Table of contents

 

ARTICLE I SALE OF THE ACQUIRED ASSETS; CLOSING	1
Section 1.1 Purchase and Sale of the Acquired Assets; Assumption of Assumed Liabilities	1
Section 1.2 Closings	1
Section 1.3 Escrow; Closing Notices; Purchase Price Adjustments	6
Section 1.4 Assumption of Assumed Liabilities	8
Section 1.5 Purchase Price Adjustments	10
Section 1.6 Consent of Third Parties	11
Section 1.7 Allocation of Consideration	11
Section 1.8 Taxes, Utilities and Assessments; Other Allocations	11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER	12
Section 2.1 Authorization; No Conflicts; Formation	12
Section 2.2 Absence of Litigation	13
Section 2.3 Compliance with Laws; Permits; Consents	13
Section 2.4 Acquired Assets; Title	13
Section 2.5 Labor; Employee Benefits	14
Section 2.6 No Brokerage	14
Section 2.7 Environmental Matters	15
Section 2.8 Financial Statements	15
Section 2.9 Absence of Certain Changes	16
Section 2.10 Taxes	17
Section 2.11 Contracts	17
Section 2.12 OSHA Matters	18
Section 2.13 Absence of Certain Business Practices	18
Section 2.14 Insurance	18
Section 2.15 Suppliers	18
Section 2.16 LACMTA CLAIM	19
Section 2.17 No Other Representations or Warranties; Schedules	19
Section 2.18 Disclosure	19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER	20
Section 3.1 Incorporation; Authorization	20
Section 3.2 No Brokerage	20
Section 3.3 No Breaches	21
Section 3.4 Condition of Tangible Assets	21
Section 3.5 Investor Representations	21
Section 3.6 No Other Representations or Warranties; Schedules	22
ARTICLE IV COVENANTS	23
Section 4.1 Conduct of Business	23
Section 4.2 Further Assurances	23
Section 4.3 Public Announcements	24
Section 4.4 Covenant Not to Compete; Non-Solicitation	24
Section 4.5 Seller Name	26
Section 4.6 Investigation	27
Section 4.7 Taxes	27

 

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Section 4.8 Confidentiality	28
Section 4.9 Employees	29
Section 4.10 Health Care Continuation Coverage	29
Section 4.11 Supplementation of Schedules	30
Section 4.12 Replacement of Seller Credit Support	30
Section 4.13 Intentionally Omitted	30
Section 4.14 Insurance	30
Section 4.15 Notification	30
Section 4.16 Cooperation Regarding Programmable Logic Controller	31
Section 4.17 Intentionally Deleted	31
Section 4.18 Contract Extensions; Notice of Certain Events	31
ARTICLE V CONDITIONS PRECEDENT	32
Section 5.1 Conditions Precedent to Obligations of Purchaser to Montgomery Closing	32
Section 5.2 Conditions Precedent to Obligations of Purchaser to WMATA Closing	33
Section 5.3 Conditions Precedent to Obligations of Seller to Montgomery Closing	34
Section 5.4 Conditions Precedent to Obligations of Seller to WMATA Closing	35
ARTICLE VI SURVIVAL; INDEMNIFICATION	36
Section 6.1 Survival	36
Section 6.2 Indemnification	36
Section 6.3 Sole and Exclusive Remedy	39
Section 6.4 Conflict with Transit Authority Documents	40
ARTICLE VII MISCELLANEOUS	40
Section 7.1 Counterparts	40
Section 7.2 Governing Law	40
Section 7.3 Dispute Resolution	41
Section 7.4 Entire Agreement; No Third Party Beneficiary	41
Section 7.5 Expenses	41
Section 7.6 Notices	41
Section 7.7 Successors and Assigns	43
Section 7.8 Headings	43
Section 7.9 Amendments and Waivers	43
Section 7.10 Interpretation; Absence of Presumption	43
Section 7.11 Severability	44
Section 7.12 Further Assurances	44
Section 7.13 Business Days	44
Section 7.14 Bulk Transfer	45
Section 7.15 Transfer and Other Taxes	45
Section 7.16 Termination	45

 

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SCHEDULES & EXHIBITS, ANNEXES

 

Schedule 1.4(a)				–				Certain Montgomery Liabilities
Schedule 1.4(b)				–				Certain WMATA Liabilities
Schedule 1.7				–				Purchase Price Allocation
Schedule 2.1				–				Conflicts
Schedule 2.2				–				Absence of Litigation
Schedule 2.3(a)				–				Compliance with Laws
Schedule 2.3(b)(i)				–				Seller Permits
Schedule 2.3(b)(ii)				–				Hanover Permits
Schedule 2.3(c)				–				Seller Consents
Schedule 2.4(a)				–				Seller Encumbrances
Schedule 2.4(b)				–				Hanover Encumbrances
Schedule 2.5(a)				–				Employees
Schedule 2.5(b)				–				Labor Unions
Schedule 2.7				–				Environmental Matters
Schedule 2.8(a)				–				Financial Statements
Schedule 2.8(b)				–				Hanover Financials
Schedule 2.9				–				Certain Changes
Schedule 2.10				–				Taxes
Schedule 2.11				–				Contracts
Schedule 2.12				–				OSHA Matters
Schedule 2.14				–				Insurance
Schedule 2.15				–				Suppliers
Schedule 4.9				–				Designated Employees
Schedule 4.12				–				Seller Credit Support
Schedule 4.14				–				Required Insurance
Schedule 4.16				–				Hourly Rates
Exhibit A				–				Definitions
Exhibit B				–				Form of Bill of Sale
Exhibit C				–				Form of Assumption Agreement
Exhibit D				–				Form of Closing Certificate
Annex A-1		–				Montgomery Convenience Spare Parts
Annex A-2		–				WMATA Convenience Spare Parts
Annex A-3		–				MBTA Convenience Spare Parts
Annex B-1		–				Montgomery Customer-Owned Spare Parts
Annex B-2		–				WMATA Customer-Owned Spare Parts
Annex B-3		–				LACMTA Customer-Owned Spare Parts
Annex B-4		–				MBTA Customer-Owned Spare Parts
Annex C-1		–				Montgomery Tools
Annex C-2		–				WMATA Tools
Annex C-3		–				MBTA Tools
Annex D-1		–				Montgomery Vehicles
Annex D-2		–				WMATA Vehicles
Annex D-3		–				LACMTA Vehicles

 

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PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (together with the Annexes, Schedules and Exhibits hereto, this “ Agreement ”), dated as of May 7, 2009, is entered into by and between Clean Energy, a California corporation (“ Purchaser ”), and Exterran Energy Solutions, L.P., a Delaware limited partnership (“ Seller ”).  Sometimes each of Seller and Purchaser are referred to herein as a “ Party ”, and together as “ Parties ”.

 

WHEREAS, Seller is engaged, directly and through its wholly-owned subsidiary Hanover Compressed Natural Gas Services, LLC, a Delaware limited liability company (“ Hanover ”), in the compressed natural gas operations and maintenance business, and any ancillary work related thereto, in connection with the Contracts with certain state transit authorities (the “ Business ”); and

 

WHEREAS, Purchaser desires to purchase the Acquired Assets and assume the Assumed Liabilities and Seller desires to sell the Acquired Assets to Purchaser, all on the terms and subject to the conditions set forth in this Agreement;

 

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

 

Certain capitalized terms used herein are defined in Exhibit A .

 

ARTICLE I
SALE OF THE ACQUIRED ASSETS; CLOSING

 

Section 1.1                                       Purchase and Sale of the Acquired Assets; Assumption of Assumed Liabilities .

 

(a)                                   Subject to the terms and conditions of this Agreement, Seller shall sell, convey, transfer, assign and deliver to Purchaser and its successors and assigns, forever, and Purchaser shall purchase and acquire from Seller, the Acquired Assets, free and clear of all Encumbrances (other than Permitted Encumbrances), and Purchaser shall assume the Assumed Liabilities, for the purchase price specified in Section 1.1(b) hereof.

 

(b)                                  Subject to the terms and conditions of this Agreement, Purchaser shall (i) pay Seller an aggregate of $5,875,250, subject to adjustment as set forth herein, in cash in U.S. Dollars (the “ Purchase Price ”), and (ii) assume the Assumed Liabilities.

 

Section 1.2                                       Closings .

 

(a)                                   General .  Subject to the terms and conditions of this Agreement, the closing of the sale and purchase of the Acquired Assets and the assumption of the Assumed Liabilities shall occur in multiple steps.  The consummation of the purchase and sale of the Hanover Interest and the deposit of the Montgomery Base Purchase Price and the WMATA Base Purchase Price into Escrow (the “ Hanover Closing ”) shall occur simultaneously with the execution and delivery of

 

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this Agreement.  The consummation of the purchase and sale of the Montgomery Assets and assumption of the Montgomery Liabilities (the “ Montgomery Closing ”) shall be effective as of the close of business on the earliest mutually convenient date after the delivery by Seller to Purchaser of the Montgomery Closing Notice, not to be later than the tenth Business Day after the satisfaction or waiver of the conditions set forth in Section 5.1 and Section 5.3 hereof, or such earlier or later date as may be agreed upon by the Parties (the “ Montgomery Closing Date ”).  The consummation of the purchase and sale of the WMATA Assets and assumption of the WMATA Liabilities (the “ WMATA Closing ”) shall be effective as of the close of business on the earliest mutually convenient date after the delivery by Seller to Purchaser of the WMATA Closing Notice, not to be later than the tenth Business Day after the satisfaction or waiver of the conditions set forth in Section 5.2 and Section 5.4 hereof or such earlier or later date as may be agreed upon by the Parties (the “ WMATA Closing Date ”).  Each Closing shall take place at 10:00 a.m., local time, on the applicable Closing Date, at the offices of Sheppard, Mullin, Richter & Hampton, LLP, 333 South Hope Street, Suite 4800, Los Angeles, CA 90071 or as may be agreed upon by the Parties.

 

(b)                                  Hanover Closing Deliveries .  In addition to the other things required to be done hereby, at the Hanover Closing, subject to the terms of this Agreement,

 

(i)                                      Seller shall convey and deliver to Purchaser the following:

 

(A)                               an assignment of the Hanover Interest in a form acceptable to Purchaser, duly executed by Seller;

 

(B)                                 the Escrow Agreement, duly executed by Seller;

 

(C)                                 certified resolutions of the general partner of the general partner of Seller evidencing the authority of Seller to consummate the transactions contemplated by this Agreement;

 

(D)                                a good standing certificate for Hanover from the State of Delaware;

 

(E)                                  all books and records of Hanover that are maintained separately from Seller’s books and records, including but not limited to minute books, corporate records and financial documents;

 

(F)                                  a Guaranty, duly executed by the Seller Guarantor, guarantying the obligations of Seller under this Agreement and the Ancillary Agreements, in form and substance acceptable to Purchaser (“ Seller Guaranty ”);

 

(G)                                 a good standing certificate for the Seller Guarantor from the State of Delaware; and

 

(H)                                all other certificates, documents and instruments of conveyance required pursuant hereto to be delivered by or on behalf of Seller, as the case may be, at or prior to the Hanover Closing or as shall, in the reasonable opinion of Purchaser, be necessary to transfer to Purchaser all of the spare parts, convenience

 

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spare parts, tools, vehicles and other tangible assets used by Hanover or its Affiliates in the conduct of Hanover’s business in accordance herewith and, where necessary or desirable, in recordable form;

 

and

 

(ii)                                   Purchaser shall convey and deliver to Seller the following:

 

(A)                               the Hanover Base Purchase Price by wire transfer of immediately available funds in accordance with instructions previously provided by Seller;

 

(B)                                 the Escrow Agreement, duly executed by Purchaser;

 

(C)                                 a Guaranty, duly executed by the Purchaser Guarantor, guarantying the obligations of Purchaser under this Agreement and the Ancillary Agreements, in form and substance satisfactory to Seller (“ Purchaser Guaranty ”);

 

(D)                                evidence satisfactory to Seller of Purchaser’s compliance with Section 4.12 with respect to the MBTA Contract and the LACMTA Contracts;

 

(E)                                  a copy of the documentation that Purchaser intends to file in order to change the company name of Hanover in accordance with Section 4.5;

 

(F)                                  a good standing certificate for Purchaser from the state of California;

 

(G)                                 a good standing certificate for the Purchaser Guarantor from the state of Delaware; and

 

(H)                                certified resolutions of the Board of Directors of Purchaser evidencing the authority of Purchaser to consummate the transactions contemplated by this Agreement.

 

(c)                                   Montgomery Closing Deliveries .  In addition to the other things required to be done hereby, at the Montgomery Closing, subject to the terms of this Agreement,

 

(i)                                      Seller shall convey and deliver to Purchaser the following:

 

(A)                               a bill of sale, in the form attached hereto as Exhibit B (the “ Montgomery Bill of Sale ”) and instruments of assignment, in forms reasonably satisfactory to Purchaser, to evidence the transfer to Purchaser of the Montgomery Assets (other than the Montgomery Contract) in accordance herewith, duly executed by Seller;

 

(B)                                 an assumption agreement in the form attached hereto as Exhibit C (the “ Montgomery Liabilities Assumption ”) to evidence the assumption by Purchaser of the Montgomery Liabilities in accordance herewith, duly executed by Purchaser;

 

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(C)                                 an instrument or instruments (the “ Montgomery Contract Assignment ”) in such form as Montgomery County may require that is reasonably acceptable to Seller and Purchaser or, if Montgomery County does not require any particular form, in a form reasonably acceptable to Seller and Purchaser, to evidence the assignment to Purchaser of the Montgomery Contract in accordance herewith, and the consent of Montgomery County to such assignment (if necessary), duly executed by Seller and Montgomery County;

 

(D)                                documentation to be submitted to Seller’s automobile leasing company necessary to obtain a transfer of title of the motor vehicles set forth on Annex D-1 to Purchaser;

 

(E)                                  all such other certificates, documents and instruments of conveyance required pursuant hereto to be delivered by or on behalf of Seller, as the case may be, at or prior to the Montgomery Closing or as shall, in the reasonable opinion of Purchaser, be necessary to transfer to Purchaser the Montgomery Assets in accordance herewith and, where necessary or desirable, in recordable form;

 

(F)                                  certified resolutions of the general partner of the general partner of Seller evidencing the authority of Seller to consummate the Montgomery Closing;

 

(G)                                 a good standing certificate for Seller from the State of Delaware; and

 

(H)                                if not previously delivered to Purchaser, all other certificates and such other instruments and documents required pursuant hereto to be delivered by or on behalf of Seller, as the case may be, at or prior to the Montgomery Closing;

 

and

 

(ii)                                   Purchaser shall deliver to Seller the following:

 

(A)                               an Escrow Release Notice in the amount of the Montgomery Base Purchase Price, duly executed by Purchaser;

 

(B)                                 the Montgomery Bill of Sale, duly executed by Purchaser;

 

(C)                                 the Montgomery Liabilities Assumption, duly executed by Purchaser;

 

(D)                                the Montgomery Contract Assignment, duly executed by Purchaser;

 

(E)                                  certified board resolutions evidencing the authority of Purchaser to consummate the Montgomery Closing;

 

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(F)                                  a good standing certificate for Purchaser from the state of California; and

 

(G)                                 if not previously delivered to Seller, all other certificates and such other instruments and documents required pursuant hereto to be delivered by or on behalf of Purchaser at or prior to the Montgomery Closing.

 

(d)                                  WMATA Closing Deliveries .  In addition to the other things required to be done hereby, at the WMATA Closing, subject to the terms of this Agreement,

 

(i)                                      Seller shall convey and deliver to Purchaser the following:

 

(A)                               a bill of sale, in the form attached hereto as Exhibit B (the “ WMATA Bill of Sale ”) and instruments of assignment, in forms reasonably satisfactory to Purchaser, to evidence the transfer to Purchaser of the WMATA Assets (other than the WMATA Contract) in accordance herewith, duly executed by Seller;

 

(B)                                 an assumption agreement in the form attached hereto as Exhibit C (the “ WMATA Liabilities Assumption ”) to evidence the assumption by Purchaser of the WMATA Liabilities in accordance herewith, duly executed by Purchaser;

 

(C)                                 an instrument or instruments (the “ WMATA Contract Assignment ”) in such form as WMATA may require that is reasonably acceptable to Seller and Purchaser or, if WMATA does not require any particular form, in a form reasonably acceptable to Seller and Purchaser, to evidence the assignment to Purchaser of the WMATA Contract in accordance herewith, and the consent of WMATA to such assignment (if necessary), duly executed by Seller and WMATA;

 

(D)                                documentation to be submitted to Seller’s automobile leasing company necessary to obtain a transfer of title of the motor vehicles set forth on Annex D-2 to Purchaser;

 

(E)                                  all such other certificates, documents and instruments of conveyance required pursuant hereto to be delivered by or on behalf of Seller, as the case may be, at or prior to the WMATA Closing or as shall, in the reasonable opinion of Purchaser, be necessary to transfer to Purchaser the WMATA Assets in accordance herewith and, where necessary or desirable, in recordable form;

 

(F)                                  certified resolutions of the general partner of the general partner of Seller evidencing the authority of Seller to consummate the WMATA Closing;

 

(G)                                 a good standing certificate for Seller from the State of Delaware; and

 

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(H)                                if not previously delivered to Purchaser, all other certificates and such other instruments and documents required pursuant hereto to be delivered by or on behalf of Seller, as the case may be, at or prior to the WMATA Closing;

 

and

 

(ii)                                   Purchaser shall deliver to Seller the following:

 

(A)                               an Escrow Release Notice in the amount of the WMATA Base Purchase Price, duly executed by Purchaser;

 

(B)                                 the WMATA Bill of Sale, duly executed by Purchaser;

 

(C)                                 the WMATA Liabilities Assumption, duly executed by Purchaser;

 

(D)                                the WMATA Contract Assignment, duly executed by Purchaser;

 

(E)                                  certified board resolutions evidencing the authority of Purchaser to consummate the WMATA Closing;

 

(F)                                  a good standing certificate for Purchaser from the state of California; and

 

(G)                                 if not previously delivered to Seller, all other certificates and such other instruments and documents required pursuant hereto to be delivered by or on behalf of Purchaser at or prior to the WMATA Closing.

 

Section 1.3                                       Escrow; Closing Notices; Purchase Price Adjustments .

 

(a)                                   Escrow Deposit.   Subject to the terms of this Agreement, at the Hanover Closing, Purchaser will deposit $2,700,000 of the Purchase Price (constituting the Montgomery Base Purchase Price and the WMATA Base Purchase Price) into a mutually acceptable interest-bearing escrow account (“ Escrow ”) with U.S. Bank, N.A. (“ Escrow Agent ”) to be disbursed to Seller, in accordance with the terms of this Section 1.3 and a mutually acceptable escrow agreement (the “ Escrow Agreement ”) to be entered into by and among Seller, Purchaser and the Escrow Agent at or prior to the Hanover Closing.

 

(b)                                  Montgomery Closing Notice and Purchase Price Reductions Related to Closing Date.

 

(i)                                      At any time after (A) Montgomery County has indicated to Seller that it is prepared to execute and deliver the Montgomery Contract Assignment, (B) the conditions set forth in Section 5.1(a) and Section 5.1(c) have been satisfied, (C) the conditions set forth in Section 5.3 have been satisfied or Seller is prepared to waive any unsatisfied such conditions, (D) Seller is prepared to deliver the items necessary to satisfy the conditions set forth in Section 5.1(d) and (E) Seller has provided or simultaneously provides the WMATA Closing Notice, Seller may provide written notice (the “ Montgomery Closing Notice ”) to Purchaser indicating that Seller is ready, willing and able to consummate the Montgomery Closing.  The date of Purchaser’s receipt of the Montgomery Closing Notice is referred to herein as the “ Montgomery Record Date ”.

 

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(ii)                                   At the close of business on each of June 30, 2009, July 31, 2009, August 31, 2009 and September 30, 2009, if the Montgomery Closing has not occurred, then the Montgomery Base Purchase Price will be reduced by $60,000 (but not below zero) and Seller shall provide to Purchaser an Escrow Release Notice, duly executed by Seller, instructing the Escrow Agent to release $60,000 to Purchaser from Escrow; provided that, in the event that the Montgomery Record Date has occurred and the failure to effect the Montgomery Closing following the Montgomery Record Date is due to facts or circumstances within the reasonable control of Purchaser then no such reduction shall occur.

 

(iii)                                If the WMATA Closing has not occurred by the close of business on August 31, 2009, then the provisions of Section 1.3(c)(iii) will apply.

 

(iv)                               If the Montgomery Closing has not occurred by the close of business on October 31, 2009, then the Montgomery Assets shall be excluded from the Acquired Assets and the Parties’ obligations with respect to the Montgomery Closing shall terminate, and Seller shall provide to Purchaser an Escrow Release Notice, duly executed by Seller, instructing the Escrow Agent to release $60,000 to Purchaser from Escrow.

 

(c)                                   WMATA Closing Notice and Purchase Price Reductions Related to Closing Date.

 

(i)                                      At any time after (A) WMATA has indicated to Seller that it is prepared to execute and deliver the WMATA Contract Assignment, (B) the conditions set forth in Section 5.2(a) and Section 5.2(c) have been satisfied, (C) the conditions set forth in Section 5.4 have been satisfied or Seller is prepared to waive any unsatisfied such conditions and (D) Seller is prepared to deliver the items necessary to satisfy the conditions set forth in Section 5.3(d), Seller may provide written notice (the “ WMATA Closing Notice ”) to Purchaser indicating that Seller is ready, willing and able to consummate the WMATA Closing.  The date of Purchaser’s receipt of the WMATA Closing Notice is referred to herein as the “ WMATA Record Date ”.

 

(ii)                                   At the close of business on each day after May 8, 2009, if the WMATA Closing has not occurred then the WMATA Purchase Price will be reduced by $10,000 (but not below zero) and, at Purchaser’s request (but no more frequently than monthly), Seller shall provide to Purchaser an Escrow Release Notice, duly executed by Seller, instructing the Escrow Agent to release the aggregate amount of such reductions (to the extent not previously released) to Purchaser from Escrow; provided that, in the event that the WMATA Record Date has occurred and the failure to effect the WMATA Closing following the WMATA Record Date is due to facts or circumstances within the reasonable control of Purchaser then no such reduction shall occur.

 

(iii)                                If the WMATA Closing has not occurred by the close of business on August 31, 2009, then, unless the Parties otherwise agree in writing, the WMATA Assets and the Montgomery Assets shall be excluded from the Acquired Assets and the Parties’ obligations with respect to the WMATA Closing and the Montgomery Closing shall terminate.  Upon such termination, Seller shall provide to Purchaser an Escrow Release Notice, duly executed by Seller, instructing the Escrow Agent to release the balance of the Escrow to Purchaser.

 

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Section 1.4                                       Assumption of Assumed Liabilities .

 

(a)                                   Subject to the terms of this Agreement, at the Montgomery Closing Purchaser shall assume all liabilities and obligations

 

(i)                                      of Seller under the Montgomery Contract arising from facts and circumstances occurring

 

(A)                               exclusively after the Montgomery Closing, or

 

(B)                                 both before and after the Montgomery Closing, but solely to the extent attributable to the post-closing occurrence,

 

including in either case, without limitation, liabilities relating to warranties, repair or replacement work or any other contractual obligations that accrue or become payable or performable pursuant to the terms of the Montgomery Contract, and for personal injuries and property damage,

 

(ii)                                   that are specifically set forth in Schedule 1.4(a)  to this Agreement,

 

(iii)                                related to the Montgomery Business or Montgomery Assets and arising from facts and circumstances occurring

 

(A)                               exclusively after the Montgomery Closing, or

 

(B)                                 both before and after the Montgomery Closing, but solely to the extent attributable to the post-closing occurrence,

 

including in either case, without limitation, liabilities for Taxes or Environmental, Health and Safety Liabilities, and

 

(iv)                               the transfer and other Taxes set forth in Section 7.15 hereof related to the transfers at the Montgomery Closing.

 

Collectively, the liabilities set forth in (i) – (iv) above are referred to herein as the “ Montgomery Liabilities ”.

 

(b)                                  Subject to the terms of this Agreement, at the WMATA Closing Purchaser shall assume all liabilities and obligations

 

(i)                                      of Seller under the WMATA Contract arising from facts and circumstances occurring

 

(A)                               exclusively after the WMATA Closing, or

 

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(B)                                 both before and after the WMATA Closing, but solely to the extent attributable to the post-closing occurrence,

 

including in either case, without limitation, liabilities relating to warranties, repair or replacement work or any other contractual obligations that accrue or become payable or performable pursuant to the terms of the WMATA Contract, and for personal injuries and property damage,

 

(ii)                                   that are specifically set forth in Schedule 1.4(b)  to this Agreement,

 

(iii)                                related to the WMATA Business or WMATA Assets and arising from facts and circumstances occurring

 

(A)                               exclusively after the WMATA Closing, or

 

(B)                                 both before and after the WMATA Closing, but solely to the extent attributable to the post-closing occurrence,

 

including in either case, without limitation, liabilities for Taxes or Environmental, Health and Safety Liabilities, and

 

(iv)                               the transfer and other Taxes set forth in Section 7.15 hereof related to the transfers at the WMATA Closing.

 

Collectively, the liabilities set forth in (i) – (iv) above are referred to herein as the “ WMATA Liabilities ”.

 

(c)                                   Notwithstanding anything to the contrary contained herein, Purchaser shall not assume or be bound by or be obligated or responsible for any duties, responsibilities, commitments, expenses, obligations or liabilities of Seller (or which may be asserted against or imposed upon Purchaser as a successor or transferee of Seller or as an acquirer of the Montgomery Assets or the WMATA Assets or otherwise as a matter of Law) of any kind or nature, whether fixed or contingent, known or unknown, warranties, obligations or claims (collectively, the “ Non-Assumed Liabilities ”), other than the Montgomery Liabilities and the WMATA Liabilities.  Subject to the foregoing, all of the following shall be considered Non-Assumed Liabilities for the purposes of this Agreement:

 

(i)                                      any liability or obligation of Seller arising out of any Contract that (A) is required by the terms thereof to be discharged on or prior to the applicable Closing, or (B) relates to or arises out of a breach or default by Seller on or prior to the applicable Closing (including any event occurring at or prior to the applicable Closing that with the lapse of time or the giving of notice, or both, would become a breach or default under such Contract);

 

(ii)                                   except for any and all sales and use, transfer, conveyance, recordation and filing fees, Taxes or assessments to be paid by Purchaser pursuant Section 7.15 hereof, any liability for Taxes under the Montgomery Contract arising prior to the Montgomery Closing Date or under the WMATA Contract arising prior to the WMATA Closing Date;

 

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(iii)                                any liability or obligation arising (whether arising before or after any Closing) under or with respect to any Benefit Plan or any other compensation, policy or arrangement or collective bargaining agreement maintained, contributed to or entered into at any time by Seller or any of its Affiliates prior to such Closing or with respect to the employment of any employee, agent or independent contractor by Seller or any of its Affiliates (whether or not employed by Purchaser after such Closing), including any liability or obligation with respect to workers compensation, unemployment insurance premiums or any claims arising under any federal, state or local tax withholding, employment, labor or discrimination Laws;

 

(iv)                               any liability or obligation of Seller relating to the operation of Seller prior to the applicable Closing arising by operation of Law under any common Law or statutory doctrine (including successor liability or de facto merger);

 

(v)                                  any liabilities of Seller to Employees arising out of or triggered by the consummation of the transactions contemplated by this Agreement;

 

(vi)                               any liability or obligation related to the Montgomery Business, the Montgomery Assets, the WMATA Business or the WMATA Assets arising from facts and circumstances occurring (A) exclusively before the applicable Closing or (B) both before and after the applicable Closing but solely to the extent attributable to the pre-Closing occurrence; and

 

(vii)                            any Environmental, Health and Safety Liabilities of Seller that may exist or that may arise out of facts or circumstances existing prior to the applicable Closing.

 

(d)                                  Seller hereby retains all Non-Assumed Liabilities.

 

Section 1.5                                       Purchase Price Adjustments .

 

(a)                                   Hanover Working Capital.   The parties acknowledge that, prior to the Hanover Closing, Hanover’s customers have generally made payments directly to Seller and Hanover’s expenses have generally been paid directly by Seller.  Accordingly, the Parties agree that, from and after the Hanover Closing, (i) Seller shall be responsible for the timely payment of all of Hanover’s accounts payable as of the Hanover Closing and (ii) Seller shall be entitled to receive the benefit of all of Hanover’s accounts receivable as of the Hanover Closing and the Hanover WIP.  Any dispute as to which Party is entitled to retain any funds received or as to which Party is obligated to make any payment pursuant to this Section 1.5(a) shall be submitted to the Accountants for resolution, with the Accountants’ determination to be final and binding on both Parties.  The cost of the Accountants shall be borne half by Seller and half by Purchaser.

 

(b)                                  Equipment Adjustments .  Within three Business Days after each Closing Date, Purchaser and a representative from Seller will perform a count of the applicable assets and prepare a mutually agreed-upon post-closing statement setting forth the MBTA Equipment Adjustment, the LACMTA Equipment Adjustment, the Montgomery Equipment Adjustment or the WMATA Equipment Adjustment (as applicable) as of such Closing Date, utilizing the values set forth on Annexes A-1 through C-3, as applicable.  If the count reveals items of equipment that are not of a type set forth on the applicable Annexes, then the value for such item shall be as agreed upon by Seller and Purchaser.  If the Parties cannot agree on a value for any such item,

 

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then Seller shall retain such item and no credit will be given to Seller for it in the applicable adjustment.  Within five Business Days after the date that the post-closing statement is agreed upon a true-up payment in the amount of the applicable adjustment will be paid in cash by Purchaser to Seller (if the adjustment is positive) and by Seller to Purchaser (if the adjustment is negative).

 

Section 1.6                                       Consent of Third Parties .  Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any of the Contracts or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third Person, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Seller or Purchaser thereunder.  Seller will use its commercially reasonable efforts to obtain the consent of each such Person for the assignment to Purchaser of any such Contract.

 

Section 1.7                                       Allocation of Consideration .  The allocation of the Purchase Price among the Acquired Assets and Hanover’s assets shall be as set forth on Schedule 1.7 hereto (the “ Allocation ”).  The Parties hereto covenant and agree that the Allocation shall be conclusive and final for all purposes of this Agreement.  Purchaser and Seller shall each report the federal, state and local income and other Tax consequences of the transactions contemplated by this Agreement in a manner consistent with the Allocation and cooperate in the preparation and filing of Form 8594 under Section 1060 of the Code (or any successor form or successor provision of any future Tax Law, or any comparable provisions of state, or local tax Law), with their respective federal, state and local income tax returns for the taxable year that includes the applicable Closing Dates.  Upon each Closing and each post-Closing adjustment to the Purchase Price, Purchaser and Seller will revise the Allocation to reflect any adjustment in the Purchase Price attributable thereto pursuant to Section 1.3(b)(ii), Section 1.3(c)(ii) or Section 1.5.

 

Section 1.8                                       Taxes, Utilities and Assessments; Other Allocations .   In the case of the Acquired Assets, any ad valorem, property or similar Taxes, any charges for utilities or similar costs or assessments, and other similar periodic charges and all payments under the Contracts shall be prorated on a per diem basis through the applicable Closing Date (based on estimates or the most recent amounts paid), with Seller being responsible for all of such prorated charges attributable to the period on or prior to such Closing Date and Purchaser being responsible for all of such prorated charges attributable to the period after such Closing Date.  Promptly upon receipt, Seller or Purchaser, as appropriate, shall provide the other with copies of all bills for such items for which the other Party is responsible pursuant to this Section 1.8.  The resulting amount payable by Seller or Purchaser shall be paid promptly upon demand by the Party hereto to whom such payment is owed.

 

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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents and warrants to and for the benefit of Purchaser as follows:

 

Section 2.1                                       Authorization; No Conflicts; Formation .

 

(a)                                   Seller has full requisite power and authority to execute, deliver and perform this Agreement and the other instruments and documents contemplated hereby to be executed and delivered by Seller, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  Seller has taken all necessary actions to authorize the execution, delivery and performance of this Agreement and the other instruments and documents contemplated hereby to be executed and delivered by Seller.  The execution, delivery and performance by Seller of this Agreement and the other instruments and documents contemplated hereby to be executed and delivered by Seller, and the consummation by Seller of the transactions contemplated hereby and thereby do not and will not (i) violate or conflict with or result in the breach of any provision of Seller’s certificate of limited partnership or partnership agreement, (ii) except as set forth on Schedule 2.1 , whether after the giving of notice or lapse of time or both, violate or conflict with any provision of, or result in the modification, cancellation, termination or acceleration of, any obligation under, or result in the imposition or creation of any Encumbrances upon Seller, the Acquired Assets, Hanover or any of Hanover’s assets pursuant to any agreement or contract by which Seller, the Acquired Assets, Hanover or any of Hanover’s assets is bound or (iii) violate or conflict with any Law applicable to Seller, the Acquired Assets, Hanover or Hanover’s assets or by which the Acquired Assets or Hanover’s assets may be bound or affected, other than, in the case of clauses (ii) and (iii), such violations or conflicts that would not have a Material Adverse Effect.  This Agreement has been, and the other instruments and documents contemplated hereby to be executed and delivered by Seller at each Closing will, at such Closing, have been, duly executed and delivered by Seller, and constitute (or will constitute at such Closing, as applicable) legal, valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether in equity or at Law).

 

(b)                                  Seller (i) is a limited partnership Seller duly formed, validly existing and in good standing under the Laws of the State of Delaware, (ii) has all requisite power and authority to own and operate the Acquired Assets as they are now being operated, and (iii) is in good standing and is duly qualified to transact business in each jurisdiction in which Seller’s ownership or use of the Acquired Assets requires it to be so qualified, with such exceptions as do not individually or in the aggregate have a Material Adverse Effect.  Other than Hanover, Seller has no Affiliates or any investments in, or joint venture arrangements with, any other Person that materially affects the Acquired Assets.

 

(c)                                   Hanover (i) is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware, (ii) has all requisite power and authority to own and operate its assets as they are now being operated,  and (iii) is in good standing and is duly qualified to transact business in each jurisdiction in which Hanover’s ownership or use of its assets requires it to be so qualified, with such exceptions as do not individually or in the aggregate have a Material Adverse Effect.  Hanover has no Affiliates or any investments in, or joint venture arrangements with, any other Person that materially affects Hanover’s assets.

 

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Section 2.2                                       Absence of Litigation .  Except as set forth on Schedule 2.2 , there is no Action pending or, to the Knowledge of Seller, threatened against Seller or Hanover, at Law or in equity, before or by any court, arbitrator, panel or other Government Authority that is related to or affects the Business, the Acquired Assets or Hanover’s assets.  Neither Seller nor Hanover is currently operating under or subject to any order, award, stipulation, judgment, writ, decree, determination or injunction of any arbitrator or Government Authority that is related to or affects the Business, the Acquired Assets or Hanover’s assets.  There is not pending against Seller or Hanover any Action (a) seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement, (b) seeking to prohibit or limit the ownership or operation by Purchaser of any portion of the Acquired Assets, or (c) which otherwise could reasonably individually or in the aggregate be expected to have a Material Adverse Effect.

 

Section 2.3                                       Compliance with Laws; Permits; Consents .

 

(a)                                   Except as set forth on Schedule 2.3(a) , Seller is in compliance with all Laws applicable to the Acquired Assets, and Hanover is in compliance with all Laws applicable to its assets, except for such non-compliance as would not individually or in the aggregate have a Material Adverse Effect.

 

(b)                                  Seller owns, or has full rights under, all Permits, all of which are listed on Schedule 2.3(b)(i)  hereto, of any Government Authority which are necessary for the operation of the Acquired Assets as currently operated, except where the absence of which would not have a Material Adverse Effect.  Hanover owns, or has full rights under, all Permits, all of which are listed on Schedule 2.3(b)(ii)  hereto, of any Government Authority which are necessary for the operation of Hanover’s assets as currently operated, except where the absence of which would not have a Material Adverse Effect.  Each of the foregoing is in full force and effect, and Seller and Hanover are in compliance with all of their respective obligations with respect thereto, and no event has occurred which permits, or upon the giving of notice or lapse of time or otherwise would permit, revocation or early termination of any of the foregoing, with such exceptions as do not individually or in the aggregate have a Material Adverse Effect.

 

(c)                                   Except as set forth in Schedule 2.3(c)  hereto, no filing, consent, waiver, approval or authorization of any Government Authority or of any third Party is required to be made or obtained on the part of Seller or Hanover in connection with the execution, delivery and performance by Seller of this Agreement or the consummation by Seller of the transactions contemplated hereby, except for such filings, consents, waivers, approvals or authorizations the failure of which to obtain would, individually or in the aggregate, not have a Material Adverse Effect.

 

Section 2.4                                       Acquired Assets; Title .

 

(a)                                   Seller has good and marketable title to all of the tangible assets included in the Acquired Assets free and clear of all Encumbrances, except for (i) liens for Taxes, assessments and other governmental charges which are not due and payable and which may thereafter be paid without penalty, (ii) Encumbrances arising by or through Purchaser, (iii) Encumbrances listed on Schedule 2.4(a)  hereto and (iv) such minor imperfections in title as do not detract in any material respect from the value or utility of the subject property in the operation of the Acquired Assets,

 

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taken as a whole, (collectively, “ Permitted Encumbrances ”).  Except as set forth in Schedule 2.4(a) , there is no financing statement under the UCC or any security agreement authorizing any secured Party to file any such financing statement with respect to any of the Acquired Assets.  At each Closing, Seller will convey to Purchaser good title to all of the tangible assets included in the Acquired Assets applicable to such Closing, free and clear of all Encumbrances other than Permitted Encumbrances.

 

(b)                                  Seller owns 100% of the issued and outstanding membership interest of Hanover and there are no other outstanding equity interests in Hanover.  Except as set forth in Schedule 2.4(b)  hereto, Hanover owns all of the spare parts, convenience spare parts, tools and vehicles that are necessary for the conduct of the Business as currently conducted by Hanover on the date of this Agreement.  Hanover has good and marketable title to all of its tangible assets free and clear of all Encumbrances, except for Permitted Encumbrances.  Except as set forth in Schedule 2.4(b) , there is no financing statement under the UCC or any security agreement authorizing any secured Party to file any such financing statement with respect to any of Hanover’s assets.  At the Closing, Seller will convey to Purchaser good title to the Hanover Interest, free and clear of all Encumbrances.

 

Section 2.5                                       Labor; Employee Benefits .

 

(a)                                   Schedule 2.5(a)  hereto sets forth a complete and correct list of the name, job title, base salary or wage rate, bonus entitlement and any compensatory benefits of each of Seller’s current Employees whose work is primarily related to the Acquired Assets or to Hanover, and whether or not each such Employee is actively at work and, if not, the reason that such Employee is not actively at work, including, without limitation, any stock option, stock purchase, stock award, deferred compensation, profit sharing, incentive compensation, bonus, health, life insurance, cafeteria, flexible spending, dependent care, fringe benefit, vacation pay, holiday pay, disability, sick pay, workers compensation, unemployment, severance pay, employee loan, educational assistance plan, policy or arrangement in which such current Employees participate.  Hanover has no employees and does not maintain or contribute to any Benefit Plans.

 

(b)                                  Except as set forth in Schedule 2.5(b) , no Employees are represented by a union or other labor organization or association, and to the Knowledge of Seller, no such organizing efforts are now being conducted with respect to the Employees.  Seller has not, at any time during the preceding three years, had a strike, work stoppage or work slowdown, nor, to the Knowledge of Seller, is any such action threatened.  Seller is not involved in nor, to the Knowledge of Seller, threatened with, any labor dispute, arbitration, lawsuit or administrative proceeding relating to labor matters involving the Employees.

 

(c)                                   As it relates to the Business, Seller has fully complied with the verification requirements and the recordkeeping requirements of IRCA; the information and documents on which the Seller relied in complying with IRCA are true and correct; and there have not been any discrimination complaints filed against Seller pursuant to IRCA.

 

Section 2.6                                       No Brokerage .  No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the other documents contemplated by this transaction or the transactions contemplated hereby or thereby based upon any agreements, written or oral, made by or on behalf of Seller or Hanover.

 

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Section 2.7                                       Environmental Matters .

 

Except as set forth in Schedule 2.7 and except in each case as would not have a Material Adverse Effect:

 

(a)                                   Seller, with regard to its operation of the Acquired Assets, and Hanover, are and at all times have been, in compliance with, and have not been and are not in violation of or liable under, any Environmental Law;

 

(b)                                  Neither Seller nor Hanover has received any actual or threatened notice or other communication from (i) any Person acting in the public interest, or (ii) the current or prior owner or operator with respect to the Acquired Assets or any of Hanover’s assets, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health and Safety Liabilities with respect to any of the Acquired Assets or other property or asset (whether real, personal or mixed) in which Seller or Hanover has or has had an interest, or with respect to any property at or with respect to any Release of Hazardous Materials;

 

(c)                                   Seller has no Knowledge of or any basis to reasonably expect, nor has it received, any citation, directive, inquiry, notice, order, summons, warning or other communication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of any Environmental Health and Safety Liabilities with respect to the Acquired Assets or Hanover’s assets;

 

(d)                                  Seller has no Knowledge of Environmental, Health and Safety Liabilities with respect to the Acquired Assets or Hanover’s assets;

 

(e)                                   Seller has no Knowledge that there are any (i) underground storage tanks, (ii) asbestos-containing material or (iii) equipment containing polychlorinated biphenyls on any of its properties related to the Acquired Assets or on any of Hanover’s properties.

 

Section 2.8                                       Financial Statements .

 

(a)                                   Attached hereto as Schedule 2.8(a)  are true, correct and complete copies of an unaudited pro forma financial statement for the Business for the year ended December 31, 2008 and an unaudited pro forma balance sheet for the Business at December 31, 2008 (the “ Financial Statements ”).

 

(b)                                  Except as set forth in Schedule 2.8(b) , the Financial Statements, for purposes of this Section 2.8, are in accordance with the books and records of Seller and Hanover and have been prepared in accordance generally accepted accounting principles consistently applied during such periods and present fairly the financial position and results of operations of the Business as conducted by Seller and Hanover on a consolidated basis as of the dates and for the periods indicated.

 

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(c)                                   Hanover has no obligation, liability or commitment of any nature whatsoever (whether direct or indirect, fixed or contingent, known or unknown, due or to become due, accrued or otherwise, and whether or not determined or determinable), and there is no existing condition, situation or set of circumstances which is reasonably expected to result in such an obligation, liability or commitment, except for (i) obligations, liabilities and commitments reflected or reserved against in the unaudited consolidated balance sheet of the Business at December 31, 2008 (the “ Balance Sheet Date ”) included in the Financial Statements (the “ Balance Sheet ”), (ii) obligations, liabilities and commitments that are not of a nature required by GAAP to be reflected on the Balance Sheet and (iii) current liabilities incurred in the Ordinary Course of Business after the Balance Sheet Date that, individually or in the aggregate, do not have, and are not reasonably likely to have, a Material Adverse Effect.

 

Section 2.9                                       Absence of Certain Changes .  Except as contemplated herein or as set forth on Schedule 2.9 hereto, since December 31, 2008, Seller has operated the Acquired Assets and Hanover has operated only in the Ordinary Course of Business, and there has been no:

 

(a)                                   event or occurrence that individually or in the aggregate has caused a Material Adverse Effect;

 

(b)                                  physical damage, destruction or loss in an amount exceeding $20,000 in the aggregate affecting the Acquired Assets or Hanover’s assets which is not covered by insurance or remedied within thirty (30) days;

 

(c)                                   increase in compensation payable or to become payable to any Employee, or any bonus payment made or promised to any Employee, or any material change in personnel policies, insurance benefits, Benefit Plans or other compensation arrangements affecting the Employees (other than increases in wages and salaries or bonus payments made in the Ordinary Course of Business);

 

(d)                                  waiver of any rights of Seller or Hanover under any Contract;

 

(e)                                   mortgage, pledge or subjection to any Encumbrance (other than Permitted Encumbrances) of any of the Acquired Assets or on any of Hanover’s assets;

 

(f)                                     sale or transfer of the Acquired Assets or, except in the Ordinary Course of Business, any of Hanover’s assets;

 

(g)                                  entrance into any material transaction regarding the Acquired Assets or Hanover’s assets other than in the Ordinary Course of Business;

 

(h)                                  any labor union organizing activity, any actual or threatened employee strikes, work stoppages, slow-downs or other labor disputes or disturbances or any Material Adverse Change in relations with Employees; or

 

(i)                                      any authorization, approval, agreement or commitment to do any of the foregoing.

 

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Section 2.10                                 Taxes .

 

(a)                                   Except as set forth on Schedule 2.10 and as would not have a Material Adverse Effect, Hanover has timely filed all material Returns which are required to be filed by it, which returns and reports are true, correct and complete in all material respects, and paid all Taxes that are required to be paid by Hanover or (except for Taxes that are Permitted Encumbrances) to which the Acquired Assets are or may be subject.

 

(b)                                  There are no material Actions now pending, nor, to the Knowledge of Seller, except as set forth on Schedule 2.10 , are there any material Actions pending or proposed against Hanover, nor are there any pending audits by, the IRS or other Government Authority relating to any Taxes or assessments, or any claims or deficiencies asserted with respect thereto, that could result in a lien on Hanover or its assets.

 

(c)                                   Hanover has duly and timely complied with all applicable Laws, rules and regulations with respect to the withholding of Taxes, remittance to Taxing Authorities of withheld Taxes, and reporting in respect of employee wages and other payments to employees and other Persons for all periods.

 

Section 2.11                                 Contracts .

 

(a)                                   The compact disc attached to Schedule 2.11 contains true, correct and complete copies of all Contracts.  Except as contemplated in this Agreement or as set forth on Schedule 2.11 or with such exceptions as would not individually or in the aggregate have a Material Adverse Effect:

 

(i)                                      each of the Contracts is valid and binding on and enforceable against Seller or Hanover (as applicable) in accordance with its terms and on and against the other Parties thereto, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar Laws affecting the enforcement of creditors’ rights generally and except to the extent that injunctive or other equitable relief is within the discretion of a court of competent jurisdiction, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether in equity or at Law);

 

(ii)                                   neither Seller, nor Hanover nor, to the Knowledge of Seller, any other Party to any Contract, is in breach or default under any Contract;

 

(iii)                                neither Seller nor Hanover has waived any right under any Contract;

 

(iv)                               no event has occurred that, with the giving of notice or the lapse of time or both, would constitute a breach or default under any Contract;

 

(v)                                  assignment of the Montgomery Contract to Purchaser pursuant to the Montgomery Contract Assignment will not constitute a breach of the Montgomery Contract;

 

(vi)                               assignment of the WMATA Contract to Purchaser pursuant to the WMATA Contract Assignment will not constitute a breach of the WMATA Contract; and

 

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(vii)                            to Seller’s Knowledge, there are no unresolved disputes under any of the Contracts.

 

(b)                                  There are no contracts or agreements to which Seller or Hanover is a Party or under which Seller, the Acquired Assets, Hanover or Hanover’s assets are in any way bound that in any way would exclude or restrict Purchaser or any of its Affiliates upon consummation of the transactions contemplated hereby, from competing in any form of business or other activity in any geographic area.

 

Section 2.12                                 OSHA Matters .  Hanover is in compliance with the requirements of the Occupational Safety and Health Act and the regulations promulgated thereunder and any similar Laws or regulations of any state or local jurisdiction (“ OSHA ”).  Hanover has not received any citation from any Government Authority, including, without limitation, the Occupational Safety and Health Administration or any Government Authority inspector setting forth any respect in which the facilities or operations of Hanover are not in compliance with OSHA, or the regulations under such act, which non-compliance has not been corrected or remedied to the satisfaction of any Government Authority or inspector.  Schedule 2.12 hereto sets forth a list of all citations heretofore issued to Hanover under OSHA and correspondence from and to any Government Authority and any Government Authority inspectors during the past five years related to the Business.

 

Section 2.13                                 Absence of Certain Business Practices .  Neither Seller nor Hanover nor any manager, officer, employee, agent or Affiliate of Seller or Hanover, acting on Seller or Hanover’s behalf has, directly or indirectly, (a) since December 31, 2006, given any gift or similar benefit to any customer, supplier, competitor or employee or official of any Government Authority with regard to the Acquired Assets or Hanover’s assets which would subject Seller or Hanover to any damage or penalty in any civil, criminal or governmental litigation or proceeding and which would have a Material Adverse Effect, or (b) acted in any other unlawful manner with regard to the Acquired Assets or Hanover’s assets with, to, or in connection with Seller’s or Hanover’s customers, suppliers, or competitors which would have a Material Adverse Effect.

 

Section 2.14                                 Insurance.   Schedule 2.14 lists as of the date of this Agreement all policies of property, fire, casualty, liability, business interruption workmen’s compensation and other forms of insurance of any kind relating to the Business as conducted by Seller and Hanover (the “ Insurance Policies ”).  ACORD Certificates of all Insurance Policies have been made available to Purchaser.  All of the Insurance Policies are in full force and effect and are maintained with reputable insurance carriers, and Seller has made all payments required to maintain the Insurance Policies in full force and effect.  Seller has not received notice of default under any Insurance Policy, nor has it received written notice or, to the Seller’s Knowledge, oral notice of any pending or threatened termination or cancellation, coverage limitation or reduction or premium increase with respect to any Insurance Policy.

 

Section 2.15                                 Suppliers .  Neither Seller nor Hanover is required to provide bonding or any other security arrangements in connection with any transactions with any of its suppliers.  Schedule 2.15 lists all material suppliers of the Seller and Hanover related to the Business for the fiscal year ended December 31, 2008.  Neither Seller nor Hanover has received any written or, to the Knowledge of the Seller, oral notice from any suppliers on Schedule 2.15 to that effect that

 

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any such suppliers will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to supplies provided to Seller or Hanover related to the Business (whether as a result of the consummation of the transactions contemplated hereby or otherwise.)

 

Section 2.16                                 LACMTA CLAIM .  The LACMTA Claim represents a bona fide claim that Seller and Hanover have property investigated and asserted in good faith.  Neither Hanover nor Seller has used any false or fraudulent records to support the LACMTA Claim.

 

Section 2.17                                 No Other Representations or Warranties; Schedules .  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE II (AS MODIFIED BY THE SCHEDULES HERETO), NEITHER SELLER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO SELLER, ITS AFFILIATES, THE BUSINESS, THE ACQUIRED ASSETS, THE ASSUMED LIABILITIES OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, SELLER DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY SELLER, ANY AFFILIATE OF SELLER OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES, AND THE ACQUIRED ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE II HEREOF (AS MODIFIED BY THE SCHEDULES HERETO), SELLER (I) EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO THE CONDITION OF THE ACQUIRED ASSETS, THE CUSTOMER-OWNED EQUIPMENT OR ANY OTHER ASSETS OR EQUIPMENT AT OR IN USE AT ANY FACILITY, WHETHER OR NOT OWNED BY SELLER OR HANOVER (INCLUDING ANY IMPLIED OR EXPRESSED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS) AND (II) HEREBY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT OR INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO PURCHASER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO PURCHASER BY ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF SELLER OR ANY OF ITS AFFILIATES).  SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO PURCHASER REGARDING THE PROBABLE SUCCESS OR PROFITABILITY OF THE BUSINESS.  THE DISCLOSURE OF ANY MATTER OR ITEM IN ANY SCHEDULE HERETO SHALL NOT BE DEEMED TO CONSTITUTE AN ACKNOWLEDGEMENT THAT ANY SUCH MATTER IS REQUIRED TO BE DISCLOSED.

 

Section 2.18                                 Disclosure .  Copies of all documents and other written information on the CD attached to Schedule 2.11 are true and complete copies thereof and include all amendments, supplements or modifications thereto or waivers thereunder.  To the Knowledge of Seller, the documents and other written information on the CD attached to Schedule 2.11 do not omit any material facts necessary, in light of the circumstances under which such information is furnished, to make the statements set forth therein not misleading.

 

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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to and for the benefit of Seller as follows:

 

Section 3.1                                       Incorporation; Authorization .

 

(a)                                   Purchaser has full requisite power and authority to execute, deliver and perform this Agreement and the other instruments and documents contemplated hereby to be executed and delivered by Purchaser, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  Purchaser has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other instruments and documents contemplated hereby to be executed and delivered by Purchaser.  The execution, delivery and performance by Purchaser of this Agreement and the other instruments and documents contemplated hereby to be executed and delivered by Purchaser, and the consummation by Purchaser of the transactions contemplated hereby and thereby do not and will not (i) violate or conflict with or result in the breach of any provision of Purchaser’s certificate of incorporation or bylaws or (ii) whether after the giving of notice or lapse of time or both, violate or conflict with any provision of, or result in the modification, cancellation, termination or acceleration of, any obligation under, or result in the imposition or creation of any Encumbrances upon Purchaser or its assets pursuant to any agreement or contract by which Purchaser or its assets are bound (iii) violate or conflict with any Law applicable to Purchaser or any other restriction of any kind or character to which Purchaser is subject, other than, in the case of clauses (ii) and (iii), such violations or conflicts that would not have a Material Adverse Effect on Purchaser.  This Agreement has been, and the other instruments and documents contemplated hereby to be executed and delivered by Purchaser at each Closing will, at such Closing, have been, duly executed and delivered by Purchaser, and constitute (or will constitute at such Closing, as applicable) legal, valid and binding obligations of Purchaser enforceable against Purchaser in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether in equity or at Law).

 

(b)                                  Purchaser (i) is a corporation, duly formed, validly existing and in good standing under the Laws of the State of California, (ii) and has all requisite corporate power and authority to own and operate the Acquired Assets and to carry on the Business as it is now being conducted, and (iii) upon each Closing, shall be in good standing and duly qualified to transact business in each jurisdiction in which Purchaser’s ownership or use of the Acquired Assets applicable to such Closing requires it to be so qualified.

 

Section 3.2                                       No Brokerage .  No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the other documents contemplated by this transaction or the transactions contemplated hereby or thereby based upon any agreements, written or oral, made by or on behalf of Purchaser.

 

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Section 3.3                                       No Breaches .  Purchaser is unaware of any breaches of the representations, warranties or covenants made by Seller in Article II hereof.

 

Section 3.4                                       Condition of Tangible Assets .  NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER IS NOT MAKING ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN BY SELLER IN ARTICLE II (AS MODIFIED BY THE SCHEDULES HERETO AS SUPPLEMENTED OR AMENDED), AND PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED THEREIN, THE ACQUIRED ASSETS AND THE TANGIBLE ASSETS COVERED BY THE CONTRACTS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS, AND PURCHASER IS ACCEPTING ALL ASSETS OR EQUIPMENT AT OR IN USE AT ANY FACILITY, WHETHER OR NOT OWNED BY SELLER OR HANOVER IN THEIR CURRENT CONDITION ON AN “AS IS,” “WHERE IS” BASIS.

 

Section 3.5                                       Investor Representations .

 

(a)                                   Purchase Entirely for Own Account .  This Agreement is made with Purchaser in reliance upon Purchaser’s representation to the Seller, which by Purchaser’s execution of this Agreement Purchaser hereby confirms, that the Hanover Interest to be purchased by Purchaser will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third person, with respect to the Hanover Interest.

 

(b)                                  Reliance Upon Purchaser’s Representations .  Purchaser understands that the Hanover Interest is not, at the time of the Hanover Closing may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof or other available exemption thereunder, and that the Seller’s reliance on such exemption is based on Purchaser’s representations set forth in this Agreement.  Purchaser realizes that the basis for the exemption may not be present if, notwithstanding such representations, Purchaser intends to acquire the Hanover Interest only for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise.  Purchaser has no such intention.

 

(c)                                   Receipt of Information .  Purchaser has received and reviewed information about Hanover.  Purchaser further represents that through its representatives it has had an opportunity to ask questions and receive answers from Seller regarding the terms and conditions of the Hanover Interest and the business, properties, prospects and financial condition of Hanover and to obtain additional information (to the extent Seller possessed such information or could acquire it without unreasonable effort or expense) requested by Purchaser.  The foregoing, however, does not limit or modify the representations and warranties of Seller in Article II of this Agreement or the right of Purchaser to rely thereon.

 

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(d)                                  Investment Experience .  Purchaser is experienced in evaluating and investing in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Hanover Interest.  Purchaser has not been organized for the purpose of acquiring the Hanover Interest.

 

(e)                                   Accredited Investor .  Purchaser represents and warrants that it is an “Accredited Investor,” as such term is defined in Rule 501(a) of Regulation D of the Securities Act.

 

(f)                                     Restricted Securities .  Purchaser understands that the Hanover Interest may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Hanover Interest or an available exemption from registration under the Securities Act, the Hanover Interest must be held indefinitely.  In particular, Purchaser is aware that the Hanover Interest may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that Rule are met.  Among the conditions for use of Rule 144 is the availability of current information to the public about Hanover.  Such information is not now available and Hanover has no present plans to make such information available.

 

Section 3.6                                       No Other Representations or Warranties; Schedules .  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III (AS MODIFIED BY THE SCHEDULES HERETO), NEITHER PURCHASER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO PURCHASER, ITS AFFILIATES OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, PURCHASER DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY PURCHASER, ANY AFFILIATE OF PURCHASER OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III HEREOF (AS MODIFIED BY THE SCHEDULES HERETO), PURCHASER HEREBY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT OR INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO SELLER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO PURCHASER BY ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF PURCHASER OR ANY OF ITS AFFILIATES).

 

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ARTICLE IV
COVENANTS

 

Section 4.1                                       Conduct of Business .  Except as otherwise specifically permitted by this Agreement or with the prior written consent of Purchaser, from and after the date of this Agreement and until the applicable Closing Date for the respective Acquired Assets, Seller agrees that:

 

(a)                                   Except as otherwise contemplated pursuant to this Agreement, Seller shall operate the Acquired Assets and the Business as currently operated and only in the Ordinary Course of Business;

 

(b)                                  Except as otherwise contemplated pursuant to this Agreement, Seller shall use its commercially reasonable efforts to preserve the Acquired Assets intact, to keep available to Purchaser the services of the Transferred Employees, to preserve for Purchaser the good will of the suppliers, distributors, customers and others having business relationships with respect to the Acquired Assets and the Business and to continue in full force and effect without material modification any existing policies or binders of insurance currently maintained by Seller;

 

(c)                                   Seller shall promptly inform Purchaser in writing of any specific event or circumstance of which it has or obtains Knowledge, that has or is reasonably likely to have, individually or in the aggregate, taken together with the other events or circumstances, a Material Adverse Effect;

 

(d)                                  Except as otherwise contemplated pursuant to this Agreement, Seller shall not:

 

(i)                                      change or modify in any respect existing inventory management or credit and collection policies, procedures and practices with respect to accounts receivable related to the Contracts without first notifyi