until the total of all Losses with respect to such matters exceeds $10,000.00, at which time Seller shall be liable for the full amount of such Damages (including the initial $10,000.00).

(d)

The maximum recovery for Losses in the aggregate under this Section 7.2 shall be the aggregate consideration received by Seller pursuant to this Agreement.

(e)

Purchaser’s remedies against Seller for any Losses hereunder shall be cumulative, and the exercise by Purchaser of its right to indemnification hereunder shall not affect the right of Purchaser to exercise any other remedy at law or in equity, to recover damages, or to obtain equitable or other relief, provided, that Seller shall not be liable for damages in 

-16-

excess of the actual damages suffered by Purchaser as a result of the act, circumstance, or condition for which indemnification is sought.

Section 7.3

Agreement of Purchaser to Indemnify Seller.

(a)

Subject to the terms and conditions of this Section 7.3, Purchaser hereby agrees to indemnify, defend, and hold harmless Seller from, against, for, and in respect of any and all Losses asserted against, relating to, imposed upon, or incurred by Seller by reason of, resulting from or based upon:

(i)

the inaccuracy or untruth of any representation or warranty of Purchaser, contained in or made pursuant to this Agreement or in any certificate, Schedule, or Exhibit furnished by Purchaser, in connection with the execution and delivery of this Agreement or the closing of the transactions contemplated hereby; and

(ii)

the breach by Purchaser of any covenant or agreement made in or pursuant to this Agreement or any agreement executed by Purchaser, and delivered to Seller in connection with the Closing of the transactions contemplated hereby. 

(b)

Purchaser’s obligation to indemnify Seller for Losses is subject to the condition that Purchaser shall have received notice of the Losses for which indemnity is sought on or before the expiration of the applicable Warranty Survival Period.

(c)

Seller’s remedies against Purchaser for any Losses hereunder shall be cumulative, and the exercise by Seller of its right to indemnification hereunder shall not affect the right of Seller to exercise any other remedy at law or in equity, to recover damages, or to obtain equitable or other relief, provided, that Purchaser shall not be liable for damages in excess of the actual damages suffered by Seller as a result of the act, circumstance, or condition for which indemnification is sought.

Section 7.4

Procedures for Indemnification.  

As used herein, the term “Indemnitor” means the party against whom indemnity hereunder is sought, and the term “Indemnitee” means the party seeking indemnification hereunder.  

(a)

A claim for indemnification hereunder (“Indemnification Claim”) shall be made by Indemnitee by delivery of a written declaration to Indemnitor requesting indemnification and specifying the basis on which indemnification is sought and the amount of asserted Losses, and, in the case of a Third Party Claim (as defined in Section 7.5 hereof), containing (by attachment or otherwise) such other information as Indemnitee shall have concerning such Third Party Claim.

(b)

If the Indemnification Claim involves a matter other than a Third Party Claim, the Indemnitor shall have ten (10) days to object to such Indemnification Claim by delivery of a written notice of such objection to Indemnitee specifying in reasonable detail the basis for such objection.  Failure to timely so object shall constitute a final and binding acceptance of the Indemnification Claim by the Indemnitor and the Indemnification Claim shall be paid in accordance with Section 7.4(c)hereof.  If an objection is timely interposed by the Indemnitor and the dispute is not resolved within forty-five (45) days from the date (such period is hereinafter the “Negotiation Period”) Indemnitee receives such objection, such 

-17-

dispute shall be resolved by arbitration in accordance with the provisions of Section 10.8, unless the Indemnification Claim involves (i) Intellectual Property or (ii) injunctive relief is reasonably necessary to protect the interests of the Indemnitee (collectively the types of claims referred to in clauses (i) and (ii) are hereinafter referred to as the “Excluded Claims”), in which event, the dispute may be resolved by institution of an appropriate legal proceeding or by arbitration in accordance with the provisions of Section 10.7 at the option of the Indemnitee.

(c)

Upon determination of the amount of Losses required to be paid pursuant to an Indemnification Claim, whether by agreement between Indemnitor and Indemnitee or by an arbitration award, or by any other final adjudication, Indemnitor shall pay the amount of such Indemnification Claim by check within ten (10) days of the date such amount is determined.

Section 7.5

Defense of Third Party Claims.  

Should any claim be made, or suit or proceeding (including, without limitation, a binding arbitration or an audit by any taxing authority) be instituted against Indemnitee by a Third Party which, if prosecuted successfully, would be a matter for which Indemnitee is entitled to indemnification under this Agreement (a “Third Party Claim”), the obligations and liabilities of the parties hereunder with respect to such Third Party Claim shall be subject to the following terms and conditions:

(a)

The Indemnitee shall give the Indemnitor written notice of any such claim promptly after receipt by the Indemnitee of notice thereof, and the Indemnitor will undertake the defense thereof by representatives of its own choosing reasonably acceptable to the Indemnitee.  The assumption of the defense of any such claim by the Indemnitor shall be an acknowledgement by the Indemnitor of its obligation to indemnify the Indemnitee with respect to such claim hereunder.  If, however, the Indemnitor fails or refuses to undertake the defense of such claim within fifteen (15) days after written notice of such claim has been given to the Indemnitor by the Indemnitee, the Indemnitee shall have the right to undertake the defense, compromise, and, settlement of such claim with counsel of its own choosing.  The Indemnitor shall have the right to participate in any defense assumed by the Indemnitee, at its sole cost and expense.  In the circumstances described in the preceding sentence, the Indemnitee shall, promptly upon its assumption of the defense of such claim, make an Indemnification Claim as specified in Section 7.4, which shall be deemed an Indemnification Claim that is not a Third Party Claim for the purposes of the procedures set forth herein.

(b)

The Indemnitee and Indemnitor shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available records relating to such claim and furnishing, without expense to the Indemnitor, management employees of the Indemnitee as may be reasonably necessary for the preparation of the defense of any such claim or for testimony as witnesses in any proceeding relating to such claim.

Section 8. Post Closing Matters

Section 8.1

Employment of Employees.  

On or before the Closing Date, Purchaser shall offer employment to all of the full-time salaried and non-salaried Employees (except for Employees who are (a) on Worker’s Compensation or other medical disability leave, (b) on “light duty” as a result of any worker’s compensation or other medical disability, except pregnancy disability, or (c) otherwise on any other leave or part-time status, other than 

-18-

vacation leave or maternity leave at the Closing Date) at the same rates of pay and working conditions offered by Seller to such Employees on the date of this Agreement.  All Employees accepting Purchaser’s offer of employment are referred to as the “Hired Employees.”  Seller shall be responsible for the payment of all accrued but unpaid wages, vacation pay, sick pay, holiday pay, and severance pay due to Hired Employees, up to and including the Effective Time or the earlier termination of employment.  Seller shall be responsible for the payment of any amounts due to its Employees (including the Hired Employees) pursuant to the Seller Plans as a result of the employment of the Employees.  Seller will be responsible for reporting and paying all employee-related costs and liabilities of Hired Employees accruing prior to the Closing Date.  Purchaser shall become responsible for all costs and liabilities attributable to Hired Employees accruing on and after the Closing Date.  Purchaser shall allow Seller access to the Hired Employees to perform services as needed to wind up the affairs of Seller, to the extent such services do not unduly interfere with the timely performance of duties by such Hired Employees for Purchaser.  The services of the Hired Employees shall be provided, subject to the preceding sentence, free of charge to Seller. 

Section 8.2

Seller’s Benefit Plans.  

Purchaser will assume no responsibility with regard to any Seller Qualified Plans.  Seller shall retain any and all liability under the Company Plans of Seller.  For the purposes of this Section 8.2 a claim is deemed incurred when the services that are the subject of the claim performed; in the case of life insurance, when death occurs; in the case of disability benefits, when the disability occurs; in the case of a hospital stay, when the employee or covered dependent first enters the hospital; and in the case of workers’ compensation, when the injury occurs.  To the extent necessary, Seller may continue to communicate with the Hired Employees regarding their rights and entitlement to any benefits under the Plans, subject to Purchaser’s prior approval, which shall not be unreasonably withheld.

Section 8.3

Employee Files.  

On the Closing Date, or as soon as practicable thereafter, Seller shall deliver to a designee of Purchaser all historical personnel records of each of the Hired Employees, including, but not limited to, employment agreements, confidentiality and noncompete agreements, employment applications, performance reviews, corrective action reports, disciplinary reports, notices of transfer, notices of rate changes, and other similar documents.

Section 8.4

Assistance in Hiring.  

Seller shall use reasonable efforts to assist Purchaser in employing as new employees of Purchaser, all persons presently employed by Seller who are identified by Purchaser prior to the Closing Date.  Seller shall terminate effective as of the Closing Date all employment agreements it has with any of the Hired Employees.  

Section 8.5

Discharge of Business Obligations.  

From and after the Closing Date Seller shall pay and discharge, in accordance with past practice but not less than on a timely basis, all obligations and liabilities incurred, including but not limited to trade payables, current liabilities, and any other Excluded Liability, prior to the Closing Date in respect of the Business, its operations or the Purchased Assets and properties used therein (except for those expressly assumed by Purchaser hereunder), including without limitation any liabilities or obligations to employees, trade creditors, and clients of the Business.

-19-

Section 8.6

Maintenance of Books and Records.  

Each of Seller and Purchaser shall preserve until the fifth anniversary of the Closing Date all Books and Records possessed or to be possessed by such party relating to any of the Purchased Assets, liabilities or business of the Business prior to the Closing Date.  After the Closing Date, where there is a legitimate purpose, such party shall provide the other parties with access, upon prior reasonable written request specifying the need therefor, during regular business hours, to (a) the officers and employees of such party and (b) the books of account and records of such party, but, in each case, only to the extent relating to the Purchased Assets, Assumed Liabilities, or Business prior to the Closing Date, and the other parties and their representatives shall have the right to make copies of such books and records; provided however, that the foregoing right of access shall not be exercisable in such a manner as to interfere unreasonably with the normal operations and business of such party; and provided further, that, as to so much of such information as constitutes trade secrets or confidential business information of such party, the requesting party and its officers, directors and representative will use due care to not disclose such information except (i) as required by law, (ii) with the prior written consent of such party, which consent shall not be unreasonably withheld, or (iii) where such information becomes available to the public generally, or becomes generally known to competitors of such party, through sources other than the requesting party, its affiliates or its officers, directors, or representatives.  Such records may nevertheless be destroyed by a party if such party sends to the other parties written notice of its intent to destroy records, specifying with particularity the contents of the records to be destroyed.  Such records may then be destroyed after the 30th day after such notice is given unless another party objects to the destruction in which case the party seeking to destroy the records shall deliver such records to the objecting party.

Section 8.7

Payments Received.  

Seller and Purchaser each agree that after the Closing they will hold and will promptly transfer and deliver to the other, from time to time as and when received by them, any cash, checks with appropriate endorsements (using their best efforts not to convert such checks into cash), or other property that they may receive on or after the Closing which properly belongs to the other party, including without limitation, any insurance proceeds, and will account to the other for all such receipts.  From and after the Closing, Purchaser shall have the right and authority to endorse without recourse the name of Seller on any check or any other evidences of indebtedness received by Purchaser on account of the Business and the Purchased Assets transferred to Purchaser hereunder.

Section 8.8

UCC Matters.  

From and after the Closing Date, Seller will promptly refer all inquiries with respect to ownership of the Purchased Assets or the Business to Purchaser.  In addition, Seller will execute such documents and financing statements as Purchaser may request from time to time to evidence transfer of the Purchased Assets to Purchaser, including any necessary assignments of financing statements.

Section 8.9

Certain Expenses.  

Any payments made by Seller on behalf of Purchaser or by Purchaser on behalf of Seller which are made after the Closing Date (“Post Closing Payments”) shall be reimbursed by the party on whose behalf the payment was made as follows:  an accounting will take place each Friday for a period of two months after the Closing Date, at which the amount (the “Settlement Amount”) by which Post-Closing Payments made by one party (the “Payee”) exceeds Post-Closing Payments made by the other party (the “Payor”) will be calculated.  The Payor at each such accounting shall issue a check payable to the Payee in satisfaction of the settlement amount for that accounting.  The foregoing notwithstanding to preserve the 

-20-

rights of the parties with respect to third parties, neither party shall make any Post Closing Payment without the prior written consent of the other.

Section 8.10

Further Assurances.  

From and after the date hereof, Seller agrees, without further consideration, to execute and deliver promptly to Purchaser, such further consents, waivers, assignments, endorsements, and other documents and instruments, and to take all such further actions, as Purchaser may from time to time reasonably request, with respect to the assignment, transfer, and delivery to Purchaser of the Purchased Assets, and the fulfillment of any condition precedent to the obligations of Purchaser that was waived by Purchaser in order to close the transactions contemplated herein, and the consummation in full of the transactions provided for herein.

Section 8.11

Assignment and Ownership of Intellectual Property Rights.  

Seller will follow the required and appropriate procedures as specified in the Shrink-wrap Software licenses and by law to assign and transfer its rights in the Shrink-wrap Software to Purchaser, and, if required to record such assignment.  Seller will follow the required and appropriate procedures as required by law or by third party agreement, to assign and transfer its rights in the Intellectual Property to Purchaser, and to record such assignment with the U.S. Patent and Trademark Office and/or the U.S. Copyright Office.  Seller recognizes and agrees that all derivative works, modifications, upgrades, and new versions based on the Intellectual Property, and all new technologies and products developed by Purchaser shall be owned by Purchaser exclusively, including but not limited to all worldwide patent, copyright, trademark, trade secret, confidential information and other proprietary rights.

Section 8.12

Winding Up of Seller.  

From and after the Closing Date, Seller shall cease all business activities and commence winding up its business and affairs.  Seller shall inform Purchaser of the proposed date for filing articles of dissolution so that Purchaser can simultaneously file an amendment to its Certificate of Authority to secure the name “BlendedSchools”.

Section 9. Restrictive Covenants

Section 9.1

Definitions.  

As used herein, the following capitalized terms are used with the meanings thereafter ascribed:

“Affiliate” means any person or entity directly or indirectly Controlling, Controlled by, or under common Control with Seller.  

“Area” means the United States and Canada.

“Competing Enterprise” means any person or entity that is substantially engaged in Seller's business, except that any business related to any asset that is not a Purchased Asset shall not be deemed a “Competing Enterprise”.

“Control” means the power to direct the management and affairs of a person.

“Trade Secrets” means information of Seller which derives economic value, actual or potential, from not being generally known and not being readily ascertainable by proper 

-21-

means to other persons who can obtain economic value from its disclosure or use and which is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality, but shall not include Excluded Information.  Trade Secrets may include both technical or non-technical data, including without limitation,  (a) any process, machine, pattern, compilation, program, method, technique, formula, chemical formula, composition of matter, or device which (1) is not generally known or which Seller, has a reasonable basis to believe may not be generally known, (2) is being used or studied by Seller and is not described in a printed patent or in any literature already published and distributed externally by Seller, and (3) is not readily ascertainable from inspection of a product of Seller; (b) any engineering, technical, or product specifications including those of features used in any current product of Seller or which may be so used, or the use of which is contemplated in a future product of Seller; (c) any application, operating system, communication system, or other computer software (whether in source or object code) and all flow charts, algorithms, coding sheets, routines, subroutines, compilers, assemblers, design concepts, test data, documentation, or manuals related thereto, whether or not copyrighted, patented, or patentable; or (d) information concerning the customers, suppliers, products, pricing strategies of Seller, personnel assignments and policies of Seller, or matters concerning the financial affairs and management of Seller; provided however, that Trade Secrets shall not include any Excluded Information.  As used herein, “Excluded Information” means Proprietary Information (i) which has been voluntarily disclosed to the public by Seller, (ii) independently developed and disclosed by parties other than Seller, or (iii) that otherwise enters the public domain through lawful means or without misappropriation by Seller.

Section 9.2

Non-Solicitation of Employees.  

Until the third (3rd) anniversary of the Closing Date, Seller shall not directly or indirectly solicit, offer employment to, or hire any employee of Purchaser or any of its subsidiaries if (i) such employee is then an employee of Purchaser or any of Purchaser’s subsidiaries, or (ii) such employee has terminated such employment within 180 days of such solicitation or offer.

Section 9.3

Non-Solicitation of Customers.  

Until the fifth (5th) anniversary of the Closing Date, neither Seller nor any Affiliate shall, within the Area, on such Seller’s own behalf, on behalf of any Affiliate, or an behalf of any Competing Enterprise, solicit, contact, call upon, communicate with, or attempt to communication with any customer or prospect of Seller or any representative of any such customer or prospect of Seller, with a view to the sale or provision of any product, deliverable, or service competitive with any product, deliverable, or service sold, provided, or under development by Seller on the Closing Date.

Section 9.4

Covenant Not to Compete by Seller.  

Until the fifth (5th) anniversary of the Closing Date, Seller agree that, neither Seller nor any of Affiliate will, directly or indirectly, own, manage, operate, join, control, or be employed or engaged by, nor participate in the ownership, management, operation, or control of, any Competing Enterprise.  

Section 9.5

Trade Secrets.  

Seller for itself and each Affiliate acknowledges and agrees that all Trade Secrets, and all physical embodiments thereof, are a part of the Purchased Assets and are confidential to and shall be and remain the sole and exclusive property of Purchaser.  Seller for itself and each Affiliate agrees that all Trade Secrets will be held in trust and strictest confidence, that each Affiliate shall protect such Trade Secrets from disclosure, and that each Affiliate will make no use of such Trade Secrets without the prior written consent of Purchaser.  The obligations of confidentiality contained in this Section 9.5 shall apply 

-22-

from the date of this Agreement and with respect to all Trade Secrets at all times thereafter, until such Trade Secret is no longer a trade secret under applicable law.

Section 9.6

Remedies.  

Seller for itself and any Affiliate covenants and agrees that Purchaser by virtue of the consummation of the transactions contemplated by this Agreement will utilize the Purchased Assets in and throughout the Area, and that great loss and irreparable damage would be suffered by Purchaser if Seller should breach or violate any of the terms or provisions of the covenants and agreements set forth in this Section.  Seller for itself and any Affiliate, further acknowledges and agrees that each such covenant and agreement is reasonably necessary to protect and preserve unto Purchaser the benefit of its bargain in the acquisition of the Purchased Assets, including, without limitation, the good will thereof.  Therefore, in addition to all the remedies provided in this Agreement, or available at law or in equity, Seller for itself and any Affiliate jointly and severally agrees Purchaser shall be entitled to a temporary restraining order and a permanent injunction to prevent a breach or contemplated breach of any of the covenants or agreements of Seller contained in this Section 9.6.  The existence of any claim, demand, action, or cause of action of Seller against Purchaser shall not constitute a defense to the enforcement by Purchaser of any of the covenants or agreements herein whether predicated upon this Agreement or otherwise, and shall not constitute a defense to the enforcement by Purchaser of any of its rights hereunder.  

Section 9.7

Blue Penciling.  

In the event that any one or more of the provisions, or parts of any provisions, contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, the same shall not invalidate or otherwise affect any other provision hereof, and the parties hereto agree that such provisions shall be reformed to set forth the maximum limitations permitted under applicable law.  Specifically, but without limiting the foregoing in any way, each of the covenants of the parties to this Agreement contained herein shall be deemed and shall be construed as a separate and independent covenant and should any part or provision of any of such covenants be held or declared invalid by any court of competent jurisdiction, such invalidity shall in no way render invalid or unenforceable any other part or provision thereof or any other covenant of the parties not held or declared invalid. 

Section 10. General Provisions

Section 10.1

Bulk Sales Law Waiver.  

Purchaser and Seller each agree to waive compliance by the other with the provisions of the bulk sales law or comparable law of any jurisdiction to extent that the same may be applicable to the transactions contemplated by this Agreement.  Seller agrees to indemnify and hold Purchaser harmless from and against any loss, damage, liability, cost, expense or claim arising out of any failure to take any required actions under the bulk sales or comparable law of any state.

Section 10.2

Expenses.  

All expenses incurred by the parties hereto in connection with or related to the authorization, preparation, and execution of this Agreement and the Closing of the transactions contemplated hereby, including without limiting the generality of the foregoing, all fees and expenses of agents, representatives, counsel, and accountants employed by any such party, shall be borne solely and entirely by the party which has incurred the same.  

-23-

Section 10.3

Notice.  

Any notice, request, demand, or other communication which is required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given: (a) if sent by email, telecopy, facsimile transmission, or other similar electronic or digital transmission method, when transmitted, provided there is evidence of delivery to the email address or telephone number of the telecopy or facsimile machine; (b) if sent by a nationally recognized next day delivery service that obtains a receipt on delivery, one (1) business day after it is sent; (c) if sent by registered or certified United States mail, five (5) days after it is deposited in the mail, addressed to the proposed recipient at the last known address of the recipient, with the proper postage affixed; (d) if in person, when tendered, and (e) in any other case, when actually received.  Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.:

(a)

If to Seller:

Blendedschools.net

Attention:  Jed Friedrichsen

Email: jfriedrichsen@blendedschools.net

Telephone (573) 999-5425

Facsimile:  (814) 542-2569

With a copy to:

Timothy A. Schoonover

Babst Calland

330 Innovation Blvd., Suite 302

State College, PA 16803

Telephone: (814) 867-8055

Facsimile: (814) 867-8051

(b)

If to Purchaser:

BLSCH Acquisition, LLC

C/O Sibling Group Holdings, Inc.

1355 Peachtree Street, Suite 1150 

Atlanta, GA 30309

Attention: Legal Department

Telephone (404) 551-5274

Facsimile  (404) 890-5615

With a copy to:

Krevolin & Horst, LLC

1201 W. Peachtree St.

Suite 3250

Atlanta, GA 30309

Attention:  Gerry Balboni

Telephone:  (404) 812-3111

Facsimile:   (404) 812-3101

Any party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other parties in the manner above provided for giving notice.  If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made, and if delivered by mail, the date on which such notice, request, instruction, or document is received shall be the date of delivery.

-24-

Section 10.4

Assignment; Binding Effect.  

This Agreement shall be binding upon the parties hereto and their respective successors, permitted assigns and permitted transferees.  Seller may not assign its rights or delegate its obligations hereunder without Purchaser’s consent, which shall not be unreasonably withheld.

Section 10.5

Headings.  

The Section, subsection, and other headings in this Agreement are inserted solely as a matter of convenience and for reference, and are not a part of this Agreement, provided however, that Purchaser may assign this Agreement to any Affiliate or to any successor to its assets and business upon notice to Seller.

Section 10.6

Counterparts.  

This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one counterpart has been signed by each party and delivered to the other party hereto.

Section 10.7

Governing Law.  

This Agreement, the rights of the parties hereunder, and any and all disputes between the parties, shall be governed by, construed, and enforced in accordance with the laws of the State of Georgia, without regard to its conflicts of laws rules.  The parties agree that any appropriate state court sitting in Fulton County, Georgia or any Federal Court sitting in the Northern District of Georgia (Atlanta Division) (collectively, the “Permitted Courts”), shall have exclusive jurisdiction of any dispute, case, or controversy in any way related to, arising under, or in connection with this Agreement, including extra-contractual claims, and shall be a proper forum in which to adjudicate such dispute, case, or controversy, and each party irrevocably: (a) consents to the jurisdiction of the Permitted Courts in such actions, (b) agrees not to plead or claim that such litigation brought in the Permitted Courts has been brought in an inconvenient forum, and (c) waives the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party.  In any suit, arbitration, mediation, or other proceeding to enforce any right or remedy under this Agreement or to interpret any provision of this Agreement, Purchaser will be entitled to recover its costs, including reasonable attorneys’ fees, and all costs and fees incurred on appeal or in a bankruptcy or similar action.

Section 10.8

Arbitration.  

Any Indemnification Claim that is not an Excluded Claim shall, any, Excluded Claim may, and any determination of the scope or applicability of this provision to arbitrate, shall, be submitted to, and settled by, arbitration in the City of Atlanta, State of Georgia, before one (1) arbitrator.  The arbitration shall be administered by JAMS pursuant to its Streamlined Arbitration Rules and Procedures.  Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in the highest court of the forum, state or federal, having jurisdiction.  The expenses of the arbitration shall be borne equally by the parties to the arbitration, provided that each party shall pay for and bear the cost of its own experts, evidence, and counsel's fees, and provided further, that in the discretion of the arbitrator, the arbitrator may, in the award, allocate all or part of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the prevailing party.  This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction.

-25-

Section 10.9

Partial Invalidity.  

Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision or provisions had never been contained herein unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable.

Section 10.10

Survival.  

The covenants, representations, warranties, and agreements contained herein shall survive the Closing of the transactions contemplated herein, for the length of time that Purchaser or Seller, as the case may be, may assert an indemnification for a breach or violation of such covenant, representation, warranty, or agreement pursuant to Section hereof.

IN WITNESS WHEREOF, each party hereto has executed this Agreement, or caused this Agreement to be executed on its behalf by its duly authorized officers, all as of the Closing Date.

Seller:

Blendedschools.net

By:___________________________________

Gregory Hoover, President

Purchaser:

BLSCH Acquisition, LLC

By:

Sibling Group Holdings, Inc., Manager

By: ___________________________________

Mack Leath, CEO

-26-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00227-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00227-of-00352.parquet"}]]