UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported): |
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| The OTCQX Best Market* |
* Until December 2, 2019, Basic Energy Services, Inc.’s common stock traded on the New York Stock Exchange under the symbol “BAS”. On December 3, 2019, Basic Energy Service, Inc.’s common stock began trading on the OTCQX® Best Market tier of the OTC Markets Group Inc. Deregistration under Section 12(b) of the Act became effective on March 16, 2020.
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry into a Material Definitive Agreement.
The information regarding the APAs (as defined below) and the DIP Note (as defined below) set forth in Item 1.03 of this Current Report on Form 8-K is incorporated into this Item 1.01 by reference.
Item 1.03. Bankruptcy or Receivership.
Chapter 11 Filing
On August 17, 2021, Basic Energy Services, Inc. (the “Company”) and certain of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Bankruptcy Petitions,” and the cases commenced thereby, the “Chapter 11 Cases”) for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Chapter 11 Cases are being jointly administered under the caption In re Basic Energy Services, Inc., et al., Case No. 21-90002 (DRJ).
No trustee has been appointed and the Company will continue to manage itself and its subsidiaries as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Debtors are seeking approval of a variety of “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations. In connection with the Chapter 11 Cases, the Debtors are seeking authority to sell substantially all of their assets pursuant to Section 363 of the Bankruptcy Code. Information related to the Chapter 11 Cases, including Bankruptcy Court filings, are available at a website administered by the Company’s noticing and claims agent, Prime Clerk LLC, at https://cases.primeclerk.com/basicenergy.
APAs
Select APA
In connection with the Chapter 11 Cases, on August 17, 2021, Basic Energy Services, L.P. and Agua Libre Midstream, LLC, wholly-owned subsidiaries of the Company (collectively, the “Select Sellers”), entered into an Asset Purchase Agreement (the “Select APA”) with Select Energy Services, Inc. (“Select”) and Select Energy Services, LLC, a wholly-owned subsidiary of Select (“Select Buyer”). Pursuant to the terms of the Select APA, the Select Sellers agreed to sell to the Select Buyer all or substantially all of the Select Sellers’ water logistic assets located outside the State of California, which includes, among other things, all water logistics trucks located outside the State of California, certain specialized tank trucks, storage tanks, pipelines, water wells, and disposal facilities related to the water logistic assets, salt water disposal wells and certain real property (the “Select Transaction”) for a purchase price of $20,000,000, of which $15,000,000 in cash and $5,000,000 in Class A Common Stock of Select (the “Select Purchase Price”), subject to certain customary purchase price adjustments. As part of the consideration, Select Buyer will be assuming certain liabilities associated with the assets being conveyed by the Select Sellers, including, all liabilities related to the applicable water logistic assets from and after closing of the Select Transaction.
In connection with the execution of the Select APA, Select Buyer will deposit, within one business day following the execution of the Select APA, $2,000,000 to be held in escrow. Upon the closing of the Select Transaction, the deposit will be credited against the Select Purchase Price and held in escrow to secure the Select Sellers' obligations with respect to the post-closing purchase price adjustments. The Select APA contains customary representations, warranties and covenants and is anticipated to close in September 2021, subject to customary closing conditions and approval by the Bankruptcy Court. The Select APA does not impose any post-closing indemnification obligations on the Select Sellers.
A copy of the Select APA has been filed with the Bankruptcy Court, along with a motion seeking, among other relief, the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase all or a portion of the Select Sellers’ water logistic assets. The description of the Select APA set forth above is qualified in its entirety by reference to the Select APA filed herewith as Exhibit 2.1 and incorporated herein by reference.
Axis APA
In connection with the Chapter 11 Cases, on August 17, 2021, the Company, Basic Energy Services, L.P., C&J Well Services, Inc. and KVS Transportation, Inc., all wholly-owned subsidiaries of the Company (collectively, the “Axis Sellers”), entered into an Asset Purchase Agreement (the “Axis APA”) with Axis Energy Services Holdings, LLC (“Axis”). Pursuant to the terms of the Axis APA, the Axis Sellers agreed to sell to Axis certain assets owned by the Axis Sellers, including, but not limited to, all assets associated with the Axis Sellers’ business lines outside the State of California (excluding the water logistic business), well service rights, real property locations inclusive of, but not limited to, real property owned in New Mexico, Oklahoma and Texas, all assets within the fishing and rental tool service lines, all assets within the coiled tubing service line, and all rolling stock assets required to support the operating assets being purchased by Axis (the “Axis Transaction”) for a purchase price of $25,000,000, of which $17,500,000 in cash and $7,500,000 in preferred equity interests in Axis (the “Axis Purchase Price”), subject to certain customary purchase price adjustments. As part of the consideration, Axis will be assuming certain liabilities associated with the assets being conveyed by the Axis Sellers, including, all liabilities related to the applicable assets from and after closing of the Axis Transaction.
In connection with the execution of the Axis APA, Axis will deposit, within one business day following the execution of the Axis APA, $2,500,000 to be held in escrow. Upon the closing of the Axis Transaction, the deposit will be credited against the purchase price and held in escrow to secure the Axis Sellers' obligations with respect to the post-closing purchase price adjustments. From the execution date of the APA until the date an auction is held in accordance with bidding procedures approved by the Bankruptcy Court for the sale of the assets, Axis has the right to conduct an environmental assessment of the Axis Sellers’ assets and if any matter is discovered that would cause, or would reasonably be expected to cause, any such asset to be in violation of any environmental law or any environmental permit or requires, or would reasonably be expected to require, remedial or corrective action under any environmental law the Axis Sellers may elect to cure such matter, reduce the purchase price by the cost to remedy such violation or effect such corrective action or, if the, cost to remedy such violation or effect such corrective action exceeds the allocated value of such asset, exclude such asset from the Axis Transaction and reduce the Axis Purchase Price by the allocated value of such asset; provided no adjustment to the Axis Purchase Price will occur except to the extent such costs and allocated values of any excluded asset, in the aggregate, exceed $500,000. The Axis APA contains customary representations and warranties and is anticipated to close in September 2021, subject to customary closing conditions and approval by the Bankruptcy Court. The Axis APA does not impose any post-closing indemnification obligations on the Axis Sellers.
A copy of the Axis APA has been filed with the Bankruptcy Court, along with a motion seeking, among other relief, the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase all or a portion of the Axis Sellers’ assets. The description of the Axis APA set forth above is qualified in its entirety by reference to the Axis APA filed herewith as Exhibit 2.2 and incorporated herein by reference.
Berry APA
In connection with the Chapter 11 Cases, on August 17, 2021, the Company, Basic Energy Services, L.P., C&J Well Services, Inc. and KVS Transportation, Inc., all wholly-owned subsidiaries of the Company (collectively, the “Berry Sellers”), entered into an Asset Purchase Agreement (the “Berry APA” and, together with the Select APA and Axis APA, the “APAs”) with Berry Corporation (bry) (“Berry”). Pursuant to the terms of the Berry APA, the Berry Sellers agreed to sell to Berry certain assets associated with the Berry Sellers’ business lines in the State of California, including but not limited to, well service rights, certain real property locations owned in the State of California, all assets within the fishing and rental tool service lines, all assets within the coiled tubing service line, and all rolling stock assets required to support the operating assets being purchased by Berry (the “Berry Transaction”) for a cash purchase price of $27,000,000 (the “Berry Purchase Price”). As part of the consideration, Berry will be assuming certain liabilities associated with the assets being conveyed by the Berry Sellers, including, all liabilities related to the applicable assets from and after closing of the Berry Transaction.
In connection with the execution of the Berry APA, Berry will deposit, within one business day following the execution of the Berry APA, $2,700,000 to be held in escrow. Upon the closing of the Berry Transaction, the deposit will be credited against the Berry Purchase Price and one-half of the deposit amount will be held in escrow to secure the Select Sellers' obligations with respect to the post-closing purchase price adjustments. The Berry APA contains customary representations and warranties and is anticipated to close in September 2021, subject to customary closing conditions and approval by the Bankruptcy Court. The Berry APA does not impose any post-closing indemnification obligations on the Berry Sellers.
A copy of the Berry APA has been filed with the Bankruptcy Court, along with a motion seeking, among other relief, the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase all or a portion of the Berry Sellers’ assets. The description of the Berry APA set forth above is qualified in its entirety by reference to the Berry APA filed herewith as Exhibit 2.3 and incorporated herein by reference.
DIP Note
In connection with the Chapter 11 Cases, the Debtors filed motions seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in that certain Debtor-in-Possession Secured Multi-Draw Promissory Note, dated as of August 18, 2021 (the “DIP Note”), among the Company, as borrower, the various lenders from time to time party thereto and Guggenheim Credit Services, LLC, as agent (the “Agent”).
It is expected that the DIP Note will provide for term loans in an aggregate principal amount not to exceed, as of the Closing Date (as defined in the DIP Note), $35 million (the “Term Loans”).
The Term Loans will bear interest at LIBOR (subject to a 1% floor) for the applicable interest period plus 9.00%. The Company must also pay (i) an upfront fee in an aggregate amount equal to 5.0% of the aggregate principal amount of the Term Loans, (b) an administration fee equal to $175,000 and (c) an exit fee equal to 1.0% of the aggregate principal amount of the Term Loans payable on the earlier to occur of (1) the date that all the obligations under the DIP Note are paid in full in cash and (2) the Maturity Date (as defined in the DIP Note).
The DIP Note includes certain customary representations and warranties, covenants applicable to the Company and, with certain exceptions, its subsidiaries, and events of default. If an event of default under the DIP Note occurs and is continuing, then the Agent may declare any outstanding obligations under the DIP Note to be immediately due and payable.
The obligations under the DIP Note are guaranteed by the other Debtors. Subject to customary exceptions and limitations, the obligations under the DIP Note are secured by a lien on substantially all of the assets of the Company and each other Debtor.
The description of the DIP Note set forth above is qualified in its entirety by reference to the DIP Note, which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or Obligation under an Off Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.03 of this Form 8-K regarding the DIP Note is incorporated herein by reference.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The commencement of the Chapter 11 Cases constitutes an event of default that accelerated the obligations under the following debt instruments (the “Debt Instruments”):
| · | The ABL Credit Agreement, dated as of October 2, 2018 (as amended, restated, amended and restated, supplemented, or modified from time to time), by and among, the Company, the lenders party from time to time thereto and Bank of America, N.A., in its capacity as administrative agent. |
| · | The Indenture, dated as of October 2, 2018 (as amended, restated, amended and restated, supplemented, or modified from time to time), by and among, the Company, the other Debtors party thereto, as guarantors, the lenders party from time to time thereto and UMB Bank, N.A., in its capacity as trustee and collateral agent. |
| · | The Senior Secured Promissory Note, dated as of March 9, 2020 (as amended, restated, amended and restated, supplemented, or modified from time to time), by and among, the Company, the other Debtors party thereto, as guarantors, and Ascribe III Investments LLC (“Ascribe”). |
| · | The Second Lien Delayed Draw Promissory Note, dated as of October 15, 2020 (as amended, restated, amended and restated, supplemented, or modified from time to time), by and among, the Company, the other Debtors party thereto, as guarantors, and Ascribe. |
| · | The Super Priority Credit Agreement, dated as of May 3, 2021 (as amended, restated, amended and restated, supplemented, or modified from time to time), by and among, the Company, the lenders party from time to time thereto and Cantor Fitzgerald Securities, in its capacity as administrative agent. |
Any efforts to enforce payment obligations under the Debt Instruments are automatically stayed as a result of the filing of the Chapter 11 Cases and the holders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 16, 2021, the Board of Directors of Basic approved the implementation of a Key Employee Retention Program (the “KERP”) for 33 of the Company’s employees, which is designed to retain key employees of the Company in their current roles over the near term while providing them with financial stability. The KERP payments are in lieu of any existing non-salary compensation plans or severance payments, if any, that would otherwise be payable to the KERP participants.
The KERP provides up to $1.4 million to the plan participants in two installment payments, contingent upon the participants’ continued employment with the Company through the applicable “retention period”, which is the date that is 30 days following the date that the sale transaction(s) close in the chapter 11 cases and the Company’s debtor-in-possession facility is repaid. If a KERP participant is terminated for cause (as defined in the KERP) or resigns other than for good reason (as defined in the KERP) prior to the occurrence of certain events, such participant will forfeit his or her KERP payment.
On August 16, 2021, the Board of Directors of the Company approved the implementation of a Key Employee Incentive Program (the “KEIP”), which is designed to incentive key employees of the Company to maintain productivity and consummate a value maximizing sale transaction. The KEIP provides for a total award pool of $600,000 to the Company’s Chief Executive Officer, Chief Financial Officer, and Executive Vice President of Operations if a sale transaction metric is achieved at threshold level and $850,000 (in the aggregate) if such metric is achieved at target level, subject to the prior repayment in full of the Company’s debtor-in-possession facility. The KEIP awards are in lieu of any existing non-salary compensation plans, including bonuses, long-term incentive awards, or severance payments, if any, that would otherwise be due to or payable to the KEIP participants. The KEIP awards may be clawed back if a KEIP participant resigns or is terminated for cause (as defined in the KEIP) before 30 days following the consummation of a sale transaction.
Item 7.01. Regulation FD Disclosure.
On August 17, 2021, the Company issued a press release announcing the filing of the Bankruptcy Petitions and the commencement of the Chapter 11 Cases. A copy of the press release is attached hereto as Exhibit 99.1.
The Company cautions that trading in the Company’s securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual recovery, if any, by holders of the Company’s securities in the Chapter 11 Cases.
The information set forth in Item 7.01 of this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing.
Cautionary Statement on Forward-Looking Statements
This Current Report on Form 8-K contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. The words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “intend”, “plan”, “project”, and similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on the Company’s current views and assumptions and involve risks and uncertainties that include, among other things: risks and uncertainties relating to the Chapter 11 Cases, including but not limited to, the Company’s ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Cases, the effects of the Chapter 11 Cases on the Company and on the interests of various constituents, potential delays in the Chapter 11 process due to the effects of the COVID-19 virus, objections to the APAs, the DIP Note or other pleadings filed that could protract the Chapter 11 Cases, the Bankruptcy Court’s rulings in the Chapter 11 Cases, including the approvals of the terms and conditions of, and the transactions contemplated by, the APAs, and the DIP Note and the outcome of the Chapter 11 Cases in general, the length of time the Company will operate under the Chapter 11 Cases, risks associated with third-party motions in the Chapter 11 Cases, the potential adverse effects of the Chapter 11 Cases on the Company’s liquidity or results of operations and increased legal and other professional costs related to the Chapter 11 Case, the ability of the Company to meet the closing conditions and successfully consummate the APAs, employee attrition and the Company’s ability to retain senior management and other key personnel due to the distractions and uncertainties, the trading price and volatility of the Company’s common stock and other factors disclosed from time to time in the Company’s filings with the Securities and Exchange Commission or otherwise, including the factors discussed in Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K and in the Company’s periodic reports on Form 10-Q. The Company therefore cautions readers against relying on these forward-looking statements. All forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
The Company is not undertaking any obligation to update forward-looking statements or other statements it may make even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. The exhibits listed in the Exhibit Index below are filed as part of this report. |
EXHIBIT INDEX
| Exhibit No. | Description |
| 2.1 | Asset Purchase Agreement, dated as of August 17, 2021, by and among Basic Energy Services, L.P. and Agua Libre Midstream, LLC, Select Energy Services, Inc. and Select Energy Services, LLC. |
| 99.1 | Press Release dated August 17, 2021. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BASIC ENERGY SERVICES, INC. |
| Date: August 18, 2021 | By: | /s/ Adam L. Hurley |
| Adam L. Hurley | ||
| (Executive Vice President, Chief Financial Officer, Treasurer and Secretary) |
Exhibit 2.1
ASSET PURCHASE AGREEMENT
dated as of
August 17, 2021
by and between
Basic Energy Services, L.P. and
Agua Libre Midstream LLC,
as Sellers,
Select Energy Services, Inc.,
as Parent,
and
Select Energy Services, LLC,
as Buyer
TABLE OF CONTENTS
Page
| ARTICLE I DEFINITIONS | 1 | |
| Section 1.01 | Definitions | 1 |
| ARTICLE II PURCHASE AND SALE | 2 | |
| Section 2.01 | Purchase and Sale of the Assets | 2 |
| Section 2.02 | Excluded Assets | 4 |
| Section 2.03 | Consideration | 6 |
| Section 2.04 | Adjustments to the Purchase Price | 6 |
| Section 2.05 | Closing | 9 |
| Section 2.06 | Final Settlement Statement | 10 |
| Section 2.07 | Post-Closing Payments | 12 |
| Section 2.08 | No Duplicative Effect; Methodologies | 12 |
| Section 2.09 | Purchase Price Deposit | 13 |
| Section 2.10 | Division of Revenues | 14 |
| Section 2.11 | Division of Expenses | 14 |
| Section 2.12 | Consents to Assign | 14 |
| Section 2.13 | Consents for Purchased Contracts | 16 |
| Section 2.14 | Assets Sold “As Is, Where Is” | 16 |
| Section 2.15 | Presence of Wastes, NORM, Hazardous Substances and Asbestos | 17 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS | 18 | |
| Section 3.01 | Organization | 18 |
| Section 3.02 | Authority and Authorization | 18 |
| Section 3.03 | Enforceability | 18 |
| Section 3.04 | Conflicts | 18 |
| Section 3.05 | Material Contracts | 19 |
| Section 3.06 | Approvals | 20 |
| Section 3.07 | Environmental Matters | 20 |
| Section 3.08 | Litigation | 21 |
| Section 3.09 | Intellectual Property | 21 |
| Section 3.10 | Insurance Coverage | 22 |
| Section 3.11 | Taxes | 22 |
| Section 3.12 | Employment Matters | 22 |
| Section 3.13 | Employee Benefits | 23 |
| Section 3.14 | Letters of Credit | 23 |
| Section 3.15 | Preferential Purchase Rights | 23 |
| Section 3.16 | Broker | 24 |
| Section 3.17 | Investment | 24 |
| Section 3.18 | Compliance with Laws | 25 |
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| Section 3.19 | Sufficiency of Assets | 25 |
| Section 3.20 | Permits | 25 |
| Section 3.21 | Properties | 25 |
| Section 3.22 | No Other Representations | 26 |
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER | 26 | |
| Section 4.01 | Organization | 26 |
| Section 4.02 | Authorization and Authority | 27 |
| Section 4.03 | Enforceability | 27 |
| Section 4.04 | Capitalization | 27 |
| Section 4.05 | Securities Filings; Financial Statements; Absence of Liabilities | 29 |
| Section 4.06 | Absence of Changes | 30 |
| Section 4.07 | Conflicts | 30 |
| Section 4.08 | Broker | 30 |
| Section 4.09 | Financial Ability | 30 |
| Section 4.10 | Approvals | 30 |
| Section 4.11 | Litigation | 31 |
| Section 4.12 | Bankruptcy | 31 |
| Section 4.13 | Investigation | 31 |
| Section 4.14 | Qualification | 32 |
| Section 4.15 | No Other Representations | 32 |
| ARTICLE V COVENANTS OF SELLERS | 32 | |
| Section 5.01 | Operating Covenants | 32 |
| Section 5.02 | Assumption and Rejection of Executory Contracts and Leases | 34 |
| Section 5.03 | Access | 35 |
| Section 5.04 | Permits | 37 |
| Section 5.05 | Title Cooperation | 37 |
| Section 5.06 | Certain Accounts Payable | 38 |
| ARTICLE VI COVENANTS OF PARENT AND BUYER | 38 | |
| Section 6.01 | Access | 38 |
| Section 6.02 | Data Retention | 38 |
| Section 6.03 | Registration of Parent Class A Common Stock | 39 |
| Section 6.04 | Current Public Information; Legend Removal | 44 |
| ARTICLE VII COVENANTS OF PARENT, BUYER AND SELLERS | 45 | |
| Section 7.01 | Commercially Reasonable Efforts; Further Assurances | 45 |
| Section 7.02 | Bankruptcy Proceedings | 45 |
| Section 7.03 | Public Announcements | 48 |
| Section 7.04 | Confidentiality | 48 |
| Section 7.05 | Employee Matters | 48 |
ii
| Section 7.06 | Tax Matters; Apportionment of Tax Liability | 50 |
| Section 7.07 | Disclosure Schedule Updates | 53 |
| Section 7.08 | Replacement of Existing Letters of Credit | 54 |
| Section 7.09 | Casualty or Condemnation Loss | 55 |
| Section 7.10 | Transition Services Agreement | 55 |
| ARTICLE VIII CONDITIONS TO CLOSING | 56 | |
| Section 8.01 | Conditions to Obligations of Parent, Buyer and Sellers | 56 |
| Section 8.02 | Conditions to Obligation of Parent and Buyer | 56 |
| Section 8.03 | Conditions to Obligation of Sellers | 57 |
| ARTICLE IX TERMINATION | 57 | |
| Section 9.01 | Grounds for Termination | 57 |
| Section 9.02 | Effect of Termination | 60 |
| Section 9.03 | Break-Up Fee; Expense Reimbursement | 61 |
| ARTICLE X SURVIVAL AND INDEMNIFICATION | 62 | |
| Section 10.01 | Survival | 62 |
| Section 10.02 | Indemnification by Buyer | 63 |
| Section 10.03 | Indemnification Procedures | 64 |
| Section 10.04 | Express Negligence | 65 |
| Section 10.05 | Tax Treatment of Indemnity Payments | 65 |
| Section 10.06 | Sole and Exclusive Remedy | 65 |
| ARTICLE XI MISCELLANEOUS | 66 | |
| Section 11.01 | Notices | 66 |
| Section 11.02 | Amendments and Waivers | 67 |
| Section 11.03 | Expenses | 67 |
| Section 11.04 | Successors and Assigns/Liquidating Trust | 68 |
| Section 11.05 | Governing Law | 68 |
| Section 11.06 | Jurisdiction | 68 |
| Section 11.07 | Waiver of Jury Trial | 68 |
| Section 11.08 | Counterparts; Effectiveness; Third Party Beneficiaries | 69 |
| Section 11.09 | Entire Agreement | 69 |
| Section 11.10 | Severability | 69 |
| Section 11.11 | Specific Performance | 69 |
| Section 11.12 | Certain Acknowledgements and Limitations | 70 |
| Section 11.13 | Disclosure Schedules | 70 |
| Section 11.14 | Preparation of Agreement | 70 |
iii
EXHIBITS, ANNEXES, SCHEDULES AND DISCLOSURE SCHEDULES
| Exhibits | |
| Exhibit A | Definitions |
| Exhibit B | Form of Assignment and Bill of Sale |
| Exhibit C | Form of Assumption Agreement |
| Exhibit D | Form of Surface Deed |
| Exhibit E | Form of Seller Certificate |
| Exhibit F | Form of Seller FIRPTA Certificate – Basic |
| Exhibit G | Form of IP Assignment Agreement |
| Exhibit H | Form of Buyer Certificate |
| Exhibit I | Form of Bid Procedures Order |
| Exhibit J | Form of Sale Order |
| Annexes | |
| Annex A | SWD Wells and Water Wells |
| Annex B | Surface Tracts |
| Annex C | Surface Leases |
| Annex D | Rights of Way |
| Annex E | Equipment |
| Annex F | Permits |
| Annex G | Vehicles and Vehicle Finance Leases |
| Annex H | Applicable Contracts |
| Annex I | Intellectual Property |
| Schedules | |
| Schedule 1.01 | Assumed Indebtedness |
| Schedule 2.02(l) | Excluded Contracts and Other Assets |
| Schedule 2.02(y) | Excluded Assets |
| Schedule 5.02(a) | 365 Schedule |
| Schedule 5.02(b) | Desired 365 Contracts |
| Schedule 7.06(c) | Allocation Methodology |
| Disclosure Schedules | |
| Disclosure Schedule 3.05(a) | Material Contracts |
| Disclosure Schedule 3.05(b) | Material Contract Defaults |
| Disclosure Schedule 3.06 | Approvals |
| Disclosure Schedule 3.07 | Environmental Matters |
| Disclosure Schedule 3.08 | Litigation |
| Disclosure Schedule 3.10 | Insurance Coverage |
| Disclosure Schedule 3.11 | Taxes |
| Disclosure Schedule 3.12(a) | Seller Employees |
| Disclosure Schedule 3.12(b) | Independent Contractors |
| Disclosure Schedule 3.14 | Existing Letters of Credit |
| Disclosure Schedule 3.15 | Preferential Purchase Rights |
| Disclosure Schedule 4.04(f) | Parent Subsidiaries |
| Disclosure Schedule 4.05(a) | Parent Reports |
| Disclosure Schedule 4.10 | Parent Approvals |
iv
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) dated as of August 17, 2021 (the “Execution Date”), is entered into by and between Select Energy Services, LLC, a Delaware limited liability company (“Buyer”), Select Energy Services, Inc., a Delaware corporation (“Parent”), Basic Energy Services, L.P., a Delaware limited partnership (“Basic”), and Agua Libre Midstream LLC, a Delaware limited liability company (“Agua Libre” and, together with Basic, each a “Seller” and, collectively, “Sellers”). Parent, Buyer and Sellers are sometimes referred to collectively herein as the “Parties” and individually as a “Party.”
WITNESETH:
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, the Assets (as defined below);
WHEREAS, Sellers and certain of their affiliates are contemplating filing voluntary petitions for relief (the “Bankruptcy Cases”) under chapter 11 of the Bankruptcy Code in the Bankruptcy Court;
WHEREAS, Sellers desire to sell, transfer and assign to Buyer, and Buyer desires to purchase and acquire from Sellers, the Assets, and, in connection therewith, the Parties desire for Buyer to assume the Assumed Liabilities;
WHEREAS, in connection with the transactions contemplated hereby, simultaneously with the execution of this Agreement Sellers, Buyer and the Escrow Agent shall enter into the Deposit Escrow Agreement; and
WHEREAS, Sellers’ ability and obligation to consummate the Transactions are subject to, among other things, the entry of the Sale Order.
NOW, THEREFORE, in consideration of the mutual promises, representations and warranties made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. The capitalized terms used but not defined herein and defined in Exhibit A shall have the meanings set forth in Exhibit A hereto, which is incorporated herein by reference.
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ARTICLE II
PURCHASE AND SALE
Section 2.01 Purchase and Sale of the Assets. Subject to the terms and conditions and for the consideration herein set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers agree to sell, assign, convey and deliver to Buyer, and Buyer agrees to purchase and acquire from Sellers at the Closing (as defined below), all of Sellers’ right, title and interest in and to the assets described below, other than the Excluded Assets (collectively, the “Assets”):
(a) the salt water disposal wells described on Annex A (the “SWD Wells”) and all fee, leasehold and other surface and subsurface rights attributable to the SWD Wells (the “SWD Land Rights”) and all disposal equipment and facilities located on the lands covered by the SWD Land Rights;
(b) the additional water wells described on Annex A (the “Water Wells”) and all fee, leasehold and other surface and subsurface rights attributable to the Water Wells (the “Water Land Rights”) and all equipment and facilities located on the lands covered by the Water Land Rights;
(c) the fee surface tracts described on Annex B (collectively, the “Surface Tracts”);
(d) all surface leases, licenses, subleases, rental or occupancy agreements, concessions and other agreements (written or oral) to which either Seller is a party and covering real property that is used or held for use primarily in connection with the ownership or operation of the SWD Wells or Water Wells or to the extent which are required for access to the SWD Wells or Water Wells, including those described on Annex C (collectively, together with all amendments and modifications thereto, the “Surface Leases”) and any surface facilities, yards, shops, and offices located on the Surface Leases, together with all fixtures, buildings, structures or other improvements thereon;
(e) all easements, rights-of-way, leases, servitudes, licenses, privileges, surface use agreements and other surface or subsurface interests or rights (the “Right-of-Way Agreements”) held or owned by Sellers to the extent used or held for use primarily in connection with the ownership or operation of the SWD Wells or Water Wells or to the extent which are required for access to the SWD Wells or Water Wells, including those described on Annex D, together with all rights, hereditaments and appurtenances thereto (collectively, together with all amendments and modifications thereto, the “Rights of Way”);
(f) (i) all pipelines, transportation equipment, other equipment, storage facilities, machinery, fixtures, furniture, buildings, structures, improvements and other real, personal and mixed property, operational and nonoperational, located on the Properties (except for any such personal property leased from Third Parties), and (ii) all other pipelines, transportation equipment, other equipment, storage facilities, machinery, fixtures, furniture, buildings, structures, improvements and other real, personal and mixed property, operational or nonoperational, located off the Properties, used or held for use primarily in connection with the ownership of the Assets (except for any such personal property leased from Third Parties), which (whether described in the foregoing clauses (i) or (ii)) shall include, but not be limited to, that property described on Annex E;
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(g) to the extent assignable by Sellers to Buyer, all Permits set forth on Annex F (and, for the avoidance of doubt, solely to the extent the applicable Governmental Authority consents to or otherwise approves the assignment or transfer of the applicable Permit);
(h) all Assigned Contracts (other than those listed on Schedule 2.02(l)) and any and all amendments, ratifications or extensions of the foregoing (collectively, the “Purchased Contracts”);
(i) to the extent, and only to the extent, in the possession of Sellers and related to the Assets, (i) to the extent assignable by Sellers to Buyer, and subject to the payment by Buyer of any fees required as a condition to the assignment thereof to Buyer, all geophysical, geological, engineering and other technical data, whether written or in electronically reproducible form, and (ii) all books, records, files, reports, and accounting records and copies of Tax records, including: (A) land and title records (including lease files, Third Party brokerage information, run sheets, abstracts of title, surveys, maps, title opinions and title curative documents); (B) Contract files; (C) correspondence; (D) facility files (including construction records); and (E) environmental, regulatory, accounting and copies of Tax records (such materials, excluding the Excluded Records, the “Data”); provided, however, that (1) Buyer’s right with respect to Data pursuant to clause (i) shall be limited to the extent the assignment and disclosure of, or rights granted hereunder with respect to, such Data are not restricted by the terms of any confidentiality, license or similar agreement (provided that Sellers shall use commercially reasonable efforts prior to the Closing to obtain any consent to such assignment and disclosure to the extent such restrictions exist, provided Sellers shall not be required to pay any fees or other amounts to Third Parties in connection with obtaining such consents), (2) rights to receive access to and copies of such Data from Third Parties shall accrue to Buyer only to the same extent as such rights are vested in Sellers, and (3) to the extent that any such Data relates to both Assets and Excluded Assets, Sellers shall be entitled to retain the original copies of such Data that relates primarily to Excluded Assets and shall deliver copies of such Data to Buyer hereunder;
(j) all of the trucks, trailers, frac tanks, vehicles and other rolling stock used or held for use primarily in connection with the ownership or operation of the Assets, including those described on Part 1 of Annex G (the “Vehicles”) and all finance leases described on Part 2 of Annex G (the “Vehicle Finance Leases”);
(k) all Acquired Accounts Receivable;
(l) all rights, claims, causes, causes of action, remedies, defenses, rights of set-off, rights of recoupment, and rights to payment or to enforce payment and credits of any Seller to the extent related directly to the Assets (other than the Excluded Assets) or any Assumed Liability;
(m) all office equipment, computers, software, and hardware of Sellers used or held for use primarily in connection with the ownership or operation of the Assets or related to the Continuing Employees (the “Office Equipment”);
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(n) (i) the Intellectual Property described on Annex I and (ii) the names “Agua Libre” and “Agua Libre Midstream” and all variations and derivations thereof, in each case, solely to the extent owned by Sellers (collectively, the “Transferred Intellectual Property”); and
(o) all intangible rights, inchoate rights, transferable rights under warranties made by prior owners, manufacturers, vendors, and Third Parties, and rights accruing under applicable statutes of limitation or prescription to the extent related or attributable to the Assets described in clauses (a) through (n) above on or after the Closing Date.
To the extent the assignment of any Asset to Buyer pursuant to this Agreement requires the consent of or payment of a fee to any Third Party notwithstanding the entry of the Sale Order then such Asset shall not be assigned to Buyer (and shall constitute an Excluded Asset) unless such consent is obtained or Buyer pays any fee required to effect such assignment (provided that Sellers shall not be required to pay any fees or other amounts to Third Parties in connection with obtaining any such consents).
Section 2.02 Excluded Assets. Any assets of Sellers that are not described or otherwise identified as Assets in Section 2.01, together with all of the following assets, shall not constitute Assets and shall not be sold, assigned or conveyed to Buyer pursuant to this Agreement (such assets as described herein below, the “Excluded Assets”):
(a) all cash and cash equivalents of Sellers;
(b) all corporate and financial records of Sellers (other than the Data contemplated by Section 2.01(i)) and all Excluded Records;
(c) all Contracts of insurance or indemnity, subject to Section 10.01;
(d) all proceeds, income or revenues attributable to the Assets, other than proceeds received on account of the Acquired Accounts Receivable, with respect to any period of time prior to the Closing Date;
(e) all rights, claims, demands and causes of action of Sellers under this Agreement;
(f) all rights, claims (including any claim as defined in section 101 of the Bankruptcy Code), causes, causes of action, remedies, defenses, rights of set-off, rights of recoupment, and rights to payment or to enforce payment and credits of any Seller except to the extent related to the Assets with respect to any period of time on or after the Closing Date or any Assumed Liability;
(g) any refund of costs or expenses borne by Sellers;
(h) any Tax credits, refunds or abatements or other Tax assets or Tax benefits of Sellers (other than those allocated to Buyer under Section 7.06);
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(i) any prepayments or good faith or other deposits submitted by any Third Party under the terms of the Bid Procedures Order;
(j) any of Sellers’ rights, claims and causes of action under the Bankruptcy Code and any Avoidance Actions in which Sellers have or will have rights;
(k) the name “Basic Energy” and all variations and derivations thereof and any Trademarks containing any of the foregoing;
(l) all Contracts and other assets listed on Schedule 2.02(l);
(m) any executory contracts or unexpired leases that are not Desired 365 Contracts;
(n) all Existing Letters of Credit and cash deposits and proceeds of such Existing Letters of Credit;
(o) all equipment and original copies of Data to the extent primarily related to Excluded Assets or Excluded Liabilities;
(p) all Permits, except for those Permits contemplated by Section 2.01(f);
(q) except for the Vehicles, all trucks, trailers, vehicles and other rolling stock;
(r) except for the Office Equipment, all office equipment, computers, software and hardware;
(s) except for the Transferred Intellectual Property, all Intellectual Property owned by Sellers;
(t) all assets excluded pursuant to the express terms of this Agreement, including Section 2.12 or Section 5.02;
(u) except to the extent related to any Assumed Liabilities, all audit rights arising under any of the Applicable Contracts or otherwise with respect to (i) any period prior to the Closing Date, with respect to the Assets or (ii) any of the Excluded Assets;
(v) any assets or properties described in Section 2.01 that are not assignable to Buyer pursuant to this Agreement after giving effect to the Sale Order;
(w) all engagements and similar letters and agreements with Sellers’ legal advisors, it being agreed that Buyer shall have no right to claim, own or waive any attorney-client or similar privilege in favor of Sellers or any of their Affiliates with respect to the ownership or operation of the Assets;
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(x) any property or obligation that has been escheated or been reportable as unclaimed property to any state or municipality under any applicable escheatment or unclaimed property laws;
(y) excluding all assets listed on Annex E, all assets described on Schedule 2.02(y) and all other assets of Sellers related primarily to or held for use primarily in connection with the business of Sellers other than the Business; and
(z) any assets or properties otherwise expressly identified as Excluded Assets under this Agreement.
Section 2.03 Consideration. As consideration for the Assets, Buyer shall pay or deliver to Sellers in accordance with this Agreement, (a) $15,000,000 in cash (the “Cash Consideration”) and (b) the Stock Consideration (together with the Cash Consideration, the “Purchase Price”), and assume all Assumed Liabilities in accordance with this Agreement. The Purchase Price shall be paid as provided in Section 2.05 and shall be subject to adjustment as provided in Section 2.04, Section 2.06, Section 2.12 and Section 5.02. The Purchase Price, as increased or reduced, as applicable, in accordance with this Agreement, is referred to as the “Adjusted Purchase Price”. Buyer shall be entitled to deduct and withhold from any consideration otherwise payable or deliverable to Sellers such amounts as may be required to be deducted or withheld therefrom under the Code, under any Tax law or pursuant to any other Applicable Law, provided that, to the extent the certificate in Exhibit F is provided by Sellers to Buyer on or before the Closing Date, Buyer shall not deduct or withhold any amounts payable hereunder other than to the extent required as a result of a change in Applicable Law following the date hereof. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes as having been paid to the Person to whom such amounts would otherwise have been paid absent such deduction or withholding.
Section 2.04 Adjustments to the Purchase Price. Adjustments to the Purchase Price shall be made according to this Section 2.04.
(a) Upward Adjustments. The Purchase Price shall be adjusted upward by the following, but only to the extent such items relate to the Assets:
(i) an amount equal to all Property Expenses and all other costs and expenses (including prepaid Property Expenses and other costs and expenses but excluding Taxes) attributable to the Assets paid or borne by Sellers (or applied by a Person against Property Expenses owed to such Person as an offset against amounts due and payable to Sellers), whether paid by (or applied as an offset against amounts due and payable to) Sellers prior to the Closing Date or after the Closing Date but prior to the determination of the Adjusted Purchase Price, to the extent attributable to the period on or after the Closing Date; provided, however, that to the extent that such Property Expenses or other cost or expense would be deemed to be an upward adjustment pursuant to this Section 2.04(a)(i) but such expenses have not been paid by Sellers (or applied by a Person against Property Expenses owed to such Person as an offset against amounts due and payable to Sellers), no upward adjustment to the Purchase Price shall be made but instead the obligation to perform and pay when due with respect to such Property Expense shall be an Assumed Liability; and
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(ii) the amount of Cure Costs, if any, by which the Purchase Price is to be increased pursuant to Section 5.02.
(b) Downward Adjustments. The Purchase Price shall be adjusted downward by the following:
(i) an amount equal to the Assumed Indebtedness, if any;
(ii) an amount equal to all Excess Cure Costs, if any, paid or economically borne by Buyer; and
(iii) an amount, if any, by which the Purchase Price is to be reduced pursuant to Section 7.09.
(c) Net Working Capital Adjustment. The Purchase Price shall be adjusted upward (if a positive number) or downward (if a negative number), as applicable, by an amount equal to the Net Working Capital Adjustment.
(d) Tax Adjustments/Apportionment of Prepaid Expense Items.
(i) The Parties agree to adjust the Purchase Price, downward or upward, as appropriate, in accordance with the provisions of Section 7.06.
(ii) For purposes of the Purchase Price, to the extent not otherwise expressly provided for under the definition of “Property Expenses,” Section 2.04(a), Section 2.04(b), Section 2.04(c) Section 2.04(d)(i) and Section 7.06, those other items of expenses and accounts payable in relation to the Assets that are paid or payable on an annual, quarterly, monthly or other regular periodic basis and relate to a period before or after the Closing Date (“Prorated Expense Items”) shall be prorated as of the Closing Date and apportioned, such that Buyer will receive the economic benefit or burden, as applicable, of all such items on and after the Closing Date and Sellers shall receive the economic benefit or burden, as applicable, of all such items for the period prior to the Closing Date. After the Closing Date, (x) if Buyer receives any bills or accounts or any reimbursement for prepaid expenses in relation to Prorated Expense Items that are attributable in whole to the period prior to the Closing Date, then Buyer shall promptly forward the same to Sellers (for payment, in the case of any such bills or accounts), (y) if Sellers receive any bills or accounts or any reimbursement for prepaid expenses in relation to the Prorated Expense Items that are attributable in whole to the period on or after the Closing Date, then Sellers shall promptly forward the same to Buyer (for payment, in the case of any such bills or accounts) and (z) if Buyer or Sellers receive any bills or accounts or any reimbursements for prepaid expenses in relation to the Prorated Expense Items that are attributable in part to the period prior to the Closing Date, and in part to the period on and after the Closing Date, the amount thereof shall be apportioned between Sellers, on the one hand, and Buyer, on the other hand, respectively, as of the Closing Date, based on the number of days in such period falling prior to the Closing Date, on the one hand, and on and after the Closing Date, on the other hand. In the case of bills, accounts or reimbursements referred to in clause (z), the party receiving the same shall be required to pay only such portion of such bill or account for which it is responsible in accordance with this Section 2.04(d)(ii).
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(e) Closing Statement.
(i) Sellers shall prepare and deliver to Buyer, not less than five (5) Business Days before the Closing Date, a statement (the “Closing Statement”) setting forth Sellers’ good faith calculation of the estimated Net Working Capital Adjustment, including a list of Accounts Receivable, and the adjustments to the Purchase Price provided in this Section 2.04, using estimates where actual amounts are not known at such time, and Sellers’ good faith calculation of the estimated Adjusted Purchase Price; such estimated Adjusted Purchase Price (as such may be modified pursuant to any changes proposed by Buyer and accepted by Sellers) shall be referred to as the “Closing Date Adjusted Purchase Price.” The Closing Statement shall be prepared in accordance with this Agreement, including Section 2.08. At least two (2) Business Days prior to the Closing Date, Buyer shall designate to Sellers in writing the Accounts Receivable of Sellers that Buyer desires to be transferred and conveyed from Sellers to Buyer at Closing (the “Acquired Accounts Receivable”); provided that, Buyer shall designate as Acquired Accounts Receivable an aggregate amount of Accounts Receivable of Sellers at least equal to the lesser of (y) an amount sufficient to prevent any downward adjustment to the Purchase Price pursuant to Section 2.04(c) and (z) the amount of Accounts Receivable set forth on the Closing Statement after deducting the Allowance for Doubtful Accounts. If Buyer has any questions or disagreements regarding the Closing Statement (including Sellers’ estimate of the Acquired Accounts Receivable), then, upon written request by Buyer, Sellers and Buyer shall in good faith attempt to resolve any disagreements, and Sellers shall afford Buyer the opportunity to examine the Closing Statement and such supporting schedules, analyses and workpapers on which the Closing Statement is based or from which the Closing Statement is derived as are reasonably requested by Buyer. If (A) Buyer and Sellers agree on changes to the Closing Statement based on such discussions, then the Closing Date Adjusted Purchase Price shall be paid at Closing based on such changes; or (B) Buyer and Sellers do not agree on changes to the Closing Statement, then the Closing Date Adjusted Purchase Price shall be paid at the Closing based on the amounts set forth in the Closing Statement; provided, however, that if the amount of the Acquired Accounts Receivable is different than Sellers’ estimate thereof, the Closing Statement shall be amended to include Buyer’s good faith determination of Acquired Accounts Receivable, the calculation of Net Working Capital as a result shall be recalculated using the Acquired Accounts Receivable instead of Sellers’ estimate thereof and the Closing Date Adjusted Purchase Price shall be paid at the Closing based on the amounts set forth in such amended Closing Statement; provided, further, that in either of clauses (A) or (B), appropriate adjustments to the Purchase Price shall be made after the Closing pursuant to Section 2.06.
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(ii) Sellers will include in the Closing Statement Sellers’ good faith calculation of the prorations provided for in Section 2.04(d). If final bills or accounts in relation to any Prorated Expense Items referred to in Section 2.04(d)(ii) are not available or have not been issued prior to that date, Sellers shall estimate the amount of each such item in good faith and in accordance with customary industry practices, and such estimate shall be reflected in the Closing Statement. The amount payable by Buyer at the Closing will be increased or decreased to reflect the net amount owing between the Parties as shown on the Closing Statement, using such estimates where necessary. Final adjustment between the Parties as to any item used in the preparation of the Closing Statement in accordance with this Section 2.04 shall be made in accordance with Section 2.06 and Section 7.06.
Section 2.05 Closing. The closing of the purchase and sale of the Assets, the assumption by Buyer of the Assumed Liabilities and the other transactions contemplated herein (the “Closing”) shall take place at the offices Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite 300, Dallas, Texas 75201, as soon as possible, but in no event later than two (2) Business Days, after satisfaction or waiver by the requisite Parties of the conditions to Closing set forth in Article VIII (other than those conditions that by their nature cannot be satisfied until the time of Closing, but subject to the satisfaction or waiver by the requisite Parties of those conditions), or at such other time or place as Buyer and Sellers may agree in writing. At and as of the Closing:
(a) Pursuant to section 363 of the Bankruptcy Code, effective as of the Closing, Sellers shall sell, assign and convey all Assets (other than Excluded Assets) to Buyer;
(b) Buyer shall assume all Assumed Liabilities. All Liabilities of Sellers other than the Assumed Liabilities (the “Excluded Liabilities”) shall be retained by Sellers;
(c) Sellers shall deliver to Buyer the following instruments, each dated as of the Closing Date, properly executed by an authorized officer or representative of the applicable Seller(s) and, where appropriate, acknowledged:
(i) an Assignment and Bill of Sale Without Warranty in the form of Exhibit B (the “Assignment and Bill of Sale”);
(ii) with respect to each SWD Well and Water Well, all forms required by applicable Governmental Authorities to substitute Buyer as owner and operator of such SWD Well or Water Well (as applicable), including all applicable designations of operator forms (collectively, the “Operator Forms”);
(iii) an Assumption Agreement between Sellers and Buyer in the form of Exhibit C (the “Assumption Agreement”);
(iv) a Deed Without Warranty pertaining to each Surface Tract in the form of Exhibit D (collectively, the “Surface Deeds”), or such other jurisdictionally equivalent form as may be applicable outside of the State of Texas;
(v) a certificate in the form of Exhibit E;
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(vi) a certificate in the form of Exhibit F;
(vii) executed documentation necessary to transfer title of the Vehicles from each applicable Seller to Buyer; and
(viii) an Intellectual Property Assignment in the form of Exhibit G, transferring all of Sellers’ right, title and interest in and to the Transferred Intellectual Property (the “IP Assignment Agreement”).
(d) Buyer shall deliver to Sellers executed counterparts of the following instruments each dated the Closing Date, properly executed by an authorized officer or representative of Parent and/or Buyer, as applicable, and, where appropriate, acknowledged:
(i) a certificate in the form of Exhibit H;
(ii) the Assignment and Bill of Sale;
(iii) the Assumption Agreement;
(iv) the Operator Forms; and
(v) the IP Assignment Agreement.
(e) Buyer shall deliver an amount equal to the Closing Date Cash Consideration, by wire transfer of immediately available funds, to one or more accounts designated by Sellers; and
(f) Parent shall issue to Basic the Stock Consideration by means of book-entry transfer of the Stock Consideration registered in the name of Basic and shall provide evidence to Sellers of such issuance instructions to the Transfer Agent promptly after delivery thereof.
| Section 2.06 | Final Settlement Statement. |
(a) As soon as practical and, in any event, no later than ninety (90) calendar days after the Closing Date, Sellers shall prepare and deliver to Buyer a statement (the “Final Settlement Statement”) setting forth Sellers’ calculation of the Net Working Capital Adjustment and the adjustments to the Purchase Price in accordance with Section 2.04). The Final Settlement Statement shall be prepared in accordance with this Agreement and on a basis consistent with the preparation of the Closing Statement as described in Section 2.04(e), and shall set forth Sellers’ calculation of the Adjusted Purchase Price.
(b) Following the delivery of the Final Settlement Statement, Sellers shall afford Buyer the opportunity to examine the Final Settlement Statement and Sellers’ calculation of the Adjusted Purchase Price, and such supporting schedules and analyses as are reasonably necessary and appropriate in connection with such review. Sellers shall cooperate with Buyer in such examination, including responding to questions asked by Buyer, and Sellers shall make available to Buyer any records under Sellers’ control that are requested by Buyer in connection with such review.
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(c) If, within thirty (30) calendar days following delivery of the Final Settlement Statement to Buyer, Buyer has not delivered to Sellers written notice (the “Objection Notice”) of Buyer’s objections to the Final Settlement Statement or Sellers’ calculation of the Adjusted Purchase Price (which Objection Notice in order to be valid must contain a statement describing in reasonable detail the items objected to, the basis of such objections and Buyer’s calculation of the amount(s) for the items objected to that Buyer asserts should be used for purposes of the Final Settlement Statement), then the Adjusted Purchase Price as set forth in such Final Settlement Statement shall be deemed final and conclusive. In addition, any of Sellers’ calculations of the Adjusted Purchase Price as set forth in the Final Settlement Statement which are not objected to in the Objection Notice shall be deemed final and conclusive.
(d) If Buyer delivers the Objection Notice satisfying Section 2.06(c) above, within such thirty (30)-day period, then Sellers and Buyer shall endeavor in good faith to resolve the objections of Buyer set forth in the Objection Notice for a period not to exceed fifteen (15) calendar days from the date of delivery of the Objection Notice. If at the end of such fifteen (15)-day period there are any objections that remain in dispute, then either Buyer or Sellers may require by written notice to the other that the remaining objections in dispute be submitted for resolution to the Dallas, Texas office of BDO USA LLP or to such other independent accounting firm as may be selected jointly by Buyer and Sellers within the ten (10) calendar days following a written request by Buyer or Sellers (BDO USA LLP or such jointly selected accounting firm, the “Referee”). The Referee’s engagement shall be limited to the resolution of disputed amounts set forth in the Final Settlement Statement that have been identified by Buyer in the Objection Notice, which resolution shall be in accordance with this Agreement and no other matter relating to the Final Settlement Statement shall be subject to determination by the Referee except to the extent affected by resolution of the disputed amounts. In connection with the engagement of the Referee, each of Buyer and Sellers shall execute any engagement, indemnity and other agreement as the Referee shall require as a condition to such engagement. If BDO USA LLP is unable or unwilling to serve as the Referee and Buyer and Sellers are unable to agree upon the designation of a Person as substitute arbitrator, then Buyer or Sellers, or either of them, may in writing request the Bankruptcy Court to appoint the substitute referee; provided that such Person so appointed shall be a national or regional accounting firm with no prior material relationships with Buyer or Sellers or their respective Affiliates and shall have experience in auditing companies engaged in oil and gas wellsite service activities.
(e) The Referee shall determine such items of the calculation of the Adjusted Purchase Price as are disputed within thirty (30) calendar days after the objections that remain in dispute are submitted to it.
(f) If any disputed items are submitted to the Referee for resolution, (i) each of Buyer and Sellers shall furnish to the Referee such workpapers and other documents and information relating to such disputed items as the Referee may request and are available to that Party or its Affiliates (or its independent public accountants) and will be afforded the opportunity to present to the Referee any materials relating to the determination of the matters in dispute and to discuss such determination with the Referee prior to any written notice of determination hereunder being delivered by the Referee; (ii) the Referee shall not assign a value to such objection that is greater than the greatest value for such objection claimed by either Party or less than the smallest value for such objection claimed by either Party; (iii) the determination by the Referee of items of the calculation of the Adjusted Purchase Price, as applicable, as set forth in a written notice delivered to Sellers and Buyer by the Referee, shall be made in accordance with this Agreement and shall be binding and conclusive on the Parties and shall constitute an arbitral award that is final, binding and unappealable (absent manifest error or fraud) and upon which a judgment may be entered by a court having jurisdiction thereof; and (iv) the fees and expenses of the Referee (the “Audit Fees”) shall be paid by and apportioned between Buyer and Sellers based on the aggregate dollar amount in dispute and the relative recovery as determined by the Referee or Sellers and Buyer, respectively (such that, by way of example, if the amount in dispute is $100 and it is resolved $70 in favor of Buyer and $30 in favor of Sellers, then Sellers would bear 70% of the Audit Fees and Buyer would bear 30% of the Audit Fees).
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| Section 2.07 | Post-Closing Payments. |
(a) If the Closing Date Adjusted Purchase Price is greater than the Adjusted Purchase Price determined in accordance with Section 2.06 (the amount by which the Closing Date Adjusted Purchase Price exceeds the Adjusted Purchase Price herein referred to as the “Closing Amount Excess”), then Sellers and Buyer shall jointly instruct the Escrow Agent to pay to Buyer out of the Escrow Funds an amount equal to the Closing Amount Excess (or, if the Closing Amount Excess is greater than the amount of cash in the Escrow Funds (such excess, the “Escrow Cash Shortfall”), then the full amount of cash in the Escrow Funds). If there is an Escrow Cash Shortfall, then, in addition to the cash distribution of the full amount of cash in the Escrow Funds as provided above, Sellers shall deliver to Buyer, within five (5) Business Days after written notice of an Escrow Cash Shortfall to Sellers, an amount in cash equal to the Escrow Cash Shortfall by cashier’s or certified check, or wire transfer of immediately available funds to the account designated by Buyer.
(b) If the Adjusted Purchase Price determined in accordance with Section 2.06 is greater than the Closing Date Adjusted Purchase Price (the amount by which the Adjusted Purchase Price exceeds the Closing Date Adjusted Purchase Price herein referred to as the “Closing Amount Shortfall”), then Buyer shall deliver to Sellers, within five (5) Business Days after the Adjusted Purchase Price is finally determined in accordance with Section 2.06, an amount in cash equal to the Closing Amount Shortfall by cashier’s or certified check, or wire transfer of immediately available funds to the account designated by Sellers.
(c) Sellers shall pay to Buyer, and Buyer shall pay to Sellers, as applicable, any post-Closing payments as may be required herein, including pursuant to Section 2.10, Section 2.11 or Section 7.06.
Section 2.08 No Duplicative Effect; Methodologies. The provisions of Section 2.04, Section 2.06, this Section 2.08 and of any other Transaction Document shall apply in such a manner so as not to give the components and calculations duplicative effect to any item of adjustment and the Parties covenant and agree that no amount shall be (or is intended to be) included, in whole or in part (either as an increase or reduction) more than once in the calculation of (including any component of) the Adjusted Purchase Price, or any other calculated amount pursuant to this Agreement if the effect of such additional inclusion (either as an increase or reduction) would be to cause such amount to be overstated or understated for purposes of such calculation. “Incurred”, as used in this Agreement, shall be interpreted in accordance with GAAP standards, as applied by Sellers consistent with past practice, subject to the other provisions in this Section 2.08; provided if not determinable pursuant to the foregoing, the date an item or work is ordered is not the date of a transaction or incurrence for settlement purposes in the Closing Statement or Final Settlement Statement and otherwise under this Agreement, as applicable, but rather the date on which the item ordered is delivered to the job site, or the date on which the work ordered is performed, is the relevant date, regardless of when the applicable invoice was sent. The Parties acknowledge and agree that, if there is a conflict between a determination, calculation, methodology, procedure or principle set forth in the definitions contained in this Agreement, as applicable, on the one hand, and those provided by GAAP, on the other hand, (i) the determination, calculation, methodology, procedure or principle set forth in this Agreement, as applicable, shall control to the extent that the matter is specifically provided for in this Agreement and (ii) the determination, calculation, methodology, procedure or principle prescribed by GAAP, as applied by Sellers consistent with past practice, shall control to the extent the matter is not so addressed in this Agreement, as applicable, or requires reclassification as an asset or liability to be included in a line item or specific adjustment.
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| Section 2.09 | Purchase Price Deposit. |
(a) Escrow Deposit. Not later than one (1) Business Day after the Execution Date, Buyer shall deposit into the Escrow Account, by wire transfer of immediately available funds, an amount equal to $2,000,000 (such amount, together with any interest earned thereon, the “Escrow Funds”).
(b) Distribution of Escrow Funds. The Escrow Funds shall be distributed as follows:
(i) if this Agreement is terminated prior to Closing for any reason, the Escrow Funds shall be delivered in accordance with Section 9.02; or
(ii) if the Closing shall occur, upon final determination of the Adjusted Purchase Price pursuant to Section 2.06:
(A) if Buyer is entitled to a distribution of all or a portion of the Escrow Funds pursuant to Section 2.07(a), then Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to deliver (1) to Buyer out of the Escrow Funds an amount in cash equal to the Closing Amount Excess (or, if there is an Escrow Cash Shortfall, the full amount of cash in the Escrow Funds) and (2) to Sellers any cash remaining in the Escrow Funds after the payment in clause (1) of this Section 2.09(b)(ii)(A) has been made; or
(B) if Buyer is not entitled to a distribution of any portion of the Escrow Funds pursuant to Section 2.07(a), then Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to deliver to Sellers all of the cash remaining in the Escrow Funds upon such distribution.
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Section 2.10 Division of Revenues. To the extent Sellers receive proceeds attributable to the Assets and related to periods on or after the Closing Date, Sellers shall deliver such proceeds received after Closing (net of (A) expenses (other than Property Expenses) incurred by Sellers in earning or receiving such proceeds and any fees payable or incurred in connection therewith not reimbursed to Sellers by a Third Party and (B) applicable Non-Income Taxes in respect of such proceeds paid or borne by Sellers and not reimbursed to Sellers by a Third Party) to Buyer promptly upon Sellers’ receipt thereof. To the extent Buyer receives proceeds attributable to the Assets and related to periods prior to the Closing Date (other than proceeds received on account of the Acquired Accounts Receivable), Buyer shall deliver such proceeds (net of (A) expenses incurred by Buyer in earning or receiving such proceeds and any fees payable or incurred in connection therewith not reimbursed to Buyer by a Third Party and (B) applicable Non-Income Taxes in respect of such proceeds paid or borne by Buyer and not reimbursed to Buyer by a Third Party) to Sellers promptly upon Buyer’s receipt thereof.
Section 2.11 Division of Expenses. For purposes of determining the amount of the adjustments to the Purchase Price provided for in Section 2.04, the principles set forth in this Section 2.11 shall apply except as expressly provided otherwise in this Agreement. As between Buyer and Sellers, (i) all Property Expenses attributable to periods prior to the Closing Date, other than Assumed Liabilities, shall be borne by Sellers and (ii) (A) all Property Expenses attributable to periods from and after the Closing Date and (B) all other Property Expenses assumed by Buyer as Assumed Liabilities shall be borne by Buyer.
Section 2.12 Consents to Assign. Sellers shall, within five (5) days after the entry of the Bid Procedures Order (to the extent not sent prior to such date), send to the holder of each Applicable Schedule 3.06 Consent with respect to any Purchased Contract that is not a 365 Contract (for which notices regarding 365 Contracts are addressed in Section 5.02) a notice in compliance with the contractual provisions applicable to such Applicable Schedule 3.06 Consent seeking such holder’s consent to the transactions contemplated hereby or such other notice (which may be included in the sale notice related to the Sale Order) as necessary to permit the assignment of such Purchased Contract to Buyer pursuant to this Agreement upon entry of the Sale Order (a “Consent Notice”). With respect to each Consent relating to a Contract for which the counterparty’s consent to assignment would be required for such Contract to be assumed and assigned to Buyer, after giving effect to sections 365(c)(1) and 365(f)(1) of the Bankruptcy Code, but which Consent is not set forth on Disclosure Schedule 3.06 and is discovered by Sellers (including, if applicable, any such Consent that is identified by Buyer) prior to Closing, all such Consents shall thereafter be Applicable Schedule 3.06 Consents and Sellers shall send to the holder of each such Consent a Consent Notice.
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(a) If Sellers fail to obtain an Applicable Schedule 3.06 Consent prior to Closing and (A) with respect to any Purchased Contract that is not a 365 Contract, (1) the failure to obtain such Applicable Schedule 3.06 Consent would cause the assignment of the Purchased Contract affected thereby to Buyer to be void or voidable, or (2) the failure to obtain such Applicable Schedule 3.06 Consent would result in the termination of such Purchased Contract under the express terms thereof upon the purported assignment of such Purchased Contract to Buyer pursuant to this Agreement or (B) with respect to any Purchased Contract, a party holding such Applicable Schedule 3.06 Consent right has objected to the assignment of the affected Purchased Contract in accordance with the terms of the relevant Applicable Schedule 3.06 Consent right or based on any anti-assignment or consent to assign provision contained in such Purchased Contract (each Consent as to which clause (A) or (B) is applicable, a “Required Consent”), then, unless the Bankruptcy Court has entered an order approving (or in the case of clause (B), such objection is resolved to permit) the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent, the Purchased Contract affected by such un-obtained Required Consent shall be excluded from the Assets to be assigned to Buyer at Closing (and shall be considered Excluded Assets hereunder). In the event that any such Required Consent with respect to any such excluded Purchased Contract is obtained during the Post-Closing Consent Period (or if during the Post-Closing Consent Period the Bankruptcy Court enters an order providing that (x) such Required Consent is not required to consummate the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (y) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent), then, (1) Sellers shall so notify Buyer and (2) on the tenth (10th) Business Day after the date such Consent is obtained and Sellers shall assign the Purchased Contract that was so excluded as a result of such previously un-obtained Consent to Buyer pursuant to an instrument in substantially the same form as the Assignment and Bill of Sale (and such Purchased Contract shall no longer be considered Excluded Assets hereunder) and Buyer shall assume all Assumed Liabilities with respect thereto. Notwithstanding anything to the contrary in this Agreement, without limiting any of the rights of Buyer hereunder, from and after the Closing, Buyer and Sellers shall reasonably cooperate in a reasonable arrangement to provide Buyer with all of the benefits of, or under, each Purchased Contract excluded pursuant to this Section 2.12(a), including enforcement (at Buyer’s cost) for the benefit of Buyer, if applicable, of any and all rights of Sellers against any party with respect to such Purchased Contract arising out of the breach or cancellation with respect to such Purchased Contract by such party; provided, further, that to the extent that any such arrangement has been made to provide Buyer with the benefits of, under or with respect to, an excluded Purchased Contract, from and after the Closing, Buyer shall be responsible for, and shall promptly pay and perform all payment and other obligations under such Purchased Contract for the period during which Buyer is receiving the benefits under the applicable Purchased Contract to the same extent as if such Purchased Contract had been assigned or transferred at the Closing.
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(b) If Sellers fail to obtain a Consent prior to Closing and such Consent is not a Required Consent (or if prior to Closing the Bankruptcy Court enters an order providing that (x) such Required Consent is not required to consummate the sale of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (y) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent), then the Purchased Contract subject to such un-obtained Consent shall nevertheless be assigned by Sellers to Buyer at Closing as part of the Assets and Buyer shall be deemed to have assumed any and all Liabilities for the failure to obtain any such Consent as part of the Assumed Liabilities hereunder and Buyer shall have no claim against the Seller Indemnified Parties from any Liability for, the failure to obtain such Consent.
(c) Prior to Closing and until the earlier to occur of (x) the confirmation of the Plan and (y) the ninetieth (90th) day after Closing (the period from Closing until the earlier of clause (x) or (y), the “Post-Closing Consent Period”), with respect to any un-obtained Required Consents with respect to which the Bankruptcy Court shall not have entered an order providing that (A) such Required Consent is not required to consummate the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (B) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent, Sellers shall use their commercially reasonable efforts to obtain all Consents; provided, however, that Sellers shall not be required to incur any Liability, pay any money or provide any other consideration in order to obtain any such Consent. Buyer shall use its commercially reasonable efforts (without any obligation to incur any Liability, pay money or provide any other consideration) to assist and cooperate with Sellers in furtherance of Sellers’ efforts pursuant to this Section 2.12(c).
Section 2.13 Consents for Purchased Contracts. For all purposes of this Agreement (including all representations and warranties of Sellers contained herein), Sellers shall be deemed to have obtained all required Consents in respect of the assumption and assignment of any Purchased Contract if, and to the extent that, (a) Sellers have properly served under the Bankruptcy Code notice of assumption and assignment on the counterparty to such Purchased Contract, (b) any objections to assumption and assignment of such Purchased Contracts filed by such counterparty have been withdrawn or overruled (including pursuant to the Sale Order or other order of the Bankruptcy Court), and (c) pursuant to the Sale Order, Sellers are authorized to assume and/or assign such Purchased Contracts to Buyer pursuant to section 365 of the Bankruptcy Code or otherwise.
| Section 2.14 | Assets Sold “As Is, Where Is”. |
(a) BUYER ACKNOWLEDGES AND AGREES THAT THE ASSETS SOLD PURSUANT TO THIS AGREEMENT ARE SOLD, CONVEYED, TRANSFERRED AND ASSIGNED ON AN “AS IS, WHERE IS” BASIS “WITH ALL FAULTS” AND WITHOUT WARRANTY OF TITLE AND THAT, EXCEPT AS SET FORTH IN ARTICLE III OF THIS AGREEMENT (THE “SELLER REPRESENTATIONS”), SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES, TERMS, CONDITIONS, UNDERSTANDINGS OR COLLATERAL AGREEMENTS OF ANY NATURE OR KIND, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, CONCERNING THE ASSETS OR THE CONDITION, DESCRIPTION, QUALITY, USEFULNESS, QUANTITY OR ANY OTHER THING AFFECTING OR RELATING TO THE ASSETS, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHICH WARRANTIES ARE ALSO HEREBY EXPRESSLY DISCLAIMED. BUYER FURTHER ACKNOWLEDGES THAT SELLERS HAVE MADE NO AGREEMENT OR PROMISE TO REPAIR OR IMPROVE ANY OF THE ASSETS BEING SOLD TO BUYER, AND THAT BUYER TAKES ALL SUCH ASSETS IN THE CONDITION EXISTING ON THE CLOSING DATE “AS IS, WHERE IS” AND “WITH ALL FAULTS” AND WITHOUT WARRANTY OF TITLE.
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(b) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THE SELLER REPRESENTATIONS AND WITHOUT LIMITING THE GENERALITY OF SECTION 2.14(a), SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) TITLE TO ANY OF THE ASSETS, (ii) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (iii) THE CONDITION, QUALITY, SUITABILITY OR MARKETABILITY OF THE ASSETS, (iv) GEOLOGICAL CONDITIONS, INCLUDING, WITHOUT LIMITATION, SUBSIDENCE, SUBSURFACE CONDITIONS, WATER TABLE, UNDERGROUND WATER RESERVOIRS, LIMITATIONS REGARDING THE WITHDRAWAL OF WATER AND FAULTING, (v) THE AVAILABILITY OF ANY UTILITIES TO ANY PROPERTY OR ANY PORTION THEREOF INCLUDING, WITHOUT LIMITATION, WATER, SEWAGE, GAS AND ELECTRIC AND INCLUDING THE UTILITY AVAILABILITY CAPACITIES ALLOCATED TO ANY PROPERTY BY THE RELEVANT GOVERNMENTAL OR REGULATORY AUTHORITY, (vi) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY OR ON BEHALF OF SELLERS OR THIRD PARTIES WITH RESPECT TO THE ASSETS, AND (vii) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO BUYER OR ANY AFFILIATE OF BUYER, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO. ANY AND ALL SUCH DATA, INFORMATION AND OTHER MATERIALS FURNISHED BY OR ON BEHALF OF SELLERS IS PROVIDED TO BUYER AS A CONVENIENCE, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE RISK.
Section 2.15 Presence of Wastes, NORM, Hazardous Substances and Asbestos. BUYER ACKNOWLEDGES THAT THE ASSETS HAVE BEEN USED FOR GATHERING, TRANSPORTING, TREATING, DISPOSING AND/OR OTHER SERVICES RELATED TO THE HANDLING OF PRODUCED WATER AND THAT THERE MAY BE PETROLEUM, PRODUCED WATER, WASTES OR OTHER SUBSTANCES OR MATERIALS LOCATED IN, ON OR UNDER THE ASSETS OR ASSOCIATED WITH THE ASSETS. ADDITIONALLY, THE ASSETS MAY CONTAIN ASBESTOS, HAZARDOUS SUBSTANCES OR NORM. NORM MAY AFFIX OR ATTACH ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE OR IN OTHER FORMS, AND NORM-CONTAINING MATERIAL MAY HAVE BEEN BURIED OR OTHERWISE DISPOSED OF ON THE ASSETS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THE ASSETS BY REASON THEREOF. SPECIAL PROCEDURES MAY BE REQUIRED FOR REMEDIATION, REMOVING, TRANSPORTING AND DISPOSING OF ASBESTOS, NORM, HAZARDOUS SUBSTANCES AND OTHER MATERIALS FROM THE ASSET. Buyer assumes all liability for the assessment, remediation, removal, transportation and disposal of these materials and associated activities with respect to the Assets actually acquired by Buyer at Closing hereunder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Parent and Buyer as follows, except as set forth in the Disclosure Schedule (and subject to Section 11.13):
Section 3.01 Organization. Each Seller is an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Laws of the jurisdiction of its organization. Each Seller is duly qualified or licensed to do business and is in good standing (if applicable) in each jurisdiction where the nature of its business or properties makes such qualification or licensing necessary, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Seller Material Adverse Effect.
Section 3.02 Authority and Authorization. Each Seller has full power and authority to carry on its business as presently conducted and to enter into this Agreement and the other Transaction Documents to which such Seller is or will be a party and, subject to the entry of the Bid Procedures Order and the entry of the Sale Order, to perform its obligations under this Agreement and the other Transaction Documents to which such Seller is or will be a party. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is or will be a party, and the performance by each Seller of its obligations under this Agreement and the other Transaction Documents to which such Seller is or will be a party and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite limited liability company action on the part of such Seller and, in respect of Basic, on the part of the general partner of Basic.
Section 3.03 Enforceability. This Agreement has been duly executed and delivered on behalf of each Seller and (assuming due authorization, execution and delivery thereof by Parent and Buyer, as applicable), subject to requisite Bankruptcy Court approval, will constitute the legal, valid and binding obligation of each Seller enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, reorganization or moratorium statutes, or other similar Applicable Laws affecting the rights of creditors generally or equitable principles (collectively, “Equitable Limitations”). At the Closing, all other Transaction Documents required hereunder to be executed and delivered by each Seller shall be duly executed and delivered and (assuming due authorization, execution and delivery thereof by the other parties thereto) shall constitute legal, valid and binding obligations of such Seller enforceable against it in accordance with their terms, except as enforceability may be limited by Equitable Limitations, subject to the entry of the Sale Order and provided no stay exists with respect to the Sale Order.
Section 3.04 Conflicts. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is or will be a party does not, and the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is or will be a party shall not, (a) violate or be in conflict with, or require the consent (other than consents that have been obtained) of any Person or entity under, any provision of such Seller’s Organizational Documents, (b) subject to the entry of the Bid Procedures Order and the Sale Order and obtaining the consents described on Disclosure Schedule 3.06, conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice, or both would constitute a default) under any agreement or instrument to which such Seller is a party, (c) subject to the entry of the Bid Procedures Order and the Sale Order, violate any provision of or require any consent, authorization or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to any Seller or (d) result in the creation of any Lien on any of the Assets, other than Liens that may arise or be deemed to arise with respect to such Assets as a result of the transactions contemplated by this Agreement.
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| Section 3.05 | Material Contracts. |
(a) Disclosure Schedule 3.05(a) sets forth a list, as of the Execution Date, of all Applicable Contracts of the type described below and any and all amendments, extensions, or other modifications thereof (each such Contract listed on Disclosure Schedule 3.05(a), other than any such Contract that is an Excluded Asset or an Excluded Liability a “Material Contract”):
(i) any Applicable Contract that that could reasonably be expected to result in aggregate payments by or to a Seller in excess of $100,000 in the current or any future calendar year;
(ii) any Applicable Contract that constitutes a lease under which a Seller is the lessor or the lessee of real or personal property that (A) cannot be unilaterally terminated by the lessee thereunder without penalty upon ninety (90) days’ or less notice and (B) involves an annual base rental of more than $25,000;
(iii) any Applicable Contract (other than a lease, easement or right-of-way) that constitutes an interest in real property that is material to the Business;
(iv) any Contract with any Affiliate of Sellers that will be binding on Buyer after the Closing;
(v) any Contract to sell, lease or otherwise dispose of any Sellers’ interests in any of the Assets;
(vi) any tax partnership or joint venture Contract;
(vii) any Contract for drilling or well workover services or other well services agreement with respect to the SWD Wells or Water Wells;
(viii) any Contract containing any preferential purchase rights, rights of purchase, rights of first offer, right of first refusal or other similar rights affecting the Assets; or
(ix) any Contract that is an indenture, mortgage, loan, credit agreement, sale-leaseback, guaranty of financial obligation, bond, letter of credit or similar financial Contract the obligations under which are secured by a Lien on any Asset created by, through or under Sellers;
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(x) any Applicable Contract that is material to the Business as currently conducted by Sellers and contains a “most favored nations” or similar provision that will be binding on Buyer or the Assets after the Closing; or
(xi) any Contract that will be binding on the Buyer or the Assets after the Closing and materially restrict the ability of Buyer after the Closing to own and operate the Assets or conduct the Business in any geographic region or conduct any other business currently conducted by Buyer or its Affiliates.
(b) Except as set forth on Disclosure Schedule 3.05(b), subject to entry of the Sale Order and payment of all Cure Costs, as of the Execution Date, all of the Material Contracts are, to Sellers’ Knowledge, in full force and effect and no Seller nor, to Sellers’ Knowledge, any other party to any such Material Contract is in breach of or default, or with the lapse of time or the giving of notice, or both, would be in breach or default, with respect to any of its obligations thereunder except to the extent that such breaches or defaults do not constitute a Seller Material Adverse Effect.
Section 3.06 Approvals. Disclosure Schedule 3.06 contains a complete and accurate list or description of all approvals, consents, filings and notifications required to be obtained, made or given by Sellers, after giving effect to the entry of the Bid Procedures Order and the Sale Order, for the consummation of the Transactions (each, a “Consent”), other than (a) for Preferential Purchase Rights to the extent disclosed on Disclosure Schedule 3.15, (b) under Contracts that are terminable without cost upon not greater than ninety (90) days’ notice, (c) any approvals, consents, filings and notifications of or with any Governmental Authority of the type customarily obtained, made or given after Closing and (d) approvals as to which the failure to obtain, make or give would not result in a Seller Material Adverse Effect.
| Section 3.07 | Environmental Matters. |
(a) Except as set forth on Disclosure Schedule 3.07, the Assets are not subject to any order, decree or judgments issued against Sellers by an environmental Governmental Authority, in each case, in existence as of the Execution Date and based on any Environmental Laws that presently require any remedial or other corrective action or operating restrictions.
(b) Except as set forth on Disclosure Schedule 3.07, the Assets are in compliance with all Environmental Laws in all material respects, and such compliance includes obtaining, maintaining, renewing, and complying in all material respects with the terms and conditions of all material Environmental Permits necessary for the operation of the Assets as presently conducted, and no such Environmental Permits are currently subject to any adverse modification, to Seller’s Knowledge or challenge from any Person. Except as set forth on Disclosure Schedule 3.07, no Seller has received any written notice from any Governmental Authority alleging any material violation of or material liability under Environmental Laws with respect to the Assets that remains unresolved as of the Execution Date, and there are no Proceedings (including any Environmental Claims) pending, or to Seller’s Knowledge, threatened, alleging or relating to any alleged violation of or liability under Environmental Laws with respect to the Assets.
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(c) Except as set forth on Disclosure Schedule 3.07, as of the Execution Date, (1) there has been no Release of Hazardous Substances at, to or from the Assets that has not been resolved to the satisfaction of the applicable Governmental Authority, and (2) to Seller’s Knowledge no Hazardous Substances are present, or have been used, handled, managed, stored, generated, transported, processed, treated, disposed of, on, in, from, under or in connection with the Assets that, in each case, would reasonably be expected to result in a material Liability for which Buyer would be responsible based on the Assets acquired pursuant to this Agreement.
(d) True, complete, and correct copies of all material, non-privileged reports, studies, audits, inspections or other documents addressing environmental conditions, health or safety at the Assets that would reasonably be expected to result in an Environmental Claim that are in Sellers’ possession have been made available for Buyer’s review.
This Section 3.07 shall constitute Sellers’ sole representation and warranty as to Environmental Claims, compliance with Environmental Laws or environmental conditions of or affecting the Assets.
Section 3.08 Litigation. Except as set forth in Disclosure Schedule 3.08, as of the Execution Date, there is no Proceeding pending against any Seller or, to Sellers Knowledge, which have been threatened against any Seller that (a) if determined or resolved adversely in accordance with the plaintiff’s demands would reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect or otherwise materially adversely affect Buyer’s ownership and operations of the Assets following the Closing, (b) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions or (c) affects the execution, delivery or performance by any Seller of this Agreement or any other Transaction Document to which any Seller is or will be a party.
Section 3.09 Intellectual Property. The consummation of the Transactions shall not adversely affect, diminish, or terminate any Intellectual Property rights included in the Transferred Intellectual Property, except as would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect. To Sellers’ Knowledge, all items of Transferred Intellectual Property are fully transferable and assignable by Sellers without restriction and without payment of any kind to any person. To Sellers’ Knowledge, no current or former partner, director, officer, or employee of Sellers or any of their Affiliates will, after giving effect to the Transactions, own or retain any ownership rights in or to, or have the right to receive any royalty or other payment with respect to, any of the Transferred Intellectual Property. To Sellers’ Knowledge, there are no pending suits, actions, claims, proceedings or investigations alleging that Sellers are infringing, misappropriating, diluting or otherwise violating any Intellectual Property of a third party in respect of the Transferred Intellectual Property or that seek to limit or challenge the validity, enforceability, ownership or use of the Transferred Intellectual Property. Sellers have not received any written claim or “cease and desist” letter from any third party in respect of the Transferred Intellectual Property. To Sellers’ Knowledge, the operation of the Business by Sellers as currently conducted has not infringed, misappropriated, diluted or otherwise violated the Intellectual Property of any third party. To Sellers’ Knowledge, no third party is engaging in any activity or business that infringes upon, dilutes, or otherwise violates the Transferred Intellectual Property.
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Section 3.10 Insurance Coverage. Disclosure Schedule 3.10 sets forth a list of all material insurance policies and fidelity bonds of Sellers in effect as of the Execution Date relating to the Assets.
Section 3.11 Taxes. Except as set forth on Disclosure Schedule 3.11:
(a) (i) all Tax Returns with respect to any material amount of Non-Income Taxes have, to the extent required by Applicable Law to be filed (taking into account extensions of time within which to file), been filed when due in accordance with all Applicable Law, (ii) such Tax Returns are true and complete in all material respects; and (iii) each Seller has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Non-Income Taxes with respect to the Assets, in each case, that are or have become due and payable;
(b) there is no claim, audit, action, suit, proceeding or investigation pending against or with respect to any Seller in respect of any material amount of Non-Income Taxes, and no Seller has in force any waiver of any statute of limitations in respect of Non-Income Taxes or any extension of time with respect to a Non-Income Tax assessment or deficiency;
(c) there are no Liens on any of the Assets (other than Liens for current period Taxes not yet due and payable) currently existing, pending or, to Sellers’ Knowledge, threatened with respect to any Assets related to any unpaid Taxes;
(d) the Assets do not consist of property or obligations, including uncashed checks to vendors, customers, or employees, non-refunded overpayments, or unclaimed subscription balances, that is escheatable or reportable as unclaimed property to any state or municipality under any applicable escheatment or unclaimed property laws; and
(e) no Asset is subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.
This Section 3.11 shall constitute Sellers’ sole representations and warranties as to Tax matters.
| Section 3.12 | Employment Matters. |
(a) Disclosure Schedule 3.12(a) sets forth a complete and accurate list that sets forth each employee of Sellers and their Affiliates who primarily provide services related to the Assets (each a “Seller Employee”). As of the date hereof, Sellers have made available to Buyer complete and accurate information (the “Compensation Schedule”) concerning the following for each Seller Employee: (1) employing entity; (2) job title and location of employment; (3) base salary or hourly rate of pay; (4) status as exempt or non-exempt under the Fair Labor Standards Act and comparable state Applicable Law; (5) bonus compensation and other compensation paid for which he or she is eligible; and (6) hire date and service date (if different).
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(b) Disclosure Schedule 3.12(b) sets forth a complete and accurate list of all of the individual independent contractors and consultants providing services to Sellers or their Affiliates relating to the Assets and a description of the services provided.
(c) The individuals set forth on Disclosure Schedules 3.12(a) and 3.12(b) represent the entirety of the individuals necessary to manage, maintain, and operate the Assets as now managed, maintained, and operated.
(d) Neither Sellers nor their Affiliates are a party or subject to any collective bargaining agreement or other contract with a labor union or similar representative of Seller Employees and no collective bargaining agreement is currently being negotiated by Sellers or their Affiliates. To Sellers’ knowledge, (i) no Seller Employee is represented by a labor union or similar representative with respect to such employee’s employment by Sellers or their Affiliates and (ii) there is no proceeding, petition, or campaign by a labor union or any similar representative to become the collective bargaining representative of any Seller Employee. There is no strike, slowdown, work stoppage or other labor disturbance against Sellers or their Affiliates pending or, to Sellers’ Knowledge, threatened.
(e) Sellers and their Affiliates are, and for the past three (3) years have been, in compliance in all material respects with all applicable foreign, federal, state and local Laws respecting labor and employment, including all such Laws regarding employment practices, collective bargaining, terms and conditions of employment, prohibited discrimination, harassment and retaliation, equal employment, fair employment practices, recordkeeping, employee leave, immigration, wages and hours, and employee and contractor classification, except, in the case of each of the foregoing, as would not have a Seller Material Adverse Effect.
Section 3.13 Employee Benefits. Neither Sellers nor any of their respective ERISA Affiliates have maintained, sponsored or participated in, or contributed to, in the six (6) year period preceding the date hereof: (i) a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA); (ii) a “multiple employer plan” (as defined in Section 4063 or Section 4064 of ERISA); or (iii) a plan covered by Section 412 of the Code or Title IV of ERISA.
Section 3.14 Letters of Credit. Disclosure Schedule 3.14 lists all Existing Letters of Credit.
Section 3.15 Preferential Purchase Rights. Except as set forth on Disclosure Schedule 3.15, to Sellers’ Knowledge, there are no preferential purchase rights, rights of first refusal, drag-along rights, tag-along rights or other similar rights that are applicable to the transfer of the Assets in connection with the Transactions (the “Preferential Purchase Rights”). As of the Execution Date, no Seller has received any written notice in the two (2) year period preceding the Execution Date from any Person asserting or attempting to assert any Preferential Purchase Right as it pertains to any of the Properties or the Assets.
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Section 3.16 Broker. Other than amounts as may be payable by Sellers for which neither Parent nor Buyer shall have any liability, no broker, finder, investment banker or other similar person is or will be, in connection with the transactions contemplated by this Agreement or the other Transaction Documents, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on behalf of Sellers or any of their respective Affiliates.
| Section 3.17 | Investment. |
(a) The Stock Consideration is being acquired by Basic for investment purposes only, for Basic’s own account and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the 1933 Act (other than a disposition pursuant to a registration statement effective under the 1933 Act or an applicable exemption from registration thereunder). Basic is an “accredited investor” as defined in Regulation D promulgated under the 1933 Act, and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Stock Consideration and is capable of bearing the economic risks of such investment.
(b) Basic acknowledges that the offer and sale of the Stock Consideration has not been registered under the 1933 Act or any state or foreign securities laws and that the Stock Consideration may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the 1933 Act and are registered under any applicable state or foreign securities laws or pursuant to an exemption from registration under the 1933 Act and any applicable state or foreign securities laws.
(c) Basic has such expertise, knowledge and sophistication in financial and business matters generally that it is capable of evaluating, and has evaluated, the merits and economic risks of its investment in the Stock Consideration. Basic is knowledgeable of the oil and gas wellsite service business and of the usual and customary practices of providers of oil and gas wellsite services, including those in the areas where the Parent and its Affiliates have operations. Further, Basic is capable of making such investigation, inspection, review and evaluation of the Stock Consideration as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the Stock Consideration.
(d) Basic confirms, acknowledges and agrees that Basic is relying entirely upon the representations and warranties of Buyer in this Agreement and its own investigations and inspections of the public filings of Buyer, prior to the execution of this Agreement in entering into this Agreement and proceeding with the Transactions on the terms as set forth herein. In deciding to enter into this Agreement, and to consummate the Transactions, other than the express representations and warranties of Buyer set forth in Article IV, each Seller has relied solely upon its own knowledge, investigation, judgment and analysis and not on any disclosure or representation made by, or any duty to disclose on the part of, Buyer or Buyer’s Representatives.
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Section 3.18 Compliance with Laws. Each Seller is (and for the past three (3) years has been) in compliance with, and is not in default or violation of, all Applicable Laws, except for any such non-compliance, defaults or violations that do not constitute a Seller Material Adverse Effect, and to Sellers’ Knowledge, no Seller is under investigation with respect to any material violation of any Applicable Law. No Seller has received any written notice that the current use and ownership, operation or maintenance of the Assets, violate, in any material respect, any Applicable Law.
Section 3.19 Sufficiency of Assets. To the Seller’s Knowledge, the Assets constitute all assets, properties, rights, privileges and interests, of whatever kind or nature, real or personal or mixed, tangible or intangible, used or necessary to, and immediately following the consummation of the transactions contemplated by this Agreement, will be sufficient to permit the Buyer to (a) own, operate and maintain the Business in a manner consistent in all material respects with the current operation and maintenance thereof in the ordinary course of business consistent with past practice and (b) perform the obligations that are required to be performed under the Assigned Contracts. To Sellers’ Knowledge, none of the Excluded Assets are necessary for the ownership, operation or maintenance of the Business.
Section 3.20 Permits. The Permits set forth on Annex F constitute all of the Permits necessary for the ownership, operation, maintenance, and use of the Assets as owned and operated and maintained in the Ordinary Course of Business. To Sellers’ Knowledge, all such Permits are in full force and effect, and each of the applicable Sellers is (and for the past three (3) years has been) in material compliance with such Permits, and has not received any written or other notice of any violation of any such Permits which remains outstanding and unresolved. To the Seller’s Knowledge, all such Permits listed on Annex F have been delivered or made available to Buyer. There are no Permits from a Governmental Authority that cover both any Asset, on the one hand, and any Excluded Asset, on the other hand.
| Section 3.21 | Properties. |
(a) As of the Execution Date, no written notice from any Person has been received by Sellers in the two (2) year period preceding the Execution Date challenging such Sellers’ respective title to, valid leasehold interests in or valid rights to use, the Properties owned or leased by such Seller.
(b) (i) Sellers have made available to Buyer true, correct and complete copies of all Property Agreements that are in the possession of Sellers or any of their respective Affiliates; and (ii) Sellers have made available to Buyer true, correct and complete copies of all title commitments, title policies, title reports, title opinions, boundary maps and surveys (together with copies of all encumbrances listed on any of the foregoing) pertaining to any of the Properties that are in the possession of Sellers or any of their respective Affiliates.
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(c) No Seller has received written notice of any condemnation action or other proceeding in eminent domain pending related to the Properties. To Sellers’ Knowledge, (i) there is not any condemnation action or other proceeding in eminent domain threatened affecting the Properties and (ii) there is no proposal under consideration by any Governmental Authority to take or use any of the Properties.
(d) Sellers have made available to Buyer true, correct and complete copies of all engineering consultants’ reports, property condition reports, material environmental reports and similar reports with respect to the Properties, to the extent within the possession of any Seller or its Affiliates.
(e) Sellers have not received any written notification that any material alteration, repair, improvement or other work has been ordered or directed in writing to be done or performed to or in respect of any of the Properties by any Governmental Authority, board of insurance underwriters or anyone else having the right or purporting to have the right to require such work to be completed, which alteration, repair, improvement or other work has not been completed in material satisfaction of all requirements in connection therewith.
Section 3.22 No Other Representations. None of Buyer, Parent nor any other Person (on behalf of Buyer or Parent or otherwise) has made or is making any representation or warranty whatsoever, express or implied, at law or in equity, with respect to Buyer or Parent, this Agreement or the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in Article IV (as modified by the Disclosure Schedules), and no Seller is relying on and has not relied on any representation or warranty other than those representations or warranties set forth in Article IV (as modified by the Disclosure Schedules) and any reliance by any Seller on any representation or warranty other than those representations and warranties set forth in Article IV (as modified by the Disclosure Schedules) is hereby expressly disclaimed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Sellers as follows, except as set forth in the Disclosure Schedule (and subject to Section 11.13) or, solely with respect to Section 4.06, in any statements, reports, schedules, forms or other documents filed or furnished by Parent with the SEC:
Section 4.01 Organization. Each of Parent and Buyer is an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Laws of the jurisdiction of its organization. Each of Parent and Buyer is duly qualified or licensed to do business and is in good standing (if applicable) in each jurisdiction where the nature of its business or properties makes such qualification or licensing necessary, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect or a Buyer Material Adverse Effect, as applicable. Parent has delivered to Sellers accurate and complete copies of its certificate of incorporation and bylaws, including all amendments thereto.
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Section 4.02 Authorization and Authority. Each of Parent and Buyer has full power and authority to carry on its business as presently conducted, to enter into this Agreement and the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party, to purchase the Assets on the terms described in this Agreement and to perform its other obligations under this Agreement and the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party. The execution and delivery by each of Parent and Buyer of this Agreement and the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party, and the performance by each of Parent and Buyer of this Agreement and the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party and the transactions contemplated hereby and thereby, have been duly and validly authorized by all requisite corporate or limited liability company action on the part of Parent and Buyer, as applicable.
Section 4.03 Enforceability. This Agreement has been duly executed and delivered on behalf of each of Parent and Buyer, and (assuming in each case due authorization, execution and delivery thereof by Sellers), subject to requisite Bankruptcy Court approval, will constitute a legal, valid and binding obligation of each of Parent and Buyer enforceable against it in accordance with its terms, except as enforceability may be limited by Equitable Limitations. At the Closing all other Transaction Documents required hereunder to be executed and delivered by Parent and Buyer shall be duly executed and delivered and (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) shall constitute legal, valid and binding obligations of Parent and Buyer enforceable against it in accordance with their terms, except as enforceability may be limited by Equitable Limitations, subject to the entry of the Sale Order and provided no stay exists with respect to the Sale Order.
| Section 4.04 | Capitalization. |
(a) As of the Execution Date:
(i) the authorized capital stock of Parent consists of (A) 350 million shares of Parent Class A Common Stock, of which 91,760,705 shares have been issued and are outstanding; (B) 40 million shares of Parent Class A-2 Common Stock, of which no shares of common stock are issued and outstanding; (C) 150 million shares of Parent Class B Common Stock, of which 16,221,101 shares have been issued and are outstanding; and (D) 50 million shares of Parent Preferred Stock, of which no shares are issued and outstanding;
(ii) Parent holds no shares of its capital stock in its treasury;
(iii) 2,117,844 shares of Parent Class A Common Stock are subject to issuance pursuant to Parent Options that are outstanding as of the close of business on the Execution Date;
(iv) No shares of Parent Common Stock are subject to issuance pursuant to Parent Warrants;
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(v) 3,813,121 shares of Parent Class A Common Stock are reserved for future issuance pursuant to Parent RSUs that are outstanding as of the close of business on the Execution Date; and
(vi) 3,089,664 shares of Parent Class A Common Stock are reserved for future issuance pursuant to equity awards not yet granted under the Parent Equity Plans.
All of the outstanding shares of Parent Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable.
(b) (i) None of the outstanding shares of Parent Common Stock is entitled or subject to any preemptive right, right of repurchase or forfeiture, right of participation, right of maintenance or any similar right; (ii) none of the outstanding shares of Parent Common Stock is subject to any right of first refusal in favor of Parent; and (iii) there is no Contract of Parent relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or from granting any option or similar right with respect to), any shares of Parent Common Stock, or any securities of any Subsidiary of any of any Parent Entity. None of the Parent Entities is under any obligation, or is bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding shares of Parent Common Stock.
(c) Parent has included in its reports filed with the SEC accurate and complete copies of all equity plans pursuant to which it has granted any outstanding Parent Options, Parent Warrants and Parent RSUs, and the forms of all Parent Option, Parent Warrant and Parent RSU evidencing such awards.
(d) As of the Execution Date, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of any of the Parent Entities; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of any of the Parent Entities; (iii) outstanding or authorized stock appreciation rights, phantom stock, profit participation or similar rights or equity-based awards with respect to any of the Parent Entities; or (iv) stockholder rights plan (or similar plan commonly referred to as a “poison pill”) or Contract under which any of the Parent Entities is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities.
(e) All outstanding shares of Parent Common Stock and all options and other securities of the Parent Entities have been issued and granted in compliance in all material respects with: (i) all applicable securities laws and other Applicable Laws; and (ii) all requirements set forth in applicable Contracts, except where the failure to be so issued, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Parent Material Adverse Effect.
(f) All of the outstanding shares of capital stock of each of Parent’s Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and free of preemptive rights, and, except as set forth on Disclosure Schedule 4.04(f), are owned beneficially and of record by Parent.
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(g) Upon issuance in accordance with this Agreement, the Parent Class A Common Stock issued as the Stock Consideration will be duly authorized, validly issued, fully paid and non-assessable, will be issued free and clear of any preemptive or similar rights of any other Person and will be free of restrictions on transfer other than restrictions on transfer under applicable federal and state securities laws.
| Section 4.05 | Securities Filings; Financial Statements; Absence of Liabilities. |
(a) Except as set forth on Disclosure Schedule 4.05(a), all statements, reports, schedules, forms and other documents required to have been filed or furnished by Parent with the SEC since December 31, 2020 (the “Parent Reports”) have been so filed or furnished on a timely basis. None of Parent’s Subsidiaries is required to file any documents with the SEC. Except as set forth on Disclosure Schedule 4.05(a), as of the time it was filed or furnished with the SEC (or, if amended or superseded by a filing prior to the Execution Date, then on the date of such filing): (i) each of the Parent Reports complied as to form in all material respects with the applicable requirements under Applicable Laws; and (ii) none of the Parent Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected by the filing of the applicable amending or superseding Parent Report.
(b) The financial statements (including any related notes) contained or incorporated by reference in the Parent Reports: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, as permitted by Form 10-Q, Form 8-K or any successor form under the Exchange Act, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments); and (iii) fairly present in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of operations, cash flows and changes in stockholders’ equity of Parent and its consolidated Subsidiaries for the periods covered thereby. No financial statements of any Person other than the Parent Entities are required by GAAP to be included in the consolidated financial statements of Parent contained or incorporated by reference in the Parent Reports.
(c) Parent maintains an effective system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) which is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. To Buyer’s Knowledge, since December 31, 2020, neither Parent nor any of its Subsidiaries nor any of their respective independent accountants has identified or been made aware of: (A) any significant deficiency or material weakness in the design or operation of internal controls over financial reporting utilized by the Parent Entities; (B) any illegal act or fraud, whether or not material, that involves any of the Parent Entities’ respective management or other employees; or (C) any claim or allegation regarding any of the foregoing.
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(d) None of the Parent Entities has any liabilities of the type required to be reflected in financial statements or the notes thereto prepared in accordance with GAAP, in each case, except for: (i) liabilities identified as such, or specifically reserved against, in the Parent Balance Sheet; (ii) liabilities that have been incurred by such Parent Entity since the date of the Parent Balance Sheet in the ordinary course of business consistent with past practices; (iii) liabilities for performance of obligations of such Parent Entity pursuant to the express terms of Parent Contracts; (iv) liabilities under this Agreement or incurred in connection with the transactions contemplated by this Agreement; and (v) liabilities that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Parent Material Adverse Effect.
Section 4.06 Absence of Changes. Between December 31, 2020 and the Execution Date there has not been any Parent Material Adverse Effect, and no event has occurred and no circumstance has arisen that, in combination with any other events or circumstances, would reasonably be expected to have such a Parent Material Adverse Effect.
Section 4.07 Conflicts. The execution and delivery by each of Parent and Buyer of this Agreement and the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party does not, and the consummation by Parent and Buyer of the transactions contemplated by this Agreement and the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party shall not, (a) violate or be in conflict with, or require the consent of any Person under, any provision of Parent’s or Buyer’s Organizational Documents, as applicable, (b) conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice, or both, would constitute a default) under any agreement or instrument to which Parent or Buyer, as applicable, is a party or is bound, or (c) violate any provision of or require any consent, authorization or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to Parent or Buyer, as applicable.
Section 4.08 Broker. Other than amounts as may be payable by Parent or Buyer for which neither Seller shall have any liability, no broker, finder, investment banker or other similar person is or will be, in connection with the transactions contemplated by this Agreement or any other Transaction Documents, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on behalf of Parent or Buyer or any of their respective Affiliates.
Section 4.09 Financial Ability. As of the Execution Date, Buyer has sufficient funds committed and unconditionally available to it to perform all of Buyer’s obligations under this Agreement, including without limitation to pay the Adjusted Purchase Price in accordance with the terms of this Agreement and to assume the Assumed Liabilities. Buyer’s ability to consummate the transactions contemplated hereby is not contingent upon its ability to secure any financing or to complete any public or private placement of securities prior to or upon Closing.
Section 4.10 Approvals. Except as set forth on Disclosure Schedule 4.10, there are no approvals, consents, filings or notifications required to be obtained, made or given by Parent or Buyer as a condition to or in connection with the performance by Parent or Buyer, as applicable, of its obligations under this Agreement or any other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party or the consummation by Parent or Buyer, as applicable, of the transactions contemplated by this Agreement or such other Transaction Documents.
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Section 4.11 Litigation. As of the Execution Date, there is no Proceeding pending against Parent or Buyer or, to Buyer’s Knowledge, which have been threatened against Parent or Buyer that (a) affect the execution and delivery by Parent or Buyer, as applicable, of this Agreement or the other Transaction Documents to which Parent or Buyer, as applicable, is or will be a party or (b) if determined or resolved adversely in accordance with the plaintiff’s demands, would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Parent or Buyer to perform its obligations under this Agreement or such other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.
Section 4.12 Bankruptcy. There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to Buyer’s Knowledge, threatened against Parent or Buyer.
| Section 4.13 | Investigation. |
(a) Buyer has such expertise, knowledge and sophistication in financial and business matters generally that it is capable of evaluating, and has evaluated, the merits and economic risks of its investment in the Assets. Buyer is knowledgeable of the oil and gas wellsite service business and of the usual and customary practices of providers of oil and gas wellsite services, including those in the areas where the Assets are located. Further, Buyer is capable of making such investigation, inspection, review and evaluation of the Assets as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the Assets, their value, operation and suitability.
(b) Buyer has had the opportunity to examine all aspects of the Assets that Buyer has deemed relevant and has had access to all information requested by Buyer with respect to the Assets in order to enter into this Agreement. In connection with the Transactions, Buyer has had the opportunity to ask such questions of, and has received sufficient answers from, the Representatives of Sellers and obtain such additional information about the Assets as Buyer deems necessary to enter into this Agreement.
(c) Buyer confirms, acknowledges and agrees that Buyer is relying entirely upon the representations and warranties of Sellers in this Agreement and its own investigations and inspections of the books, records and assets of Sellers, including the Assets, prior to the execution of this Agreement in entering into this Agreement and proceeding with the Transactions on the terms as set forth herein. In deciding to enter into this Agreement, and to consummate the Transactions, other than the express representations and warranties of Sellers set forth in Article III, Buyer has relied solely upon its own knowledge, investigation, judgment and analysis and not on any disclosure or representation made by, or any duty to disclose on the part of, Sellers or Sellers’ Representatives.
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Section 4.14 Qualification. At the Closing, Buyer (or an Affiliate of Buyer to which the Assets are assigned at Closing) will be qualified to own and, where applicable, assume operatorship of the Assets in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated by this Agreement will not cause Buyer to be disqualified as such an owner or operator. To the extent required by the applicable state and federal Governmental Authorities, as of Closing Buyer (or, if applicable, Buyer’s operating Affiliate) will have (a) such lease bonds, area-wide bonds or any other surety bonds or insurance policies and (b) such consents and approvals, in each case as are required to enable Buyer (or, if applicable, Buyer’s operating Affiliate) to own and operate the Assets in the ordinary course of business in material compliance with any Applicable Laws governing the Assets.
Section 4.15 No Other Representations. No Seller nor any other Person (on behalf of any Seller or otherwise) has made or is making any representation or warranty whatsoever, express or implied, at law or in equity, with respect to Sellers, the Assets, this Agreement or the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in Article III (as modified by the Disclosure Schedules), and neither Parent nor Buyer is relying on and has not relied on any representation or warranty other than those representations or warranties set forth in Article III (as modified by the Disclosure Schedules) and any reliance by Parent or Buyer on any representation or warranty other than those representations and warranties set forth in Article III (as modified by the Disclosure Schedules) is hereby expressly disclaimed.
ARTICLE V
COVENANTS OF SELLERS
Section 5.01 Operating Covenants. From the Execution Date until the Closing or, if earlier, the termination of this Agreement as contemplated hereby, except (t) as required by this Agreement or any other Transaction Document, (u) as required by any lease, Contract, or instrument listed on any Annex, Disclosure Schedule or Schedule, as applicable, (v) as required by any Applicable Law or any Governmental Authority (including by order or directive of the Bankruptcy Court or fiduciary duty of the board of managers of any Seller or its Affiliates) or any requirements or limitations resulting from the Bankruptcy Cases, (w) to the extent related solely to Excluded Assets and/or Excluded Liabilities, (x) for renewal of expiring insurance coverage in the Ordinary Course of Business, (y) for emergency operations or (z) as otherwise consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed):
(a) Sellers will:
(i) subject to any Bankruptcy Court order to the contrary, operate the Assets in the Ordinary Course of Business;
(ii) maintain or cause its Affiliates to maintain the books of account and records relating to the Assets in the usual, regular and ordinary manner, in accordance with its usual accounting practices;
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(iii) give written notice to Buyer as soon as is practicable of any material damage or casualty to or destruction or condemnation of any Asset of which Sellers have Knowledge;
(iv) use reasonable best efforts to maintain insurance coverage on the Assets in the amounts and types described on Disclosure Schedule 3.10; and
(v) use commercially reasonable efforts to maintain or cause its Affiliates to maintain all Permits (including Environmental Permits) required for the operation of the Assets as presently conducted; and
(b) no Seller shall:
(i) sell, lease or otherwise transfer any Asset, or otherwise voluntarily divest or relinquish any right or asset, other than (A) sales or other dispositions of materials, supplies, machinery, equipment, improvements or other personal property or fixtures in the Ordinary Course of Business which have been replaced with an item of substantially equal suitability and (B) dispositions of Excluded Assets;
(ii) enter into any material Contract that if entered into prior to the Execution Date would be required to be listed in Disclosure Schedule 3.05(a) other than (A) Contracts of the type described in Section 3.05(a)(iii) and Section 3.05(a)(viii) entered into in the Ordinary Course of Business (provided that Sellers shall use commercially reasonable efforts to notify Buyer of the terms of any such Contract prior to the execution thereof), (B) confidentiality agreements entered into in accordance with the Bid Procedures Order, (C) contracts or agreements entered into in connection with the Bankruptcy Cases (including any in connection with an Alternative Transaction) and (D) Contracts that would not adversely affect the Assets in any material respect;
(iii) amend or modify in any material respect or terminate any Purchased Contract (other than termination or expiration in accordance with its terms) or any Permits (including Environmental Permits) required for the operation of the Assets as presently conducted;
(iv) change the methods of accounting or accounting practice by Sellers, except as required by concurrent changes in Applicable Law or GAAP as agreed to by its independent public accountants; or
(v) to the extent any of the following would reasonably have the effect of increasing the Non-Income Tax liability of Buyer for any period after the Closing Date, (A) make any settlement of or compromise any Non-Income Tax liability with respect to the Assets, (B) change any Non-Income Tax election or Non-Income Tax method of accounting or make any new Non-Income Tax election or adopt any new Non-Income Tax method of accounting with respect to the Assets; (C) surrender any right to claim a refund of Non-Income Taxes with respect to the Assets; or (D) consent to any extension or waiver of the limitation period applicable to any Non-Income Tax claim or assessment with respect to the Assets.
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| Section 5.02 | Assumption and Rejection of Executory Contracts and Leases. |
(a) Schedule 5.02(a) (as may be amended from time to time or supplemented with written notice to Buyer, other than with respect to an increase to the Cure Costs) sets forth each 365 Contract and Sellers’ good faith estimate of all cure and reinstatement costs or expenses that are required to be paid under sections 365(b)(1)(A) and 365(b)(1)(B) to effectuate the assumption and assignment of the Desired 365 Contracts (such costs or expenses required to be paid by Buyer, the “Cure Costs”) in respect of each such 365 Contract (and if no Cure Cost is estimated to be payable in respect of any 365 Contract, the amount of such Cure Cost designated for such 365 Contract shall be “$0.00”) (as such schedules may from time to time be amended or supplemented with written notice to Buyer, the “365 Schedule”).
(b) Subject to Buyer’s rights under Section 5.02(d) below to subsequently amend such designations, Schedule 5.02(b) sets forth a complete list of the 365 Contracts listed on the 365 Schedule that Buyer desires to be assumed by Sellers and transferred and conveyed to Buyer as a Purchased Contract, which shall include each Vehicle Finance Lease (collectively, and as further modified by Buyer pursuant to the provisions of this Section 5.02(b), the “Desired 365 Contracts”). Any 365 Contracts that are not Desired 365 Contracts shall be an Excluded Asset for all purposes hereof.
(c) Promptly following entry of the Bid Procedures Order (to the extent not previously filed), Sellers shall file the 365 Schedule with the Bankruptcy Court and deliver a written notice, in a form reasonably acceptable to Buyer, of the proposed potential assignments of the 365 Contracts and the proposed Cure Costs for each 365 Contract (as set forth on Schedule 5.02(a)) to all non-debtor parties of the 365 Contracts, which notice shall notify each non-debtor party to such 365 Contract of (i) the proposed Cure Cost for such 365 Contract and (ii) an objection deadline for such non-debtor party to object to the proposed Cure Cost. To the extent that any objections are received from such non-debtor parties that are counterparties to Desired 365 Contracts, Sellers shall take all reasonably necessary actions to, subject to Buyer’s obligations under Section 5.02(f), resolve such disputes with the applicable non-debtor party to the satisfaction of Buyer.
(d) Notwithstanding the foregoing, (i) at any time prior to the Designation Deadline or, if Buyer is the Successful Bidder, at any time prior to the Sale Hearing, Buyer may designate any 365 Contract that has not been rejected as a Desired 365 Contract and upon receipt of any such notice Sellers shall use commercially reasonable efforts to effect the assumption of such 365 Contract by Sellers in accordance with the Bankruptcy Code and, if Sellers are successful in effecting such assumption as of Closing, such 365 Contract shall become a Desired 365 Contract and transferred and conveyed to Buyer as a Purchased Contract and (ii) Buyer may revise Schedule 5.02(b) by excluding one or more Desired 365 Contracts at any time prior to the Sale Hearing; provided, however, that Buyer may not exclude from Schedule 5.02(b) any Desired 365 Contract that is a Vehicle Finance Lease.
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(e) Notwithstanding anything in this Agreement to the contrary, Sellers shall not reject any 365 Contracts without the prior written consent of Buyer in its sole discretion; provided that, after the Designation Deadline, Sellers may reject 365 Contracts (other than Desired 365 Contracts) without the consent of Buyer so long as such 365 Contracts were identified to Buyer in writing at least five (5) Business Days prior to the Designation Deadline. In the event that Sellers identify (whether less than five (5) Business Days before or after the Designation Deadline) any additional 365 Contracts capable of being assumed or rejected that were not previously identified as such, Sellers shall promptly notify Buyer of (i) such 365 Contracts and (ii) Sellers’ good faith estimate of the amount of the cure costs payable in respect of each such 365 Contract, which shall become Cure Costs, and, subject to Section 5.02(d), Buyer may designate each such additional 365 Contract as a Desired 365 Contract or Excluded Asset pursuant to this Section 5.02(e), notwithstanding the passage of the Designation Deadline. Schedule 5.02(b) and the definition of Desired 365 Contracts shall be deemed automatically amended to reflect changes made pursuant to this Section 5.02(e).
(f) Buyer shall provide adequate assurance of future performance of all of the Desired 365 Contracts so that all Desired 365 Contracts can be assumed by Sellers and assigned to Buyer at the Closing in accordance with the provisions of section 365 of the Bankruptcy Code and this Agreement, provided that Buyer shall cooperate with Sellers in providing such adequate assurance of future performance of all of the Desired 365 Contracts and Buyer acknowledges that such cooperation may require Buyer to provide information regarding Buyer and its Subsidiaries, as well as a commitment of performance by Buyer and/or its Subsidiaries with respect to the Desired 365 Contracts from and after the Closing to demonstrate adequate assurance of the performance of the Desired 365 Contracts, and Sellers’ obligation to assume and assign such Desired 365 Contracts is subject to the cooperation and providing of such information and commitment by Buyer. Sellers shall have no liability for Cure Costs with respect to the Desired 365 Contracts.
(g) At the Closing, (i) the Purchase Price shall be increased by the Cure Costs with respect to the Desired 365 Contracts paid by Sellers prior to Closing, provided that the Purchase Price shall not be increased by the amount of any Excess Cure Costs, and (ii) Buyer (and not Sellers) shall pay the Cure Costs with respect to the Desired 365 Contracts that have not been paid by Sellers as of the Closing.
(h) Notwithstanding anything in this Agreement to the contrary, including Section 5.02(d) above, Vehicle Finance Leases shall at all times constitute Desired 365 Contracts and shall be assigned to Buyer at the Closing.
| Section 5.03 | Access. |
(a) Each Seller shall afford to Buyer and its authorized representatives from the Execution Date until the Closing Date, during normal business hours, reasonable access to the Assets (subject to the terms, conditions and restrictions of agreements related to Assets to which such Seller is a party and the consent of the operator, as applicable) and to such Seller’s title, Surface Leases, Rights of Way, Contracts, environmental and legal materials, books, records, statements and operating data and other information relating to the Assets, together with the opportunity to make copies of such materials, books, records and other documents and information at Buyer’s expense, and will furnish to Buyer such other information in Sellers’ possession with respect to the Assets as Buyer may reasonably request; provided, however, that all such information shall be held in confidence by Buyer in accordance with the terms of the Confidentiality Agreement; provided, further, that in no event shall Sellers be obligated to provide (i) access or information in violation of Applicable Law, (ii) any information the disclosure of which would cause the loss of any legal privilege available to any Seller relating to such information or would cause any Seller to breach a confidentiality obligation to which it is bound; provided that the applicable Seller has used its reasonable efforts to protect the privilege or to obtain a waiver of the applicable contractual obligation, or (iii) copies of bids, letters of intent, expressions of interest or other proposals received from other Persons in connection with the transactions contemplated by this Agreement or information and analyses relating to such communications, except to the extent required in the Bid Procedures Order.
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(b) From the Execution Date until the Closing Date, but subject to the other provisions of this Section 5.03 and obtaining any required consents of Third Parties, Buyer shall have the opportunity to conduct at its expense a non-invasive environmental assessment (which shall not include invasive testing of the soil, groundwater, surface water, air or other environmental media or of building materials, equipment or facilities) of the Properties (subject to any conditions or restrictions contained in any lease covering such Properties and the consent of any Third Parties, as applicable) (“Phase I Assessment”). Buyer shall not conduct prior to Closing any invasive testing of the soil, groundwater, surface water, air and other environmental media and of building materials, equipment or facilities of the Properties absent Sellers’ express written consent, which consent may be withheld by Sellers in their sole discretion. Sellers shall use commercially reasonable efforts to obtain any Third Party consents that may be required in connection with any Phase I Assessment of the Assets.
(c) While performing any Phase I Assessment of the Properties, Buyer or any of their representatives and agents must comply with (i) Sellers’ environmental and safety rules and policies and with the operator’s environmental and safety rules and policies on all other Assets, and (ii) all Applicable Laws which might in any way relate to a Phase I Assessment. In the event that Buyer’s Phase I Assessment identifies any condition that Buyer believes must be disclosed to any Governmental Authority under Applicable Law, Buyer shall first notify Sellers of such conditions, providing Sellers with a reasonable description of such conditions and shall provide Sellers with the reasonable opportunity to notify such Governmental Authority. Buyer shall only notify a Governmental Authority of such environmental condition if, after providing Sellers with the reasonable opportunity to provide such notice, Sellers do not notify such Governmental Authority and Buyer reasonably believes that Applicable Law requires Buyer to notify such Governmental Authority of such environmental conditions; provided, however, that Buyer will furnish Sellers copies of all materials to be disclosed prior to any disclosure thereof and will not disclose any such information unless such disclosure is expressly required by Buyer by Applicable Law. Sellers shall have the right to observe each Phase I Assessment and Buyer shall promptly, and in any event within five (5) days after Buyer’s receipt or access thereto, provide to Sellers a copy of all results, analyses, reports and reviews prepared by or for Buyer with respect to each Phase I Assessment. All information obtained or reviewed by Buyer in connection with environmental assessments conducted pursuant to this Section 5.03 (including Phase I Assessments) shall be maintained as strictly confidential by Buyer and shall be governed by the terms of the Confidentiality Agreement; provided that Sellers shall be permitted to provide such information to Potential Bidders and their Representatives in connection with the Auction or any Alternative Transaction. Upon Buyer’s completion of a Phase I Assessment, and to the extent directly related to such Phase I Assessment, Buyer shall be responsible for returning the Property to substantially the condition existing prior to Buyer’s first entry onto the applicable Property for the Phase I Assessment, to the extent any Phase I Assessment (or Buyer or any of its representatives) disturbs such applicable Property.
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(d) BUYER SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD EACH SELLER, EACH OF THEIR SUCCESSORS, THEIR AFFILIATES AND ALL OF THEIR RESPECTIVE DIRECTORS AND OFFICERS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS AND LOSSES CAUSED DIRECTLY OR INDIRECTLY BY THE ACTS OR OMISSIONS OF BUYER, BUYER’S AFFILIATES OR ANY PERSON ACTING ON BUYER’S OR ITS AFFILIATE’S BEHALF IN CONNECTION WITH ANY DUE DILIGENCE CONDUCTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY SITE VISITS CONDUCTED PURSUANT TO SECTION 5.03(a) AND SECTION 5.03(b), EXCEPT TO EXTENT SUCH CLAIMS OR LOSSES ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLERS. Buyer shall comply with all rules, regulations, policies and instructions reasonably required by Sellers, or any Third Party operator of any Assets, which are provided to Buyer regarding Buyer’s actions while upon, entering or leaving any Asset, including any insurance requirements that Sellers may reasonably impose, or any such Third Party operator may impose, on contractors authorized to perform work on any Asset owned or operated by Sellers (or any such Third Party operator, as applicable).
(e) From and after the Closing, Buyer shall afford to each third party acquiror (and their respective Representatives) of Excluded Assets pursuant to a definitive agreement that is approved by the Bankruptcy Court (each, an “Excluded Asset PSA”) reasonable access to the Properties for the purpose of inspecting and removing such Excluded Assets in each case on the same terms as Sellers are affording access to Buyer pursuant to this Section 5.03, mutatis mutandis; provided that, the cost of any such inspection or removal shall be at the sole cost of the applicable third party acquiror. Each such third party acquiror shall be a third party beneficiary of this Section 5.03(e). Sellers shall require each Excluded Asset PSA to include a covenant substantially similar to this Section 5.03(e) for the benefit of Buyer, including designating Buyer as third party beneficiary thereof.
Section 5.04 Permits. Notwithstanding any other provision in this Agreement, Buyer shall use its reasonable best 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 to transfer to Buyer all transferable Permits listed on Annex F. Sellers agree to provide reasonably assistance to support Buyer’s efforts to accomplish such transfer.
Section 5.05 Title Cooperation. Sellers shall reasonably cooperate, at the sole cost of Buyer, prior to and at the Closing, with Buyer in connection with Buyer obtaining, at its option, any title insurance policy or policies (including in connection with the preparation of any related land title surveys) with respect to the Properties. Without limiting the generality of the foregoing, Sellers shall execute and deliver any customary documents and affidavits at Closing, in each case in a form reasonably acceptable to the Buyer and the title company, as may reasonably be necessary for the title company to issue such title policies or endorsement.
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Section 5.06 Certain Accounts Payable. Sellers shall cause each Subsidiary of Basic Parent and each Affiliate of either Seller that in each case is the payee of any accounts payable that are retained by Sellers as Excluded Liabilities (a) not to assert mechanics’ liens against customers of Basic Parent, Parent or any of their respective Subsidiaries in respect of such accounts payable or (b) if such Subsidiary or Affiliate has previously asserted any such mechanics’ liens against customers of Basic Parent, Parent or any of their respective Subsidiaries in respect of such accounts payable, to release and terminate any such liens promptly following the Closing and to promptly deliver notice of such release and termination to Buyer.
ARTICLE VI
COVENANTS OF PARENT AND BUYER
Section 6.01 Access. Buyer agrees that, following the Closing, and subject to Applicable Law and except as may be necessary to protect any applicable legal privilege, it shall (and shall cause its Subsidiaries to) give to Sellers and their Representatives reasonable access during normal business hours to the offices, books and records relating to the Assets or any operations relating thereto for any and all periods prior to and including the Closing Date as Sellers and their Representatives may reasonably request and to make copies of the same in connection with (a) the preparation of Tax Returns or information returns, (b) reports or other obligations by Sellers to Governmental Authorities, (c) with respect to the administration of the Excluded Assets or Excluded Liabilities, (d) with respect to the administration of the Bankruptcy Cases, (e) pursuing, prosecuting or commencing litigation on account of or relating to Excluded Assets, including avoidance actions, (f) objecting to proofs of claims or administrative expense claims, (g) preparing the Final Settlement Statement and any other matters contemplated by Section 2.06 and (h) any final determination of any audit or examination, Proceeding or determination; provided, however, that all such information shall be held in confidence by Sellers, their Affiliates and their respective Representatives and may not be disclosed to any other Person without the written consent of Buyer, except to the extent reasonably required in connection with the foregoing clauses (a)-(h) or as otherwise expressly contemplated by this Agreement. Buyer shall (and shall cause its Subsidiaries to) preserve all such books and records for a period of three (3) years after the Closing; provided, however, that Buyer shall have the right at any time after the second (2nd) anniversary of the Closing Date to request in writing that Sellers take any such records and, if Sellers do not agree to take such records within ninety (90) Business Days after receipt of the request, Buyer (or its Subsidiaries, as applicable) may dispose of such records.
Section 6.02 Data Retention. Buyer, for a period of three (3) years following Closing, will (a) retain the Data and (b) provide Sellers, their Affiliates, and Sellers and their Affiliates officers, employees and representatives with reasonable access to the Data during normal business hours for review and copying; provided that Buyer may destroy Data from time to time and prior to the end of such period in accordance with its normal document retention policy as long as Buyer notifies Sellers at least thirty (30) days in advance and provides Sellers an opportunity to remove or copy such Data.
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| Section 6.03 | Registration of Parent Class A Common Stock. |
(a) Shelf Registration Statement. Subject to the timely receipt of information described in Section 6.03(b), no later than three (3) Business Days after the Closing, Parent shall (i) file with (or confidentially submit to) the SEC a Registration Statement on Form S-3, Form S-1 or the then appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the 1933 Act or any successor rule thereto (a “Shelf Registration Statement”) that covers all Parent Class A Common Stock acquired by Basic pursuant to this Agreement (the “Registrable Securities”) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the 1933 Act or any successor rule thereto and (ii) use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the SEC as soon as practicable thereafter which, in any event, shall be within ten (10) Business Days of clearing comments of, or receiving oral or written confirmation of “no review,” from the SEC staff. In addition, Parent shall use its reasonable best efforts to cause a Shelf Registration Statement filed pursuant to this Section 6.03(a) to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Shelf Registration Statement is available or, if not available, that another Shelf Registration Statement (if Parent is eligible to file a Shelf Registration Statement) or other Registration Statement (if Parent is not so eligible) is continuously available, for the resale of the Registrable Securities until the earlier of (y) the date that all Registrable Securities have been sold or (z) one year from the date of Closing (such period, the “Registration Period”). If Parent files a Shelf Registration Statement on Form S-3 and thereafter Parent becomes ineligible to use Form S-3 for secondary sales, Parent shall use its reasonable best efforts to file a shelf registration statement on Form S-1 (a “Form S-1 Shelf”) as promptly as practicable to replace the shelf Registration Statement that is a Shelf Registration Statement and have the Form S-1 Shelf declared effective as promptly as practicable and to cause such Form S-1 Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another Registration Statement is available, for the resale of the Registrable Securities during the Registration Period. When effective, a Registration Statement filed pursuant to this Section 6.03(a) (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the 1933 Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any Prospectus contained in such Registration Statement, in the light of the circumstances under which such statement is made).
(b) Information Required for Participation in Shelf Registration Statement. At least ten (10) Business Days prior to any anticipated filing date of a Registration Statement pursuant to this Section 6.03, Parent shall use reasonable efforts to notify Basic in writing (which may be by email) of the information reasonably necessary about Basic to include the Registrable Securities in such Registration Statement. Notwithstanding anything else in this Agreement, Parent shall not be obligated to include the Registrable Securities to the extent Parent has not received such information, and received any other reasonably requested agreements or certificates, on or prior to the fifth (5th) Business Day prior to the first anticipated filing date of a Registration Statement pursuant to this Section 6.03.
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(c) General Procedure. Parent shall use its reasonable best efforts to effect the registration of the Registrable Securities pursuant to this Section 6.03, and Parent shall, as expeditiously as possible:
(i) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be required by the rules, regulations or instructions applicable to the registration form used by Parent or by the 1933 Act or rules and regulations thereunder to keep the Registration Statement effective during the Registration Period;
(ii) prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto (except for periodic reports under the Exchange Act), furnish without charge to the Basic, and Basic’s legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as Basic or the legal counsel for Basic may request in order to facilitate the disposition of the Registrable Securities;
(iii) cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by Parent are then listed;
(iv) provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
(v) advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;
(vi) at least three (3) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities and its counsel, including, without limitation, providing copies promptly upon receipt of any comment letters received with respect to any such Registration Statement or Prospectus;
(vii) notify Basic at any time when a Prospectus relating to such Registration Statement is required to be delivered under the 1933 Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 6.03(e);
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(viii) permit a representative of Basic and any attorney or accountant retained by Basic to participate, at each such person’s own expense (except as provided under Section 6.03(d)), in the preparation of the Registration Statement, and cause Parent’s officers, directors and employees to supply all information reasonably requested by any such representative, attorney or accountant in connection with the registration; and
(ix) make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of Parent’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the SEC).
(d) Registration Expenses. Parent shall pay all fees and expenses incident to the performance of Parent’s obligations under this Section 6.03.
(e) Suspension of Sales. Subject to a good faith determination by Parent, upon the advice of legal counsel, that it is in the best interests of Parent to suspend the use of the Registration Statement, following the effectiveness of the Registration Statement, Parent, by written notice to Basic, may direct Basic to, and to cause its Affiliates to, suspend sales of the Registrable Securities pursuant to the Registration Statement for such times as Parent reasonably may determine is necessary and advisable (but in no event for more than two (2) occasions or for more than sixty (60) consecutive calendar days, or in the aggregate, for more than ninety (90) total calendar days, in each case during any twelve (12)-month period commencing on the date of this Agreement), (i) if Parent shall have determined in good faith that (A) the offer or sale of any Registrable Securities would materially impede, delay or interfere with any material proposed financing, offer or sale of securities, acquisition, business combination, corporate reorganization or other transaction involving Parent, (B) after the advice of counsel, the sale of Registrable Securities pursuant to the Registration Statement would require disclosure of material nonpublic material information not otherwise required to be disclosed under applicable law and (C) executive management of Parent has determined in good faith that (1) Parent has a bona fide business purpose for preserving the confidentiality of such transaction, or (2) disclosure would have a material adverse effect on Parent or Parent’s ability to consummate such transaction, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis, as applicable or (ii) Parent shall have determined in good faith, after the advice of counsel, that it is required by law, rule or regulation to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate information into the Registration Statement for the purpose of reflecting in the prospectus included in the Registration Statement any facts or events arising after the effective date of the Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represent a fundamental change in the information set forth therein that are not solely the result of Exchange Act reports by Parent that are incorporated by reference into the Registration Statement. Upon the occurrence of any such suspension or as a result of any other event the Registration Statement ceases to be effective or unavailable (except such times as Parent is permitted hereunder to suspend the prospectus forming part of the Registration Statement and other than in the event of a stop order addressed in Section 6.03(c)(v)), Parent shall use its commercially reasonable efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis (or if necessary to file and have declared effective a subsequent Registration Statement) or to take such action as is necessary to make resumed use of the Registration Statement, as applicable, so as to permit Basic to resume sales of the Registrable Securities as soon as possible. In the case of an event that causes Parent to suspend the use of the Registration Statement (a “Suspension Event”), Parent shall give written notice (a “Suspension Notice”) to Basic to suspend sales of the Registrable Securities pursuant to the Prospectus and such notice shall state generally the basis for the notice (and shall not contain any material non-public information) and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and Parent is using its commercially reasonable efforts to terminate suspension of the use of the Registration Statement as promptly as possible. Upon receipt of any Suspension Notice from Parent, Basic agrees that it will immediately discontinue offers and sales of the Registrable Securities under the Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until Basic receives copies of a supplemental or amended prospectus that corrects the misstatement(s) or omission(s) referred to above and receives an End of Suspension Notice (as defined below) or unless otherwise notified by Parent that it may resume such offers and sales. Basic may recommence effecting sales of the Registrable Securities pursuant to the Registration Statement (or such filings) following further notice to such effect (an “End of Suspension Notice”) from Parent, which End of Suspension Notice shall be given by Parent to Basic in the manner described above promptly following the conclusion of any Suspension Event and its effect.
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(f) Reporting Obligations. As long as Basic shall own Registrable Securities, Parent, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Parent after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act. Parent further covenants that it shall take such further action as Basic may reasonably request, all to the extent required from time to time to enable Basic to sell shares of the Parent Class A Common Stock held by Basic without registration under the 1933 Act within the limitation of the exemptions provided by Rule 144, including providing any legal opinions.
(g) Indemnification.
(i) Parent agrees to indemnify, to the extent permitted by Applicable Law, Basic, its officers and directors and agents and each person who controls Basic (within the meaning of the 1933 Act) against all losses, claims, damages, liabilities and expenses (including attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to Parent by Basic expressly for use therein.
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(ii) In connection with any Registration Statement in which Basic is participating, Basic shall furnish to Parent in writing such information and affidavits as Parent reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by Applicable Law, shall indemnify Parent, its directors and officers and agents and each person who controls Parent (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by Basic expressly for use therein.
(iii) Any person entitled to indemnification under this Section 6.03(g) shall (A) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (B) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one (1) counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
(iv) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. Each of Parent and Basic also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event Parent of Basic’s indemnification is unavailable for any reason.
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(v) If the indemnification provided under Section 6.03(g) from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of Basic under this Section 6.03(g) shall be limited to the amount of the net proceeds received by Basic in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 6.03(g)(i), Section 6.03(g)(ii) and Section 6.03(g)(iii), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution pursuant to this Section 6.03(g)(v) from any person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything in this Agreement to the contrary, this Section 6.03 shall survive the Closing for so long as any claim may be made hereunder and Article X shall have no application hereto.
Section 6.04 Current Public Information; Legend Removal. During the Registration Period, to the extent Parent shall be required to do so under the Exchange Act, Parent agrees to (a) file in a timely manner all reports and other documents required, if any, to be filed by it under the 1933 Act and the Exchange Act and the rules and regulations adopted thereunder; and (b) make available information necessary to comply with Rule 144 promulgated under the Securities Act or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such rule (“Rule 144”), if available with respect to resales of the Registrable Securities, at all time, all to the extent required from time to time to enable each holder to sell the Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by Rule 144 . In connection with a sale of shares of Registrable Securities by Basic or its Affiliates in reliance on Rule 144 promulgated under the Securities Act or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as Rule 144, Basic, its Affiliates or the broker shall deliver to Parent’s transfer agent a broker representation letter providing to the transfer agent and Parent information reasonably necessary to determine that such sale of the shares of Registrable Securities is made in compliance with Rule 144. Upon receipt of such representation letter, Parent shall direct its transfer agent to remove the notation of any securities legend in Basic’s or its Affiliate’s certificate or the book entry account maintained by the transfer agent, and Parent shall bear all costs associated therewith. At such time as the shares of Registrable Securities have been (i) sold pursuant to an effective registration statement under the Securities Act or (ii) sold after being held by Basic or its Affiliates for more than six (6) months if Basic or such Affiliate is not, and has not been in the preceding three (3) months, an affiliate of Parent (as defined in Rule 144), if the book entry account or certificate for such shares of Registrable Securities still bears the notation of a restrictive securities legend, Parent agrees, upon request of Basic or its Affiliate or permitted assignee, to take commercially reasonable steps necessary to effect the removal of such legend from the Registrable Securities no later than two (2) Business Days following such request by Basic, such Affiliate or such assignee and Parent shall bear all costs associated therewith (other than the costs of Basic’s legal counsel), so long as Basic, its Affiliate or their permitted assigns provide to Parent information reasonably necessary (including a customary broker representation letter, a customary shareholder representation letter and customary certifications reasonably requested to allow Parent’s outside legal counsel to provide an opinion of counsel if required by Parent’s transfer agent) to determine that the legend is no longer required under the Securities Act or applicable state laws.
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ARTICLE VII
COVENANTS OF PARENT, BUYER AND SELLERS
Section 7.01 Commercially Reasonable Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, including Section 7.02(e), and subject to the Bankruptcy Code and any orders of the Bankruptcy Court, Parent, Buyer and Sellers each agree to use 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 to consummate the Transactions; provided that the Parties understand and agree that the commercially reasonable efforts of any Party shall not be deemed to include, except as expressly set forth in this Agreement, entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the Transactions; provided that this Section 7.01 shall not (a) limit or affect the obligation of any Party to perform its obligations and covenants expressly set forth in this Agreement or (b) require any Party to incur any obligations or pay any fees or amounts to Third Parties not otherwise required under this Agreement. Sellers, Parent and Buyer agree to execute and deliver or cause to be executed and delivered 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 in accordance with the terms and conditions of this Agreement.
Section 7.02 Bankruptcy Proceedings.
(a) Each of Parent and Buyer agree that it will promptly take such actions as are reasonably requested by Sellers to assist in (i) consummating the Transactions in accordance with this Agreement and (ii) obtaining entry of the Sale Order and finding of adequate assurance of future performance by Buyer, including furnishing affidavits or other documents or information for filing with the Bankruptcy Court for the purposes, among others, of providing necessary assurances of performance by Buyer under this Agreement and demonstrating that Buyer is a “good faith” purchaser under section 363(m) of the Bankruptcy Code. Sellers shall use reasonable best efforts to obtain as part of the Sale Order a determination that the Buyer constitutes a “good faith” purchaser under section 363(m) of the Bankruptcy Code and that the sale of the Assets to Buyer pursuant to this Agreement shall be immediately effective, notwithstanding the provisions of Rules 6004(h) and 6006(d) of the Federal Rules of Bankruptcy Procedure.
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(b) The Bid Procedures Order will provide that the Break-Up Fee and Expense Reimbursement, as defined in Section 9.03, will constitute, pursuant to sections 364 and 503 of the Bankruptcy Code, a superpriority administrative expense claim in each of Seller’s bankruptcy estates with priority over any and all administrative expense claims. In the event the entry of the Sale Order or the Bid Procedures Order shall be appealed or a stay pending appeal is requested, Sellers shall use commercially reasonable efforts to promptly defend any motion for reconsideration, or to alter, amend, stay, or otherwise challenge the Sale Order or any appeal of the Sale Order, and shall prosecute such defense until the Sale Order is final and not subject to appeal, and Buyer agrees to cooperate in such efforts.
(c) Each Party acknowledges that this Agreement and the sale of the Assets and assumption and assignment of the Purchased Contracts are subject to Bankruptcy Court approval and the consideration by Sellers of higher or better competing transactions (including any competing bids, plan of reorganization or recapitalization or restructuring transaction) in respect of all or any part of the Assets in accordance with the Bid Procedures Order.
(d) From and after the Execution Date and until the Closing, no Seller shall take any action which is intended to (or is reasonably likely to), or fail to take any action the intent (or the reasonably likely result) of which failure to act is to, result in the reversal, voiding, modification or staying of the Bid Procedures Order. If Buyer is the Successful Bidder at the Auction, Sellers shall not take any action which is intended to (or is reasonably likely to), or fail to take any action the intent (or the reasonably likely result) of which failure to act is to, result in the reversal, voiding, modification or staying of the Sale Order or this Agreement.
(e) From and after the Execution Date and until the Closing, to the extent reasonably practicable under the circumstances, Sellers shall make reasonable efforts to consult and cooperate with Buyer regarding (i) any pleadings, motions, notices, statements, applications, schedules, reports or other papers to be filed with the Bankruptcy Court in relation to the implementation of the Transactions, (ii) any discovery taken in connection with seeking entry of the Sale Order (including any depositions) and (iii) any hearing relating to the Sale Order, including the submission of any evidence, including witnesses’ testimony, in connection with such hearing.
(f) The bidding procedures to be employed with respect to this Agreement shall be those approved by the Bankruptcy Court pursuant to the Bid Procedures Order. Each of Parent and Buyer acknowledges and agrees that from the Execution Date until the termination of this Agreement in accordance with its terms, Sellers and their respective Affiliates and Representatives shall be permitted to take such actions as permitted under the Bid Procedures Order with respect to an Alternative Transaction and may take any other affirmative action to cause, promote or assist with an Alternative Transaction not otherwise prohibited under the Bid Procedures Order and the taking of such actions shall not be deemed a breach by Sellers of this Agreement. Without limiting the foregoing, until the Successful Bidder has been determined in accordance with the Bid Procedures Order, Sellers may, directly or indirectly through Representatives of Sellers, (i) solicit inquiries, proposals or offers from Third Parties (a “Potential Bidder”) for the Assets (and negotiate the terms of such proposals or offers) in connection with any Alternative Transaction, (ii) engage in discussions and negotiations regarding an Alternative Transaction with any Potential Bidder and any Potential Bidder’s Representatives in accordance with or as otherwise permitted under the Bid Procedures Order in connection with the solicitation of one or more proposals relating to an Alternative Transaction, (iii) enter into any agreement or letter of intent with respect to any Alternative Transaction and (iv) furnish to any Potential Bidder and its Representatives public or non-public information relating to any Seller and afford to any such Potential Bidder access to any properties, assets, books or records of any Seller or the business of Sellers.
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(g) Without limiting the requirements of Section 7.02(a) through Section 7.02(f), from and after the Execution Date until the earlier of (x) the conclusion of the Auction if Buyer is not a Successful Bidder at the Auction or (y) the Closing, Sellers, each of Parent and Buyer agree to:
(i) support and take all steps reasonably necessary and desirable to consummate the Transactions in accordance with this Agreement;
(ii) to the extent any legal or structural impediment arises that would prevent, hinder or delay the consummation of the Transactions, support and take all steps reasonably necessary and desirable to address any such impediment;
(iii) negotiate in good faith and use commercially reasonable efforts to execute and deliver the definitive documents and any other required agreements to effectuate and consummate the Transactions; and
(iv) consult and negotiate in good faith with material stakeholders and their advisors regarding the execution of definitive documents and the implementation of the Transactions.
(h) If an Auction is conducted and Sellers do not choose Buyer as the Successful Bidder, but instead choose Buyer as the Back-up Bidder, Buyer will serve as the Back-up Bidder. If Buyer is chosen as the Back-up Bidder, Buyer will be required to keep its bid to consummate the Transactions on the terms and conditions set forth in this Agreement (as may be amended with Sellers’ written consent prior to or at the Auction) open and irrevocable until the Back-up Termination Date. If the agreement with the Successful Bidder (other than Buyer) is terminated prior to closing under such agreement, Buyer will be deemed to be the Successful Bidder and each of Parent and Buyer will forthwith consummate the Transactions on the terms and conditions set forth in this Agreement (as the same may be amended with Sellers’ written consent prior to or at the Auction).
(i) The Escrow Funds shall be applied as provided in this Agreement or returned to Buyer in accordance with this Agreement and the Bid Procedures. Any instructions provided by Sellers to the Escrow Agent in respect of the Escrow Funds shall be consistent with this Agreement and the Bid Procedures.
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Section 7.03 Public Announcements. Each Party agrees that, prior to Closing, the consent (as to both form and content), not to be unreasonably withheld, of the other Parties shall be obtained prior to issuing any press release or making any public statement with respect to this Agreement or the other Transaction Documents or the Transactions, except to the extent that such press release or other public announcement is required in connection with the Auction, the Bid Procedures Order, any order of the Bankruptcy Court or by Applicable Law and such prior notice is not practicable given the circumstances giving rise to the requirement to issue such release; provided that Parent, Buyer, Sellers and Basic Parent shall be permitted to issue a press release or make a public announcement upon the execution of this Agreement to announce such execution of this Agreement and will provide the other Parties with a copy of such press release or public announcement in advance of its release and provide such other Parties with a reasonable opportunity to comment on the same. From and after the Closing, Parent, Buyer and Sellers will provide each other a copy of any press release or other public announcement with respect to this Agreement, the other Transaction Documents or the Transactions that Parent, Buyer, Basic Parent or a Seller proposes to issue or make in advance of its release and provide the others with a reasonable opportunity to comment on the same, except to the extent that such press release or other public announcement is required by any order of the Bankruptcy Court or Applicable Law and such prior notice is not practicable given the circumstances giving rise to the requirement to issue such release.
Section 7.04 Confidentiality. The Parties acknowledge that Parent and Basic Parent previously executed the Confidentiality Agreement. Notwithstanding anything to the contrary in the Confidentiality Agreement, to the extent of any conflict between the provisions of the Confidentiality Agreements and the terms hereof, the terms hereof shall prevail. The Parties acknowledge and understand that this Agreement will be filed with the Bankruptcy Court and may be made available by Sellers to Potential Bidders as contemplated by the Bid Procedures Order. The Parties agree that such disclosure shall not be deemed to violate any confidentiality obligations owing to any Party, whether pursuant to this Agreement, the Confidentiality Agreement or otherwise. Notwithstanding the foregoing, this Section 7.04 shall not in any way limit, to the extent required by Applicable Law, the disclosure of information by Sellers or their Affiliates in connection with the administration of the Bankruptcy Cases, pursuant to any provision of the Bankruptcy Code or any order of the Bankruptcy Court.
Section 7.05 Employee Matters.
(a) Pursuant to Section 6 of the Confidentiality Agreement, each of Parent and Buyer is subject to certain restrictions on the solicitation and hiring of the employees of Sellers and certain of their Affiliates. However, Sellers agree that, (i) solely during the period beginning on the Execution Date and ending on the earlier to occur of (A) the Closing Date and (B) the termination of this Agreement in accordance with its terms, Buyer or one of its Affiliates may make offers of employment to any or all of the Seller Employees (each such offer, an “Employment Offer”); provided, however, that any such Employment Offer must comply with Section 7.05(b), and (ii) if, and only if, the Closing has occurred, Buyer or its applicable Affiliate(s) may hire any Seller Employee pursuant to any Employment Offer made in compliance with Section 7.05(a)(i).
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(b) Within five (5) days after the Execution Date, Sellers will update the Compensation Schedule to include the following with respect to each Seller Employee: (1) leave status (including nature and expected duration of any leave); (2) details of any visa or other work permit; and (3) accrued but unused vacation, paid time off, sick days and personal days. Each Employment Offer shall provide for compensation at a base salary or base wage and annual cash incentive compensation opportunity, as applicable, and employee benefit plans and arrangements, in each case, that are no less favorable than those provided to similarly situated employees of Buyer, and shall be subject to and conditioned upon the occurrence of the Closing and any employment by Buyer or its Affiliates of any Seller Employee shall not become effective prior to the Closing. A copy of any Employment Offer shall be delivered to Sellers at least five (5) Business Days prior to being delivered to the applicable employee. Buyer shall provide to Sellers, not later than the Closing Date, the names of each Seller Employee who has then accepted an Employment Offer from Buyer or any of its Affiliates (each Seller Employee who accepts such an offering being a “Continuing Employee”) and the names of the Seller Employees who have then declined an Employment Offer from Buyer or its Affiliates. Each Continuing Employee shall, as of the Closing Date (if he or she is still employed by Sellers or their Affiliate), be terminated by Sellers or their Affiliate, as applicable (and Sellers shall and shall cause their Affiliates to release such Continuing Employee from all non-compete or similar restrictions that would restrict or be violated in any way by, such Continuing Employee’s activities as an employee of Buyer or its Affiliate) and become an employee of Buyer or its Affiliate.
(c) Sellers shall reasonably assist Buyer and its Affiliates, as applicable, in communicating with the employees of Sellers and their Affiliates regarding potential employment with Buyer or its Affiliates; provided that Buyer shall coordinate with a Person designated by Sellers in discussing Employment Offers with the Seller Employees and shall not directly communicate with any Seller Employee regarding potential employment by Buyer or its Affiliates other than as directed or consented to by such designee. Sellers shall reasonably assist Buyer and its Affiliates, as applicable, in facilitating all employment offers, including the execution of Form I-9s and other pre-employment documents for all Continuing Employees.
(d) Buyer shall, and shall cause its Affiliates to, credit Continuing Employees for service earned on and prior to the Closing Date with Sellers and their Affiliates or predecessors to the extent that such service would be credited pursuant to the applicable employee benefit plan, program or arrangement maintained by Sellers, in addition to service earned with Buyer and its Affiliates on or after the Closing Date to the extent that service is relevant for purposes of eligibility, vesting, paid-leave entitlement or the calculation of benefits under any employee benefit plan, program or arrangement of Buyer or any of its Affiliates for the benefit of the Continuing Employees on or after the Closing Date, but not for the purposes of benefit accrual under any defined benefit pension plan; provided, however, that nothing herein shall result in a duplication of benefits with respect to the Continuing Employees.
(e) Buyer shall use commercially reasonable efforts to (or, as applicable, cause its Affiliates to) waive any pre-existing condition or actively at work limitations, evidence of insurability and waiting periods for the Continuing Employees and their eligible spouses and dependents under any employee benefit plan, program or arrangement of Buyer or any of its Affiliates for the benefit of the Continuing Employees on or after the Closing Date. Buyer shall use commercially reasonable efforts to (or, as applicable cause its Affiliates to) credit for purposes of determining and satisfying annual deductibles, co-insurance, co-pays, out-of-pocket limits and other applicable limits under the comparable health plans and arrangements offered to Continuing Employees, deductibles, co-insurance, co-pays and out-of-pocket expenses paid by Continuing Employees and their respective spouses and dependents under Sellers or any of their respective Affiliates’ health plans in the calendar year in which the Closing Date occurs.
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(f) Buyer or its Affiliates shall provide each Continuing Employee with credit for the same number of vacation, paid time off, sick days and personal days such Continuing Employee has accrued but not used in the calendar year in which the Closing Date occurs (“Accrued PTO”); provided, that to the extent required by applicable Law, such amount shall be paid by Buyer or its Affiliates to the applicable Continuing Employee in cash. For the avoidance of doubt, after the Closing Date, Continuing Employees will only be eligible to use Accrued PTO (and any vacation, paid time off, sick days and personal days accrued following the Closing Date) in accordance with Buyer’s or its Affiliates’ policies, as applicable, that are in effect from time to time. Prior to the Closing Date, Sellers shall provide to Buyer an updated Compensation Schedule to include each Continuing Employee’s Accrued PTO as of the Closing Date.
(g) On the Closing Date, Sellers and their Affiliates shall cease to provide health and welfare coverage to each Continuing Employee and his or her covered dependents and beneficiaries, and Buyer or its Affiliate shall commence providing such coverage to Continuing Employees and his or her covered dependents and beneficiaries. Buyer and its “buying group” (as defined in Treasury Regulation section 54.4980B-9, Q&A-2(c)) shall be solely responsible for providing continuation coverage under COBRA to those individuals who are or become M&A qualified beneficiaries (as defined in Treasury Regulation section 54.490B-9, Q&A-4(a)) with respect to the transactions contemplated by this Agreement. Buyer and its Affiliates shall provide coverage required by COBRA to Continuing Employees and their eligible dependents or beneficiaries under group health plans maintained by Buyer or an Affiliate of Buyer with respect to qualifying events occurring on and after the Closing Date.
(h) Each of Parent and Buyer acknowledge that, except for solicitations expressly permitted by Section 7.05(a)(i) and hiring expressly permitted by Section 7.05(a)(ii), each of Parent and Buyer remains subject to the restrictions on the solicitation of the employees of Sellers and their Affiliates contained in Section 6 of the Confidentiality Agreement.
Section 7.06 Tax Matters; Apportionment of Tax Liability.
(a) Non-Income Taxes.
(i) All Non-Income Taxes (and any refunds thereof) with respect to the Assets attributable to any taxable period (or portion thereof) before the Closing Date shall be for Sellers’ account, and all Non-Income Taxes (and any refunds thereof) with respect to the Assets attributable to any taxable period (or portion thereof) after (and including if applicable) the Closing Date shall be for Buyer’s account.
(ii) All real estate, personal property, and similar ad valorem Taxes (and any refunds thereof) assessed with respect to the Assets for the taxable year of the Closing shall be prorated based on the number of full days in such period that occur before the Closing Date, on the one hand, and the number of days in such period that occur on or after the Closing Date, on the other hand. All other Non-Income Taxes (and any refunds thereof) with respect to the Assets shall be allocated between Sellers and Buyer as though the taxable year of the Closing ended as of the close of business on the day before the Closing Date, and all such Non-Income Taxes (and any refunds thereof) with respect to the Assets attributable to taxable periods ending as of the close of business on the day before the Closing Date shall be for Sellers’ account and all such Non-Income Taxes (and refunds thereof) with respect to the Assets attributable to taxable periods beginning on or after the Closing Date shall be for Buyer’s account.
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(iii) To the extent known, the apportionment of Non-Income Taxes (and any refunds thereof) with respect to the Assets for the taxable year of the Closing between the Parties shall take place in the Closing Statement and the Final Settlement Statement (without duplication) by (i) increasing the Purchase Price pursuant to Section 2.04(d)(i) by the amount of all Non-Income Taxes allocated to Buyer in accordance with this Section 7.06(a) but paid by Sellers prior to the Closing Date (or after the Closing Date but prior to the determination of the Adjusted Purchase Price) and (ii) decreasing the Purchase Price pursuant to Section 2.04(d)(i) by the amount of all Non-Income Taxes allocated to Sellers in accordance with this Section 7.06(a) but paid or payable by Buyer. If the actual amount of Non-Income Taxes is not determinable in connection with the preparation of the Closing Statement or the Final Settlement Statement, as applicable, Buyer and Sellers shall utilize the most recent information available in estimating the adjustments to the Purchase Price contemplated by this Section 7.06(a)(iii). Upon determination of the actual amount of Non-Income Taxes with respect to the Assets for the taxable year of the Closing, to the extent the actual amount of a Non-Income Tax (or the amount thereof paid or economically borne by Buyer or Sellers) allocable to Buyer or Sellers under this Section 7.06(a) is determined to be different than the amount, if any, that was taken into account in the determination of the Purchase Price as set forth in the Closing Statement or Final Settlement Statement or was not taken into account in the determination of the Purchase Price as set forth in the Closing Statement or Final Settlement Statement, timely payments shall be made from Sellers to Buyer, or from Buyer to Sellers, as applicable, to the extent necessary to cause the applicable Party to bear the amount of such Non-Income Tax that is allocable to such Party under this Section 7.06(a).
(iv) Subject to the payment right in Section 7.06(a)(iii), Buyer shall be responsible for the payment to the applicable Governmental Authority of all Non-Income Taxes with respect to the Assets that become due and payable on or after the Closing Date. For the avoidance of doubt, the Parties acknowledge that Buyer shall not be responsible for the payment of any Tax set forth on, or arising from or relating to a disclosure item set forth on, Disclosure Schedule 3.11 (other than Non-Income Taxes with respect to the Assets arising from, or relating to, Liens for current period Taxes not yet due and payable for the taxable year of the Closing that are set forth on Disclosure Schedule 3.11 and that are allocated to Buyer pursuant to Section 7.06(a)(i) and Section 7.06(a)(ii)).
(b) Transfer Taxes. Any sales, use, transfer, documentary, stamp, registration or similar Taxes (“Transfer Taxes”) due as a result of the transfer of the Assets pursuant to this Agreement that are not eliminated or reduced through the application of Section 1146(a) of the Bankruptcy Code and/or the Sale Order entered by the Bankruptcy Court shall be borne by Buyer. If required by Applicable Law, Sellers shall, in accordance with Applicable Law, calculate and remit any Transfer Taxes that are required to be paid as a result of the transfer of the Assets to Buyer, and Buyer shall promptly reimburse Sellers for such Transfer Taxes. If Sellers receive notice that any Transfer Taxes are due, Sellers shall promptly forward a copy of such notice to Buyer. Sellers and Buyer shall reasonably cooperate in the preparation of any Tax Return related to Transfer Taxes, including by signing and delivering such resale, occasional sale and other certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce) any Transfer Taxes, and Buyer shall file (or cause to be filed) any such Tax Returns related to Transfer Taxes.
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(c) Purchase Price Allocation. Buyer shall provide to Sellers a statement (the “Allocation”) allocating the Purchase Price and any other items that are treated as additional consideration for Tax purposes among the Assets in accordance with section 1060 of the Code, the Treasury Regulations promulgated thereunder and consistent with the methodology in Schedule 7.06(c) within ninety (90) days after the Closing Date. Such allocation shall become conclusive and binding on the Parties fifteen (15) days after timely delivery by Buyer unless Sellers object in writing to the Allocation. If Sellers object, the Parties shall use commercially reasonable efforts to resolve any disputes within fifteen (15) days after Buyer’s receipt of written notice of Sellers’ objection. Any unresolved disputes shall be submitted to the Referee or an accounting firm selected pursuant to the procedures in Section 2.06(d) (the “Accounting Firm”). The resolution of the dispute by the Accounting Firm shall be conclusive and binding on all Parties and the Allocation shall be updated to reflect such resolution. Sellers and Buyer shall use commercially reasonable efforts to update the Allocation in a manner consistent with section 1060 of the Code and the methodology in Schedule 7.06(c) following any adjustment to the Purchase Price pursuant to this Agreement. For the avoidance of doubt, the Parties shall cooperate in determining the portion of the Purchase Price allocable to the Assets that are subject to a Transfer Tax prior to the due date of the Tax Return required to be filed in connection with such Transfer Taxes; provided, that if the Parties do not agree with respect to such determination, such matter shall be resolved in accordance with the process outlined in this Section 7.06(c); provided, further, that in the event of a dispute with respect to such a determination that is not resolved prior to the due date of the applicable Tax Return, such Tax Return shall be filed utilizing an allocation determined by Buyer and such Tax Return shall be amended if the Allocation is subsequently adjusted pursuant to the procedures described above. Sellers and Buyer shall, and shall cause their Affiliates to, report consistently with the Allocation, as adjusted, in all Tax Returns, including IRS Form 8594, which Buyer and Sellers shall file with the Internal Revenue Service or any other Governmental Authority and neither Sellers nor Buyer shall take any position in any such Tax Return that is inconsistent with the Allocation, as adjusted, in each case, unless required to do so by a final “determination” as defined in section 1313(a) of the Code. Sellers and Buyer agree to promptly advise each other regarding the existence of any tax audit, controversy or litigation related to the Allocation.
(d) Tax Cooperation. The Parties shall cooperate in good faith fully, as and to the extent reasonably requested by any other Party, in connection with the filing of Tax Returns and any audit, litigation, or other proceeding with respect to Taxes related to the Assets. Such cooperation shall include the retention and (upon another Party’s request) the provision of records and information that are relevant to any such Tax Return or audit, litigation or other proceeding, provided that nothing in this Section 7.06(d) shall prohibit Sellers from ceasing operations or winding up its affairs following the Closing, and the obligation of each Seller under this Section 7.06(d) shall not survive any such ceasing or winding up.
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Section 7.07 Disclosure Schedule Updates.
(a) From and after the Execution Date until the Closing, Sellers shall be entitled to supplement, update, amend or modify the Disclosure Schedules relating to the representations and warranties of Sellers set forth in Article III to reflect any facts, circumstances or events first arising or, in the case of representations given to the Knowledge of Sellers, becoming known to Sellers subsequent to the Execution Date, by providing Buyer with written notice (“Schedule Update Notice”) setting forth the update, amendment or modification and specifying the Disclosure Schedule or Disclosure Schedules affected thereby, and such supplement, update, amendment or modification shall amend and supplement the applicable Disclosure Schedules previously delivered; provided, however, that if any such Disclosure Schedules are supplemented, updated, amended or modified in a manner that discloses any matter or circumstance that would otherwise give rise to a failure of the condition in Section 8.02(a)(ii) to be satisfied as of the date of such Schedule Update Notice (determined as if the date of such Schedule Update Notice were the Closing Date), Buyer may terminate this Agreement pursuant to Section 9.01(d)(ii), provided if Buyer provides written notice to terminate this Agreement pursuant to Section 9.01(d)(ii) then, if such breach giving rise to the failure of such condition is capable of being cured, upon written notice of Sellers to Buyer within one (1) Business Day of receipt of Buyer’s written notice to terminate this Agreement pursuant to Section 9.01(d)(ii) that Sellers elect to attempt to cure such breach such termination shall not be effective unless (and until) as of the end of the applicable cure period set forth in Section 9.01(d)(ii) such breach shall not have been cured to the extent necessary to no longer cause a failure of the condition in Section 8.02(a)(ii) to be satisfied. If Buyer fails to timely provide written notice to terminate this Agreement pursuant to Section 9.01(d)(ii) with respect to any supplement, update, amendment or modification of the Disclosure Schedules as provided in this Section 7.07, then Buyer, in respect of such matters disclosed by supplement, update, amendment or modification, shall be deemed to have waived its right to terminate this Agreement or prevent the consummation of the transactions contemplated by this Agreement pursuant to Section 8.02(a)(ii) or Section 9.01(d)(ii), as applicable, and to have accepted such updated Disclosure Schedules for all purposes under this Agreement.
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(b) From and after the Execution Date until the Closing, Buyer shall be entitled to supplement, update, amend or modify the Disclosure Schedules relating to the representations and warranties of Parent and Buyer set forth in Article IV to reflect any facts, circumstances or events first arising subsequent to the Execution Date, by providing Sellers with a Schedule Update Notice setting forth the update, amendment or modification and specifying the Disclosure Schedule or Disclosure Schedules affected thereby, and such supplement, update, amendment or modification shall amend and supplement the applicable Disclosure Schedules previously delivered; provided, however, that if any such Disclosure Schedules are supplemented, updated, amended or modified in a manner that discloses any matter or circumstance that would otherwise give rise to a failure of the condition in Section 8.03(a)(ii) to be satisfied as of the date of such Schedule Update Notice (determined as if the date of such Schedule Update Notice were the Closing Date), Sellers may terminate this Agreement pursuant to Section 9.01(e)(ii), provided if Sellers provide written notice to terminate this Agreement pursuant to Section 9.01(e)(ii) then, if such breach giving rise to the failure of such condition is capable of being cured, upon written notice of Buyer to Sellers within one (1) Business Day of receipt of Sellers’ written notice to terminate this Agreement pursuant to Section 9.01(e)(ii) that Buyer elects to attempt to cure such breach such termination shall not be effective unless (and until) as of the end of the applicable cure period set forth in Section 9.01(e)(ii) such breach shall not have been cured to the extent necessary to no longer cause a failure of the condition in Section 8.03(a)(ii) to be satisfied. If Sellers fail to timely provide written notice to terminate this Agreement pursuant to Section 9.01(e)(ii) with respect to any supplement, update, amendment or modification of the Disclosure Schedules as provided in this Section 7.07, then Sellers, in respect of such matters disclosed by supplement, update, amendment or modification, shall be deemed to have waived its right to terminate this Agreement or prevent the consummation of the transactions contemplated by this Agreement pursuant to Section 8.03(a)(ii) or Section 9.01(e)(ii), as applicable, and to have accepted such updated Disclosure Schedules for all purposes under this Agreement.
Section 7.08 Replacement of Existing Letters of Credit. The Parties acknowledge that none of the Existing Letters of Credit, if any, posted by Sellers, whether with Governmental Authorities or otherwise, relating to the Assets are to be transferred to Buyer. On or before Closing, Buyer shall endeavor to obtain, or cause to be obtained in the name of Buyer, replacements for such Existing Letters of Credit designated as “Replacement Letters of Credit” on Disclosure Schedule 3.14 (the “Replacement Letters of Credit”) as necessary to permit the cancellation of the Replacement Letters of Credit at Closing and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit. Buyer may also provide evidence that such replacements are not necessary as a result of existing bonds, letters of credit or guarantees that Buyer has previously posted as long as such existing bonds, letters of credit or guarantees are adequate to secure the cancellation of the Replacement Letters of Credit and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit at Closing. Notwithstanding the foregoing, in the event Buyer is unable to obtain any such bonds, letters of credit and guarantees prior to Closing adequate to secure the cancellation of the Replacement Letters of Credit and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit, the Parties shall nonetheless proceed with Closing and Buyer shall (a) at Closing deliver to Sellers an amount equal to the cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit that are not released at Closing and (b) indemnify and hold Sellers harmless for any failure to obtain such bonds, letters of credit and guarantees. If Sellers receive any amounts after the Closing as a return of the cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit (such amount returned to Sellers, the “Excess Recovery Amount”), Sellers shall deliver to Buyer the Excess Recovery Amount.
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Section 7.09 Casualty or Condemnation Loss.
(a) If, after the Execution Date but prior to the Closing Date, any portion of the Assets is damaged or destroyed or otherwise impaired by fire, explosion, tornado, hurricane, earthquake, earth movement, flood, water damage or other casualty or is taken in condemnation or under right of eminent domain (in each case, a “Casualty or Condemnation Loss”) that, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Seller Material Adverse Effect, then, subject to Section 7.09(b), Buyer shall nevertheless be required to close the transactions contemplated by the Agreement without any change to the Purchase Price, and Sellers shall (i) pay to Buyer all sums paid to Sellers by Third Parties by reason of such Casualty or Condemnation Loss with respect to the Assets (net of amounts spent or incurred by Sellers prior to Closing with respect to replacement or repair of any such Casualty or Condemnation Loss), (ii) assign, transfer and set over to Buyer or subrogate Buyer to all of Sellers’ and their Affiliates’ right, title and interest (if any) in insurance claims, unpaid awards and other rights against Third Parties (excluding any Liabilities, other than insurance claims, of or against any Seller Indemnified Parties) arising out of such Casualty or Condemnation Loss with respect to the Assets, (iii) to the extent any retention or deductible related to applicable insurance policies referred to in clause (ii) is not paid by Sellers prior to the Closing, the Purchase Price shall be reduced by the amount of such retention or deductible, and (iv) otherwise provide reasonable cooperation to Buyer (whether before or after the Closing Date) in the pursuit of such insurance claims, unpaid awards and other rights against Third Parties; provided, however, that Sellers shall reserve and retain (and Buyer shall assign to Sellers) all rights, title, interests and claims against Third Parties for the recovery of Sellers’ costs and expenses incurred prior to the Closing in pursuing or asserting any such insurance claims or other rights against Third Parties with respect to any such Casualty or Condemnation Loss. Except as expressly set forth hereinabove, Sellers shall retain all rights to insurance, condemnation awards and other claims against Third Parties with respect to the casualty or taking except to the extent the Parties otherwise agree in writing.
(b) If, after the Execution Date but prior to the Closing Date, there is a Casualty or Condemnation Loss that, individually or in the aggregate, has had, or would reasonably be expected to have, a Seller Material Adverse Effect, then Buyer may terminate this Agreement pursuant to Section 9.01(d)(iii) (and such Casualty or Condemnation Loss shall be deemed for purposes of Section 9.01(d)(iii) to be an unwaived condition in Section 8.02 that is incapable of being satisfied by the End Date).
Section 7.10 Transition Services Agreement. The Parties shall cooperate in good faith to negotiate and enter into a transition services agreement on mutually acceptable terms prior to the Closing; provided that, nothing in this Section 7.10 or such transition services agreement will require Sellers to maintain sufficient personnel to perform any services after Closing, and Sellers shall have no obligation to procure any services from Third Parties or employ any personnel in connection with the performance of any services and Sellers shall have no obligation to provide any services under such transition services agreement to the extent Sellers do not have sufficient personnel to provide such services; provided further that, for a period of thirty (30) days after the Closing, Sellers shall not voluntarily terminate the employment of any employee necessary for the performance of any services contemplated in the transition services agreement other than for cause (as determined in Sellers’ sole discretion and consistent with past practices) or materially reduce the base salary or benefits provided to any such employee unless, after giving effect to such termination or any resignation of any such employee, Sellers shall have available to it sufficient employees to perform such services.
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ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Parent, Buyer and Sellers. The obligations of Parent, Buyer and Sellers to consummate the Closing are subject to the satisfaction (or, in the case of clauses (b) and (c) of this Section 8.01, waiver by each to the extent permitted under Applicable Law) of each of the following conditions:
(a) no Applicable Law shall prohibit the Transactions or the consummation of the Closing;
(b) all actions by or in respect of or filings with any Governmental Authority required to permit the consummation of the Closing shall have been taken, made or obtained (other than those actions or filings that are customarily obtained after the Closing); and
(c) no injunction, order, decree or judgment of any Governmental Authority of competent jurisdiction shall be in effect which prohibits, restrains or enjoins the consummation of the Transactions; provided that the Party seeking to rely on this Section 8.01(c) as a basis not to consummate the Closing must have used commercially reasonable efforts to prevent the entry of such injunction, order, decree or judgment.
Section 8.02 Conditions to Obligation of Parent and Buyer. The obligation of each of Parent and Buyer to consummate the Closing is subject to the satisfaction (or waiver by Parent and Buyer) of each of the following further conditions:
(a) (i) each Seller shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date and (ii) (A) the representations and warranties of Sellers set forth in Article III of this Agreement (other than the Seller Fundamental Representations), disregarding all qualifications and exceptions contained therein as to “material,” “in all material respects,” Seller Material Adverse Effect or similar materiality qualifiers, shall be true and correct at and as of the Closing Date, as if made at and as of such date with only such exceptions as do not, or would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect, and (B) the Seller Fundamental Representations shall be true and correct at and as of the Closing Date, as if made at and as of such date;
(b) the Bid Procedures Order and the Sale Order, together with any other order of the Bankruptcy Court required to consummate the Transactions, shall have been entered by the Bankruptcy Court and each such order shall be a Final Order and in full force and effect;
(c) Sellers shall have delivered each of the items required by Section 2.05(c) to be delivered by Sellers at the Closing; and
(d) Sellers or its Affiliates shall have paid, or otherwise satisfied, all amounts due and payable pursuant to that certain letter agreement dated as of July 8, 2021, by and between Occidental Petroleum Corporation and Basic Parent.
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Section 8.03 Conditions to Obligation of Sellers. The obligation of Sellers to consummate the Closing is subject to the satisfaction (or waiver by Sellers) of the following further conditions:
(a) (i) each of Parent and Buyer shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date and (ii) (A) the representations and warranties of Parent and Buyer set forth in Article IV of this Agreement (other than the Buyer Fundamental Representations), disregarding all qualifications and exceptions contained therein as to “material,” “in all material respects,” Parent Material Adverse Effect or Buyer Material Adverse Effect or similar materiality qualifiers, shall be true and correct at and as of the Closing Date, as if made at and as of such date with only such exceptions as do not, or would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect or a Buyer Material Adverse Effect, and (B) the Buyer Fundamental Representations shall be true and correct at and as of the Closing Date, as if made at and as of such date;
(b) the Bid Procedures Order and the Sale Order, together with any other order of the Bankruptcy Court required to consummate the Transactions, shall have been entered by the Bankruptcy Court and each such order shall be a Final Order and in full force and effect; and
(c) (i) Parent and Buyer shall have delivered each of the items required by Section 2.05(d) to be delivered by Parent and Buyer (as applicable) at the Closing, (ii) Buyer shall have made the payment of the Cash Consideration as required by Section 2.05(e) and (iii) Parent shall have provided evidence to Sellers of issuance instructions to the Transfer Agent of the Stock Consideration promptly after delivery thereof as required by Section 2.05(f).
ARTICLE IX
TERMINATION
Section 9.01 Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Sellers and Buyer;
(b) by Sellers upon written notice to Buyer or by Buyer upon written notice to Sellers if the Closing shall not have been consummated on or before the date that is sixty (60) days after the Execution Date or such later date as is necessary to accommodate the cure period contemplated by Section 9.01(d)(ii)(B) or Section 9.01(e)(ii)(B) below (the “End Date”), unless extended by mutual written agreement of Buyer and Sellers and subject to the extension contemplated by the proviso to Section 9.01(d) and the proviso to Section 9.01(e) below; provided that, Sellers shall be entitled to extend the End Date for up to an additional fifteen (15) days upon written notice to Buyer;
(c) by Sellers upon written notice to Parent and Buyer or by Buyer upon written notice to Sellers if a Governmental Authority of competent jurisdiction shall have issued an order, injunction or judgment or law that permanently restrains, prohibits, enjoins or declares illegal the Transactions and such order, injunction or judgment becomes final and non-appealable;
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(d) by Buyer upon written notice by Buyer to Sellers if:
(i) (A) an Auction occurs and Buyer is not the Successful Bidder or the Back-up Bidder at the Auction or (B) the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction; provided that Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01(d)(i)(B) if an Auction occurs and Buyer is the Back-up Bidder except upon the earlier of (1) the consummation of such Alternative Transaction or (2) the Back-up Termination Date;
(ii) Sellers shall have breached of any of their representations, warranties, covenants or other obligations contained in this Agreement which would give rise to the failure of a condition set forth in Section 8.02 and (A) such breach is not waived in writing by Buyer or (B) solely to the extent such breach is capable of being cured, following written notice thereof from Buyer to Sellers specifying the reason such condition is unsatisfied, such breach remains uncured for a period of ten (10) Business Days after Sellers’ receipt of such written notice from Buyer;
(iii) any condition set forth in Section 8.01 or Section 8.02 that has not been waived by Buyer shall have become incapable of being satisfied by the End Date; or
(iv) the Bid Procedures Order shall not have been entered by the Bankruptcy Court within seven (7) days of the Petition Date;
provided that each deadline set forth in clauses (i), (ii) and (iv) of this Section 9.01(d) shall be subject to the Bankruptcy Court’s docket, and accordingly, (A) shall be deemed extended through the date of the hearing set by the Bankruptcy Court for consideration of the applicable pleading if, after using reasonable efforts, Sellers are unable to obtain a docket setting for such hearing prior to such deadline, (B) shall be deemed extended through the date(s) of any continued hearing set by the Bankruptcy Court for consideration of such pleading if, after using reasonable efforts, Sellers are unable to conclude such hearing(s) prior to such deadline and (C) shall be deemed extended as required to comply with any notice periods required under the Bankruptcy Code which, as a result of any extensions described under the foregoing clauses (A) and (B), cannot be complied with prior to such deadline; or
(e) by Sellers upon written notice by Sellers to Parent and Buyer if:
(i) (A) an Auction occurs and Buyer is not the Successful Bidder or the Back-up Bidder at the Auction or (B) the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction; provided that Sellers shall not be permitted to terminate this Agreement pursuant to this Section 9.01(e)(i)(B) if an Auction occurs and Buyer is the Back-up Bidder except upon the earlier of (1) the consummation of such Alternative Transaction or (2) the Back-up Termination Date;
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(ii) Parent or Buyer shall have breached any of its representations, warranties, covenants or other obligations contained in this Agreement which would give rise to the failure of a condition set forth in Section 8.03 and (A) such breach is not waived in writing by Sellers or (B) solely to the extent such breach is capable of being cured, following written notice thereof from Sellers to Parent and Buyer specifying the reason such condition is unsatisfied, such breach remains uncured for a period of ten (10) Business Days after Buyer’s receipt of such written notice from Sellers;
(iii) any condition set forth in Section 8.01 or Section 8.03 that has not been waived by Sellers shall have become incapable of being satisfied by the End Date; or
(iv) Buyer shall not have deposited the Escrow Funds in the Escrow Account within one (1) Business Day after the Execution Date;
provided that each deadline set forth in clauses (i) and (ii) of this Section 9.01(e) shall be subject to the Bankruptcy Court’s docket, and accordingly, (A) shall be deemed extended through the date of the hearing set by the Bankruptcy Court for consideration of the applicable pleading if, after using reasonable efforts, Sellers are unable to obtain a docket setting for such hearing prior to such deadline, (B) shall be deemed extended through the date(s) of any continued hearing set by the Bankruptcy Court for consideration of such pleading if, after using reasonable efforts, Sellers are unable to conclude such hearing(s) prior to such deadline and (C) shall be deemed extended as required to comply with any notice periods required under the Bankruptcy Code which, as a result of any extensions described under the foregoing clauses (A) and (B), cannot be complied with prior to such deadline.
(f) Notwithstanding the foregoing, (x) Sellers shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if either Seller is in breach of any of its representations and warranties in this Agreement or shall have failed to perform or comply with any of its covenants and agreements in this Agreement such that either (A) the condition to closing set forth in clause (i) or (ii) (as applicable) of Section 8.02(a) shall not be satisfied or (B) such breach or failure to perform or comply by such Seller is the primary cause of the occurrence of any event giving Sellers a right to terminate this Agreement or the failure of the Closing to have occurred, and (y) Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if either Parent or Buyer is in breach of its respective representations and warranties in this Agreement or shall have failed to perform or comply with any of its covenants and agreements in this Agreement such that either (A) the condition to closing set forth in clause (i) or (ii) (as applicable) of Section 8.03(a) shall not be satisfied or (B) such breach or failure to perform or comply by Parent or Buyer is the primary cause of the occurrence of any event giving Buyer a right to terminate this Agreement or the failure of the Closing to have occurred.
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Section 9.02 Effect of Termination.
(a) If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 9.01, then, except for the provisions of Section 5.03(d), Section 7.03, Section 7.04, this Section 9.02, Section 9.03 and Article XI and such of the defined terms on Exhibit A necessary to give context to the surviving provisions, this Agreement shall forthwith become void and the Parties shall have no liability or obligation hereunder.
(b) If Sellers are entitled to terminate this Agreement pursuant to (i) Section 9.01(e)(ii) or (ii) Section 9.01(b) and, in the case of clause (ii), (A) Parent or Buyer is then in Willful Breach of this Agreement, or (B) Parent or Buyer has failed to close in the instance where, as of the End Date, (1) all of the conditions in Section 8.01 and Section 8.02 (in each case excluding conditions that, by their terms, cannot be satisfied until the Closing) have been satisfied by Sellers (or waived by Parent and Buyer), (2) each Seller is ready, willing and able to perform its obligations under Section 2.05(c), and (3) Parent or Buyer nevertheless fails to close, then, in each such event, Sellers shall be entitled to, at their option (x) obtain specific performance in lieu of termination or (y) terminate this Agreement and receive a distribution of the Escrow Funds (or if Buyer terminates this Agreement pursuant to Section 9.01(b) at a time when Sellers had the right to terminate this Agreement and receive a distribution of the Escrow Funds pursuant to this Section 9.02(b), Sellers shall be entitled to a distribution of the Escrow Funds) as liquidated damages for such termination (the Parties agree that the foregoing liquidated damages are reasonable considering all of the circumstances existing as of the Execution Date, shall not serve as a penalty and constitute the Parties’ good faith estimate of the actual damages reasonably expected to result from such termination of this Agreement by Sellers). Nothing herein shall be construed to prohibit Sellers from first seeking specific performance in accordance with the last sentence of this Section 9.02(b), but thereafter terminating this Agreement and receiving a distribution of the Escrow Funds as liquidated damages in lieu of fully prosecuting its claim for specific performance. Each Party acknowledges that the remedies at law of Sellers for a breach or threatened breach of this Agreement by Parent or Buyer as contemplated pursuant to this Section 9.02(b) may be inadequate and, in recognition of this fact, Sellers, without posting any bond or the necessity or proving the inadequacy as a remedy of monetary damages, and in addition to all other remedies that may be available, shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available. If at any time Sellers are entitled to receive a distribution of the Escrow Funds pursuant to this Section 9.02(b), Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to distribute to Sellers all of the Escrow Funds.
(c) If this Agreement is terminated prior to the Closing by Sellers or by Buyer pursuant to Section 9.01 other than under the circumstances described in Section 9.02(b), within two (2) Business Days after such termination, Sellers and Buyer shall jointly instruct the Escrow Agent to distribute to Buyer all of the Escrow Funds.
(d) Subject to this Section 9.02 and Section 9.03, upon the termination of this Agreement, no Party shall have any other liability or obligation hereunder, and Sellers shall be free to immediately enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
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Section 9.03 Break-Up Fee; Expense Reimbursement.
(a) If (i) this Agreement is terminated by (A) Buyer pursuant to and in accordance with Section 9.01(d)(i), or (B) Sellers pursuant to and in accordance with Section 9.01(e)(i), (ii) Buyer shall not have breached any of its representations or warranties or failed to perform or comply with any of its covenants or agreements contained in this Agreement such that the conditions set forth in Section 8.03(a) (excluding conditions that, by their terms, cannot be satisfied until the Closing) shall not be satisfied and (iii) any Seller or Sellers consummate an Alternative Transaction prior to the date that is six (6) calendar months after the Execution Date, Sellers shall, subject to entry of the Bid Procedures Order, pay to Buyer a termination fee in the amount of (A) $500,000 (the “Break-Up Fee”) plus (B) the reasonable and documented costs and expenses incurred by Buyer in connection with the Transactions, up to a maximum of $500,000 (the “Expense Reimbursement”), which Break-Up Fee and Expense Reimbursement will constitute, pursuant to sections 364 and 503 of the Bankruptcy Code, a superpriority administrative expense claim in each of Seller’s bankruptcy estates with priority over any and all administrative expense claims and shall be payable upon consummation of such Alternative Transaction from the proceeds of such sale.
(b) Notwithstanding anything contained herein to the contrary, each of Parent and Buyer agrees that, upon any termination of this Agreement under circumstances where the Break-Up Fee and Expense Reimbursement is payable by Sellers pursuant to this Section 9.03 and such Break-Up Fee and Expense Reimbursement is paid in full to Buyer by Sellers, Parent and Buyer shall be precluded from any other remedy against Sellers, at law or in equity or otherwise, and neither Parent nor Buyer shall seek to obtain any recovery, judgment or damages of any kind, including consequential, indirect or punitive damages, against Sellers or any of their respective Representatives, equityholders or Affiliates in connection with this Agreement or the Transactions and Sellers and their respective Representatives, equityholders and Affiliates shall be fully released and discharged from any liability or obligation under or resulting from this Agreement and the Transactions.
(c) Each of Parent and Buyer represents to Sellers, and Sellers acknowledge and agree, that this Section 9.03 is a condition precedent to the execution by Parent and Buyer of this Agreement and is necessary to ensure that Parent and Buyer will continue to pursue the Transaction, and each Seller acknowledges that the Break-Up Fee and Expense Reimbursement, if payable hereunder, (i) constitutes an actual and necessary cost and expense of preserving Sellers’ estates, within the meaning of section 503(b) of the Bankruptcy Code, (ii) is of substantial benefit to Sellers, (iii) is reasonable and appropriate, including in light of the size and nature of the Transactions and the efforts that have been or will be expended by Parent and Buyer, notwithstanding that the proposed Transactions are subject to higher or better offers, and (iv) was negotiated by the Parties at arms’-length and in good faith.
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(d) Sellers’ obligation to pay the Break-Up Fee and Expense Reimbursement, as provided herein, shall (i) survive termination of this Agreement pursuant to Section 9.01(d)(i) or Section 9.01(e)(i), (ii) be paid to Buyer, in cash, within two (2) Business Days from the date of consummation of the first Alternative Transaction consummated by Sellers, from the sale proceeds thereof or otherwise from Sellers’ cash balances, and (iii) constitute, pursuant to sections 364 and 503 of the Bankruptcy Code, a superpriority administrative expense claim in each of Seller’s bankruptcy estates with priority over any and all administrative expense claims.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
Section 10.01 Survival.
(a) The representations and warranties of Sellers contained herein and in any certificate or other writing delivered by Sellers pursuant hereto shall terminate upon and not survive the Closing and there shall be no liability (whether arising in contract, tort or otherwise, or whether at law or in equity, and regardless of the legal theory under which any entitlement, remedy or recourse may be sought or imposed (including all rights afforded by any statute which limits the effects of a release with respect to unknown claims)) thereafter in respect thereof. Each of the covenants of Sellers contained in this Agreement shall terminate upon the Closing except to the extent that performance under such covenant is to take place after Closing, in which case such covenant shall survive the Closing until the earlier of (i) performance of such covenant in accordance with this Agreement or, (ii) (A) if time for performance of such covenant is specified in this Agreement, thirty (30) days following the expiration of the time period for such performance or (B) if time for performance of such covenant is not specified in this Agreement, the expiration of applicable statute of limitations with respect to any claim for any failure to perform such covenant. The intended effect of termination of Sellers’ representations, warranties, covenants and agreements is to bar, from and after the date of termination, any claim or cause of action based on (x) the alleged inaccuracy of such representation or breach of such warranty or (y) such alleged breach or failure to fulfill such covenant or agreement; provided that if a written notice of any claim with respect to any covenant to be performed after Closing is given to Sellers prior to the expiration of such covenant then such covenant shall survive until, but only for purposes of, the resolution of such claim by final, non-appealable judgment or settlement. Neither Parent nor Buyer shall have any recourse against any Seller Indemnified Party or any of their Affiliates or their respective lenders or creditors from and after Closing for any Losses relating to the Assets or this Agreement (including title and environmental matters) or Sellers’ breach of any representations and warranties, covenants or other provision of this Agreement, subject to Parent’s and Buyer’s rights under Section 11.11 with respect to those covenants of Sellers the performance of which is to take place after closing, as contemplated by this Section 10.01(a).
(b) All representations and warranties of Buyer contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby until the date that is eighteen (18) months after the Closing (the “Survival Date”); provided that the Buyer Fundamental Representations shall survive the Closing indefinitely. Each of the covenants of Buyer contained in this Agreement shall terminate upon the Closing except to the extent that performance under such covenant is to take place after Closing, in which case such covenant shall survive the Closing until the earlier of (i) performance of such covenant in accordance with this Agreement or, (ii) (A) if time for performance of such covenant is specified in this Agreement, thirty (30) days following the expiration of the time period for such performance or (B) if time for performance of such covenant is not specified in this Agreement, the expiration of applicable statute of limitations with respect to any claim for any failure to perform such covenant. Notwithstanding anything herein to the contrary, Buyer will not be liable with respect to any claim for the breach or inaccuracy of any representation or warranty pursuant to Section 10.02(a)(i), unless written notice of a claim thereof is delivered to Buyer prior to the Survival Date.
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(c) Subject to Section 10.01(a), the remainder of this Agreement shall survive the Closing without time limit. Representations, warranties, covenants, obligations and agreements of Sellers shall be of no further force and effect after the date of their expiration as set forth in Section 10.01(a). For the avoidance of doubt, nothing in this Agreement shall prohibit Sellers from ceasing operations or winding up its affairs following the Closing.
(d) Any representation and warranty insurance policy obtained by Buyer in connection with the transactions contemplated by this Agreement shall include a complete and unconditional (except in cases of fraud) waiver of subrogation and contribution rights against all of the Seller Indemnified Parties, and neither Buyer nor any of its Affiliates shall amend or waive such waiver in any respect without the prior written consent of Sellers.
Section 10.02 Indemnification by Buyer.
(a) From and after Closing, Buyer hereby assumes and agrees to release, defend, indemnify and hold Sellers and their Affiliates, and each of their respective officers, managers, directors, employees, equity owners, agents and successors (collectively, the “Seller Indemnified Parties”) harmless from and against any and all losses, liabilities, obligations, damages, costs and expenses (individually, a “Loss” and, collectively, “Losses”) based upon, attributable to or resulting from:
(i) any breach of any representation or warranty of Parent or Buyer set forth in Article IV hereof, or any representation or warranty contained in any certificate delivered by or on behalf of Parent or Buyer pursuant to this Agreement;
(ii) any breach of any covenant or other agreement on the part of Parent or Buyer under this Agreement;
(iii) the Assumed Liabilities;
(iv) the Assets or Buyer’s ownership or operation of the Assets after the Closing Date;
(v) Buyer Taxes;
(vi) any and all Expenses incident to the foregoing; and
(vii) any other indemnity obligations of Parent, Buyer and their Affiliates expressly set forth in this Agreement.
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(b) The aggregate amount of all payments made by the Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a)(i) shall not exceed an amount equal to $2,000,000 (the “Cap”); provided that (A) the Cap shall not apply with respect to any Losses resulting from, arising out of or relating to breaches of the Buyer Fundamental Representations and (B) in no event shall the aggregate amount of all payments made by Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a)(i) exceed the Adjusted Purchase Price actually paid by Buyer.
Section 10.03 Indemnification Procedures.
(a) In the event that any Proceedings shall be instituted or that any claim or demand shall be asserted by any Indemnified Party in respect of which payment may be sought under Section 10.02 (an “Indemnification Claim”), the Indemnified Party shall reasonably and promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge which is covered by this indemnity to be forwarded to the Indemnifying Party. The Indemnifying Party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the Indemnified Party, and to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder. If the Indemnifying Party elects to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, it shall within thirty (30) days (or sooner, if the nature of the Indemnification Claim so requires) notify the Indemnified Party of its intent to do so. If the Indemnifying Party elects not to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, the Indemnified Party may defend against, negotiate, settle or otherwise deal with such Indemnification Claim. If the Indemnifying Party shall assume the defense of any Indemnification Claim, the Indemnified Party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided, however, that such Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (i) so requested by the Indemnifying Party to participate or (ii) in the reasonable opinion of counsel to the Indemnified Party a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable; and provided, further, that the Indemnifying Party shall not be required to pay for more than one such counsel for all Indemnified Parties in connection with any Indemnification Claim. The Parties agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Indemnification Claim. Notwithstanding anything in this Section 10.03 to the contrary, neither the Indemnifying Party nor the Indemnified Party shall, without the written consent of the other party, settle or compromise any Indemnification Claim or permit a default or consent to entry of any judgment unless the claimant and such party provide to such other party an unqualified release from all liability in respect of the Indemnification Claim. If the Indemnifying Party makes any payment on any Indemnification Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance benefits or other claims of the Indemnified Party with respect to such Indemnification Claim.
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(b) After any final decision, judgment or award shall have been rendered by a Governmental Authority of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the Indemnified Party and the Indemnifying Party shall have arrived at a mutually binding agreement with respect to an Indemnification Claim hereunder, the Indemnified Party shall forward to the Indemnifying Party notice of any sums due and owing by the Indemnifying Party pursuant to this Agreement with respect to such matter.
Section 10.04 Express Negligence. THE INDEMNIFICATION, RELEASE, ASSUMED LIABILITIES, WAIVER AND LIMITATION OF LIABILITY PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY INDEMNIFIED PARTY. PARENT, BUYER AND SELLERS ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
Section 10.05 Tax Treatment of Indemnity Payments. The Parties agree to treat any indemnity payment made pursuant to this Article X as an adjustment to the Purchase Price for U.S. federal, state, local and foreign income tax purposes. Any indemnity payment under this Article X shall be treated as an adjustment to the value of the asset upon which the underlying Indemnification Claim was based, unless a final determination (within the meaning of section 1313 of the Code) with respect to the Indemnified Party or any of its Affiliates causes any such payment not to be treated as an adjustment to the value of the asset for U.S. federal income tax purposes.
Section 10.06 Sole and Exclusive Remedy. Except for the post-Closing payments contemplated in Section 2.07, the remedies provided in this Article X shall be the sole and exclusive legal and equitable remedies of the Parties, from and after the Closing, with respect to this Agreement and the transactions contemplated hereby, and no Person will have any other entitlement, remedy or recourse, whether in contract, tort or otherwise, or whether at law or in equity, and regardless of the legal theory under which such entitlement, remedy or recourse may be sought or imposed (including all rights afforded by any statute which limits the effects of a release with respect to unknown claims), it being agreed that all of such other remedies, entitlements and recourse are expressly waived and released by the Parties to the fullest extent permitted by law. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or representative of Sellers or any of their Affiliates (the “Seller Non-Party Group”) shall have any liability for any obligations or liabilities of Sellers under this Agreement of or for any Claim based on, in respect of, or by reason of, the transactions contemplated hereby. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or representative of Buyer, Parent or any of their Affiliates (the “Buyer Non-Party Group”) shall have any liability for any obligations or liabilities of Buyer or Parent under this Agreement of or for any Claim based on, in respect of, or by reason of, the transactions contemplated hereby.
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ARTICLE XI
MISCELLANEOUS
Section 11.01 Notices. All notices and communications which are required or may be given to a Party hereunder shall be in writing, addressed as indicated below and shall be deemed to have been duly given upon the earliest of: (a) if by personal delivery, then the date of delivery if such date is a Business Day during normal business hours, or, if such date is not a Business Day during normal business hours, then the next Business Day, (b) if sent by U.S. certified mail, postage prepaid, return receipt requested, then the date shown as received on the return notice, (c) if sent by email, with delivery receipt to sender or upon an affirmative reply by email by the intended recipient that such email was received, or (d) if by Federal Express overnight delivery (or other reputable overnight delivery service), the date shown on the notice of delivery if such date is a Business Day during normal business hours, or, if such date is not a Business Day during normal business hours, then on the next Business Day:
if to Parent or Buyer, to:
c/o Select Energy Services, Inc.
1233 W Loop S, Suite 1400
Houston, TX 77027
Attention: Adam R. Law
Email: ALaw@selectenergy.com
with a copy to:
Vinson & Elkins LLP
1001 Fannin Street, Suite 2500
Houston, TX 77002
Attention: Stephen Gill
Email: sgill@velaw.com
if to Sellers, to:
c/o Basic Energy Services, Inc.
801 Cherry Street, Suite 2100
Fort Worth, Texas 76102
Attention: Robert J. Reeb, III
Email: RReeb@BasicES.com
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with a copy to:
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: Rodney L. Moore
Email: Rodney.Moore@weil.com
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ray C. Schrock, P.C.
Sunny Singh
Email: Ray.Schrock@weil.com
Sunny.Singh@weil.com
The Parties may change the identity, address and email addresses to which such communications are to be addressed by giving written notice to the other Parties in the manner provided in this Section 11.01.
Section 11.02 Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party to this Agreement, or in the case of a waiver, by the Party against whom the waiver is to be effective.
(b) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 11.03 Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.
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Section 11.04 Successors and Assigns/Liquidating Trust.
(a) Subject to Section 11.04(b), the provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided that no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement, in whole or in part, by operation of law or otherwise, without the prior written consent of each other Party hereto; provided, however, that Sellers may assign their respective rights and obligations under this Agreement to any liquidating trust or other representative of Sellers created or appointed pursuant to a Bankruptcy Court order; provided, further, that Buyer may assign its rights and obligations under this Agreement to a Subsidiary, provided that no such transfer or assignment will release Buyer of its obligations hereunder or enlarge, alter or change any obligation of Sellers to Buyer; and provided, further, that Sellers may assign their respective rights under Section 6.03 to any Person to which any Stock Consideration is transferred.
(b) If a Liquidating Trust is established, from and after the formation of the Liquidating Trust all rights and obligations of Sellers under this Agreement shall accrue to and be for the benefit of and shall be exercisable by the Liquidating Trust, as provided by any order of the Bankruptcy Court and the Liquidating Trustee shall be entitled to exercise all of the rights of Sellers under this Agreement.
Section 11.05 Governing Law. EXCEPT TO THE EXTENT THE MANDATORY PROVISIONS OF THE BANKRUPTCY CODE APPLY, THIS AGREEMENT, THE TRANSACTION DOCUMENTS, AND ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED PURSUANT HERETO, AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS AGREEMENT OR THE NEGOTIATION, EXECUTION, TERMINATION, PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, INCLUDING ITS STATUTES OF LIMITATIONS, WITHOUT REGARD TO ANY CONFLICTS OF LAW OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.
Section 11.06 Jurisdiction. Each Party agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contained in or contemplated by this Agreement and the Transaction Documents (whether in contract or tort), exclusively in (a) the Bankruptcy Court so long as the Bankruptcy Cases remain open and (b) after the close of the Bankruptcy Cases, or in the event that the Bankruptcy Court determines that it does not have jurisdiction, the United States District Court for the Southern District of Texas in Harris County, Texas or any Texas state court sitting in Harris County, Texas (together with the Bankruptcy Court, the “Chosen Courts”), and solely in connection with claims arising under this Agreement or any other Transaction Document or the Transactions (whether in contract or tort) (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 11.01.
Section 11.07 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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Section 11.08 Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when all Parties shall have received a counterpart hereof signed by all of the other Parties. Until and unless all Parties have received a counterpart hereof signed by the other Parties, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the Parties and their respective successors and assigns prior to Closing; provided, however, (a) the Seller Indemnified Parties are intended to be, and shall be, third party beneficiaries of the rights of Seller Indemnified Parties specified in Article X, (b) the Seller Non-Party Group are intended to be, and shall be, third party beneficiaries of the rights of Seller Indemnified Parties specified in Section 10.02, (c) the Seller Non-Party Group and the Buyer Non-Party Group are intended to be, and shall be, third party beneficiaries of Section 10.06 and (d) third party acquirors of Excluded Assets pursuant to an Excluded Asset PSA are intended to be, and shall be, third party beneficiaries of the rights of third party acquirors of Excluded Assets pursuant to an Excluded Asset PSA specified in Section 5.03(e). From and after the establishment of the Liquidating Trust, the Liquidating Trustee shall be a third party beneficiary of Sellers’ rights under this Agreement.
Section 11.09 Entire Agreement. This Agreement, the Confidentiality Agreement and the other Transaction Documents constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the Parties with respect to the subject matter hereof and thereof.
Section 11.10 Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; and in lieu of each such invalid, void or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such invalid, void or unenforceable provision as may be valid, binding and enforceable.
Section 11.11 Specific Performance. Without limiting Sellers’ rights under Section 9.02(b), the Parties agree that, from and after Closing, irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement (without posting any bond or other undertaking) or to enforce specifically the performance of the terms and provisions hereof in addition to any other remedy to which they are entitled at law or in equity.
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Section 11.12 Certain Acknowledgements and Limitations.
(a) Any and all duties and obligations which any Party may have to any other Party with respect to or in connection with this Agreement, the other Transaction Documents or the Transactions are limited to those specifically set forth in this Agreement and the other Transaction Documents. Neither the duties nor obligations of any Party, nor the rights of any Party, shall be expanded beyond the terms of this Agreement and the other Transaction Documents on the basis of any legal or equitable principle or on any other basis whatsoever. Neither any equitable or legal principle nor any implied obligation of good faith or fair dealing nor any other matter requires any Party to incur, suffer or perform any act, condition or obligation contrary to the terms of this Agreement and the other Transaction Documents, whether or not existing and whether foreseeable or unforeseeable. Each of the Parties acknowledges that it would be unfair, and that it does not intend, to increase any of the obligations of the other Party on the basis of any implied obligation or otherwise.
(b) UNDER NO CIRCUMSTANCES SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE FOR ANY EXEMPLARY OR PUNITIVE DAMAGES FOR LIABILITIES ARISING OUT OF ANY ACTUAL, ALLEGED OR INTENTIONAL BREACH OF THIS AGREEMENT (EXCEPT TO THE EXTENT INDEMNIFIABLE PURSUANT TO ARTICLE X BECAUSE PAYABLE BY A SELLER INDEMNIFIED PARTY TO A THIRD PARTY).
Section 11.13 Disclosure Schedules. All references to Schedules and Disclosure Schedules in Article III or Article IV of this Agreement refer to Schedules contained in the Disclosure Schedule. The information in the Disclosure Schedule constitutes exceptions, qualifications and/or supplements to particular representations or warranties of Sellers or of Parent and Buyer (as applicable) as set forth in this Agreement. The Disclosure Schedule shall not be construed as indicating that any disclosed information is required to be disclosed, and no disclosure shall be construed as an admission that such information is material to, outside the ordinary course of business of, or required to be disclosed by, Sellers or Parent and Buyer (as applicable) or constitutes a Seller Material Adverse Effect or a Parent Material Adverse Effect or Buyer Material Adverse Effect (as applicable). Capitalized terms used in the Disclosure Schedule that are not defined therein and are defined in this Agreement shall have the meanings given to them in this Agreement. The captions contained in the Disclosure Schedule are for the convenience of reference only, and shall not be deemed to modify or influence the interpretation of the information contained in the Disclosure Schedules or this Agreement. The statements in each Schedule of the Disclosure Schedule qualify and relate to the corresponding provisions in the Sections of this Agreement to which they expressly refer and to each other provision in this Agreement to which the applicability of a statement or disclosure in a particular Schedule of the Disclosure Schedule is reasonably apparent on its face.
Section 11.14 Preparation of Agreement. The Parties and their counsel have reviewed the provisions of this Agreement and have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| SELLERS: | ||
| BASIC ENERGY SERVICES, L.P. | ||
| By: | Basic Energy Services GP, LLC, | |
| its general partner | ||
| By: | /s/ Keith L. Schilling | |
| Name: Keith L. Schilling | ||
| Title: President and Chief Executive Officer | ||
| AGUA LIBRE MIDSTREAM LLC | ||
| By: | /s/ Keith L. Schilling | |
| Name: Keith L. Schilling | ||
| Title: President and Chief Executive Officer | ||
Signature
page to
Asset Purchase Agreement
| PARENT: | ||
| SELECT ENERGY SERVICES, INC. | ||
| By: | /s/ John Schmitz | |
| Name: John Schmitz | ||
| Title: Chairman and Chief Executive Officer | ||
| BUYER: | ||
| SELECT ENERGY SERVICES, LLC | ||
| By: | SES Holdings, LLC, | |
| its sole managing member | ||
| By: | Select Energy Services, Inc., | |
| its sole managing member | ||
| By: | /s/ John Schmitz | |
| Name: John Schmitz | ||
| Title: Chairman and Chief Executive Officer | ||
Signature
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Asset Purchase Agreement
Exhibit A
| (a) | Definitions. |
“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations as promulgated thereunder.
“365 Contracts” means all Applicable Contracts and other executory contracts and unexpired leases to which a Seller is a party that relate to the Assets, in each case that may be assumed by one or more Sellers pursuant to section 365 of the Bankruptcy Code.
“Accounts Receivable” means all accounts receivable and any other unbilled revenue of Sellers that are current assets, as determined in accordance with GAAP, as of the Measurement Time.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person. For such purposes, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Allowance for Doubtful Accounts” means an amount equal to 2.5% multiplied by the aggregate amount of the Acquired Accounts Receivable.
“Alternative Transaction” means, subject to the Bid Procedures, (a) a sale, transfer or other disposition, directly or indirectly, of all or substantially all of the Assets (except any such sale, transfer or other disposition to the extent permitted by Section 5.01(b)(i)) to another buyer or buyers other than Buyer, (b) the consummation of any state court foreclosure action as to a material portion of the Assets or (c) successful credit bid transaction with respect to the Assets.
“Applicable Contracts” means (a) all Contracts to which a Seller is a party or is bound to the extent covering, attributable to or relating to any of the Assets or to which an Asset is subject or bound, (b) all Surface Leases, (c) all Rights of Way, (d) all contracts and agreements to which a Seller is a party establishing any SWD Land Rights (other than Surface Tracts) and Water Land Rights and (e) all Vehicle Finance Leases, including without limitation, in the case of clause (a) of this definition, those Contracts described on Annex H.
“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, order, injunction or judgment adopted or promulgated by a Governmental Authority (or under the authority of the New York Stock Exchange) that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
“Applicable Schedule 3.06 Consent” means any Consent set forth on Disclosure Schedule 3.06 relating to an Applicable Contract for which the counterparty’s consent to assignment would be required for such Applicable Contract to be assumed and assigned to Buyer, after giving effect to sections 365(c)(1) and 365(f)(1) of the Bankruptcy Code.
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“Assigned Contracts” means the Desired 365 Contracts and all other Applicable Contracts that are not 365 Contracts (other than Excluded Assets).
“Assumed Liabilities” means:
(a) all Liabilities under or associated with or appurtenant to the Assets to the extent related to periods from and after the Closing Date (other than Property Expenses for which the Purchase Price is increased pursuant to Section 2.04(a)), including without limitation all such Liabilities arising out of the operation and/or ownership of the Assets from and after the Closing Date;
(b) all Customer Lienable Prepetition Accounts Payable;
(c) all Assumed Postpetition Accounts Payable;
(d) all asset retirement obligations related to the Assets;
(e) all Liabilities associated with the Assets arising under Environmental Law, including with respect to Environmental Claims whether arising on, before or after the Closing Date, including without limitation those related to the control, storage, handling, transporting and disposing of or discharge of all materials, substances and wastes from the Assets, including produced water, hydrogen sulfide gas, drilling fluids, NORM and other wastes (but, for the avoidance of doubt, excluding any fines or penalties arising under or related to any such matters attaching to the Sellers as the owners or operators of the Assets prior to the Closing);
(f) costs, expenses and Liabilities attributable to obligations to plug the SWD Wells or Water Wells, dismantle or decommission facilities associated with such SWD Wells or Water Wells, close pits associated with such SWD Wells and restore the surface around such SWD Wells or Water Wells, facilities and pits;
(g) all Liabilities with respect to the Cure Costs required to be paid by Buyer in accordance with Section 5.02(g);
(h) all payroll obligations (include applicable payroll taxes) to the Continuing Employees incurred in the ordinary course and related to any incomplete payroll period between (x) the end of the final full payroll period prior to the Closing and (y) the Closing Date and not otherwise paid by Sellers prior to the Closing Date;
(i) all Liabilities required to be assumed by Buyer pursuant to Section 7.05; and
(j) all indebtedness for borrowed money and other obligations evidenced by notes, bonds, debentures or similar instruments, in each case that is described on Schedule 1.01 (the “Assumed Indebtedness”).
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“Assumed Postpetition Accounts Payable” means all accounts payable (as determined in accordance with GAAP) related to the Business or attributable to the Assets (but excluding any intercompany payables or accounts payable to any Affiliate of Sellers) that are incurred in the Ordinary Course of Business from the Petition Date until the Measurement Time and remain outstanding as of the Measurement Time and that Buyer elects to assume by delivery of a written notice to Sellers.
“Auction” means the auction for the sale of the Assets, if any, to be conducted in accordance with the Bid Procedures.
“Avoidance Action” means any claim, right or cause of action of Sellers arising under chapter 5 of the Bankruptcy Code and any analogous state or federal statutes and common law relating to the Assets, the Purchased Contracts and the Assumed Liabilities.
“Back-up Bidder” has the meaning set forth in the Bid Procedures Order.
“Back-up Termination Date” means the first to occur of (a) sixty (60) days after the entry of the order of the Bankruptcy Court approving an Alternative Transaction with a Successful Bidder other than Buyer or (b) consummation of an Alternative Transaction with the Successful Bidder (other than Buyer) at the Auction.
“Bankruptcy Code” means title 11 of the United States Code, as amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas or any other court having jurisdiction over the Bankruptcy Cases from time to time.
“Basic Parent” means Basic Energy Services, Inc., a Delaware corporation.
“Bid Procedures” means the Bidding Procedures, substantially in the form attached as Exhibit 1 to the Bid Procedures Order, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Bid Procedures Order” means an order of the Bankruptcy Court, substantially in the form attached hereto as Exhibit I, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Business” means the business as conducted by Sellers with the Assets prior to and after the Petition Date.
“Business Day” means any day, excluding Saturdays, Sundays or legal holidays, on which commercial banks are open for business in New York, NY.
“Buyer Fundamental Representations” means the representations and warranties of Parent and Buyer contained in Section 4.04, Section 4.08, Section 4.09 and Section 4.13.
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“Buyer Material Adverse Effect” means a material adverse effect on the ability of Buyer to consummate the Transactions or to perform its obligations hereunder and under the other Transaction Documents to which it is or will be a party.
“Buyer Taxes” means any Taxes that are allocable to (or otherwise payable by) Buyer pursuant to Section 7.06(a) and Section 7.06(b).
“Buyer’s Knowledge” means the actual knowledge of Chris George, John Schmitz (after consultation with Adam Law), Michael Skarke and Nick Swyka.
“Claim” means a claim against any Seller as defined in Bankruptcy Code section 101(5).
“Closing Date” means the date of the Closing.
“Closing Date Cash Consideration” means the Closing Date Adjusted Purchase Price minus the Escrow Funds, minus $5,000,000.
“COBRA” means the continuation coverage requirements of sections 601 et seq. of the Employee Retirement Income Security Act of 1974 and section 4980B of the Code.
“Code” means the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” means the Confidentiality and Non-Disclosure Agreement between Parent and Basic Parent, dated effective as of June 17, 2021.
“Contract” means any contract or agreement, but excluding, however, (a) any lease, easement, right-of-way (including any Surface Leases and Rights of Way) or other instrument, in each case, creating any real property interests, or (b) any Permit.
“Customer Lienable Prepetition Accounts Payable” means all accounts payable (as determined in accordance with GAAP) related to the Business or attributable to the Assets (but excluding any intercompany payables or accounts payable to any Affiliate of Sellers) that are outstanding as of the Petition Date and remain outstanding as of the Measurement Time and with respect to which the payees thereof have valid rights to assert or have asserted mechanics’ liens against customers of Sellers.
“Deposit Escrow Agreement” means that certain Escrow Agreement dated as of the Execution Date, by and among Sellers, Buyer and the Escrow Agent.
“Designation Deadline” means 5:00 p.m. (Central Prevailing Time) on the date that is two (2) days prior to the date of the Auction, or such later date as Buyer and Sellers shall mutually agree and, if applicable, as the Bankruptcy Court may authorize.
“Disclosure Schedule” means the letter dated as of the Execution Date, executed by the Parties on the Execution Date in connection with the execution and delivery of this Agreement, which letter is identified therein as the Disclosure Schedule for purposes of this Agreement.
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“Environmental Claim” means any affirmative obligation to affect cleanup or remediation under, or resolve noncompliance with, any Environmental Law and any Liability associated with or arising therefrom.
“Environmental Law” means any Applicable Law or any binding agreement with any Governmental Authority relating to the protection of occupational or human health and safety (to the extent relating to exposure to Hazardous Substances), the environment (including ambient air, soil, surface water or groundwater, or subsurface strata), protection of natural resources, endangered, threatened or candidate species, biological or cultural resources, the release into the indoor or outdoor environment of pollutants, contaminants, wastes, chemicals, or toxic or other hazardous substances (or the cleanup thereof) or concerning the exposure to, or the generation, storage, transportation, disposal, Release or remediation of any Hazardous Substances. The term “Environmental Laws” does not include good or desirable operating practices or standards that may be employed or adopted by other salt water disposal well operators or recommended, but not required, by a Governmental Authority.
“Environmental Permit” means any Permit issued pursuant to or otherwise required under Environmental Laws.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means, with respect to any Person, any entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes such Person, or that is a member of the same “controlled group” as such Person pursuant to Section 4001(a)(14) of ERISA.
“Escrow Account” means the escrow account established pursuant to the Deposit Escrow Agreement.
“Escrow Agent” means that certain Third Party that is a party, as escrow agent, to the Deposit Escrow Agreement.
“Excess Cure Costs” means, with respect to any individual 365 Contract, the amount of Cure Costs with respect to such 365 Contract that exceeds the amount set forth on the 365 Schedule for such 365 Contract multiplied by 110%; provided that, Excess Cure Costs shall not include any Customer Lienable Prepetition Accounts Payable and nothing in this definition or this Agreement shall limit or otherwise affect the obligation of Buyer to assume all Customer Lienable Prepetition Accounts Payable.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
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“Excluded Records” means any items, including items referenced in the definition of “Data,” that are (a) Tax records of Sellers (other than copies of Tax records as described in Section 2.01(i)), (b) not transferable without payment of additional consideration (unless Buyer has agreed in writing to pay such additional consideration) or that Sellers and their Affiliates would not be able to otherwise compile and prepare for transfer using commercially reasonable efforts, (c) e-mails or other electronic files on Sellers’ or their Affiliates’ servers and networks, (d) employee files and personnel records not involving any Continuing Employee, (e) legal records and legal files of Sellers, (f) all work product of and attorney-client communications with Sellers’ legal counsel or any other documents or instruments that may be protected by an attorney-client privilege (but excluding any title opinions), (g) economic projections, (h) data, correspondence, materials, documents, descriptions or records relating to the Auction, marketing, sales negotiation or sale of any of the Assets, including the existence or identities of any prospective inquirers, bidders or prospective purchasers of any of the Assets, any bids received from and records of negotiations with any such prospective purchasers and any analyses of such bids by any Person, (i) correspondence between or among any Seller or its Affiliate or their respective representatives, and any prospective purchaser other than Buyer, and correspondence between any Seller or its Affiliates or any of their respective representatives with respect to any of the bids, the prospective purchasers or the Transactions, or (j) originals of the Data that relate to both the Assets and any Excluded Assets (but that relate primarily to any Excluded Assets) (provided that Buyer shall be provided a copy of such Data as contemplated by Section 2.01(i)) and copies of all other Data.
“Existing Letters of Credit” means all performance bonds, surety bonds, letters of credit, guarantees, security deposits and similar assurances in effect as of the Execution Date that relate to the Assets.
“Expenses” means any and all notices, actions, suits, proceedings, claims, demands, assessments, judgments, costs, penalties and expenses, including attorneys’ and other professionals’ fees and disbursements incident to the foregoing.
“Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction with respect to the subject matter, (a) which has not been reversed, stayed, modified, amended, enjoined, set aside, annulled or suspended and (b) with respect to which no stay shall be in effect.
“GAAP” means generally accepted accounting principles in the United States.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental unit, authority, department, court, administrative body, agency or official, including any political subdivision thereof, or any tribal authority.
“Hazardous Substances” means any pollutant, contaminant, waste, chemical, chemical compound, substance or material or any toxic, radioactive, infectious, carcinogenic, flammable ignitable, corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, whether solid, liquid or gas, including any quantity of asbestos in any form, urea formaldehyde, polychlorinated biphenyls, toxic mold, radon gas, radioactive materials, crude oil or any fraction thereof, all forms of natural gas, and petroleum, its derivatives, by-products and other hydrocarbons, per and polyfluoroalkyl substances and any substance, waste or material regulated under any Environmental Law.
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“Indemnified Party” means a Party entitled to, or seeking to assert rights to, indemnification under Article X, whether on behalf of itself or, with respect to Sellers, any of the Seller Indemnified Parties.
“Indemnifying Party” means a Party from whom indemnification is sought under Article X by an Indemnified Party.
“Intellectual Property” means (a) inventions and invention disclosures; (b) patents and patent applications (including statutory invention registrations) or utility models (whether or not filed); (c) trademarks, service marks, logos, trade dress, trade names, domain names, and other indicia of commercial source or origin, including registrations and applications for registration thereof and goodwill associated with any of the foregoing (collectively, “Trademarks”); (d) copyrights (whether registered or unregistered) and other works of authorship (whether or not published) including registrations and applications for registration thereof; (e) trade secrets, know-how, software, formulae, customer lists, manufacturer lists, data (including seismic data), processes, protocols, specifications, analyses, plans, techniques, and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as notebooks, samples, studies and summaries); and (f) other intellectual property.
“Liability” means any direct or indirect liability, indebtedness, obligation, commitment, expense, loss, claim, deficiency, or guaranty of or by any Person of any types, whether known or unknown, and whether accrued, absolute, contingent, matured or unmatured.
“Lien” means, with respect to any property or asset, any mortgage, lien, interest pledge, charge, security interest, or encumbrance, easement, servitude, transfer restriction, mechanics’ lien, materialman’s lien, statutory lien or right, and any other consensual or non-consensual lien, whenever granted and including without limitation those charges or interests in property within the meaning of “lien” under section 101(37) of the Bankruptcy Code.
“Liquidating Trust” means a liquidating or similar trust as may be established with respect to Sellers’ estates in conjunction with the Bankruptcy Cases.
“Liquidating Trustee” means the trustees or other representative of the Liquidating Trust.
“Measurement Time” means 11:59 p.m. on the date immediately prior to the Closing Date.
“Misstatement” means an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading.
“Net Working Capital” means (x) the amount of the Acquired Accounts Receivable minus (y) the Allowance for Doubtful Accounts minus (z) the lesser of (i) the sum of (A) $2,000,000 plus (B) the amount (if any) by which the Customer Lienable Prepetition Accounts Payable exceeds $2,000,000 and (ii) the sum of (A) the Customer Lienable Prepetition Accounts Payable plus (B) the Assumed Postpetition Accounts Payable (if any); provided that, for purposes of the determining “Net Working Capital,” Cure Costs to be paid by Buyer pursuant to this Agreement shall be excluded from the amount of Customer Lienable Prepetition Accounts Payable and the amount of Assumed Postpetition Accounts Payable.
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“Net Working Capital Adjustment” means (a) if the Net Working Capital exceeds the Target Working Capital, the amount, if any, by which the Net Working Capital exceeds the Target Working Capital, which amount shall be expressed as a positive number; (b) if the Net Working Capital is less than the Target Working Capital, the amount, if any, by which the Target Working Capital exceeds the Net Working Capital, which amount shall be expressed as a negative number; or (c) if the Net Working Capital is equal to the Target Working Capital, zero.
“Non-Income Tax” means any Tax other than U.S. federal income Tax, and income, franchise, capital gains, or similar Tax imposed by any U.S. state or local jurisdiction (including the Texas Margin Tax), but including, for the avoidance of doubt, any property Tax, severance Tax, production Tax or sales and use Tax.
“Ordinary Course of Business” means the ordinary course of business of Sellers, consistent in all material respects with past custom and practice of Sellers, including changes in response to the COVID-19 pandemic and the governmental actions related thereto. Without limiting the effect of the foregoing, the term “Ordinary Course of Business” as used herein shall be no broader than the term “ordinary course of business” as used in section 363 of the Bankruptcy Code.
“Organizational Documents” means, with respect to any Person, the certificate or articles of incorporation, bylaws, certificate of formation or organization, partnership agreement, operating agreement, limited liability company agreement or any other similar organizational documents of such Person.
“Parent Balance Sheet” means the consolidated balance sheet of Parent and its consolidated Subsidiaries as of December 31, 2020 included in Parent’s Annual Report on Form 10-K for the year ended December 31, 2020.
“Parent Class A Common Stock” means the Class A common stock, $0.01 par value per share, of Parent.
“Parent Class A-2 Common Stock” means the Class A-2 common stock, $0.01 par value per share, of Parent.
“Parent Class B Common Stock” means the Class B common stock, $0.01 par value per share, of Parent.
“Parent Common Stock” means collectively, the Parent Class A Common Stock, the Parent Class A-2 Common Stock and the Parent Class B Common Stock.
“Parent Contract” means any Contract: (a) to which any of the Parent Entities is a party; (b) by which any of the Parent Entities or any asset of any of the Parent Entities is bound or under which any of the Parent Entities has any obligation; or (c) under which any of the Parent Entities has any right or interest.
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“Parent Entity” means (a) Parent and (b) each of Parent’s Subsidiaries.
“Parent Equity Plans” means any equity or equity-based incentive plan or arrangement of Parent or any of its Subsidiaries.
“Parent Material Adverse Effect” means a material adverse effect on (a) the business, financial condition or results of operations of the Parent Entities, considered as a whole, or (b) the ability of Parent to consummate the Transactions or to perform its obligations hereunder and under the other Transaction Documents to which it is or will be a party; provided that any such material adverse effect that results from any of the following matters shall not be taken into account in determining whether a material adverse effect has occurred under clause (a) of this definition: (i) entering into this Agreement or the announcement of the Transactions; (ii) changes in financial or securities markets generally; (iii) changes in general economic or political conditions in the United States or worldwide; (iv) changes in conditions or developments generally applicable to the oil and gas industry in the area in which the Parent Entities operate, including, but not limited to, changes in the market price of oil, natural gas or other hydrocarbon products or changes in general market prices in the produced water disposal, gathering and/or transportation industry generally; (v) acts of God, including hurricanes, storms or other naturally occurring events; (vi) acts or failures to act of Governmental Authorities; (vii) actions taken or omissions made after the Execution Date at the written request of Sellers; (viii) any epidemic, pandemic or disease outbreak (including the COVID-19 virus) or hostilities, terrorist activities or war or any similar disorder and, in each case, governmental actions related thereto; and (ix) any change in laws or in GAAP and any interpretations thereof from and after the Execution Date.
“Parent Option” means an option to acquire share of Parent Common Stock granted by Parent pursuant to a Parent Equity Plan.
“Parent Preferred Stock” means the preferred stock, $0.01 par value per share, of Parent.
“Parent RSU” means a restricted stock unit issued by Parent pursuant to a Parent Equity Plan.
“Parent Warrants” means warrants to purchase share of Parent Common Stock from Parent (whether granted by Parent pursuant to the Parent Equity Plans, assumed by Parent in connection with any merger, acquisition or similar transaction or otherwise issued or granted and whether vested or unvested).
“Permits” means all governmental (whether federal, state or local) permits, licenses, franchises, certificates, approvals or other similar authorizations.
“Person” means any person, entity or Governmental Authority of any nature whatsoever, specifically including an individual, firm, company, corporation, partnership, trust, joint venture, association, joint stock company, limited liability company, estate, unincorporated organization or other entity or organization.
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“Petition Date” means the date of commencement of the Bankruptcy Cases.
“Plan” means, if applicable, the joint plan of reorganization of Sellers under chapter 11 of the Bankruptcy Court with respect to the Bankruptcy Cases.
“Proceeding” means any action, claim, demand, audit, hearing, complaint, investigation, litigation, or suit commenced, brought, conducted, or heard by or before any Governmental Authority.
“Properties” means the lands covered by the SWD Land Rights, the Water Land Rights, the Surface Tracts, the Surface Leases and the Rights of Way.
“Property Agreements” means the Surface Leases, the Right-of-Way Agreements and any other real property leases, licenses, subleases, rental or occupancy agreements, concessions and other agreements (written or oral) pursuant to which any Seller holds any of the Assets constituting interests in real property.
“Property Expenses” means all expenses, charges, capital expenses, development expenses, drilling expenses, workover expenses that are attributable to the ownership, maintenance and operation of Sellers’ interest in the Assets during the period in question (other than Taxes).
“Prospectus” means the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registration Statement” means any registration statement that covers Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Release” means releasing, disposing, discharging, injecting, spilling, leaking, leaching, dumping, pouring, emitting, escaping, emptying, seeping, placing, migrating and the like into or upon any land or water or air or otherwise entering into the environment.
“Representatives” means, with respect to any Person, the officers, directors, employees, members, managers, partners, investment bankers, attorneys, accountants, consultants or other advisors, agents or representatives of such Person, when acting in such capacity on behalf of such Person.
“Sale Hearing” has the meaning set forth in the Bid Procedures Order.
“Sale Order” means an order of the Bankruptcy Court, substantially in the form attached hereto as Exhibit J, approving this Agreement and all of the terms and conditions hereof, and approving and authorizing Sellers to consummate the Transactions, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“SEC” means the United States Securities and Exchange Commission.
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“Seller Fundamental Representations” means the representations and warranties of Sellers contained in Section 3.15, Section 3.16, Section 3.17.
“Seller Material Adverse Effect” means a material adverse effect on (a) the ownership, operation, financial condition or value of the Assets, considered as a whole, or (b) the ability of either Seller to perform its respective obligations under the Transaction Documents or consummate the Transactions; provided that any such material adverse effect that results from any of the following matters shall not be taken into account in determining whether a material adverse effect has occurred under clause (a) of this definition: (i) entering into this Agreement or the announcement of the Transactions; (ii) changes in financial or securities markets generally; (iii) changes in general economic or political conditions in the United States or worldwide; (iv) changes in conditions or developments generally applicable to the oil and gas industry in the area where the Assets are located, including, but not limited to, changes in the market price of oil, natural gas or other hydrocarbon products or changes in general market prices in the produced water disposal, gathering and/or transportation industry generally; (v) acts of God, including hurricanes, storms or other naturally occurring events; (vi) acts or failures to act of Governmental Authorities; (vii) matters disclosed on any Exhibit or Annex or in the Disclosure Schedule; (viii) actions taken or omissions made after the Execution Date as permitted under this Agreement or with the express written consent of Parent or Buyer; (ix) any epidemic, pandemic or disease outbreak (including the COVID-19 virus) or hostilities, terrorist activities or war or any similar disorder and, in each case, governmental actions related thereto; (x) matters that are cured or no longer exist by the earlier of Closing and the termination of this Agreement, including matters to the extent a purchase price adjustment is provided for under this Agreement; (xi) any change in laws or in GAAP and any interpretations thereof from and after the Execution Date; (xii) Casualty or Condemnation Loss; (xiii) the commencement or pendency of the Bankruptcy Cases; (xiv) the departure of officers, managers or directors of Sellers after the Execution Date; (xv) any objections in the Bankruptcy Court to (A) this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, (B) the reorganization of any Seller and any related plan of reorganization or disclosure statement, (C) the Bid Procedures or the sale motion or (D) the assumption or rejection of any Purchased Contract; and (xvi) any order of the Bankruptcy Court (except any such order that would preclude or prohibit Sellers from consummating the Transactions) or any actions or omissions of Sellers in compliance therewith.
“Sellers’ Knowledge” means the actual knowledge of Keith Schilling (after consultation with Robby Reeb), Adam Hurley, James Newman, Brandon McGuire and Matthew Kilker.
“Stock Consideration” means 902,593 shares of Parent Class A Common Stock; provided that, if, between the Execution Date and the Closing, the Parent Class A Common Stock shall have been changed into a materially different number of shares or different class solely by reason of any reorganization, reclassification, recapitalization, stock split, split up, reverse stock split, combination or exchange of shares, or any similar event shall have occurred, the Stock Consideration shall be appropriately adjusted to provide to Sellers the same economic effect as contemplated by this Agreement prior to such event.
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“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.
“Successful Bidder” has the meaning set forth in the Bid Procedures Order.
“Target Working Capital” means $5,000,000.
“Tax” means any tax, governmental fee or other like assessment or charge of any kind whatsoever in the nature of a tax (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition of any such tax (domestic or foreign), and any liability for any of the foregoing by reason of a contract, assumption, transferee or successor liability, operation of law or otherwise.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Taxing Authority” has the meaning set forth in the definition of Tax.
“Third Party” means any Person other than a Party or its Affiliates.
“Transaction Documents” means this Agreement, the Assignment and Bill of Sale, the Assumption Agreement, the Surface Deeds, the IP Assignment Agreement, any other agreement between or among Parent, Buyer and any Seller that expressly states that it constitutes a Transaction Document for purposes of this Agreement, and all other agreements, documents and instruments entered into by Parent and/or Buyer, on the one hand, and a Seller, on the other hand, as of or after the Execution Date and at or prior to Closing in connection with the transactions contemplated hereby (as each such document, agreement and instrument may be amended, supplemented or modified).
“Transactions” means the transactions contemplated by this Agreement and the other Transaction Documents, including the purchase and sale of Assets for the Purchase Price and the assumption of the Assumed Liabilities in accordance with this Agreement and the other Transaction Documents.
“Transfer Agent” means Broadridge Financial Solutions, Inc.
“Willful Breach” means, with respect to any Party, that such Party knowingly does one or more of the following: (a) such Party willfully and intentionally breaches in any material respect (by refusing to perform or taking an action prohibited) any material pre-Closing covenant, obligation or agreement applicable to such Party, or (b) such Party willfully and intentionally causes any of its representations or warranties under this Agreement to not be true and correct in all material respects after the Execution Date and prior to the Closing Date. For clarity, if a Party is obligated hereunder to use its commercially reasonable efforts to perform an action or to achieve a result, the failure to use such commercially reasonable efforts would constitute a willful and intentional breach of this Agreement.
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| (b) | Each of the following terms is defined in the Section set forth opposite such term: |
| Term | Section |
| 365 Schedule | 5.02(a) |
| Accounting Firm | 7.06(c) |
| Accrued PTO | 7.05(f) |
| Acquired Accounts Receivables | 2.04(e) |
| Adjusted Purchase Price | 2.03 |
| Aggregate Cap | 10.02(b) |
| Agreement | Preamble |
| Agua Libre | Preamble |
| Allocation | 7.06(c) |
| Assets | 2.01 |
| Assignment and Bill of Sale | 2.05(c)(i) |
| Assumed Indebtedness | Exhibit A – within “Assumed Liabilities” |
| Assumption Agreement | 2.05(c)(iii) |
| Audit Fees | 2.06(f) |
| Bankruptcy Cases | Recitals |
| Basic | Preamble |
| Bid Procedures Motion | 7.02(b) |
| Break-Up Fee | 9.03(a) |
| Buyer | Preamble |
| Buyer Non-Party Group | 10.07 |
| Cap | 10.02(b) |
| Cash Consideration | 2.03 |
| Casualty or Condemnation Loss | 7.09(a) |
| Chosen Courts | 11.06 |
| Closing | 2.05 |
| Closing Amount Excess | 2.07(a) |
| Closing Amount Shortfall | 2.07(b) |
| Closing Date Adjusted Purchase Price | 2.04(e)(i) |
| Closing Statement | 2.04(e)(i) |
| Compensation Schedule | 3.12(a) |
| Consent | 3.06 |
| Consent Notice | 2.12 |
| Continuing Employee | 7.05(b) |
| Cure Costs | 5.02(a) |
| Data | 2.01(i) |
| Desired 365 Contracts | 5.02(b) |
| Employment Offer | 7.05(a) |
| End Date | 9.01(b) |
| End of Suspension Notice | 6.03(e) |
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| Term | Section |
| Equitable Limitations | 3.03 |
| Escrow Cash Shortfall | 2.07(a) |
| Escrow Funds | 2.09(a) |
| Excess Recovery Amount | 7.08 |
| Excluded Asset PSA | 5.03(e) |
| Excluded Assets | 2.02 |
| Excluded Liabilities | 2.05(b) |
| Execution Date | Preamble |
| Expense Reimbursement | 9.03(a) |
| Final Settlement Statement | 2.06(a) |
| Form S-1 Shelf | 6.03(a) |
| Shelf Registration Statement | 6.03(a) |
| Indemnification Claim | 10.03(a) |
| IP Assignment Agreement | 2.05(c)(ix) |
| Loss | 10.02(a) |
| Losses | 10.02(a) |
| Material Contract | 3.05(a) |
| Objection Notice | 2.06(c) |
| Office Equipment | 2.01(m) |
| Operator Forms | 2.05(c)(ii) |
| Parent | Preamble |
| Parent Reports | 4.05(a) |
| Party | Preamble |
| Parties | Preamble |
| Phase I Assessment | 5.03(b) |
| Post-Closing Consent Period | 2.12(c) |
| Potential Bidder | 7.02(f) |
| Preferential Purchase Rights | 3.15 |
| Prorated Expense Items | 2.04(d)(ii) |
| Purchase Price | 2.03 |
| Purchased Contracts | 2.01(h) |
| Referee | 2.06(d) |
| Registrable Securities | 6.03(a) |
| Replacement Letters of Credit | 7.08 |
| Required Consent | 2.12(a) |
| Rights of Way | 2.01(e) |
| Right-of-Way Agreements | 2.01(e) |
| Rule 144 | 6.04 |
| Schedule Update Notice | 7.07 |
| Seller | Preamble |
| Sellers | Preamble |
| Seller Employee | 3.12(a) |
| Seller Indemnified Parties | 10.02(a) |
| Seller Non-Party Group | 10.07 |
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| Term | Section |
| Surface Deeds | 2.05(c)(iv) |
| Surface Leases | 2.01(d) |
| Surface Tracts | 2.01(c) |
| Survival Date | 10.01(b) |
| Suspension Event | 6.03(e) |
| Suspension Notice | 6.03(e) |
| SWD Land Rights | 2.01(a) |
| SWD Wells | 2.01(a) |
| Taxing Authority | Exhibit A – within “Tax” |
| Trademarks | Exhibit A – within “Intellectual Property” |
| Transfer Taxes | 7.06(b) |
| Transferred Intellectual Property | 3.09 |
| Vehicles | 2.01(j) |
| Vehicle Finance Leases | 2.01(j) |
| Water Land Rights | 2.01(a)(ii) |
| Water Wells | 2.01(a)(ii) |
| (c) | References and Rules of Construction. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein and defined herein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law. The word “or” will have the inclusive meaning represented by the phrase “and/or.” The phrase “and/or” when used in a conjunctive phrase, shall mean any one or more of the Persons specified in or the existence or occurrence of any one or more of the events, conditions or circumstances set forth in that phrase; provided, however, that when used to describe the obligation of one or more Persons to do any act, it shall mean that the obligation is the obligation of each of the Persons but that it may be satisfied by performance by any one or more of them. “Shall” and “will” have equal force and effect. The word “extent” in the phrase “to the extent” shall mean the degree or proportion to which a subject or other things extends, and such phrase shall not mean simply “if.” References to any date shall mean such date in Fort Worth, Texas and for purposes of calculating the time period in which any notice or action is to be given or undertaken hereunder, such period shall be deemed to begin at 12:01 a.m. on the applicable date in Fort Worth, Texas. If a date specified herein for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day. All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars. THE PARTIES AGREE THAT THE BOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS LEGENDS. |
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Exhibit B
ASSIGNMENT AND BILL OF SALE
[Omitted]
Exhibit C
ASSUMPTION AGREEMENT
[Omitted]
Exhibit D
SURFACE DEED
[Omitted]
Exhibit E
SELLER CERTIFICATES
[Omitted]
Exhibit F
SELLER FIRPTA CERTIFICATE
[Omitted]
Exhibit G
IP ASSIGNMENT AGREEMENT
[Omitted]
Exhibit H
BUYER CERTIFICATE
[Omitted]
Exhibit I
BID PROCEDURES ORDER
[Omitted]
Exhibit J
SALE ORDER
[Omitted]
Exhibit 2.2
ASSET PURCHASE AGREEMENT
dated as of
August 17, 2021
by and among
Basic Energy Services, Inc.,
Basic Energy Services, L.P.,
C&J Well Services, Inc. and
KVS Transportation, Inc.,
as Sellers,
and
Axis Energy Services Holdings, LLC,
as Buyer
TABLE OF CONTENTS
Page
| ARTICLE I DEFINITIONS | 1 | |
| Section 1.01 | Definitions | 1 |
| ARTICLE II PURCHASE AND SALE | 1 | |
| Section 2.01 | Purchase and Sale of the Assets | 1 |
| Section 2.02 | Excluded Assets | 3 |
| Section 2.03 | Consideration; Allocated Value | 5 |
| Section 2.04 | Adjustments to the Purchase Price | 5 |
| Section 2.05 | Closing | 8 |
| Section 2.06 | Final Settlement Statement | 9 |
| Section 2.07 | Post-Closing Payments | 11 |
| Section 2.08 | No Duplicative Effect; Methodologies | 12 |
| Section 2.09 | Purchase Price Deposit | 12 |
| Section 2.10 | Division of Revenues | 13 |
| Section 2.11 | Division of Expenses | 13 |
| Section 2.12 | Consents to Assign | 13 |
| Section 2.13 | Consents for Purchased Contracts | 15 |
| Section 2.14 | Assets Sold “As Is, Where Is” | 15 |
| Section 2.15 | Presence of Wastes, NORM, Hazardous Substances and Asbestos | 16 |
| Section 2.16 | Delivery of Assets; Inspection | 16 |
| Section 2.17 | Acquired Accounts Receivable; Assumed Prepetition Accounts Payable | 17 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS | 17 | |
| Section 3.01 | Organization | 17 |
| Section 3.02 | Authority and Authorization | 18 |
| Section 3.03 | Enforceability | 18 |
| Section 3.04 | Conflicts | 18 |
| Section 3.05 | Material Contracts | 18 |
| Section 3.06 | Approvals | 20 |
| Section 3.07 | Environmental Matters | 20 |
| Section 3.08 | Litigation | 21 |
| Section 3.09 | Intellectual Property | 21 |
| Section 3.10 | Insurance Coverage | 21 |
| Section 3.11 | Taxes | 21 |
| Section 3.12 | Employment Matters | 22 |
| Section 3.13 | Employee Benefits | 22 |
| Section 3.14 | Letters of Credit | 23 |
| Section 3.15 | Preferential Purchase Rights | 23 |
| Section 3.16 | Broker | 23 |
| Section 3.17 | [Reserved] | 23 |
| Section 3.18 | Compliance with Laws | 23 |
| Section 3.19 | Sufficiency of Assets | 23 |
| Section 3.20 | Permits | 23 |
| Section 3.21 | Properties | 24 |
| Section 3.22 | No Other Representations | 24 |
| i |
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER | 24 | |
| Section 4.01 | Organization | 24 |
| Section 4.02 | Authorization and Authority | 25 |
| Section 4.03 | Enforceability | 25 |
| Section 4.04 | Conflicts | 25 |
| Section 4.05 | Broker | 25 |
| Section 4.06 | Financial Ability | 25 |
| Section 4.07 | Approvals | 26 |
| Section 4.08 | Litigation | 26 |
| Section 4.09 | Bankruptcy | 26 |
| Section 4.10 | Investigation | 26 |
| Section 4.11 | Qualification | 27 |
| Section 4.12 | Capitalization | 27 |
| Section 4.13 | Financial Statements; Absence of Liabilities | 28 |
| Section 4.14 | Absence of Changes | 28 |
| Section 4.15 | No Other Representations | 28 |
| ARTICLE V COVENANTS OF SELLERS | 29 | |
| Section 5.01 | Operating Covenants | 29 |
| Section 5.02 | Assumption and Rejection of Executory Contracts and Leases | 30 |
| Section 5.03 | Access | 32 |
| Section 5.04 | Permits | 34 |
| Section 5.05 | Title Cooperation | 34 |
| Section 5.06 | Certain Accounts Payable | 34 |
| ARTICLE VI COVENANTS OF BUYER | 35 | |
| Section 6.01 | Access | 35 |
| Section 6.02 | Data Retention | 35 |
| Section 6.03 | Interim Covenants | 35 |
| ARTICLE VII COVENANTS OF BUYER AND SELLERS | 36 | |
| Section 7.01 | Commercially Reasonable Efforts; Further Assurances | 36 |
| Section 7.02 | Bankruptcy Proceedings | 36 |
| Section 7.03 | Public Announcements | 38 |
| Section 7.04 | Confidentiality | 39 |
| Section 7.05 | Employee Matters | 39 |
| Section 7.06 | Tax Matters; Apportionment of Tax Liability | 41 |
| Section 7.07 | Disclosure Schedule Updates | 44 |
| Section 7.08 | Replacement of Existing Letters of Credit | 43 |
| Section 7.09 | Casualty or Condemnation Loss | 44 |
| Section 7.10 | Transition Services Agreement | 45 |
| ii |
| ARTICLE VIII CONDITIONS TO CLOSING | 45 | |
| Section 8.01 | Conditions to Obligations of Buyer and Sellers | 45 |
| Section 8.02 | Conditions to Obligation of Buyer | 46 |
| Section 8.03 | Conditions to Obligation of Sellers | 46 |
| ARTICLE IX TERMINATION | 47 | |
| Section 9.01 | Grounds for Termination | 47 |
| Section 9.02 | Effect of Termination | 49 |
| Section 9.03 | Break-Up Fee; Expense Reimbursement | 50 |
| ARTICLE X SURVIVAL AND INDEMNIFICATION | 51 | |
| Section 10.01 | Survival | 51 |
| Section 10.02 | Indemnification by Buyer | 52 |
| Section 10.03 | Indemnification Procedures | 53 |
| Section 10.04 | Express Negligence | 54 |
| Section 10.05 | Tax Treatment of Indemnity Payments | 54 |
| Section 10.06 | Sole and Exclusive Remedy | 54 |
| ARTICLE XI MISCELLANEOUS | 55 | |
| Section 11.01 | Notices | 55 |
| Section 11.02 | Amendments and Waivers | 56 |
| Section 11.03 | Expenses | 57 |
| Section 11.04 | Successors and Assigns/Liquidating Trust | 57 |
| Section 11.05 | Governing Law | 57 |
| Section 11.06 | Jurisdiction | 57 |
| Section 11.07 | Waiver of Jury Trial | 58 |
| Section 11.08 | Counterparts; Effectiveness; Third Party Beneficiaries | 58 |
| Section 11.09 | Entire Agreement | 58 |
| Section 11.10 | Severability | 58 |
| Section 11.11 | Specific Performance | 59 |
| Section 11.12 | Certain Acknowledgements and Limitations | 59 |
| Section 11.13 | Disclosure Schedules | 59 |
| Section 11.14 | Preparation of Agreement | 60 |
| ARTICLE XII DEFECTS; FINAL ACCOUNTING | 60 | |
| Section 12.01 | Defects | 60 |
| Section 12.02 | Resolution of Environmental Defects | 61 |
| Section 12.03 | Cure; Purchase Price Adjustment | 62 |
| Section 12.04 | Engagement of Arbiter | 64 |
| iii |
EXHIBITS, ANNEXES, SCHEDULES AND DISCLOSURE SCHEDULES
| Exhibits | |
| Exhibit A | Definitions |
| Exhibit B | Form of Assignment and Bill of Sale |
| Exhibit C | Form of Assumption Agreement |
| Exhibit D | Form of Surface Deed |
| Exhibit E | Form of Seller Certificate |
| Exhibit F | Form of Seller FIRPTA Certificate – Basic |
| Exhibit G | Form of IP Assignment Agreement |
| Exhibit H | Form of Buyer Certificate |
| Exhibit I | Form of Bid Procedures Order |
| Exhibit J | Form of Sale Order |
| Exhibit K | Form of Issuance Agreement |
| Exhibit L | Form of LLC Agreement Addendum |
| Annexes | |
| Annex A | Surface Tracts |
| Annex B | Surface Leases |
| Annex C | Equipment |
| Annex D | Permits |
| Annex E | Vehicles and Vehicle Finance Leases |
| Annex F | Applicable Contracts |
| Annex G | Intellectual Property |
| Schedules | |
| Schedule 2.02(l) | Excluded Contracts and Other Assets |
| Schedule 2.02(y) | Excluded Assets |
| Schedule 5.02(a) | 365 Schedule |
| Schedule 5.02(b) | Desired 365 Contracts |
| Schedule 7.06(c) | Allocation Methodology |
| Schedule 12.01 | Environmental Allocated Value |
| Disclosure Schedules | |
| Disclosure Schedule 3.05(a) | Material Contracts |
| Disclosure Schedule 3.05(b) | Material Contract Defaults |
| Disclosure Schedule 3.06 | Approvals |
| Disclosure Schedule 3.07 | Environmental Matters |
| Disclosure Schedule 3.08 | Litigation |
| Disclosure Schedule 3.10 | Insurance Coverage |
| Disclosure Schedule 3.11 | Taxes |
| Disclosure Schedule 3.12(a) | Seller Employees |
| Disclosure Schedule 3.12(b) | Independent Contractors |
| Disclosure Schedule 3.14 | Existing Letters of Credit |
| Disclosure Schedule 3.15 | Preferential Purchase Rights |
| Disclosure Schedule 3.20 | Permits |
| Disclosure Schedule 4.12 | Buyer Units |
| iv |
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) dated as of August 16, 2021 (the “Execution Date”), is entered into by and among Axis Energy Services Holdings, LLC, a Delaware limited liability company (“Buyer”), Basic Energy Services, Inc., a Delaware corporation (“Basic”), Basic Energy Services, L.P., a Delaware limited partnership (“Basic LP”), C&J Well Services, Inc., a Delaware corporation (“C&J”), and KVS Transportation, Inc., a California corporation (“KVS” and, together with Basic, Basic LP and C&J, each a “Seller” and, collectively, “Sellers”) . Buyer and Sellers are sometimes referred to collectively herein as the “Parties” and individually as a “Party.”
W I T N E S S E T H:
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, the Assets (as defined below);
WHEREAS, Sellers and certain of their affiliates are contemplating filing voluntary petitions for relief (the “Bankruptcy Cases”) under chapter 11 of the Bankruptcy Code in the Bankruptcy Court;
WHEREAS, Sellers desire to sell, transfer and assign to Buyer, and Buyer desires to purchase and acquire from Sellers, the Assets, and, in connection therewith, the Parties desire for Buyer to assume the Assumed Liabilities; and
WHEREAS, Sellers’ ability and obligation to consummate the Transactions are subject to, among other things, the entry of the Sale Order.
NOW, THEREFORE, in consideration of the mutual promises, representations and warranties made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. The capitalized terms used but not defined herein and defined in Exhibit A shall have the meanings set forth in Exhibit A hereto, which is incorporated herein by reference.
ARTICLE II
PURCHASE AND SALE
Section 2.01 Purchase and Sale of the Assets. Subject to the terms and conditions and for the consideration herein set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers agree to sell, assign, convey and deliver to Buyer, and Buyer agrees to purchase and acquire from Sellers at the Closing (as defined below), all of Sellers’ right, title and interest in and to the assets described below, other than the Excluded Assets (collectively, the “Assets”):
(a) the fee surface tracts described on Annex A (collectively, the “Surface Tracts”);
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(b) all surface leases, licenses, subleases, rental or occupancy agreements, concessions and other agreements (written or oral) described on Annex B (collectively, together with all amendments and modifications thereto, the “Surface Leases”) and any surface facilities, yards, shops, and offices located on the Surface Leases, together with all fixtures, buildings, structures or other improvements thereon;
(c) (i) all equipment, machinery, fixtures, furniture, buildings, structures, improvements and other real, personal and mixed property, operational and nonoperational, located on the Properties (except for any such personal property leased from Third Parties), and (ii) all equipment, machinery and other real, personal and mixed property, operational or nonoperational, located off the Properties, used or held for use primarily in connection with, or otherwise primarily attributable to, the ownership of the Assets or the Business (except for any such personal property leased from Third Parties), which (whether described in the foregoing clauses (i) or (ii)) shall include, but not be limited to, that property described on Annex C;
(d) to the extent assignable by Sellers to Buyer, all Permits set forth on Annex D (and, for the avoidance of doubt, solely to the extent the applicable Governmental Authority consents to or otherwise approves the assignment or transfer of the applicable Permit);
(e) all Assigned Contracts (other than those listed on Schedule 2.02(l)) and any and all amendments, ratifications or extensions of the foregoing (collectively, the “Purchased Contracts”);
(f) to the extent, and only to the extent, in the possession or control of Sellers and related to the Assets, all books, records, files, reports, and accounting records and copies of Tax records, including: (A) land and title records (including lease files, Third Party brokerage information, run sheets, abstracts of title, surveys, maps, title opinions and title curative documents); (B) Contract files; (C) correspondence; (D) facility files (including construction records); and (E) environmental, regulatory, accounting and copies of Tax records (such materials, excluding the Excluded Records, the “Data”); provided, however, that (1) rights to receive access to and copies of such Data from Third Parties shall accrue to Buyer only to the same extent as such rights are vested in Sellers and (2) to the extent that any such Data relates to both Assets and Excluded Assets, Sellers shall be entitled to retain the original copies of such Data that relates primarily to Excluded Assets and shall deliver copies of such Data to Buyer hereunder;
(g) all of the trucks, trailers, frac tanks, vehicles and other rolling stock described on Part 1 of Annex E (the “Vehicles”) and all finance leases described on Part 2 of Annex E (the “Vehicle Finance Leases”);
(h) all Acquired Accounts Receivable;
(i) all rights, claims, causes, causes of action, remedies, defenses, rights of set-off, rights of recoupment, and rights to payment or to enforce payment and credits of any Seller to the extent related directly to the Assets (other than the Excluded Assets) or any Assumed Liability;
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(j) all inventory wherever located, including all semi-finished and finished goods, raw materials, works in progress, packaging, supplies, tooling and parts, whether held at any location or facility of any Seller or in transit to any Seller, in each case, as of the Closing Date and primarily related to the Business;
(k) the Intellectual Property described on Annex G, in each case, solely to the extent owned by Sellers (collectively, the “Transferred Intellectual Property”); and
(l) all intangible rights, inchoate rights, transferable rights under warranties made by prior owners, manufacturers, vendors, and Third Parties, and rights accruing under applicable statutes of limitation or prescription to the extent related or attributable to the Assets described in clauses (a) through (k) above.
To the extent the assignment of any Asset to Buyer pursuant to this Agreement requires the consent of or payment of a fee to any Third Party notwithstanding the entry of the Sale Order then such Asset shall not be assigned to Buyer (and shall constitute an Excluded Asset) unless such consent is obtained or Buyer pays any fee required to effect such assignment (provided that Sellers shall not be required to pay any fees or other amounts to Third Parties in connection with obtaining any such consents).
Section 2.02 Excluded Assets. Any assets of Sellers that are not described on otherwise identified as Assets in Section 2.01, together with all of the following assets, shall not constitute Assets and shall not be sold, assigned or conveyed to Buyer pursuant to this Agreement (such assets as described herein below, the “Excluded Assets”):
(a) all cash and cash equivalents of Sellers;
(b) all corporate and financial records of Sellers (other than the Data contemplated by Section 2.01(f)) and all Excluded Records;
(c) all Contracts of insurance or indemnity, subject to Section 10.01;
(d) all proceeds, income or revenues attributable to the Assets, other than proceeds received on account of the Acquired Accounts Receivable, with respect to any period of time prior to the Closing Date;
(e) all rights, claims, demands and causes of action of Sellers under this Agreement;
(f) all rights, claims (including any claim as defined in section 101 of the Bankruptcy Code), causes, causes of action, remedies, defenses, rights of set-off, rights of recoupment, and rights to payment or to enforce payment and credits of any Seller except to the extent related to the Assets with respect to any period of time on or after the Closing Date or any Assumed Liability;
(g) any refund of costs or expenses borne by Sellers and not by Buyer;
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(h) any Tax credits, refunds or abatements or other Tax assets or Tax benefits of Sellers (other than those allocated to Buyer under Section 7.06);
(i) any prepayments or good faith or other deposits submitted by any Third Party under the terms of the Bid Procedures Order;
(j) any of Sellers’ rights, claims and causes of action under the Bankruptcy Code and any Avoidance Actions in which Sellers have or will have rights;
(k) the name “Basic Energy” and all variations and derivations thereof and any Trademarks containing any of the foregoing;
(l) all Contracts and other assets listed on Schedule 2.02(l);
(m) any executory contracts or unexpired leases that are not Desired 365 Contracts;
(n) all Existing Letters of Credit and cash deposits and proceeds of such Existing Letters of Credit;
(o) all equipment and original copies of Data to the extent primarily related to Excluded Assets or Excluded Liabilities;
(p) all Permits, except for those Permits contemplated by Section 2.01(d);
(q) except for the Vehicles, all trucks, trailers, vehicles and other rolling stock;
(r) all office equipment, computers, software and hardware;
(s) except for the Transferred Intellectual Property, all Intellectual Property owned by Sellers;
(t) all assets excluded pursuant to the express terms of this Agreement, including Section 2.12 or Section 5.02;
(u) except to the extent related to any Assumed Liabilities, all audit rights arising under any of the Applicable Contracts or otherwise with respect to (i) any period prior to the Closing Date, with respect to the Assets or (ii) any of the Excluded Assets;
(v) any assets or properties described in Section 2.01 that are not assignable to Buyer pursuant to this Agreement after giving effect to the Sale Order;
(w) all engagements and similar letters and agreements with Sellers’ legal advisors, it being agreed that Buyer shall have no right to claim, own or waive any attorney-client or similar privilege in favor of Sellers or any of their Affiliates with respect to the ownership or operation of the Assets;
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(x) any property or obligation that has been escheated or been reportable as unclaimed property to any state or municipality under any applicable escheatment or unclaimed property laws;
(y) excluding all assets listed on Annex C, all assets described on Schedule 2.02(y) and all other assets of Sellers related primarily to or held for use primarily in connection with the business of Sellers other than the Business; and
(z) any assets or properties otherwise expressly identified as Excluded Assets under this Agreement.
Section 2.03 Consideration; Allocated Value.
(a) As consideration for the Assets, Buyer shall (i) pay or deliver to Sellers in accordance with this Agreement, $17,500,000 in cash (the “Cash Purchase Price”) and 509,286 Class D-1 Units (the “Equity Consideration”) corresponding to a value of $7,500,000 (the “Equity Purchase Price” and together with the Cash Purchase Price, the “Purchase Price”), and (ii) assume all Assumed Liabilities in accordance with this Agreement. The Purchase Price shall be paid as provided in Section 2.05 and shall be subject to adjustment as provided in Section 2.04, Section 2.06, Section 2.12 and Section 5.02. The Purchase Price, as increased or reduced, as applicable, in accordance with this Agreement, is referred to as the “Adjusted Purchase Price”.
(b) The agreed allocation of the Purchase Price as to the Assets for purposes of Section 2.16 is as set forth on Annex A (with respect to the Surface Tracts), Annex B (with respect to the Surface Leases), Annex C (with respect to the equipment and other assets set forth thereon) and Annex E (with respect to the Vehicles) and each allocated value identified as applicable to any such Assets on such Annexes shall constitute the “Allocated Value” for such Asset.
Section 2.04 Adjustments to the Purchase Price. Adjustments to the Purchase Price shall be made according to this Section 2.04.
(a) Upward Adjustments. The Purchase Price shall be adjusted upward by the following, but only to the extent such items relate to the Assets:
(i) [reserved];
(ii) the amount of Cure Costs, if any, by which the Purchase Price is to be increased pursuant to Section 5.02; and
(iii) an amount equal to (A) the aggregate amount of the Acquired Accounts Receivable minus (B) an amount equal to the portion of the Assumed Prepetition Accounts Payable that are related to accounts that have valid rights to assert or have asserted prior to the Closing Date, mechanics’ liens against customers of Sellers; provided that, if such amount is a negative number, there shall be no adjustment to the Purchase Price pursuant to this clause (iii).
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(b) Downward Adjustments. The Purchase Price shall be adjusted downward by the following:
(i) an amount equal to all Excess Cure Costs, if any, paid or economically borne by Buyer;
(ii) an amount equal to all Straddle Period Payroll Obligations paid or otherwise economically borne by Buyer;
(iii) an amount equal to the Defect Excess, if any, as provided in Section 12.03(d); and
(iv) an amount equal to the aggregate reductions in the Purchase Price contemplated by Section 2.16.
(c) Tax Adjustments/Apportionment of Prepaid Expense Items.
(i) The Parties agree to adjust the Purchase Price, downward or upward, as appropriate, in accordance with the provisions of Section 7.06. For purposes of clarity, (A) such adjustments will be accounted for in the Closing Statement pursuant to Section 2.04(d) and the Final Settlement Statement pursuant to Section 2.06, and, if actual amounts are not known as of such time, Sellers will use good faith estimates to calculate such adjustments, and (B) to the extent any such adjustments are made following such time as the Final Settlement Statement has been finally determined pursuant to Section 2.06, then such adjustments will be settled in cash as provided in Section 2.07(c).
(ii) For purposes of the Purchase Price, to the extent not otherwise expressly provided for under the definition of “Property Expenses,” Section 2.04(a), Section 2.04(b), Section 2.04(c)(i) and Section 7.06, those other items of expenses and accounts payable in relation to the Assets that are paid or payable on an annual, quarterly, monthly or other regular periodic basis and relate to a period before or after the Closing Date (“Prorated Expense Items”) shall be prorated as of the Closing Date and apportioned, such that Buyer will receive the economic benefit or burden, as applicable, of all such items on and after the Closing Date and Sellers shall receive the economic benefit or burden, as applicable, of all such items for the period prior to the Closing Date. After the Closing Date, (x) if Buyer receives any bills or accounts or any reimbursement for prepaid expenses in relation to Prorated Expense Items that are attributable in whole to the period prior to the Closing Date, then Buyer shall promptly forward the same to Sellers (for payment, in the case of any such bills or accounts), (y) if Sellers receive any bills or accounts or any reimbursement for prepaid expenses in relation to the Prorated Expense Items that are attributable in whole to the period on or after the Closing Date, then Sellers shall promptly forward the same to Buyer (for payment, in the case of any such bills or accounts) and (z) if Buyer or Sellers receive any bills or accounts or any reimbursements for prepaid expenses in relation to the Prorated Expense Items that are attributable in part to the period prior to the Closing Date, and in part to the period on and after the Closing Date, the amount thereof shall be apportioned between Sellers, on the one hand, and Buyer, on the other hand, respectively, as of the Closing Date, based on the number of days in such period falling prior to the Closing Date, on the one hand, and on and after the Closing Date, on the other hand. In the case of bills, accounts or reimbursements referred to in clause (z), the party receiving the same shall be required to pay only such portion of such bill or account for which it is responsible in accordance with this Section 2.04(c)(ii).
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(d) Closing Statement.
(i) Sellers shall prepare and deliver to Buyer, not less than five (5) Business Days before the Closing Date, a statement (the “Closing Statement”) setting forth Sellers’ good faith calculation of the adjustments to the Purchase Price provided in this Section 2.04, using estimates where actual amounts are not known at such time, and Sellers’ good faith calculation of the estimated Adjusted Purchase Price; such estimated Adjusted Purchase Price (as such may be modified pursuant to any changes proposed by Buyer and accepted by Sellers) shall be referred to as the “Closing Date Adjusted Purchase Price.” The Closing Statement shall be prepared in accordance with this Agreement, including Section 2.08. If Buyer has any questions or disagreements regarding the Closing Statement, then, upon written request by Buyer, at least two (2) Business Days prior to the Closing Date, Sellers and Buyer shall in good faith attempt to resolve any disagreements, and Sellers shall afford Buyer the opportunity to examine the Closing Statement and such supporting schedules, analyses and workpapers on which the Closing Statement is based or from which the Closing Statement is derived as are reasonably requested by Buyer. If (A) Buyer and Sellers agree on changes to the Closing Statement based on such discussions, then the Closing Date Adjusted Purchase Price shall be paid at Closing based on such changes; or (B) Buyer and Sellers do not agree on changes to the Closing Statement, then, subject to Section 2.04(e), the Closing Date Adjusted Purchase Price shall be paid at the Closing based on the amounts set forth in the Closing Statement; provided, however, that in either of clauses (A) or (B), appropriate adjustments to the Purchase Price shall be made after the Closing pursuant to Section 2.06.
(ii) Sellers will include in the Closing Statement Sellers’ good faith calculation of the prorations provided for in Section 2.04(c). If final bills or accounts in relation to any Prorated Expense Items (including the tax adjustments referred to in Section 2.04(c)(i)) referred to in Section 2.04(c)(ii) are not available or have not been issued prior to that date, Sellers shall estimate the amount of each such item in good faith and in accordance with customary industry practices, and such estimate shall be reflected in the Closing Statement. The amount payable by Buyer at the Closing will be increased or decreased to reflect the net amount owing between the Parties as shown on the Closing Statement, using such estimates where necessary. Final adjustment between the Parties as to any item used in the preparation of the Closing Statement in accordance with this Section 2.04 shall be made in accordance with Section 2.06 and Section 7.06.
(e) Closing Adjustments. Notwithstanding anything herein to the contrary, for purposes of determining the amount payable by Buyer at the Closing in respect of the Closing Date Adjusted Purchase Price, all adjustments to the Purchase Price shall be made to the Equity Purchase Price (and not to the Cash Purchase Price) and the Equity Consideration as follows: (i) if the Closing Date Adjusted Purchase Price is greater than the Purchase Price, then (A) the Equity Purchase Price shall be increased by the amount of such excess and (B) the Equity Consideration shall be increased by a number of Class D-1 Units equal to the amount of such excess divided by $14.7265; and (ii) if the Closing Date Adjusted Purchase Price is less than the Purchase Price, then (A) the Equity Purchase Price shall be decreased by the amount of such difference and (B) the Equity Consideration shall be decreased by a number of Class D-1 Units equal to the amount of such difference divided by $14.7265. The Equity Purchase Price, as so adjusted, shall be referred to herein as the “Closing Date Equity Purchase Price”, and the Equity Consideration, as so adjusted, shall be referred to herein as the “Closing Date Equity Consideration”.
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Section 2.05 Closing. The closing of the purchase and sale of the Assets, the assumption by Buyer of the Assumed Liabilities and the other transactions contemplated herein (the “Closing”) shall take place at the offices Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite 300, Dallas, Texas 75201, as soon as possible, but in no event later than two (2) Business Days, after satisfaction or waiver by the requisite Parties of the conditions to Closing set forth in Article VIII (other than those conditions that by their nature cannot be satisfied until the time of Closing, but subject to the satisfaction or waiver by the requisite Parties of those conditions), or at such other time or place as Buyer and Sellers may agree in writing. At and as of the Closing:
(a) Pursuant to section 363 of the Bankruptcy Code, effective as of the Closing, Sellers shall sell, assign and convey all Assets (other than Excluded Assets) to Buyer;
(b) Buyer shall assume all Assumed Liabilities. All Liabilities of Sellers other than the Assumed Liabilities (the “Excluded Liabilities”), shall be retained by Sellers;
(c) Sellers shall deliver to Buyer the following instruments, each dated as of the Closing Date, properly executed by an authorized officer or representative of the applicable Seller(s) and, where appropriate, acknowledged:
(i) an Assignment and Bill of Sale Without Warranty in the form of Exhibit B (the “Assignment and Bill of Sale”);
(ii) an Assumption Agreement between Sellers and Buyer in the form of Exhibit C (the “Assumption Agreement”);
(iii) a Deed Without Warranty pertaining to each Surface Tract in the form of Exhibit D (collectively, the “Surface Deeds”), or such other jurisdictionally equivalent form as may be applicable outside of the State of Texas;
(iv) a certificate in the form of Exhibit E;
(v) a certificate in the form of Exhibit F;
(vi) executed documentation necessary to transfer title of the Vehicles from each applicable Seller to Buyer;
(vii) the Deposit Escrow Agreement;
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(viii) an Intellectual Property Assignment in the form of Exhibit G, transferring all of Sellers’ right, title and interest in and to the Transferred Intellectual Property (the “IP Assignment Agreement”);
(ix) an Issuance Agreement between Basic LP and Buyer in the form of Exhibit K, effecting the issuance of the Closing Date Equity Consideration (the “Issuance Agreement”); and
(x) an Addendum Agreement to the Buyer LLC Agreement between Basic LP and Buyer in the form of Exhibit L (the “LLC Agreement Addendum”);
(d) Buyer shall deliver to Sellers executed counterparts of the following instruments each dated the Closing Date, properly executed by an authorized officer or representative of Buyer and, where appropriate, acknowledged:
(i) a certificate in the form of Exhibit H;
(ii) the Assignment and Bill of Sale;
(iii) the Assumption Agreement;
(iv) the Deposit Escrow Agreement; and
(v) the IP Assignment Agreement;
(e) Buyer shall deliver an amount equal to the Closing Cash Payment Amount, by wire transfer of immediately available funds, to one or more accounts designated by Sellers; and
(f) Buyer shall deliver to Basic LP the following, which, if an instrument, shall be dated as of the Closing Date and properly executed by an authorized officer or representative of Buyer:
(i) the Closing Date Equity Consideration;
(ii) the Issuance Agreement; and
(iii) the LLC Agreement Addendum.
Section 2.06 Final Settlement Statement.
(a) As soon as practical and, in any event, no later than ninety (90) calendar days after the Closing Date, Sellers shall prepare and deliver to Buyer a statement (the “Final Settlement Statement”) setting forth Sellers’ calculation of the adjustments to the Purchase Price in accordance with Section 2.04. The Final Settlement Statement shall be prepared in accordance with this Agreement and on a basis consistent with the preparation of the Closing Statement as described in Section 2.04(d), and shall set forth Sellers’ calculation of the Adjusted Purchase Price.
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(b) Following the delivery of the Final Settlement Statement, Sellers shall afford Buyer the opportunity to examine the Final Settlement Statement and Sellers’ calculation of the Adjusted Purchase Price, and such supporting schedules and analyses as are reasonably necessary and appropriate in connection with such review. Sellers shall cooperate with Buyer in such examination, including responding to questions asked by Buyer, and Sellers shall make available to Buyer any records under Sellers’ control that are requested by Buyer in connection with such review.
(c) If, within thirty (30) calendar days following delivery of the Final Settlement Statement to Buyer, Buyer has not delivered to Sellers written notice (the “Objection Notice”) of Buyer’s objections to the Final Settlement Statement or Sellers’ calculation of the Adjusted Purchase Price (which Objection Notice in order to be valid must contain a statement describing in reasonable detail the items objected to, the basis of such objections and Buyer’s calculation of the amount(s) for the items objected to that Buyer asserts should be used for purposes of the Final Settlement Statement), then the Adjusted Purchase Price as set forth in such Final Settlement Statement shall be deemed final and conclusive. In addition, any of Sellers’ calculations of the Adjusted Purchase Price as set forth in the Final Settlement Statement which are not objected to in the Objection Notice shall be deemed final and conclusive.
(d) If Buyer delivers the Objection Notice satisfying Section 2.06(c) above, within such thirty (30)-day period, then Sellers and Buyer shall endeavor in good faith to resolve the objections of Buyer set forth in the Objection Notice for a period not to exceed fifteen (15) calendar days from the date of delivery of the Objection Notice. If at the end of such fifteen (15)-day period there are any objections that remain in dispute, then either Buyer or Sellers may require by written notice to the other that the remaining objections in dispute be submitted for resolution to the Dallas, Texas office of Grant Thornton LLP or to such other independent accounting firm as may be selected jointly by Buyer and Sellers within the ten (10) calendar days following a written request by Buyer or Sellers (Grant Thornton LLP or such jointly selected accounting firm, the “Referee”). The Referee’s engagement shall be limited to the resolution of disputed amounts set forth in the Final Settlement Statement that have been identified by Buyer in the Objection Notice, which resolution shall be in accordance with this Agreement and no other matter relating to the Final Settlement Statement shall be subject to determination by the Referee except to the extent affected by resolution of the disputed amounts. In connection with the engagement of the Referee, each of Buyer and Sellers shall execute any engagement, indemnity and other agreement as the Referee shall require as a condition to such engagement. If Grant Thornton LLP is unable or unwilling to serve as the Referee and Buyer and Sellers are unable to agree upon the designation of a Person as substitute arbitrator, then Buyer or Sellers, or either of them, may in writing request the Bankruptcy Court to appoint the substitute referee; provided that such Person so appointed shall be a national or regional accounting firm with no prior material relationships with Buyer or Sellers or their respective Affiliates and shall have experience in auditing companies engaged in oil and gas wellsite service activities.
(e) The Referee shall determine such items of the calculation of the Adjusted Purchase Price as are disputed within thirty (30) calendar days after the objections that remain in dispute are submitted to it.
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(f) If any disputed items are submitted to the Referee for resolution, (i) each of Buyer and Sellers shall furnish to the Referee such workpapers and other documents and information relating to such disputed items as the Referee may request and are available to that Party or its Affiliates (or its independent public accountants) and will be afforded the opportunity to present to the Referee any materials relating to the determination of the matters in dispute and to discuss such determination with the Referee prior to any written notice of determination hereunder being delivered by the Referee; (ii) the Referee shall not assign a value to such objection that is greater than the greatest value for such objection claimed by either Party or less than the smallest value for such objection claimed by either Party; (iii) the determination by the Referee of items of the calculation of the Adjusted Purchase Price, as applicable, as set forth in a written notice delivered to Sellers and Buyer by the Referee, shall be made in accordance with this Agreement and shall be binding and conclusive on the Parties and shall constitute an arbitral award that is final, binding and unappealable (absent manifest error or fraud) and upon which a judgment may be entered by a court having jurisdiction thereof; and (iv) the fees and expenses of the Referee (the “Audit Fees”) shall be paid by and apportioned between Buyer and Sellers based on the aggregate dollar amount in dispute and the relative recovery as determined by the Referee or Sellers and Buyer, respectively (such that, by way of example, if the amount in dispute is $100 and it is resolved $70 in favor of Buyer and $30 in favor of Sellers, then Sellers would bear 70% of the Audit Fees and Buyer would bear 30% of the Audit Fees).
Section 2.07 Post-Closing Payments.
(a) If the Closing Date Adjusted Purchase Price is greater than the Adjusted Purchase Price determined in accordance with Section 2.06 (the amount by which the Closing Date Adjusted Purchase Price exceeds the Adjusted Purchase Price herein referred to as the “Closing Amount Excess”), then Sellers shall deliver to Buyer, within five (5) Business Days after written notice of a Closing Amount Excess to Sellers, a number of Class D-1 Units equal to the Closing Amount Excess divided by $14.7265, which shall be effected by Basic LP (or any Person to which Basic LP has transferred any Class D-1 Units) for no additional consideration pursuant to forfeiture and/or repurchase instruments reasonably satisfactory to Buyer. If Sellers do not have sufficient Class D-1 Units to satisfy the Closing Amount Excess (the amount of such deficiency, the “Equity Shortfall”), then, in addition to the delivery of Class D-1 Units as provided above, Sellers and Buyer shall jointly instruct the Escrow Agent to pay to Buyer out of the Escrow Funds an amount equal to the Equity Shortfall.
(b) If the Adjusted Purchase Price determined in accordance with Section 2.06 is greater than the Closing Date Adjusted Purchase Price (the amount by which the Adjusted Purchase Price exceeds the Closing Date Adjusted Purchase Price herein referred to as the “Closing Amount Shortfall”), then Buyer shall deliver to Sellers, within five (5) Business Days after the Adjusted Purchase Price is finally determined in accordance with Section 2.06, an amount of Class D-1 Units equal to the Closing Amount Shortfall divided by $14.7265, which shall be effected through an issuance to Basic LP of such Class D-1 Units pursuant to an assignment and assumption agreement in substantially the same form as the Issuance Agreement.
(c) Sellers shall pay to Buyer, and Buyer shall pay to Sellers, as applicable, any post-Closing payments as may be required herein, including pursuant to Section 2.10, Section 2.11 or Section 7.06.
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Section 2.08 No Duplicative Effect; Methodologies. The provisions of Section 2.04, Section 2.06, this Section 2.08 and of any other Transaction Document shall apply in such a manner so as not to give the components and calculations duplicative effect to any item of adjustment and the Parties covenant and agree that no amount shall be (or is intended to be) included, in whole or in part (either as an increase or reduction) more than once in the calculation of (including any component of) the Adjusted Purchase Price, or any other calculated amount pursuant to this Agreement if the effect of such additional inclusion (either as an increase or reduction) would be to cause such amount to be overstated or understated for purposes of such calculation. “Incurred”, as used in this Agreement, shall be interpreted in accordance with GAAP standards, as applied by Sellers consistent with past practice, subject to the other provisions in this Section 2.08; provided if not determinable pursuant to the foregoing, the date an item or work is ordered is not the date of a transaction or incurrence for settlement purposes in the Closing Statement or Final Settlement Statement and otherwise under this Agreement, as applicable, but rather the date on which the item ordered is delivered to the job site, or the date on which the work ordered is performed, is the relevant date, regardless of when the applicable invoice was sent. The Parties acknowledge and agree that, if there is a conflict between a determination, calculation, methodology, procedure or principle set forth in the definitions contained in this Agreement, as applicable, on the one hand, and those provided by GAAP, on the other hand, (i) the determination, calculation, methodology, procedure or principle set forth in this Agreement, as applicable, shall control to the extent that the matter is specifically provided for in this Agreement and (ii) the determination, calculation, methodology, procedure or principle prescribed by GAAP, as applied by Sellers consistent with past practice, shall control to the extent the matter is not so addressed in this Agreement, as applicable, or requires reclassification as an asset or liability to be included in a line item or specific adjustment.
Section 2.09 Purchase Price Deposit.
(a) Escrow Deposit. Not later than one (1) Business Day after the Execution Date, Buyer shall deposit into the Escrow Account, by wire transfer of immediately available funds, an amount equal to $2,500,000 (such amount, together with any interest earned thereon, the “Escrow Funds”).
(b) Distribution of Escrow Funds. The Escrow Funds shall be distributed as follows:
(i) if this Agreement is terminated prior to Closing for any reason, the Escrow Funds shall be delivered in accordance with Section 9.02; or
(ii) if the Closing shall occur, upon final determination of the Adjusted Purchase Price pursuant to Section 2.06:
(A) if Buyer is entitled to a distribution of all or a portion of the Escrow Funds pursuant to Section 2.07(a), then Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to deliver (1) to Buyer out of the Escrow Funds an amount in cash equal to the Equity Shortfall and (2) to Sellers any cash remaining in the Escrow Funds after the payment in clause (1) of this Section 2.09(b)(ii)(A) has been made; or
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(B) if Buyer is not entitled to a distribution of any portion of the Escrow Funds pursuant to Section 2.07(a), then Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to deliver to Sellers all of the cash remaining in the Escrow Funds upon such distribution.
Section 2.10 Division of Revenues. To the extent Sellers receive proceeds attributable to the Assets and related to periods on or after the Closing Date, Sellers shall deliver such proceeds received after Closing (net of (A) out-of-pocket expenses incurred by Sellers in earning or receiving such proceeds and any fees payable or incurred in connection therewith not reimbursed to Sellers by a Third Party and (B) applicable Non-Income Taxes in respect of such proceeds paid or borne by Sellers and not reimbursed to Sellers by a Third Party or Buyer) to Buyer promptly upon Sellers’ receipt thereof. To the extent Buyer receives proceeds attributable to the Assets (other than proceeds received on account of the Acquired Accounts Receivable) and related to periods prior to the Closing Date, Buyer shall deliver such proceeds (net of (A) out-of-pocket expenses incurred by Buyer in earning or receiving such proceeds and any fees payable or incurred in connection therewith not reimbursed to Buyer by a Third Party and (B) applicable Non-Income Taxes in respect of such proceeds paid or borne by Buyer and not reimbursed to Buyer by a Third Party or Sellers) to Sellers promptly upon Buyer’s receipt thereof.
Section 2.11 Division of Expenses. As between Buyer and Sellers, (i) all Property Expenses attributable to periods prior to the Closing Date or paid by or on behalf of any Seller prior to the Closing Date, other than Assumed Liabilities, shall be borne by Sellers and (ii) without limitation of clause (i), (A) all Property Expenses attributable to periods from and after the Closing Date and (B) all other Property Expenses assumed by Buyer as Assumed Liabilities shall be borne by Buyer.
Section 2.12 Consents to Assign. Sellers shall, within five (5) Business Days after the entry of the Bid Procedures Order (to the extent not sent prior to the Execution Date), send to the holder of each Applicable Schedule 3.06 Consent with respect to any Purchased Contract that is not a 365 Contract (for which notices regarding 365 Contracts are addressed in Section 5.02) a notice in compliance with the contractual provisions applicable to such Applicable Schedule 3.06 Consent seeking such holder’s consent to the transactions contemplated hereby or such other notice (which may be included in the sale notice related to the Sale Order) as necessary to permit the assignment of such Purchased Contract to Buyer pursuant to this Agreement upon entry of the Sale Order (a “Consent Notice”). With respect to each Consent relating to a Contract for which the counterparty’s consent to assignment would be required for such Contract to be assumed and assigned to Buyer, after giving effect to sections 365(c)(1) and 365(f)(1) of the Bankruptcy Code, but which Consent is not set forth on Disclosure Schedule 3.06 and is discovered by Sellers (including, if applicable, any such Consent that is identified by Buyer) prior to Closing, all such Consents shall thereafter be Applicable Schedule 3.06 Consents and Sellers shall send to the holder of each such Consent a Consent Notice.
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(a) If Sellers fail to obtain an Applicable Schedule 3.06 Consent prior to Closing and (A) with respect to any Purchased Contract that is not a 365 Contract, (1) the failure to obtain such Applicable Schedule 3.06 Consent would cause the assignment of the Purchased Contract affected thereby to Buyer to be void or voidable, or (2) the failure to obtain such Applicable Schedule 3.06 Consent would result in the termination of such Purchased Contract under the express terms thereof upon the purported assignment of such Purchased Contract to Buyer pursuant to this Agreement or (B) with respect to any Purchased Contract, a party holding such Applicable Schedule 3.06 Consent right has objected to the assignment of the affected Purchased Contract in accordance with the terms of the relevant Applicable Schedule 3.06 Consent right or based on any anti-assignment or consent to assign provision contained in such Purchased Contract (each Consent as to which clause (A) or (B) is applicable, a “Required Consent”), then, unless the Bankruptcy Court has entered an order approving (or in the case of clause (B), such objection is resolved to permit) the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent, the Purchased Contract affected by such un-obtained Required Consent shall be excluded from the Assets to be assigned to Buyer at Closing (and shall be considered Excluded Assets hereunder). In the event that any such Required Consent with respect to any such excluded Purchased Contract is obtained during the Post-Closing Consent Period (or if during the Post-Closing Consent Period the Bankruptcy Court enters an order providing that (x) such Required Consent is not required to consummate the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (y) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent), then, (1) Sellers shall so notify Buyer and (2) on the tenth (10th) Business Day after the date such Consent is obtained and Sellers shall assign the Purchased Contract that was so excluded as a result of such previously un-obtained Consent to Buyer pursuant to an instrument in substantially the same form as the Assignment and Bill of Sale (and such Purchased Contract shall no longer be considered Excluded Assets hereunder) and Buyer shall assume all Assumed Liabilities with respect thereto. Notwithstanding anything to the contrary in this Agreement, without limiting any of the rights of Buyer hereunder, from and after the Closing, Buyer and Sellers shall reasonably cooperate in a reasonable arrangement to provide Buyer with all of the benefits of, or under, each Purchased Contract excluded pursuant to this Section 2.12(a), including enforcement (at Buyer’s cost) for the benefit of Buyer, if applicable, of any and all rights of Sellers against any party with respect to such Purchased Contract arising out of the breach or cancellation with respect to such Purchased Contract by such party; provided, further, that to the extent that any such arrangement has been made to provide Buyer with the benefits of, under or with respect to, an excluded Purchased Contract, from and after the Closing, Buyer shall be responsible for, and shall promptly pay and perform all payment and other obligations under such Purchased Contract for the period during which Buyer is receiving the benefits under the applicable Purchased Contract to the same extent as if such Purchased Contract had been assigned or transferred at the Closing.
(b) If Sellers fail to obtain a Consent prior to Closing and such Consent is not a Required Consent (or if prior to Closing the Bankruptcy Court enters an order providing that (x) such Required Consent is not required to consummate the sale of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (y) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent), then the Purchased Contract subject to such un-obtained Consent shall nevertheless be assigned by Sellers to Buyer at Closing as part of the Assets and Buyer shall be deemed to have assumed any and all Liabilities for the failure to obtain any such Consent as part of the Assumed Liabilities hereunder and Buyer shall have no claim against the Seller Indemnified Parties from any Liability for, the failure to obtain such Consent.
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(c) Prior to Closing and until the earlier to occur of (x) the confirmation of the Plan and (y) the ninetieth (90th) day after Closing (the period from Closing until the earlier of clause (x) or (y), the “Post-Closing Consent Period”), with respect to any un-obtained Required Consents with respect to which the Bankruptcy Court shall not have entered an order providing that (A) such Required Consent is not required to consummate the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (B) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent, Sellers shall use their commercially reasonable efforts to obtain all Consents; provided, however, that Sellers shall not be required to incur any Liability, pay any money or provide any other consideration in order to obtain any such Consent. Buyer shall use its commercially reasonable efforts (without any obligation to incur any Liability, pay money or provide any other consideration) to assist and cooperate with Sellers in furtherance of Sellers’ efforts pursuant to this Section 2.12(c).
Section 2.13 Consents for Purchased Contracts. For all purposes of this Agreement (including all representations and warranties of Sellers contained herein), Sellers shall be deemed to have obtained all required Consents in respect of the assumption and assignment of any Purchased Contract if, and to the extent that, (a) Sellers have properly served under the Bankruptcy Code notice of assumption and assignment on the counterparty to such Purchased Contract, (b) any objections to assumption and assignment of such Purchased Contracts filed by such counterparty have been withdrawn or overruled (including pursuant to the Sale Order or other order of the Bankruptcy Court), and (c) pursuant to the Sale Order, Sellers are authorized to assume and/or assign such Purchased Contracts to Buyer pursuant to section 365 of the Bankruptcy Code or otherwise.
Section 2.14 Assets Sold “As Is, Where Is”.
(a) WITHOUT LIMITATION OF SECTION 2.16, BUYER ACKNOWLEDGES AND AGREES THAT THE ASSETS SOLD PURSUANT TO THIS AGREEMENT ARE SOLD, CONVEYED, TRANSFERRED AND ASSIGNED ON AN “AS IS, WHERE IS” BASIS “WITH ALL FAULTS” AND WITHOUT WARRANTY OF TITLE AND THAT, EXCEPT AS SET FORTH IN ARTICLE III OF THIS AGREEMENT (THE “SELLER REPRESENTATIONS”), SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES, TERMS, CONDITIONS, UNDERSTANDINGS OR COLLATERAL AGREEMENTS OF ANY NATURE OR KIND, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, CONCERNING THE ASSETS OR THE CONDITION, DESCRIPTION, QUALITY, USEFULNESS, QUANTITY OR ANY OTHER THING AFFECTING OR RELATING TO THE ASSETS, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHICH WARRANTIES ARE ALSO HEREBY EXPRESSLY DISCLAIMED. WITHOUT LIMITATION OF SECTION 2.16, BUYER FURTHER ACKNOWLEDGES THAT SELLERS HAVE MADE NO AGREEMENT OR PROMISE TO REPAIR OR IMPROVE ANY OF THE ASSETS BEING SOLD TO BUYER, AND THAT BUYER TAKES ALL SUCH ASSETS IN THE CONDITION EXISTING ON THE CLOSING DATE “AS IS, WHERE IS” AND “WITH ALL FAULTS” AND WITHOUT WARRANTY OF TITLE.
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(b) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THE SELLER REPRESENTATIONS AND WITHOUT LIMITING THE GENERALITY OF SECTION 2.14(a) OR SECTION 2.16, SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) TITLE TO ANY OF THE ASSETS, (ii) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (iii) THE CONDITION, QUALITY, SUITABILITY OR MARKETABILITY OF THE ASSETS, (iv) GEOLOGICAL CONDITIONS, INCLUDING, WITHOUT LIMITATION, SUBSIDENCE, SUBSURFACE CONDITIONS, WATER TABLE, UNDERGROUND WATER RESERVOIRS, LIMITATIONS REGARDING THE WITHDRAWAL OF WATER AND FAULTING, (v) THE AVAILABILITY OF ANY UTILITIES TO ANY PROPERTY OR ANY PORTION THEREOF INCLUDING, WITHOUT LIMITATION, WATER, SEWAGE, GAS AND ELECTRIC AND INCLUDING THE UTILITY AVAILABILITY CAPACITIES ALLOCATED TO ANY PROPERTY BY THE RELEVANT GOVERNMENTAL OR REGULATORY AUTHORITY, (vi) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY OR ON BEHALF OF SELLERS OR THIRD PARTIES WITH RESPECT TO THE ASSETS, AND (vii) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO BUYER OR ANY AFFILIATE OF BUYER, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO. ANY AND ALL SUCH DATA, INFORMATION AND OTHER MATERIALS FURNISHED BY OR ON BEHALF OF SELLERS IS PROVIDED TO BUYER AS A CONVENIENCE, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE RISK.
Section 2.15 Presence of Wastes, NORM, Hazardous Substances and Asbestos. BUYER ACKNOWLEDGES THAT THERE MAY BE PETROLEUM, WASTES OR OTHER SUBSTANCES OR MATERIALS LOCATED IN, ON OR UNDER THE ASSETS OR ASSOCIATED WITH THE ASSETS. ADDITIONALLY, THE ASSETS MAY CONTAIN ASBESTOS, HAZARDOUS SUBSTANCES OR NORM. NORM MAY AFFIX OR ATTACH ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE OR IN OTHER FORMS, AND NORM-CONTAINING MATERIAL MAY HAVE BEEN BURIED OR OTHERWISE DISPOSED OF ON THE ASSETS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THE ASSETS BY REASON THEREOF. SPECIAL PROCEDURES MAY BE REQUIRED FOR REMEDIATION, REMOVING, TRANSPORTING AND DISPOSING OF ASBESTOS, NORM, HAZARDOUS SUBSTANCES AND OTHER MATERIALS FROM THE ASSET. Buyer assumes all liability for the assessment, remediation, removal, transportation and disposal of these materials and associated activities with respect to the Assets actually acquired by Buyer at Closing hereunder.
Section 2.16 Delivery of Assets; Inspection.
(a) Without limitation of Section 5.03, between the Execution Date and the earlier to occur of (i) the termination of this Agreement or (ii) the commencement of the Auction, Buyer shall be permitted to conduct an on-site physical inspection of the Assets (wherever such Assets are located and including such assets located at any customer site, subject to obtaining such customer’s approval) to determine whether Sellers have possession or control of each of the Assets. A Representative of Sellers may accompany Buyer’s Representative(s) during such inspections, which Representative of Sellers will not interfere with such inspection efforts. In such case, Sellers’ Representative will make himself or herself available to accompany Buyer’s Representative(s) at such time or times as Buyer reasonably chooses to conduct such inspections.
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(b) If, as a result of the inspections contemplated by this Section 2.16, Buyer determines that no Seller has possession or control of any Asset(s), Buyer will deliver to Sellers a statement identifying the relevant Asset(s) and a reasonably detailed description of the applicable inspection efforts prior to commencement of the Auction. The Parties will consult with one another in good faith regarding any issue identified in any such statement. If, following such consultation, Buyer determines in good faith that no Seller has possession or control of the relevant Asset(s), the Purchase Price shall be reduced by the Allocated Value of each Asset so affected, which reduction shall be accounted for in accordance with Section 2.04(d). If, prior to the final determination of the Adjusted Purchase Price determined in accordance with Section 2.06, any Asset for which a Purchase Price adjustment has been made under this Section 2.16 is delivered to Buyer (to Buyer’s reasonable satisfaction), then no Purchase Price adjustment will occur with respect to such Asset and any relevant true-up shall occur in connection with the final determination of the Adjusted Purchase Price determined in accordance with Section 2.06.
Section 2.17 Acquired Accounts Receivable; Assumed Prepetition Accounts Payable. Sellers shall prepare and deliver to Buyer, not less than five (5) Business Days before the Auction, a statement setting forth a list of Accounts Receivable and Prepetition Accounts Payable. At least two (2) Business Days prior to the Auction, Buyer shall designate to Sellers in writing (i) the Accounts Receivable, if any, that Buyer desires to be transferred and conveyed from Sellers to Buyer at Closing (the “Acquired Accounts Receivable”) and (ii) the Prepetition Accounts Payable, if any, that Buyer desires to assume from Sellers at the Closing (the “Assumed Prepetition Accounts Payable”).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as follows, except as set forth in the Disclosure Schedule (and subject to Section 11.13):
Section 3.01 Organization. Each Seller is an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Laws of the jurisdiction of its organization. Each Seller is duly qualified or licensed to do business and is in good standing (if applicable) in each jurisdiction where the nature of its business or properties makes such qualification or licensing necessary, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Seller Material Adverse Effect.
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Section 3.02 Authority and Authorization. Each Seller has full power and authority to carry on its business as presently conducted and to enter into this Agreement and the other Transaction Documents to which such Seller is or will be a party and, subject to the entry of the Bid Procedures Order and the entry of the Sale Order, to perform its obligations under this Agreement and the other Transaction Documents to which such Seller is or will be a party. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is or will be a party, and the performance by each Seller of its obligations under this Agreement and the other Transaction Documents to which such Seller is or will be a party and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite limited liability company action on the part of such Seller and, in respect of Basic LP, on the part of the general partner of Basic LP.
Section 3.03 Enforceability. This Agreement has been duly executed and delivered on behalf of each Seller and (assuming due authorization, execution and delivery thereof by Buyer), subject to requisite Bankruptcy Court approval, will constitute the legal, valid and binding obligation of each Seller enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, reorganization or moratorium statutes, or other similar Applicable Laws affecting the rights of creditors generally or equitable principles (collectively, “Equitable Limitations”). At the Closing, all other Transaction Documents required hereunder to be executed and delivered by each Seller shall be duly executed and delivered and (assuming due authorization, execution and delivery thereof by the other parties thereto) shall constitute legal, valid and binding obligations of such Seller enforceable against it in accordance with their terms, except as enforceability may be limited by Equitable Limitations, subject to the entry of the Sale Order and provided no stay exists with respect to the Sale Order.
Section 3.04 Conflicts. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is or will be a party does not, and the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is or will be a party shall not, (a) violate or be in conflict with, or require the consent (other than consents that have been obtained) of any Person or entity under, any provision of such Seller’s Organizational Documents, (b) subject to the entry of the Bid Procedures Order and the Sale Order and obtaining the consents described on Disclosure Schedule 3.06, conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice, or both would constitute a default) under any agreement or instrument to which such Seller is a party, (c) subject to the entry of the Bid Procedures Order and the Sale Order, violate any provision of or require any consent, authorization or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to any Seller or (d) result in the creation of any Lien on any of the Assets, other than Liens that may arise or be deemed to arise with respect to such Assets as a result of the transactions contemplated by this Agreement.
Section 3.05 Material Contracts.
(a) Disclosure Schedule 3.05(a) sets forth a list, as of the Execution Date, of all Applicable Contracts of the type described below and any and all amendments, extensions, or other modifications thereof (each such Contract listed on Disclosure Schedule 3.05(a), other than any such Contract that is an Excluded Asset or an Excluded Liability a “Material Contract”):
(i) any Applicable Contract that that could reasonably be expected to result in aggregate payments by or to a Seller in excess of $100,000 in the current or any future calendar year;
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(ii) any Applicable Contract that constitutes a lease under which a Seller is the lessor or the lessee of real or personal property that (A) cannot be unilaterally terminated by the lessee thereunder without penalty upon ninety (90) days’ or less notice and (B) involves an annual base rental of more than $25,000;
(iii) any Applicable Contract (other than a lease, easement or right-of-way) that constitutes an interest in real property that is material to the Business;
(iv) any Contract with any Affiliate of Sellers that will be binding on Buyer after the Closing;
(v) any Contract to sell, lease or otherwise dispose of any Sellers’ interests in any of the Assets;
(vi) any tax partnership or joint venture Contract;
(vii) any Contract containing any preferential purchase rights, rights of purchase, rights of first offer, right of first refusal or other similar rights affecting the Assets; or
(viii) any Contract that is an indenture, mortgage, loan, credit agreement, sale-leaseback, guaranty of financial obligation, bond, letter of credit or similar financial Contract the obligations under which are secured by a Lien on any Asset created by, through or under Sellers;
(ix) any Applicable Contract that is material to the Business as currently conducted by Sellers and contains a “most favored nations” or similar provision that will be binding on Buyer or the Assets after the Closing; or
(x) any Contract that will be binding on the Buyer or the Assets after the Closing and materially restrict the ability of Buyer after the Closing to own and operate the Assets or conduct the Business in any geographic region or conduct any other business currently conducted by Buyer or its Affiliates.
(b) Except as set forth on Disclosure Schedule 3.05(b), subject to entry of the Sale Order and payment of all Cure Costs, as of the Execution Date, all of the Material Contracts are, to Sellers’ Knowledge, in full force and effect and no Seller nor, to Sellers’ Knowledge, any other party to any such Material Contract is in breach of or default, or with the lapse of time or the giving of notice, or both, would be in breach or default, with respect to any of its obligations thereunder except to the extent that such breaches or defaults do not constitute a Seller Material Adverse Effect.
(c) To Sellers’ Knowledge, Sellers have made available to Buyer complete and accurate copies of all master service agreements with material customers (including any and all amendments and supplements thereto (and all written waivers of any of the terms thereof)) related to the Business as of the Execution Date.
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Section 3.06 Approvals. Disclosure Schedule 3.06 contains a complete and accurate list or description of all approvals, consents, filings and notifications required to be obtained, made or given by Sellers, after giving effect to the entry of the Bid Procedures Order and the Sale Order, for the consummation of the Transactions (each, a “Consent”), other than (a) for Preferential Purchase Rights to the extent disclosed on Disclosure Schedule 3.15, (b) under Contracts that are terminable without cost upon not greater than ninety (90) days’ notice, (c) any approvals, consents, filings and notifications of or with any Governmental Authority of the type customarily obtained, made or given after Closing and (d) approvals as to which the failure to obtain, make or give would not result in a Seller Material Adverse Effect.
Section 3.07 Environmental Matters.
(a) Except as set forth on Disclosure Schedule 3.07, the Assets are not subject to any order, decree or judgments issued against Sellers by an environmental Governmental Authority, in each case, in existence as of the Execution Date and based on any Environmental Laws that presently require any remedial or other corrective action or operating restrictions.
(b) Except as set forth on Disclosure Schedule 3.07, the Assets are in compliance with all Environmental Laws in all material respects, and such compliance includes obtaining, maintaining, renewing, and complying in all material respects with the terms and conditions of all material Environmental Permits necessary for the operation of the Assets as presently conducted, and no such Environmental Permits are currently subject to any adverse modification, to Seller’s Knowledge or challenge from any Person. Except as set forth on Disclosure Schedule 3.07, no Seller has received any written notice from any Governmental Authority alleging any material violation of or material liability under Environmental Laws with respect to the Assets that remains unresolved as of the Execution Date, and there are no Proceedings (including any Environmental Claims) pending, or to Seller’s Knowledge, threatened, alleging or relating to any alleged violation of or liability under Environmental Laws with respect to the Assets.
(c) Except as set forth on Disclosure Schedule 3.07, as of the Execution Date, (1) there has been no Release of Hazardous Substances at, to or from the Assets that has not been resolved to the satisfaction of the applicable Governmental Authority, and (2) to Seller’s Knowledge no Hazardous Substances are present, or have been used, handled, managed, stored, generated, transported, processed, treated, disposed of, on, in, from, under or in connection with the Assets that, in each case, would reasonably be expected to result in a material Liability for which Buyer would be responsible based on the Assets acquired pursuant to this Agreement.
(d) True, complete, and correct copies of all material, non-privileged reports, studies, audits, inspections or other documents addressing environmental conditions, health or safety at the Assets that would reasonably be expected to result in an Environmental Claim that are in Sellers’ possession have been made available for Buyer’s review.
This Section 3.07 shall constitute Sellers’ sole representation and warranty as to Environmental Claims, compliance with Environmental Laws or environmental conditions of or affecting the Assets.
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Section 3.08 Litigation. Except as set forth in Disclosure Schedule 3.08, as of the Execution Date, there is no Proceeding pending against any Seller or, to Sellers Knowledge, which have been threatened against any Seller that (a) if determined or resolved adversely in accordance with the plaintiff’s demands would reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect or otherwise materially adversely affect Buyer’s ownership and operations of the Assets following the Closing, (b) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions or (c) affects the execution, delivery or performance by any Seller of this Agreement or any other Transaction Document to which any Seller is or will be a party.
Section 3.09 Intellectual Property. The consummation of the Transactions shall not adversely affect, diminish, or terminate any Intellectual Property rights included in the Transferred Intellectual Property, except as would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect. To Sellers’ Knowledge, all items of Transferred Intellectual Property are fully transferable and assignable by Sellers without restriction and without payment of any kind to any person. To Sellers’ Knowledge, no current or former partner, director, officer, or employee of Sellers or any of their Affiliates will, after giving effect to the Transactions, own or retain any ownership rights in or to, or have the right to receive any royalty or other payment with respect to, any of the Transferred Intellectual Property. To Sellers’ Knowledge, there are no pending suits, actions, claims, proceedings or investigations alleging that Sellers are infringing, misappropriating, diluting or otherwise violating any Intellectual Property of a third party in respect of the Transferred Intellectual Property or that seek to limit or challenge the validity, enforceability, ownership or use of the Transferred Intellectual Property. Sellers have not received any written claim or “cease and desist” letter from any third party in respect of the Transferred Intellectual Property. To Sellers’ Knowledge, the operation of the Business by Sellers as currently conducted has not infringed, misappropriated, diluted or otherwise violated the Intellectual Property of any third party. To Sellers’ Knowledge, no third party is engaging in any activity or business that infringes upon, dilutes, or otherwise violates the Transferred Intellectual Property.
Section 3.10 Insurance Coverage. Disclosure Schedule 3.10 sets forth a list of all material insurance policies and fidelity bonds of Sellers in effect as of the Execution Date relating to the Assets.
Section 3.11 Taxes. Except as set forth on Disclosure Schedule 3.11 and other than by reason of filing the Bankruptcy Cases:
(a) (i) all Tax Returns with respect to any material amount of Non-Income Taxes have, to the extent required by Applicable Law to be filed (taking into account extensions of time within which to file), been filed when due in accordance with all Applicable Law, (ii) such Tax Returns are true and complete in all material respects; and (iii) each Seller has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Non-Income Taxes with respect to the Assets for which Buyer would be liable, if not paid;
(b) there is no claim, audit, action, suit, proceeding or investigation pending against or with respect to any Seller in respect of any material amount of Non-Income Taxes for which Buyer would be liable, if not paid, and no Seller has in force any waiver of any statute of limitations in respect of Non-Income Taxes or any extension of time with respect to a Non-Income Tax assessment or deficiency;
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(c) there are no Liens on any of the Assets currently existing, pending or, to Sellers’ Knowledge, threatened with respect to any Assets related to any unpaid Taxes; and
(d) no Asset is subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.
This Section 3.11 and Section 3.13 shall constitute Sellers’ sole representations and warranties as to Tax matters.
Section 3.12 Employment Matters.
(a) Disclosure Schedule 3.12(a) sets forth a complete and accurate list that sets forth each employee of Sellers and their Affiliates who primarily provide services related to the Assets (each a “Seller Employee”).
(b) Disclosure Schedule 3.12(b) sets forth a complete and accurate list of all of the individual independent contractors and consultants providing services to Sellers or their Affiliates relating to the Assets and a description of the services provided.
(c) The individuals set forth on Disclosure Schedules 3.12(a) and 3.12(b) represent the entirety of the individuals necessary to manage, maintain, and operate the Assets as now managed, maintained, and operated.
(d) Neither Sellers nor their Affiliates are a party or subject to any collective bargaining agreement or other contract with a labor union or similar representative of Seller Employees and no collective bargaining agreement is currently being negotiated by Sellers or their Affiliates. To Sellers’ knowledge, (i) no Seller Employee is represented by a labor union or similar representative with respect to such employee’s employment by Sellers or their Affiliates and (ii) there is no proceeding, petition, or campaign by a labor union or any similar representative to become the collective bargaining representative of any Seller Employee. There is no strike, slowdown, work stoppage or other labor disturbance against Sellers or their Affiliates pending or, to Sellers’ Knowledge, threatened.
(e) Sellers and their Affiliates are, and for the past three (3) years have been, in compliance in all material respects with all applicable foreign, federal, state and local Laws respecting labor and employment, including all such Laws regarding employment practices, collective bargaining, terms and conditions of employment, prohibited discrimination, harassment and retaliation, equal employment, fair employment practices, recordkeeping, employee leave, immigration, wages and hours, and employee and contractor classification, except, in the case of each of the foregoing, as would not have a Seller Material Adverse Effect.
Section 3.13 Employee Benefits. Neither Sellers nor any of their respective ERISA Affiliates have maintained, sponsored or participated in, or contributed to, in the six (6) year period preceding the date hereof: (i) a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA); (ii) a “multiple employer plan” (as defined in Section 4063 or Section 4064 of ERISA); or (iii) a plan covered by Section 412 of the Code or Title IV of ERISA.
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Section 3.14 Letters of Credit. Disclosure Schedule 3.14 lists all Existing Letters of Credit.
Section 3.15 Preferential Purchase Rights. Except as set forth on Disclosure Schedule 3.15, to Sellers’ Knowledge, there are no preferential purchase rights, rights of first refusal, drag-along rights, tag-along rights or other similar rights that are applicable to the transfer of the Assets in connection with the Transactions (the “Preferential Purchase Rights”).
Section 3.16 Broker. Other than amounts as may be payable by Sellers for which Buyer shall have any liability, no broker, finder, investment banker or other similar person is or will be, in connection with the transactions contemplated by this Agreement or the other Transaction Documents, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on behalf of Sellers or any of their respective Affiliates.
Section 3.17 [Reserved].
Section 3.18 Compliance with Laws. Each Seller is (and for the past three (3) years has been) in compliance with, and is not in default or violation of, all Applicable Laws, except for any such non-compliance, defaults or violations that do not constitute a Seller Material Adverse Effect, and to Sellers’ Knowledge, no Seller is under investigation with respect to any material violation of any Applicable Law. No Seller has received any written notice that the current use and ownership, operation or maintenance of the Assets, violate, in any material respect, any Applicable Law.
Section 3.19 Sufficiency of Assets. To the Seller’s Knowledge, the Assets constitute all assets, properties, rights, privileges and interests, of whatever kind or nature, real or personal or mixed, tangible or intangible, used or necessary to, and immediately following the consummation of the transactions contemplated by this Agreement, will be sufficient to permit the Buyer to, other than as, and to the extent, may be impacted by the exclusion or omission of Applicable Contracts from Assigned Contracts, (a) own, operate and maintain the Business in a manner consistent in all material respects with the current operation and maintenance thereof in the ordinary course of business consistent with past practice and (b) perform the obligations that are required to be performed under the Assigned Contracts. To Sellers’ Knowledge, none of the Excluded Assets are necessary for the ownership, operation or maintenance of the Business.
Section 3.20 Permits. The Permits set forth on Disclosure Schedule 3.20 constitute all of the Permits necessary for the ownership, operation, maintenance, and use of the Assets as owned and operated and maintained in the Ordinary Course of Business. To Sellers’ Knowledge, all such Permits are in full force and effect, and each of the applicable Sellers is (and for the past three (3) years has been) in material compliance with such Permits, and has not received any written or other notice of any violation of any such Permits which remains outstanding and unresolved. There are no Permits from a Governmental Authority that cover both any Asset, on the one hand, and any Excluded Asset, on the other hand.
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Section 3.21 Properties.
(a) (i) Sellers have made available to Buyer true, correct and complete copies of all Property Agreements that are in the possession of Sellers or any of their respective Affiliates; and (ii) Sellers have made available to Buyer true, correct and complete copies of all title commitments, title policies, title reports, title opinions, boundary maps and surveys (together with copies of all encumbrances listed on any of the foregoing) pertaining to any of the Properties that are in the possession of Sellers or any of their respective Affiliates.
(b) No Seller has received written notice of any condemnation action or other proceeding in eminent domain pending related to the Properties. To Sellers’ Knowledge, (i) there is not any condemnation action or other proceeding in eminent domain threatened affecting the Properties and (ii) there is no proposal under consideration by any Governmental Authority to take or use any of the Properties.
(c) Sellers have made available to Buyer true, correct and complete copies of all engineering consultants’ reports, property condition reports, material environmental reports and similar reports with respect to the Properties, to the extent within the possession of any Seller or its Affiliates.
(d) Sellers have not received any written notification that any material alteration, repair, improvement or other work has been ordered or directed in writing to be done or performed to or in respect of any of the Properties by any Governmental Authority, board of insurance underwriters or anyone else having the right or purporting to have the right to require such work to be completed, which alteration, repair, improvement or other work has not been completed in material satisfaction of all requirements in connection therewith.
Section 3.22 No Other Representations. Neither Buyer nor any other Person (on behalf of Buyer or otherwise) has made or is making any representation or warranty whatsoever, express or implied, at law or in equity, with respect to Buyer, this Agreement or the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in Article IV, and no Seller is relying on and has not relied on any representation or warranty other than those representations or warranties set forth in Article IV and any reliance by any Seller on any representation or warranty other than those representations and warranties set forth in Article IV is hereby expressly disclaimed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.01 Organization. Buyer is an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Laws of the jurisdiction of its organization. Buyer is duly qualified or licensed to do business and is in good standing (if applicable) in each jurisdiction where the nature of its business or properties makes such qualification or licensing necessary, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect.
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Section 4.02 Authorization and Authority. Buyer has full power and authority to carry on its business as presently conducted, to enter into this Agreement and the other Transaction Documents to which Buyer is or will be a party, to purchase the Assets on the terms described in this Agreement and to perform its other obligations under this Agreement and the other Transaction Documents to which Buyer is or will be a party. The execution and delivery by Buyer of this Agreement and the other Transaction Documents to which Buyer is or will be a party, and the performance by Buyer of this Agreement and the other Transaction Documents to which Buyer is or will be a party and the transactions contemplated hereby and thereby, have been duly and validly authorized by all requisite corporate or limited liability company action on the part of Buyer.
Section 4.03 Enforceability. This Agreement has been duly executed and delivered on behalf of Buyer, and (assuming in each case due authorization, execution and delivery thereof by Sellers), subject to requisite Bankruptcy Court approval, will constitute a legal, valid and binding obligation of Buyer enforceable against it in accordance with its terms, except as enforceability may be limited by Equitable Limitations. At the Closing all other Transaction Documents required hereunder to be executed and delivered by Buyer shall be duly executed and delivered and (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) shall constitute legal, valid and binding obligations of Buyer enforceable against it in accordance with their terms, except as enforceability may be limited by Equitable Limitations, subject to the entry of the Sale Order and provided no stay exists with respect to the Sale Order.
Section 4.04 Conflicts. The execution and delivery by Buyer of this Agreement and the other Transaction Documents to which Buyer is or will be a party does not, and the consummation by Buyer of the transactions contemplated by this Agreement and the other Transaction Documents to which Buyer is or will be a party shall not, (a) violate or be in conflict with, or require the consent of any Person under, any provision of Buyer’s Organizational Documents, (b) conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice, or both, would constitute a default) under any agreement or instrument to which Buyer is a party or is bound, or (c) violate any provision of or require any consent, authorization or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to Buyer.
Section 4.05 Broker. Other than amounts as may be payable by Buyer for which neither Seller shall have any liability, no broker, finder, investment banker or other similar person is or will be, in connection with the transactions contemplated by this Agreement or any other Transaction Documents, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on behalf of Buyer or any of their respective Affiliates.
Section 4.06 Financial Ability. As of the Execution Date, Buyer has sufficient funds committed and unconditionally available to it to perform all of Buyer’s obligations under this Agreement, including without limitation to pay the Adjusted Purchase Price in accordance with the terms of this Agreement and to assume the Assumed Liabilities. Buyer’s ability to consummate the transactions contemplated hereby is not contingent upon its ability to secure any financing or to complete any public or private placement of securities prior to or upon Closing.
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Section 4.07 Approvals. There are no approvals, consents, filings or notifications required to be obtained, made or given by Buyer as a condition to or in connection with the performance by Buyer of its obligations under this Agreement or any other Transaction Documents to which Buyer is or will be a party or the consummation by Buyer of the transactions contemplated by this Agreement or such other Transaction Documents.
Section 4.08 Litigation. As of the Execution Date, there is no Proceeding pending against Buyer or, to Buyer’s Knowledge, which have been threatened against Buyer that (a) affect the execution and delivery by Buyer of this Agreement or the other Transaction Documents to which Buyer is or will be a party or (b) if determined or resolved adversely in accordance with the plaintiff’s demands, would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Buyer to perform its obligations under this Agreement or such other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.
Section 4.09 Bankruptcy. There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to Buyer’s Knowledge, threatened against Buyer.
Section 4.10 Investigation.
(a) Buyer has such expertise, knowledge and sophistication in financial and business matters generally that it is capable of evaluating, and has evaluated, the merits and economic risks of its investment in the Assets. Buyer is knowledgeable of the oil and gas wellsite service business and of the usual and customary practices of providers of oil and gas wellsite services, including those in the areas where the Assets are located. Further, Buyer is capable of making such investigation, inspection, review and evaluation of the Assets as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the Assets, their value, operation and suitability.
(b) Buyer has had the opportunity to examine all aspects of the Assets that Buyer has deemed relevant and has had access to all information requested by Buyer with respect to the Assets in order to enter into this Agreement. In connection with the Transactions, Buyer has had the opportunity to ask such questions of, and has received sufficient answers from, the Representatives of Sellers and obtain such additional information about the Assets as Buyer deems necessary to enter into this Agreement.
(c) Buyer confirms, acknowledges and agrees that Buyer is relying entirely upon the representations and warranties of Sellers in this Agreement and its own investigations and inspections of the books, records and assets of Sellers, including the Assets, prior to the execution of this Agreement in entering into this Agreement and proceeding with the Transactions on the terms as set forth herein. In deciding to enter into this Agreement, and to consummate the Transactions, other than the express representations and warranties of Sellers set forth in Article III, Buyer has relied solely upon its own knowledge, investigation, judgment and analysis and not on any disclosure or representation made by, or any duty to disclose on the part of, Sellers or Sellers’ Representatives.
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Section 4.11 Qualification. At the Closing, Buyer (or an Affiliate of Buyer to which the Assets are assigned at Closing) will be qualified to own and, where applicable, assume operatorship of the Assets in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated by this Agreement will not cause Buyer to be disqualified as such an owner or operator. To the extent required by the applicable state and federal Governmental Authorities, as of Closing Buyer (or, if applicable, Buyer’s operating Affiliate) will have (a) such lease bonds, area-wide bonds or any other surety bonds or insurance policies and (b) such consents and approvals, in each case as are required to enable Buyer (or, if applicable, Buyer’s operating Affiliate) to own and operate the Assets in the ordinary course of business in material compliance with any Applicable Laws governing the Assets.
Section 4.12 Capitalization.
(a) As of the Execution Date, the issued and outstanding membership interests of Buyer are set forth on Disclosure Schedule 4.12(a) (collectively, the “Buyer Units”). All of the Buyer Units have been duly authorized and validly issued, and are fully paid and nonassessable.
(b) Except as otherwise set forth in the Buyer LLC Agreement: (i) none of the Buyer Units is entitled or subject to any preemptive right, right of repurchase or forfeiture, right of participation, right of maintenance or any similar right; (ii) none of the Buyer Units is subject to any right of first refusal in favor of Buyer; and (iii) there is no Contract of Buyer relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or from granting any option or similar right with respect to), any Buyer Units, or any securities of any Subsidiary of any of any Buyer Entity. Except as otherwise set forth in the Buyer LLC Agreement, none of the Buyer Entities is under any obligation, or is bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any Buyer Units.
(c) As of the Execution Date, except as otherwise set forth in the Buyer LLC Agreement, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any membership interests or other securities of any of the Buyer Entities; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any membership interests or other securities of any of the Buyer Entities; (iii) outstanding or authorized stock appreciation rights, phantom stock, profit participation or similar rights or equity-based awards with respect to any of the Buyer Entities; or (iv) Contract under which any of the Buyer Entities is or may become obligated to sell or otherwise issue any membership interests or any other securities.
(d) All of the Buyer Units have been issued and granted in compliance in all material respects with: (i) all applicable securities laws and other Applicable Laws; and (ii) all requirements set forth in applicable Contracts, except where the failure to be so issued, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Buyer Material Adverse Effect.
(e) All of the membership interests or other securities of each of the Buyer Entities has been duly authorized and validly issued, are fully paid and nonassessable, and are owned beneficially by Buyer.
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(f) As of the Execution Date, Buyer has furnished Sellers with a complete and correct copy of the Buyer LLC Agreement, as amended, and the same remains in full force and effect.
(g) Upon issuance in accordance with this Agreement, the Class D-1 Units issued as the Equity Consideration will be duly authorized, validly issued, fully paid and non-assessable, will be issued free and clear of any preemptive or similar rights of any other Person and will be free of restrictions on transfer other than restrictions on transfer under applicable federal and state securities laws or the Organizational Documents of Buyer.
Section 4.13 Financial Statements; Absence of Liabilities.
(a) Buyer has made available to Sellers the following: (i) the audited consolidated balance sheet (including any notes thereto) and related statements of income and cash flows of Buyer for the fiscal year ended December 31, 2020 (the “2020 Audited Financial Statements”) and (ii) the unaudited consolidated balance sheet and related statements of income and cash flows of Buyer and its Affiliates for the seven (7) month period ended July 31, 2021 (the “2021 Interim Financial Statements” and, together with the 2020 Audited Financial Statements the “Financial Statements”). The Financial Statements (A) have been (or will be) prepared based on the books and records of Buyer in all material respects, (B) have been (or will be) prepared in all material respects in accordance with GAAP, and (C) present fairly (or will present fairly), in all material respects in accordance with GAAP, the financial condition and results of operation of Buyer (on a consolidated basis with the business of its Affiliates) as of the respective dates and for the respective periods presented, subject, in the case the 2021 Interim Financial Statements, to normal year-end adjustments and the absence of complete notes (as applicable).
(b) Other than (i) as set forth in the Financial Statements, (ii) Liabilities for Taxes, (iii) Liabilities incurred in the ordinary course of business since July 31, 2021, (iv) Liabilities arising under this Agreement and (v) Liabilities that would not reasonably be expected to have a material adverse effect on the business, assets, properties, liabilities, results of operations, earnings or condition (financial or otherwise) of Buyer, there are no Liabilities of Buyer as of the Execution Date that are required to be reflected on, reserved against or otherwise described in a balance sheet prepared in accordance with GAAP.
Section 4.14 Absence of Changes. Between December 31, 2020 and the Execution Date, to Buyer’s Knowledge, (a) there has not been any material adverse effect on the business, assets, properties, liabilities, results of operations, earnings or condition (financial or otherwise) of Buyer, and (b) no event has occurred and no circumstance has arisen (other than general market or industry conditions) that, in combination with any other events or circumstances, would reasonably be expected to cause such a material adverse effect.
Section 4.15 No Other Representations. No Seller nor any other Person (on behalf of any Seller or otherwise) has made or is making any representation or warranty whatsoever, express or implied, at law or in equity, with respect to Sellers, the Assets, this Agreement or the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in Article III (as modified by the Disclosure Schedules), and Buyer is not relying on and has not relied on any representation or warranty other than those representations or warranties set forth in Article III (as modified by the Disclosure Schedules) and any reliance by Buyer on any representation or warranty other than those representations and warranties set forth in Article III (as modified by the Disclosure Schedules) is hereby expressly disclaimed.
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ARTICLE V
COVENANTS OF SELLERS
Section 5.01 Operating Covenants. From the Execution Date until the Closing or, if earlier, the termination of this Agreement as contemplated hereby, except (t) as required by this Agreement or any other Transaction Document, (u) as required by any lease, Contract, or instrument listed on any Annex, Disclosure Schedule or Schedule, as applicable, (v) as required by any Applicable Law or any Governmental Authority (including by order or directive of the Bankruptcy Court or fiduciary duty of the board of managers of any Seller or its Affiliates) or any requirements or limitations resulting from the Bankruptcy Cases, (w) to the extent related solely to Excluded Assets and/or Excluded Liabilities, (x) for renewal of expiring insurance coverage in the Ordinary Course of Business, (y) for emergency operations or (z) as otherwise consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed):
(a) Sellers will:
(i) subject to any Bankruptcy Court order to the contrary, operate the Assets in the Ordinary Course of Business;
(ii) maintain or cause its Affiliates to maintain the books of account and records relating to the Assets in the usual, regular and ordinary manner, in accordance with its usual accounting practices;
(iii) give written notice to Buyer as soon as is practicable of any material damage or casualty to or destruction or condemnation of any Asset of which Sellers have Knowledge;
(iv) use reasonable best efforts to maintain insurance coverage on the Assets in the amounts and types described on Disclosure Schedule 3.10; and
(v) use commercially reasonable efforts to maintain or cause its Affiliates to maintain all Permits (including Environmental Permits) required for the operation of the Assets as presently conducted; and
(b) no Seller shall:
(i) sell, lease or otherwise transfer any Asset, or otherwise voluntarily divest or relinquish any right or asset, other than (A) sales or other dispositions of materials, supplies, machinery, equipment, improvements or other personal property or fixtures in the Ordinary Course of Business which have been replaced with an item of substantially equal suitability and (B) dispositions of Excluded Assets;
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(ii) enter into any material Contract that if entered into prior to the Execution Date would be required to be listed in Disclosure Schedule 3.05(a) other than (A) Contracts of the type described in Section 3.05(a)(iii) and Section 3.05(a)(viii) entered into in the Ordinary Course of Business (provided that Sellers shall use commercially reasonable efforts to notify Buyer of the terms of any such Contract prior to the execution thereof), (B) confidentiality agreements entered into in accordance with the Bid Procedures Order, (C) contracts or agreements entered into in connection with the Bankruptcy Cases (including any in connection with an Alternative Transaction) and (D) Contracts that would not adversely affect the Assets in any material respect;
(iii) amend or modify in any material respect or terminate any Purchased Contract (other than termination or expiration in accordance with its terms) or any Permits (including Environmental Permits) required for the operation of the Assets as presently conducted;
(iv) change the methods of accounting or accounting practice by Sellers, except as required by concurrent changes in Applicable Law or GAAP as agreed to by its independent public accountants; or
(v) to the extent any of the following would reasonably have the effect of increasing the Non-Income Tax liability of Buyer for any period after the Closing Date, (A) make any settlement of or compromise any Non-Income Tax liability with respect to the Assets, (B) change any Non-Income Tax election or Non-Income Tax method of accounting or make any new Non-Income Tax election or adopt any new Non-Income Tax method of accounting with respect to the Assets; (C) surrender any right to claim a refund of Non-Income Taxes with respect to the Assets; or (D) consent to any extension or waiver of the limitation period applicable to any Non-Income Tax claim or assessment with respect to the Assets.
Section 5.02 Assumption and Rejection of Executory Contracts and Leases.
(a) Schedule 5.02(a) (as may be amended from time to time or supplemented with written notice to Buyer, other than with respect to an increase to the Cure Costs) sets forth each 365 Contract and Sellers’ good faith estimate of all cure and reinstatement costs or expenses that are required to be paid under sections 365(b)(1)(A) and 365(b)(1)(B) to effectuate the assumption and assignment of the Desired 365 Contracts (such costs or expenses required to be paid by Buyer, the “Cure Costs”) in respect of each such 365 Contract (and if no Cure Cost is estimated to be payable in respect of any 365 Contract, the amount of such Cure Cost designated for such 365 Contract shall be “$0.00”) (as such schedules may from time to time be amended or supplemented with written notice to Buyer, the “365 Schedule”).
(b) Subject to Buyer’s rights under Section 5.02(d) below to subsequently amend such designations, Schedule 5.02(b) sets forth a complete list of the 365 Contracts listed on the 365 Schedule that Buyer desires to be assumed by Sellers and transferred and conveyed to Buyer as a Purchased Contract, which shall include each Vehicle Finance Lease (collectively, and as further modified by Buyer pursuant to the provisions of this Section 5.02(b), the “Desired 365 Contracts”). Any 365 Contracts that are not Desired 365 Contracts shall be an Excluded Asset for all purposes hereof.
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(c) Promptly following entry of the Bid Procedures Order (to the extent not previously filed), Sellers shall file the 365 Schedule with the Bankruptcy Court and deliver a written notice, in a form reasonably acceptable to Buyer, of the proposed potential assignments of the 365 Contracts and the proposed Cure Costs for each 365 Contract (as set forth on Schedule 5.02(a)) to all non-debtor parties of the 365 Contracts, which notice shall notify each non-debtor party to such 365 Contract of (i) the proposed Cure Cost for such 365 Contract and (ii) an objection deadline for such non-debtor party to object to the proposed Cure Cost. To the extent that any objections are received from such non-debtor parties that are counterparties to Desired 365 Contracts, Sellers shall take all reasonably necessary actions to, subject to Buyer’s obligations under Section 5.02(f), resolve such disputes with the applicable non-debtor party to the satisfaction of Buyer.
(d) Notwithstanding the foregoing, at any time prior to the Designation Deadline (or, if any 365 Contract is first identified to Buyer by Sellers after the Designation Deadline and prior to the commencement of the Sale Hearing, within one (1) Business Day of such identification), (i) Buyer may designate any 365 Contract that has not been rejected as a Desired 365 Contract and upon receipt of any such notice Sellers shall use commercially reasonable efforts to effect the assumption of such 365 Contract by Sellers in accordance with the Bankruptcy Code and, if Sellers are successful in effecting such assumption as of Closing, such 365 Contract shall become a Desired 365 Contract and transferred and conveyed to Buyer as a Purchased Contract and (ii) Buyer may revise Schedule 5.02(b) by excluding one or more Desired 365 Contracts at any time prior to the Sale Hearing; provided, however, that Buyer may not exclude from Schedule 5.02(b) any Desired 365 Contract that is a Vehicle Finance Lease.
(e) Notwithstanding anything in this Agreement to the contrary, Sellers shall not reject any 365 Contracts without the prior written consent of Buyer in its sole discretion; provided that, after the Designation Deadline, Sellers may reject 365 Contracts (other than Desired 365 Contracts) without the consent of Buyer so long as such 365 Contracts were identified to Buyer in writing at least five (5) Business Days prior to the Designation Deadline. In the event that Sellers identify (whether less than five (5) Business Days before or after the Designation Deadline) any additional 365 Contracts capable of being assumed or rejected that were not previously identified as such, Sellers shall promptly notify Buyer of (i) such 365 Contracts and (ii) Sellers’ good faith estimate of the amount of the cure costs payable in respect of each such 365 Contract, which shall become Cure Costs, and, subject to Section 5.02(d), Buyer may designate each such additional 365 Contract as a Desired 365 Contract or Excluded Asset pursuant to this Section 5.02(e), notwithstanding the passage of the Designation Deadline. Schedule 5.02(b) and the definition of Desired 365 Contracts shall be deemed automatically amended to reflect changes made pursuant to this Section 5.02(e).
(f) Buyer shall provide adequate assurance of future performance of all of the Desired 365 Contracts so that all Desired 365 Contracts can be assumed by Sellers and assigned to Buyer at the Closing in accordance with the provisions of section 365 of the Bankruptcy Code and this Agreement, provided that Buyer shall cooperate with Sellers in providing such adequate assurance of future performance of all of the Desired 365 Contracts and Buyer acknowledges that such cooperation may require Buyer to provide information regarding Buyer and its Subsidiaries, as well as a commitment of performance by Buyer and/or its Subsidiaries with respect to the Desired 365 Contracts from and after the Closing to demonstrate adequate assurance of the performance of the Desired 365 Contracts, and Sellers’ obligation to assume and assign such Desired 365 Contracts is subject to the cooperation and providing of such information and commitment by Buyer. Sellers shall have no liability for Cure Costs with respect to the Desired 365 Contracts.
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(g) At the Closing, (i) the Purchase Price shall be increased by the Cure Costs with respect to the Desired 365 Contracts paid by Sellers prior to Closing, provided that the Purchase Price shall not be increased by the amount of any Excess Cure Costs, and (ii) Buyer (and not Sellers) shall pay the Cure Costs with respect to the Desired 365 Contracts that have not been paid by Sellers as of the Closing.
(h) Notwithstanding anything in this Agreement to the contrary, including Section 5.02(d) above, Vehicle Finance Leases shall at all times constitute Desired 365 Contracts and shall be assigned to Buyer at the Closing.
Section 5.03 Access.
(a) Each Seller shall afford to Buyer and its authorized representatives from the Execution Date until the Closing Date, during normal business hours, reasonable access to the Assets (subject to the terms, conditions and restrictions of agreements related to Assets to which such Seller is a party and the consent of the operator, as applicable) and to such Seller’s title, Surface Leases, Contracts, environmental and legal materials, books, records, statements and operating data and other information relating to the Assets, together with the opportunity to make copies of such materials, books, records and other documents and information at Buyer’s expense, and will furnish to Buyer such other information in Sellers’ possession with respect to the Assets as Buyer may reasonably request; provided, however, that all such information shall be held in confidence by Buyer in accordance with the terms of the Confidentiality Agreement; provided, further, that in no event shall Sellers be obligated to provide (i) access or information in violation of Applicable Law, (ii) any information the disclosure of which would cause the loss of any legal privilege available to any Seller relating to such information or would cause any Seller to breach a confidentiality obligation to which it is bound; provided that the applicable Seller has used its reasonable efforts to protect the privilege or to obtain a waiver of the applicable contractual obligation, or (iii) copies of bids, letters of intent, expressions of interest or other proposals received from other Persons in connection with the transactions contemplated by this Agreement or information and analyses relating to such communications, except to the extent required in the Bid Procedures Order.
(b) From the Execution Date until the date of the Auction, but subject to the other provisions of this Section 5.03 and obtaining any required consents of Third Parties, Buyer shall have the opportunity to conduct at its expense a non-invasive environmental assessment (which shall not include invasive testing of the soil, groundwater, surface water, air or other environmental media or of building materials, equipment or facilities) of the Properties (subject to any conditions or restrictions contained in any lease covering such Properties and the consent of any Third Parties, as applicable) (“Phase I Assessment”). Buyer shall not conduct prior to the Closing any invasive testing of the soil, groundwater, surface water, air and other environmental media and of building materials, equipment or facilities of the Properties absent Sellers’ express written consent, which consent may be withheld by Sellers in their sole discretion. Sellers shall use commercially reasonable efforts to obtain any Third Party consents that may be required in connection with any Phase I Assessment of the Assets.
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(c) While performing any Phase I Assessment of the Properties, Buyer or any of their representatives and agents must comply with (i) Sellers’ environmental and safety rules and policies and with the operator’s environmental and safety rules and policies on all other Assets, and (ii) all Applicable Laws which might in any way relate to a Phase I Assessment. In the event that Buyer’s Phase I Assessment identifies any condition that Buyer believes must be disclosed to any Governmental Authority under Applicable Law, Buyer shall first notify Sellers of such conditions, providing Sellers with a reasonable description of such conditions and shall provide Sellers with the reasonable opportunity to notify such Governmental Authority. Buyer shall only notify a Governmental Authority of such environmental condition if, after providing Sellers with the reasonable opportunity to provide such notice, Sellers do not notify such Governmental Authority and Buyer reasonably believes that Applicable Law requires Buyer to notify such Governmental Authority of such environmental conditions; provided, however, that Buyer will furnish Sellers copies of all materials to be disclosed prior to any disclosure thereof and will not disclose any such information unless such disclosure is expressly required by Buyer by Applicable Law. Sellers shall have the right to observe each Phase I Assessment and Buyer shall promptly, and in any event within five (5) days after Buyer’s receipt or access thereto, provide to Sellers a copy of all results, analyses, reports and reviews prepared by or for Buyer with respect to each Phase I Assessment. All information obtained or reviewed by Buyer in connection with environmental assessments conducted pursuant to this Section 5.03 (including Phase I Assessments) shall be maintained as strictly confidential by Buyer and shall be governed by the terms of the Confidentiality Agreement; provided that Sellers shall be permitted to provide such information to Potential Bidders and their Representatives in connection with the Auction or any Alternative Transaction. Upon Buyer’s completion of a Phase I Assessment, and to the extent directly related to such Phase I Assessment, Buyer shall be responsible for returning the Property to substantially the condition existing prior to Buyer’s first entry onto the applicable Property for the Phase I Assessment, to the extent any Phase I Assessment (or Buyer or any of its representatives) disturbs such applicable Property.
(d) BUYER SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD EACH SELLER, EACH OF THEIR SUCCESSORS, THEIR AFFILIATES AND ALL OF THEIR RESPECTIVE DIRECTORS AND OFFICERS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS AND LOSSES CAUSED DIRECTLY OR INDIRECTLY BY THE ACTS OR OMISSIONS OF BUYER, BUYER’S AFFILIATES OR ANY PERSON ACTING ON BUYER’S OR ITS AFFILIATE’S BEHALF IN CONNECTION WITH ANY DUE DILIGENCE CONDUCTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY SITE VISITS CONDUCTED PURSUANT TO SECTION 5.03(a) AND SECTION 5.03(b), EXCEPT TO EXTENT SUCH CLAIMS OR LOSSES ARISE FROM THE WILLFUL MISCONDUCT OF SELLERS. Buyer shall comply with all rules, regulations, policies and instructions reasonably required by Sellers, or any Third Party operator of any Assets, which are provided to Buyer regarding Buyer’s actions while upon, entering or leaving any Asset, including any insurance requirements that Sellers may reasonably impose, or any such Third Party operator may impose, on contractors authorized to perform work on any Asset owned or operated by Sellers (or any such Third Party operator, as applicable).
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(e) From and after the Closing, Buyer shall afford to each third party acquiror (and their respective Representatives) of Excluded Assets pursuant to a definitive agreement that is approved by the Bankruptcy Court (each, an “Excluded Asset PSA”), reasonable access to the Properties for the purpose of inspecting and removing such Excluded Assets, in each case, (x) on the same terms as Sellers are affording access to Buyer pursuant to this Section 5.03, mutatis mutandis and (y) solely to the extent such Excluded Asset PSA contains a covenant substantially similar to this Section 5.03(e) for the benefit of Buyer; provided that, the cost of any such inspection or removal shall be at the sole cost of the applicable third party acquiror. Each such third party acquiror shall be a third party beneficiary of this Section 5.03(e). Sellers shall require each Excluded Asset PSA to include a covenant substantially similar to this Section 5.03(e) for the benefit of Buyer. From and after the Closing, each Seller shall afford Buyer and its Representatives access, during normal business hours, to all properties of Sellers and Sellers’ Affiliates subject to surface leases, licenses, subleases, rental or occupancy agreements, concessions and other agreements (written or oral) constituting Excluded Assets hereunder that are not conveyed to a third party acquiror pursuant to an Excluded Asset PSA for the purpose of allowing Buyer to inspect and remove any Assets located on such properties.
Section 5.04 Permits. Notwithstanding any other provision in this Agreement, Buyer shall use its reasonable best 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 to transfer to Buyer all transferable Permits listed on Annex D. Sellers agree to provide reasonably assistance to support Buyer’s efforts to accomplish such transfer.
Section 5.05 Title Cooperation. Sellers shall reasonably cooperate, at the sole cost of Buyer, prior to and at the Closing, with Buyer in connection with Buyer obtaining, at its option, any title insurance policy or policies (including in connection with the preparation of any related land title surveys) with respect to the Properties. Without limiting the generality of the foregoing, Sellers shall execute and deliver any customary documents and affidavits at Closing, in each case in a form reasonably acceptable to the Buyer and the title company, as may reasonably be necessary for the title company to issue such title policies or endorsement.
Section 5.06 Certain Accounts Payable. Sellers shall cause each Subsidiary of Basic Parent and each Affiliate of either Seller that in each case is the payee of any accounts payable that are retained by Sellers as Excluded Liabilities (a) not to assert mechanics’ liens against customers of Basic Parent, Buyer Parent or any of their respective Subsidiaries in respect of such accounts payable or (b) if such Subsidiary or Affiliate has previously asserted any such mechanics’ liens against customers of Basic Parent, Buyer Parent or any of their respective Subsidiaries in respect of such accounts payable, to release and terminate any such liens promptly following the Closing and to promptly deliver notice of such release and termination to Buyer.
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ARTICLE VI
COVENANTS OF BUYER
Section 6.01 Access. Buyer agrees that, following the Closing, and subject to Applicable Law and except as may be necessary to protect any applicable legal privilege, it shall (and shall cause its Subsidiaries to) give to Sellers and their Representatives reasonable access during normal business hours to the offices, books and records relating to the Assets or any operations relating thereto for any and all periods prior to and including the Closing Date as Sellers and their Representatives may reasonably request and to make copies of the same in connection with (a) the preparation of Tax Returns or information returns, (b) reports or other obligations by Sellers to Governmental Authorities, (c) with respect to the administration of the Excluded Assets or Excluded Liabilities, (d) with respect to the administration of the Bankruptcy Cases, (e) pursuing, prosecuting or commencing litigation on account of or relating to Excluded Assets, including avoidance actions, (f) objecting to proofs of claims or administrative expense claims, (g) preparing the Final Settlement Statement and any other matters contemplated by Section 2.06 and (h) any final determination of any audit or examination, Proceeding or determination; provided, however, that all such information shall be held in confidence by Sellers, their Affiliates and their respective Representatives and may not be disclosed to any other Person without the written consent of Buyer, except to the extent reasonably required in connection with the foregoing clauses (a)-(h) or as otherwise expressly contemplated by this Agreement. Buyer shall (and shall cause its Subsidiaries to) preserve all such books and records for a period of three (3) years after the Closing; provided, however, that Buyer shall have the right at any time after the second (2nd) anniversary of the Closing Date to request in writing that Sellers take any such records and, if Sellers do not agree to take such records within ninety (90) Business Days after receipt of the request, Buyer (or its Subsidiaries, as applicable) may dispose of such records.
Section 6.02 Data Retention. Buyer, for a period of three (3) years following Closing, will (a) retain the Data and (b) provide Sellers, their Affiliates, and Sellers and their Affiliates officers, employees and representatives with reasonable access to the Data during normal business hours for review and copying; provided that Buyer may destroy Data from time to time and prior to the end of such period in accordance with its normal document retention policy as long as Buyer notifies Sellers at least thirty (30) days in advance and provides Sellers an opportunity to remove or copy such Data.
Section 6.03 Interim Covenants. From the Execution Date until the Closing or, if earlier, the termination of this Agreement as contemplated hereby, Buyer shall not take, and shall cause its Subsidiaries not to take, any action that would have required the consent of the Basic Representative (as defined in the Buyer LLC Agreement) or the Basic Member Majority (as defined in the Buyer LLC Agreement) under the Buyer LLC Agreement or, with respect to any amendment, modification or supplement to the Buyer LLC Agreement, that would have required the consent of any holder of Class D-1 Units, in each case if any Seller owned Class D-1 Units as of such date.
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ARTICLE VII
COVENANTS OF BUYER AND SELLERS
Section 7.01 Commercially Reasonable Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, including Section 7.02(e), and subject to the Bankruptcy Code and any orders of the Bankruptcy Court, Buyer and Sellers each agree to use 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 to consummate the Transactions; provided that the Parties understand and agree that the commercially reasonable efforts of any Party shall not be deemed to include, except as expressly set forth in this Agreement, entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the Transactions; provided that this Section 7.01 shall not (a) limit or affect the obligation of any Party to perform its obligations and covenants expressly set forth in this Agreement or (b) require any Party to incur any obligations or pay any fees or amounts to Third Parties not otherwise required under this Agreement. Sellers and Buyer agree to execute and deliver or cause to be executed and delivered 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 in accordance with the terms and conditions of this Agreement.
Section 7.02 Bankruptcy Proceedings.
(a) Buyer agrees that it will promptly take such actions as are reasonably requested by Sellers to assist in (i) consummating the Transactions in accordance with this Agreement and (ii) obtaining entry of the Sale Order and finding of adequate assurance of future performance by Buyer, including furnishing affidavits or other documents or information for filing with the Bankruptcy Court for the purposes, among others, of providing necessary assurances of performance by Buyer under this Agreement and demonstrating that Buyer is a “good faith” purchaser under section 363(m) of the Bankruptcy Code. Sellers shall use reasonable best efforts to obtain as part of the Sale Order a determination that the Buyer constitutes a “good faith” purchaser under section 363(m) of the Bankruptcy Code and that the sale of the Assets to Buyer pursuant to this Agreement shall be immediately effective, notwithstanding the provisions of Rules 6004(h) and 6006(d) of the Federal Rules of Bankruptcy Procedure.
(b) The Bid Procedures Order will provide that the Break-Up Fee and Expense Reimbursement, as defined in Section 9.03, will constitute, pursuant to sections 364 and 503 of the Bankruptcy Code, a superpriority administrative expense claim in each of Seller’s bankruptcy estates with priority over any and all administrative expense claims. In the event the entry of the Sale Order or the Bid Procedures Order shall be appealed or a stay pending appeal is requested, Sellers shall use commercially reasonable efforts to promptly defend any motion for reconsideration, or to alter, amend, stay, or otherwise challenge the Sale Order or any appeal of the Sale Order, and shall prosecute such defense until the Sale Order is final and not subject to appeal, and Buyer agrees to cooperate in such efforts.
(c) Each Party acknowledges that this Agreement and the sale of the Assets and assumption and assignment of the Purchased Contracts are subject to Bankruptcy Court approval and the consideration by Sellers of higher or better competing transactions (including any competing bids, plan of reorganization or recapitalization or restructuring transaction) in respect of all or any part of the Assets in accordance with the Bid Procedures Order.
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(d) From and after the Execution Date and until the Closing, no Seller shall take any action which is intended to (or is reasonably likely to), or fail to take any action the intent (or the reasonably likely result) of which failure to act is to, result in the reversal, voiding, modification or staying of the Bid Procedures Order. If Buyer is the Successful Bidder at the Auction, Sellers shall not take any action which is intended to (or is reasonably likely to), or fail to take any action the intent (or the reasonably likely result) of which failure to act is to, result in the reversal, voiding, modification or staying of the Sale Order or this Agreement.
(e) From and after the Execution Date and until the Closing, to the extent reasonably practicable under the circumstances, Sellers shall make reasonable efforts to consult and cooperate with Buyer regarding (i) any pleadings, motions, notices, statements, applications, schedules, reports or other papers to be filed with the Bankruptcy Court in relation to the implementation of the Transactions, (ii) any discovery taken in connection with seeking entry of the Sale Order (including any depositions) and (iii) any hearing relating to the Sale Order, including the submission of any evidence, including witnesses’ testimony, in connection with such hearing.
(f) The bidding procedures to be employed with respect to this Agreement shall be those approved by the Bankruptcy Court pursuant to the Bid Procedures Order. Buyer acknowledges and agrees that from the Execution Date until the termination of this Agreement in accordance with its terms, Sellers and their respective Affiliates and Representatives shall be permitted to take such actions as permitted under the Bid Procedures Order with respect to an Alternative Transaction and may take any other affirmative action to cause, promote or assist with an Alternative Transaction not otherwise prohibited under the Bid Procedures Order and the taking of such actions shall not be deemed a breach by Sellers of this Agreement. Without limiting the foregoing, until the Successful Bidder has been determined in accordance with the Bid Procedures Order, Sellers may, directly or indirectly through Representatives of Sellers, (i) solicit inquiries, proposals or offers from Third Parties (a “Potential Bidder”) for the Assets (and negotiate the terms of such proposals or offers) in connection with any Alternative Transaction, (ii) engage in discussions and negotiations regarding an Alternative Transaction with any Potential Bidder and any Potential Bidder’s Representatives in accordance with or as otherwise permitted under the Bid Procedures Order in connection with the solicitation of one or more proposals relating to an Alternative Transaction, (iii) enter into any agreement or letter of intent with respect to any Alternative Transaction and (iv) furnish to any Potential Bidder and its Representatives public or non-public information relating to any Seller and afford to any such Potential Bidder access to any properties, assets, books or records of any Seller or the business of Sellers.
(g) Without limiting the requirements of Section 7.02(a) through Section 7.02(f), from and after the Execution Date until the earlier of (x) the conclusion of the Auction if Buyer is not a Successful Bidder at the Auction or (y) the Closing, Sellers and Buyer agree to:
(i) support and take all steps reasonably necessary and desirable to consummate the Transactions in accordance with this Agreement;
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(ii) to the extent any legal or structural impediment arises that would prevent, hinder or delay the consummation of the Transactions, support and take all steps reasonably necessary and desirable to address any such impediment;
(iii) negotiate in good faith and use commercially reasonable efforts to execute and deliver the definitive documents and any other required agreements to effectuate and consummate the Transactions; and
(iv) consult and negotiate in good faith with material stakeholders and their advisors regarding the execution of definitive documents and the implementation of the Transactions.
(h) If an Auction is conducted and Sellers do not choose Buyer as the Successful Bidder, but instead choose Buyer as the Back-up Bidder, Buyer will serve as the Back-up Bidder. If Buyer is chosen as the Back-up Bidder, Buyer will be required to keep its bid to consummate the Transactions on the terms and conditions set forth in this Agreement (as may be amended with Sellers’ written consent prior to or at the Auction) open and irrevocable until the Back-up Termination Date. If the agreement with the Successful Bidder (other than Buyer) is terminated prior to closing under such agreement, Buyer will be deemed to be the Successful Bidder and Buyer will forthwith consummate the Transactions on the terms and conditions set forth in this Agreement (as the same may be amended with Sellers’ written consent prior to or at the Auction).
(i) The Escrow Funds shall be applied as provided in this Agreement or returned to Buyer in accordance with this Agreement and the Bid Procedures. Any instructions provided by Sellers to the Escrow Agent in respect of the Escrow Funds shall be consistent with this Agreement and the Bid Procedures.
Section 7.03 Public Announcements. Each Party agrees that, prior to Closing, the consent (as to both form and content), not to be unreasonably withheld, of the other Parties shall be obtained prior to issuing any press release or making any public statement with respect to this Agreement or the other Transaction Documents or the Transactions, except to the extent that such press release or other public announcement is required in connection with the Auction, the Bid Procedures Order, any order of the Bankruptcy Court or by Applicable Law and such prior notice is not practicable given the circumstances giving rise to the requirement to issue such release; provided that Buyer Parent, Buyer, Sellers and Basic Parent shall be permitted to issue a press release or make a public announcement upon the execution of this Agreement to announce such execution of this Agreement and will provide the other Parties with a copy of such press release or public announcement in advance of its release and provide such other Parties with a reasonable opportunity to comment on the same. From and after the Closing, Buyer and Sellers will provide each other a copy of any press release or other public announcement with respect to this Agreement, the other Transaction Documents or the Transactions that Buyer Parent, Buyer, Basic Parent or a Seller proposes to issue or make in advance of its release and provide the others with a reasonable opportunity to comment on the same, except to the extent that such press release or other public announcement is required by any order of the Bankruptcy Court or Applicable Law and such prior notice is not practicable given the circumstances giving rise to the requirement to issue such release.
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Section 7.04 Confidentiality. The Parties acknowledge that Buyer Parent and Basic Parent previously executed the Confidentiality Agreement. Notwithstanding anything to the contrary in the Confidentiality Agreement, to the extent of any conflict between the provisions of the Confidentiality Agreements and the terms hereof, the terms hereof shall prevail. The Parties acknowledge and understand that this Agreement will be filed with the Bankruptcy Court and may be made available by Sellers to Potential Bidders as contemplated by the Bid Procedures Order. The Parties agree that such disclosure shall not be deemed to violate any confidentiality obligations owing to any Party, whether pursuant to this Agreement, the Confidentiality Agreement or otherwise. Notwithstanding the foregoing, this Section 7.04 shall not in any way limit, to the extent required by Applicable Law, the disclosure of information by Sellers or their Affiliates in connection with the administration of the Bankruptcy Cases, pursuant to any provision of the Bankruptcy Code or any order of the Bankruptcy Court.
Section 7.05 Employee Matters.
(a) Pursuant to Section 6 of the Confidentiality Agreement, Buyer is subject to certain restrictions on the solicitation and hiring of the employees of Sellers and certain of their Affiliates. However, Sellers agree that, (i) solely during the period beginning on the Execution Date and ending on the earlier to occur of (A) the Closing Date and (B) the termination of this Agreement in accordance with its terms, Buyer or one of its Affiliates may make offers of employment to any or all of the Seller Employees (each such offer, an “Employment Offer”); provided, however, that any such Employment Offer must comply with Section 7.05(b), and (ii) if, and only if, the Closing has occurred, Buyer or its applicable Affiliate(s) may hire any Seller Employee pursuant to any Employment Offer made in compliance with Section 7.05(a)(i).
(b) Within five (5) days after the Execution Date, Sellers will deliver to Buyer a schedule (the “Compensation Schedule”) providing the following with respect to each Seller Employee: (1) employing entity; (2) job title and location of employment; (3) base salary or hourly rate of pay; (4) status as exempt or non-exempt under the Fair Labor Standards Act and comparable state Applicable Law; (5) bonus compensation and other compensation paid for which he or she is eligible; (6) hire date and service date (if different); (7) leave status (including nature and expected duration of any leave); (8) details of any visa or other work permit; and (9) accrued but unused vacation, paid time off, sick days and personal days. Each Employment Offer shall provide for compensation at a base salary or base wage and annual cash incentive compensation opportunity, as applicable, and employee benefit plans and arrangements, in each case, that are no less favorable than those provided to similarly situated employees of Buyer, and shall be subject to and conditioned upon the occurrence of the Closing and any employment by Buyer or its Affiliates of any Seller Employee shall not become effective prior to the Closing. A copy of any Employment Offer shall be delivered to Sellers at least five (5) Business Days prior to being delivered to the applicable employee. Buyer shall provide to Sellers, not later than the Closing Date, the names of each Seller Employee who has then accepted an Employment Offer from Buyer or any of its Affiliates (each Seller Employee who accepts such an offering being a “Continuing Employee”) and the names of the Seller Employees who have then declined an Employment Offer from Buyer or its Affiliates. Each Continuing Employee shall, as of the Closing Date (if he or she is still employed by Sellers or their Affiliate), be terminated by Sellers or their Affiliate, as applicable (and Sellers shall and shall cause their Affiliates to release such Continuing Employee from all non-compete or similar restrictions that would restrict or be violated in any way by, such Continuing Employee’s activities as an employee of Buyer or its Affiliate) and become an employee of Buyer or its Affiliate.
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(c) Sellers shall reasonably assist Buyer and its Affiliates, as applicable, in communicating with the employees of Sellers and their Affiliates regarding potential employment with Buyer or its Affiliates; provided that Buyer shall coordinate with a Person designated by Sellers in discussing Employment Offers with the Seller Employees and shall not directly communicate with any Seller Employee regarding potential employment by Buyer or its Affiliates other than as directed or consented to by such designee. Sellers shall reasonably assist Buyer and its Affiliates, as applicable, in facilitating all employment offers, including the execution of Form I-9s and other pre-employment documents for all Continuing Employees.
(d) Buyer shall, and shall cause its Affiliates to, credit Continuing Employees for service earned on and prior to the Closing Date with Sellers and their Affiliates or predecessors to the extent that such service would be credited pursuant to the applicable employee benefit plan, program or arrangement maintained by Sellers, in addition to service earned with Buyer and its Affiliates on or after the Closing Date to the extent that service is relevant for purposes of eligibility, vesting, paid-leave entitlement or the calculation of benefits under any employee benefit plan, program or arrangement of Buyer or any of its Affiliates for the benefit of the Continuing Employees on or after the Closing Date, but not for the purposes of benefit accrual under any defined benefit pension plan; provided, however, that nothing herein shall result in a duplication of benefits with respect to the Continuing Employees.
(e) Buyer shall use commercially reasonable efforts to (or, as applicable, cause its Affiliates to) waive any pre-existing condition or actively at work limitations, evidence of insurability and waiting periods for the Continuing Employees and their eligible spouses and dependents under any employee benefit plan, program or arrangement of Buyer or any of its Affiliates for the benefit of the Continuing Employees on or after the Closing Date. Buyer shall use commercially reasonable efforts to (or, as applicable cause its Affiliates to) credit for purposes of determining and satisfying annual deductibles, co-insurance, co-pays, out-of-pocket limits and other applicable limits under the comparable health plans and arrangements offered to Continuing Employees, deductibles, co-insurance, co-pays and out-of-pocket expenses paid by Continuing Employees and their respective spouses and dependents under Sellers or any of their respective Affiliates’ health plans in the calendar year in which the Closing Date occurs.
(f) Buyer or its Affiliates shall provide each Continuing Employee with credit for the same number of vacation, paid time off, sick days and personal days such Continuing Employee has accrued but not used in the calendar year in which the Closing Date occurs (“Accrued PTO”); provided, that to the extent required by applicable Law, such amount shall be paid by Buyer or its Affiliates to the applicable Continuing Employee in cash. For the avoidance of doubt, after the Closing Date, Continuing Employees will only be eligible to use Accrued PTO (and any vacation, paid time off, sick days and personal days accrued following the Closing Date) in accordance with Buyer’s or its Affiliates’ policies, as applicable, that are in effect from time to time. Prior to the Closing Date, Sellers shall provide to Buyer an updated Compensation Schedule to include each Continuing Employee’s Accrued PTO as of the Closing Date.
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(g) On the Closing Date, Sellers and their Affiliates shall cease to provide health and welfare coverage to each Continuing Employee and his or her covered dependents and beneficiaries, and Buyer or its Affiliate shall commence providing such coverage to Continuing Employees and his or her covered dependents and beneficiaries. Buyer and its “buying group” (as defined in Treasury Regulation section 54.4980B-9, Q&A-2(c)) shall be solely responsible for providing continuation coverage under COBRA to those individuals who are or become M&A qualified beneficiaries (as defined in Treasury Regulation section 54.490B-9, Q&A-4(a)) with respect to the transactions contemplated by this Agreement. Buyer and its Affiliates shall provide coverage required by COBRA to Continuing Employees and their eligible dependents or beneficiaries under group health plans maintained by Buyer or an Affiliate of Buyer with respect to qualifying events occurring on and after the Closing Date.
(h) and Buyer acknowledges that, except for solicitations expressly permitted by Section 7.05(a)(i) and hiring expressly permitted by Section 7.05(a)(ii), Buyer remains subject to the restrictions on the solicitation of the employees of Sellers and their Affiliates contained in Section 6 of the Confidentiality Agreement.
Section 7.06 Tax Matters; Apportionment of Tax Liability.
(a) Non-Income Taxes. All Non-Income Taxes (and any refunds thereof) with respect to the Assets attributable to the period before the Closing Date shall be for Sellers’ account and all Non-Income Taxes (and any refunds thereof) with respect to the Assets attributable to the period after and including the Closing Date shall be for Buyer’s account. For the avoidance of doubt, all refunds for federal Heavy Highway Vehicle Use Tax paid by Sellers with respect to the Assets shall be for Sellers’ account, regardless of whether they are attributable to the period before or after the Closing Date. All real estate, personal property, and similar ad valorem Taxes (and any refunds thereof) assessed with respect to the Assets for the taxable period that begins prior to the Closing Date and ends after the Closing Date shall be prorated based on the number of full days in such period that occur before the Closing Date, on the one hand, and the number of days in such period that occur on or after the Closing Date, on the other hand. All other Non-Income Taxes (and refunds thereof) with respect to the Assets shall be allocated between Sellers and Buyer as though the taxable period that begins prior to the Closing Date and ends after the Closing Date ended as of the close of business on the day before the Closing Date, and all such Non-Income Taxes (and refunds thereof) with respect to the Assets attributable to taxable periods ending as of the close of business on the day before the Closing Date shall be for Sellers’ account and all such Non-Income Taxes (and refunds thereof) with respect to the Assets attributable to taxable periods beginning on or after the Closing Date shall be for Buyer’s account. To the extent known, the apportionment of Non-Income Taxes (and any refunds thereof) with respect to the Assets between the Parties shall take place in the Closing Statement and the Final Settlement Statement. As Sellers apportionment of Non-Income Taxes shall be reflected as a downward adjustment to the purchase price pursuant to Section 2.04(c)(i), Buyer shall assume and timely pay all Non-Income Taxes that are due with respect to the Assets for the taxable period that includes the Closing Date and all Liens on Assets for such Non-Income Taxes shall remain in place following Closing. To the extent the actual amount of a Non-Income Tax (or the amount thereof paid or economically borne by Buyer or Sellers) allocable to Buyer or Sellers under this Section 7.06(a) is determined to be different than the amount, if any, that was taken into account in the Closing Statement or Final Settlement Statement or was not taken into account in the Closing Statement or Final Settlement Statement, timely payments shall be made from Sellers to Buyer, or from Buyer to Sellers, as applicable, to the extent necessary to cause the applicable Party to bear the amount of such Non-Income Tax that is allocable to such Party under this Section 7.06(a).
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(b) Transfer Taxes. Any sales, use, transfer, documentary, stamp, registration or similar Taxes (“Transfer Taxes”) due as a result of the transfer of the Assets pursuant to this Agreement that are not eliminated or reduced through the application of Section 1146(a) of the Bankruptcy Code and/or the Sale Order entered by the Bankruptcy Court shall be borne by Buyer. If required by Applicable Law, Sellers shall, in accordance with Applicable Law, calculate and remit any Transfer Taxes that are required to be paid as a result of the transfer of the Assets to Buyer, and Buyer shall promptly reimburse Sellers for such Transfer Taxes. If Sellers receive notice that any Transfer Taxes are due, Sellers shall promptly forward a copy of such notice to Buyer. Sellers and Buyer shall reasonably cooperate in the preparation of any Tax Return related to Transfer Taxes, including by signing and delivering such resale, occasional sale and other certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce) any Transfer Taxes, and Buyer shall file (or cause to be filed) any such Tax Returns related to Transfer Taxes.
(c) Purchase Price Allocation. Buyer shall provide to Sellers a statement (the “Allocation”) allocating the Purchase Price and any other items that are treated as additional consideration for Tax purposes among the Assets, as if all the Assets were acquired in taxable transactions, in accordance with section 1060 of the Code, the Treasury Regulations promulgated thereunder and consistent with the methodology in Schedule 7.06(c) within ninety (90) days after the Closing Date. Such allocation shall become conclusive and binding on the Parties fifteen (15) days after timely delivery by Buyer unless Sellers object in writing to the Allocation. If Sellers object, the Parties shall use commercially reasonable efforts to resolve any disputes within fifteen (15) days after Buyer’s receipt of written notice of Sellers’ objection. Any unresolved disputes shall be submitted to the Referee or an accounting firm selected pursuant to the procedures in Section 2.06(d) (the “Accounting Firm”). The resolution of the dispute by the Accounting Firm shall be conclusive and binding on all Parties and the Allocation shall be updated to reflect such resolution. Sellers and Buyer shall use commercially reasonable efforts to update the Allocation in a manner consistent with section 1060 of the Code and the methodology in Schedule 7.06(c) following any adjustment to the Purchase Price pursuant to this Agreement. Buyer agrees to reasonably cooperate with Sellers to identify and allocate the Assets between the Assets acquired for cash and the Assets acquired for the Class D-1 Units in a manner that is most tax-efficient to Sellers and not disproportionately adverse to Buyer or Buyer’s members, and to report consistent therewith For the avoidance of doubt, the Parties shall cooperate in determining the portion of the Purchase Price allocable to the Assets that are subject to a Transfer Tax prior to the due date of the Tax Return required to be filed in connection with such Transfer Taxes; provided, that if the Parties do not agree with respect to such determination, such matter shall be resolved in accordance with the process outlined in this Section 7.06(c); provided, further, that in the event of a dispute with respect to such a determination that is not resolved prior to the due date of the applicable Tax Return, such Tax Return shall be filed utilizing an allocation determined by Buyer and such Tax Return shall be amended if the Allocation is subsequently adjusted pursuant to the procedures described above. Sellers and Buyer shall, and shall cause their Affiliates to, report consistently with the Allocation, as adjusted, in all Tax Returns, including IRS Form 8594, which Buyer and Sellers shall file with the Internal Revenue Service or any other Governmental Authority and neither Sellers nor Buyer shall take any position in any such Tax Return that is inconsistent with the Allocation, as adjusted, in each case, unless required to do so by a final “determination” as defined in section 1313(a) of the Code. Sellers and Buyer agree to promptly advise each other regarding the existence of any tax audit, controversy or litigation related to the Allocation.
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(d) Tax Cooperation. The Parties shall cooperate fully, as and to the extent reasonably requested by any other Party, in connection with the filing of Tax Returns and any audit, litigation, or other proceeding with respect to Taxes related to the Assets. Such cooperation shall include the retention and (upon another Party’s request) the provision of records and information that are relevant to any such Tax Return or audit, litigation or other proceeding, provided that nothing in this Section 7.06(d) shall prohibit Sellers from ceasing operations or winding up its affairs following the Closing, and the obligation of each Seller under this Section 7.06(d) shall not survive any such ceasing or winding up.
Section 7.07 Disclosure Schedule Updates. From and after the Execution Date until the Closing, Sellers shall be entitled to supplement, update, amend or modify the Disclosure Schedules relating to the representations and warranties of Sellers set forth in Article III to reflect any facts, circumstances or events first arising or, in the case of representations given to the Knowledge of Sellers, becoming known to Sellers subsequent to the Execution Date, by providing Buyer with written notice (“Schedule Update Notice”) setting forth the update, amendment or modification and specifying the Disclosure Schedule or Disclosure Schedules affected thereby, and such supplement, update, amendment or modification shall amend and supplement the applicable Disclosure Schedules previously delivered; provided, however, that if any such Disclosure Schedules are supplemented, updated, amended or modified in a manner that discloses any matter or circumstance that would otherwise give rise to a failure of the condition in Section 8.02(a)(ii) to be satisfied as of the date of such Schedule Update Notice (determined as if the date of such Schedule Update Notice were the Closing Date), Buyer may terminate this Agreement pursuant to Section 9.01(d)(iii), provided if Buyer provides written notice to terminate this Agreement pursuant to Section 9.01(d)(iii) then, if such breach giving rise to the failure of such condition is capable of being cured, upon written notice of Sellers to Buyer within one (1) Business Day of receipt of Buyer’s written notice to terminate this Agreement pursuant to Section 9.01(d)(iii) that Sellers elect to attempt to cure such breach such termination shall not be effective unless (and until) as of the end of the applicable cure period set forth in Section 9.01(d)(iii) such breach shall not have been cured to the extent necessary to no longer cause a failure of the condition in Section 8.02(a)(ii) to be satisfied. If Buyer fails to timely provide written notice to terminate this Agreement pursuant to Section 9.01(d)(iii) with respect to any supplement, update, amendment or modification of the Disclosure Schedules as provided in this Section 7.07, then Buyer, in respect of such matters disclosed by supplement, update, amendment or modification, shall be deemed to have waived its right to terminate this Agreement or prevent the consummation of the transactions contemplated by this Agreement pursuant to Section 8.02(a)(ii) or Section 9.01(d)(iii), as applicable, and to have accepted such updated Disclosure Schedules for all purposes under this Agreement. The terms of this Section 7.07 shall apply mutatis mutandis with respect to the right of Buyer to supplement, update, amend or modify its Disclosure Schedules relating to the representations and warranties of Buyer set forth in Article IV to reflect any facts, circumstances or events first arising or, in the case of representations given to the Knowledge of Buyer, becoming known to Buyer subsequent to the Execution Date.
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Section 7.08 Replacement of Existing Letters of Credit. The Parties acknowledge that none of the Existing Letters of Credit, if any, posted by Sellers, whether with Governmental Authorities or otherwise, relating to the Assets are to be transferred to Buyer. From and after the Execution Date, upon request by Buyer, Sellers shall cooperate in good faith with Buyer to identify the Asset(s) to which any Existing Letter of Credit relates, including with respect to any 365 Contract that is designated as a Desired 365 Contract pursuant to Section 5.02(d). On or before Closing, Buyer shall endeavor to obtain, or cause to be obtained in the name of Buyer, replacements for all Replacement Letters of Credit as necessary to permit the cancellation of the Replacement Letters of Credit at Closing and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit. Buyer may also provide evidence that such replacements are not necessary as a result of existing bonds, letters of credit or guarantees that Buyer has previously posted as long as such existing bonds, letters of credit or guarantees are adequate to secure the cancellation of the Replacement Letters of Credit and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit at Closing. Notwithstanding the foregoing, in the event Buyer is unable to obtain any such bonds, letters of credit and guarantees prior to Closing adequate to secure the cancellation of the Replacement Letters of Credit and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit, the Parties shall nonetheless proceed with Closing and Buyer shall (a) at Closing deliver to Sellers an amount equal to the cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit that are not released at Closing and (b) indemnify and hold Sellers harmless for any failure to obtain such bonds, letters of credit and guarantees. If Sellers receive any amounts after the Closing as a return of the cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit (such amount returned to Sellers, the “Excess Recovery Amount”), Sellers shall deliver to Buyer the Excess Recovery Amount.
Section 7.09 Casualty or Condemnation Loss.
(a) If, after the Execution Date but prior to the Closing Date, any material portion of the Assets is damaged or destroyed or otherwise impaired by fire, explosion, tornado, hurricane, earthquake, earth movement, flood, water damage or other casualty or is taken in condemnation or under right of eminent domain (in each case, a “Casualty or Condemnation Loss”), then, subject to Section 7.09(b), Buyer shall nevertheless be required to close the transactions contemplated by the Agreement without any change to the Purchase Price, and Sellers shall (w) pay to Buyer all sums paid to Sellers by Third Parties by reason of such Casualty or Condemnation Loss with respect to the Assets (net of amounts spent or incurred by Sellers prior to Closing with respect to replacement or repair of any such Casualty or Condemnation Loss), (x) assign, transfer and set over to Buyer or subrogate Buyer to all of Sellers’ and their Affiliates’ right, title and interest (if any) in insurance claims and proceeds, unpaid awards and other rights against Third Parties (excluding any Liabilities, other than insurance claims and proceeds, of or against any Seller Indemnified Parties) arising out of such Casualty or Condemnation Loss with respect to the Assets, (y) bear the costs of any deductibles or retentions with respect to any such insurance claims arising from any such Casualty or Condemnation Loss and (z) otherwise provide reasonable cooperation to Buyer (whether before or after the Closing Date) in the pursuit of such insurance claims and proceeds, unpaid awards and other rights against Third Parties; provided, however, that Sellers shall reserve and retain (and Buyer shall assign to Sellers) all rights, title, interests and claims against Third Parties for the recovery of Sellers’ costs and expenses incurred prior to the Closing in pursuing or asserting any such insurance claims or other rights against Third Parties with respect to any such Casualty or Condemnation Loss. Except as expressly set forth hereinabove, Sellers shall retain all rights to insurance, condemnation awards and other claims against Third Parties with respect to the casualty or taking except to the extent the Parties otherwise agree in writing.
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(b) If, after the Execution Date but prior to the Closing Date, there is a Casualty or Condemnation Loss that, individually or in the aggregate, has had, or would reasonably be expected to have, in each case after giving effect to Buyer’s rights pursuant to Section 7.09(a)(x) and Section 7.09(a)(y), a Seller Material Adverse Effect, then Buyer may terminate this Agreement pursuant to Section 9.01(d)(iv) (and such Casualty or Condemnation Loss shall be deemed for purposes of Section 9.01(d)(iv) to be an unwaived condition in Section 8.02 that is incapable of being satisfied by the End Date).
Section 7.10 Transition Services Agreement. If requested by Buyer, the Parties shall cooperate in good faith to negotiate and enter into a transition services agreement on mutually acceptable terms prior to the Closing; provided that, nothing in this Section 7.10 or such transition services agreement will require Sellers to maintain sufficient personnel to perform any services after Closing, and Sellers shall have no obligation to procure any services from Third Parties or employ any personnel in connection with the performance of any services and Sellers shall have no obligation to provide any services under such transition services agreement to the extent Sellers do not have sufficient personnel to provide such services; provided further that, for a period of thirty (30) days after the Closing, Sellers shall not voluntarily terminate the employment of any employee necessary for the performance of any information technology functions included in the services contemplated in the transition services agreement other than for cause (as determined in Sellers’ sole discretion and consistent with past practices) or materially reduce the base salary or benefits provided to any such employee unless, after giving effect to such termination or any resignation of any such employee, Sellers shall have available to it sufficient employees to perform such services.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Buyer and Sellers. The obligations of Buyer and Sellers to consummate the Closing are subject to the satisfaction (or, in the case of clauses (b) and (c) of this Section 8.01, waiver by each to the extent permitted under Applicable Law) of each of the following conditions:
(a) no Applicable Law shall prohibit the Transactions or the consummation of the Closing;
(b) all actions by or in respect of or filings with any Governmental Authority required to permit the consummation of the Closing shall have been taken, made or obtained (other than those actions or filings that are customarily obtained after the Closing); and
(c) no injunction, order, decree or judgment of any Governmental Authority of competent jurisdiction shall be in effect which prohibits, restrains or enjoins the consummation of the Transactions; provided that the Party seeking to rely on this Section 8.01(c) as a basis not to consummate the Closing must have used commercially reasonable efforts to prevent the entry of such injunction, order, decree or judgment.
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Section 8.02 Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction (or waiver by Buyer) of each of the following further conditions:
(a) (i) each Seller shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date and (ii) (A) the representations and warranties of Sellers set forth in Article III of this Agreement (other than the Seller Fundamental Representations), disregarding all qualifications and exceptions contained therein as to “material,” “in all material respects,” Seller Material Adverse Effect or similar materiality qualifiers, shall be true and correct at and as of the Closing Date, as if made at and as of such date with only such exceptions as do not, or would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect, and (B) the Seller Fundamental Representations shall be true and correct at and as of the Closing Date, as if made at and as of such date;
(b) the Bid Procedures Order and the Sale Order, together with any other order of the Bankruptcy Court required to consummate the Transactions, shall have been entered by the Bankruptcy Court and each such order shall be a Final Order and in full force and effect; and
(c) Sellers shall have delivered each of the items required by Section 2.05(c) to be delivered by Sellers at the Closing.
Section 8.03 Conditions to Obligation of Sellers. The obligation of Sellers to consummate the Closing is subject to the satisfaction (or waiver by Sellers) of the following further conditions:
(a) (i) Buyer shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date and (ii) (A) the representations and warranties of Buyer set forth in Article IV of this Agreement (other than the Buyer Fundamental Representations), disregarding all qualifications and exceptions contained therein as to “material,” “in all material respects” or Buyer Material Adverse Effect or similar materiality qualifiers, shall be true and correct at and as of the Closing Date, as if made at and as of such date with only such exceptions as do not, or would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect, and (B) the Buyer Fundamental Representations shall be true and correct at and as of the Closing Date, as if made at and as of such date;
(b) the Bid Procedures Order and the Sale Order, together with any other order of the Bankruptcy Court required to consummate the Transactions, shall have been entered by the Bankruptcy Court and each such order shall be a Final Order and in full force and effect; and
(c) (i) Buyer shall have delivered each of the items required by Section 2.05(d) and 2.05(f) to be delivered by Buyer (as applicable) at the Closing and (ii) Buyer shall have made the payment of the Closing Cash Payment Amount as required by Section 2.05(e).
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ARTICLE IX
TERMINATION
Section 9.01 Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Sellers and Buyer;
(b) by Sellers upon written notice to Buyer or by Buyer upon written notice to Sellers if the Closing shall not have been consummated on or before the date that is forty five (45) days after the Execution Date or such later date as is necessary to accommodate the cure period contemplated by Section 9.01(d)(iii)(B) or Section 9.01(e)(ii)(B) below (the “End Date”), unless extended by mutual written agreement of Buyer and Sellers and subject to the extension contemplated by the proviso to Section 9.01(d) and the proviso to Section 9.01(e) below; provided that, Sellers shall be entitled to extend the End Date for up to an additional thirty (30) days upon written notice to Buyer;
(c) by Sellers upon written notice to Buyer or by Buyer upon written notice to Sellers if a Governmental Authority of competent jurisdiction shall have issued an order, injunction or judgment or law that permanently restrains, prohibits, enjoins or declares illegal the Transactions and such order, injunction or judgment becomes final and non-appealable;
(d) by Buyer upon written notice by Buyer to Sellers if:
(i) the Bid Procedures Order has not been entered by the Bankruptcy Court within 15 days after the Execution Date;
(ii) (A) an Auction occurs and Buyer is not the Successful Bidder or the Back-up Bidder at the Auction or (B) the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction which agreement has been approved by the Bankruptcy Court; provided that Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01(d)(ii)(B) if an Auction occurs and Buyer is the Back-up Bidder except upon the earlier of (1) the consummation of such Alternative Transaction or (2) the Back-up Termination Date;
(iii) Sellers shall have breached any of their representations, warranties, covenants or other obligations contained in this Agreement which would give rise to the failure of a condition set forth in Section 8.02 and (A) such breach is not waived in writing by Buyer or (B) solely to the extent such breach is capable of being cured, following written notice thereof from Buyer to Sellers specifying the reason such condition is unsatisfied, such breach remains uncured for a period of ten (10) Business Days after Sellers’ receipt of such written notice from Buyer; or
(iv) any condition set forth in Section 8.01 or Section 8.02 that has not been waived by Buyer shall have become incapable of being satisfied by the End Date;
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provided that each deadline set forth in clause (i) of this Section 9.01(d) shall be subject to the Bankruptcy Court’s docket, and accordingly, (A) shall be deemed extended through the date of the hearing set by the Bankruptcy Court for consideration of the applicable pleading if, after using reasonable efforts, Sellers are unable to obtain a docket setting for such hearing prior to such deadline, (B) shall be deemed extended through the date(s) of any continued hearing set by the Bankruptcy Court for consideration of such pleading if, after using reasonable efforts, Sellers are unable to conclude such hearing(s) prior to such deadline and (C) shall be deemed extended as required to comply with any notice periods required under the Bankruptcy Code which, as a result of any extensions described under the foregoing clauses (A) and (B), cannot be complied with prior to such deadline; or
(e) by Sellers upon written notice by Sellers to Buyer if:
(i) (A) an Auction occurs and Buyer is not the Successful Bidder or the Back-up Bidder at the Auction or (B) the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction; provided that Sellers shall not be permitted to terminate this Agreement pursuant to this Section 9.01(e)(i)(B) if an Auction occurs and Buyer is the Back-up Bidder except upon the earlier of (1) the consummation of such Alternative Transaction or (2) the Back-up Termination Date;
(ii) Buyer shall have breached any of its representations, warranties, covenants or other obligations contained in this Agreement which would give rise to the failure of a condition set forth in Section 8.03 and (A) such breach is not waived in writing by Sellers or (B) solely to the extent such breach is capable of being cured, following written notice thereof from Sellers to Buyer specifying the reason such condition is unsatisfied, such breach remains uncured for a period of ten (10) Business Days after Buyer’s receipt of such written notice from Sellers;
(iii) any condition set forth in Section 8.01 or Section 8.03 that has not been waived by Sellers shall have become incapable of being satisfied by the End Date; or
(iv) Buyer shall not have deposited the Escrow Funds in the Escrow Account within one (1) Business Day after the Execution Date.
(f) Notwithstanding the foregoing, (x) Sellers shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if either Seller is in breach of any of its representations and warranties in this Agreement or shall have failed to perform or comply with any of its covenants and agreements in this Agreement such that either (A) the condition to closing set forth in clause (i) or (ii) (as applicable) of Section 8.02(a) shall not be satisfied or (B) such breach or failure to perform or comply by such Seller is the primary cause of the occurrence of any event giving Sellers a right to terminate this Agreement or the failure of the Closing to have occurred, and (y) Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if Buyer is in breach of its respective representations and warranties in this Agreement or shall have failed to perform or comply with any of its covenants and agreements in this Agreement such that either (A) the condition to closing set forth in clause (i) or (ii) (as applicable) of Section 8.03(a) shall not be satisfied or (B) such breach or failure to perform or comply by Buyer is the primary cause of the occurrence of any event giving Buyer a right to terminate this Agreement or the failure of the Closing to have occurred.
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Section 9.02 Effect of Termination.
(a) If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 9.01, then, except for the provisions of Section 5.03(d), Section 7.03, Section 7.04, this Section 9.02, Section 9.03 and Article XI and such of the defined terms on Exhibit A necessary to give context to the surviving provisions, this Agreement shall forthwith become void and the Parties shall have no liability or obligation hereunder.
(b) If Sellers are entitled to terminate this Agreement pursuant to (i) Section 9.01(e)(ii) or (ii) Section 9.01(b) and, in the case of clause (ii), (A) Buyer is then in Willful Breach of this Agreement, or (B) Buyer has failed to close in the instance where, as of the End Date, (1) all of the conditions in Section 8.01 and Section 8.02 (in each case excluding conditions that, by their terms, cannot be satisfied until the Closing) have been satisfied by Sellers (or waived by Buyer), (2) each Seller is ready, willing and able to perform its obligations under Section 2.05(c), and (3) Buyer nevertheless fails to close, then, in each such event, Sellers shall be entitled to, at their option (x) obtain specific performance in lieu of termination or (y) terminate this Agreement and receive a distribution of the Escrow Funds (or if Buyer terminates this Agreement pursuant to Section 9.01(b) at a time when Sellers had the right to terminate this Agreement and receive a distribution of the Escrow Funds pursuant to this Section 9.02(b), Sellers shall be entitled to a distribution of the Escrow Funds) as liquidated damages for such termination (the Parties agree that the foregoing liquidated damages are reasonable considering all of the circumstances existing as of the Execution Date, shall not serve as a penalty and constitute the Parties’ good faith estimate of the actual damages reasonably expected to result from such termination of this Agreement by Sellers). Nothing herein shall be construed to prohibit Sellers from first seeking specific performance in accordance with the last sentence of this Section 9.02(b), but thereafter terminating this Agreement and receiving a distribution of the Escrow Funds as liquidated damages in lieu of fully prosecuting its claim for specific performance. Each Party acknowledges that the remedies at law of Sellers for a breach or threatened breach of this Agreement by Buyer as contemplated pursuant to this Section 9.02(b) may be inadequate and, in recognition of this fact, Sellers, without posting any bond or the necessity or proving the inadequacy as a remedy of monetary damages, and in addition to all other remedies that may be available, shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available. If at any time Sellers are entitled to receive a distribution of the Escrow Funds pursuant to this Section 9.02(b), Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to distribute to Sellers all of the Escrow Funds.
(c) If this Agreement is terminated prior to the Closing by Sellers or by Buyer pursuant to Section 9.01 other than under the circumstances described in Section 9.02(b), within two (2) Business Days after such termination, Sellers and Buyer shall jointly instruct the Escrow Agent to distribute to Buyer all of the Escrow Funds.
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(d) Subject to this Section 9.02 and Section 9.03, upon the termination of this Agreement, no Party shall have any other liability or obligation hereunder, and Sellers shall be free to immediately enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
Section 9.03 Break-Up Fee; Expense Reimbursement.
(a) If (i) this Agreement is terminated by (A) Buyer pursuant to and in accordance with Section 9.01(d)(ii), or (B) Sellers pursuant to and in accordance with Section 9.01(e)(i), (ii) Buyer shall not have breached any of its representations or warranties or failed to perform or comply with any of its covenants or agreements contained in this Agreement such that the conditions set forth in Section 8.03(a) (excluding conditions that, by their terms, cannot be satisfied until the Closing) shall not be satisfied and (iii) any Seller or Sellers consummate an Alternative Transaction prior to the date that is six (6) calendar months after the Execution Date, Sellers shall, subject to entry of the Bid Procedures Order, pay to Buyer a termination fee in the amount of (A) $750,000 (the “Break-Up Fee”) plus (B) the reasonable and documented costs and expenses incurred by Buyer in connection with the Transactions, up to a maximum of $500,000 (the “Expense Reimbursement”), which Break-Up Fee and Expense Reimbursement will constitute, pursuant to sections 364 and 503 of the Bankruptcy Code, a superpriority administrative expense claim in each of Seller’s bankruptcy estates with priority over any and all administrative expense claims and shall be payable upon consummation of such Alternative Transaction from the proceeds of such sale.
(b) If (i) this Agreement is terminated by Buyer pursuant to and in accordance with Section 9.01(d)(iii), (ii) Buyer shall not have breached any of its representations or warranties or failed to perform or comply with any of its covenants or agreements contained in this Agreement in any respect such that the conditions set forth in Section 8.03(a) (excluding conditions that, by their terms, cannot be satisfied until the Closing) shall not be satisfied and (iii) prior to the date that is six (6) calendar months following such termination of this Agreement, the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction, in either case, that is of equivalent value or otherwise higher or better than the Transactions, Sellers shall, subject to the entry of the Bid Procedures Order, pay to Buyer the Expense Reimbursement, which Expense Reimbursement shall be payable upon the consummation of such Alternative Transaction.
(c) Notwithstanding anything contained herein to the contrary, Buyer agrees that, upon any termination of this Agreement under circumstances where the Break-Up Fee and Expense Reimbursement is payable by Sellers pursuant to this Section 9.03 and such Break-Up Fee and Expense Reimbursement is paid in full to Buyer by Sellers and Buyer shall be precluded from any other remedy against Sellers, at law or in equity or otherwise, and Buyer shall not seek to obtain any recovery, judgment or damages of any kind, including consequential, indirect or punitive damages, against Sellers or any of their respective Representatives, equityholders or Affiliates in connection with this Agreement or the Transactions and Sellers and their respective Representatives, equityholders and Affiliates shall be fully released and discharged from any liability or obligation under or resulting from this Agreement and the Transactions.
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(d) Buyer represents to Sellers, and Sellers acknowledge and agree, that this Section 9.03 is a condition precedent to the execution by Buyer of this Agreement and is necessary to ensure that Buyer will continue to pursue the Transaction, and each Seller acknowledges that the Break-Up Fee and Expense Reimbursement, if payable hereunder, (i) constitutes an actual and necessary cost and expense of preserving Sellers’ estates, within the meaning of section 503(b) of the Bankruptcy Code, (ii) is of substantial benefit to Sellers, (iii) is reasonable and appropriate, including in light of the size and nature of the Transactions and the efforts that have been or will be expended by Buyer, notwithstanding that the proposed Transactions are subject to higher or better offers, and (iv) was negotiated by the Parties at arms’-length and in good faith.
(e) Sellers’ obligation to pay the Break-Up Fee and Expense Reimbursement, as provided herein, shall (i) survive termination of this Agreement pursuant to Section 9.01(d)(ii) or Section 9.01(e)(i), (ii) be paid to Buyer, in cash, within two (2) Business Days from the date of consummation of the first Alternative Transaction consummated by Sellers, from the sale proceeds thereof or otherwise from Sellers’ cash balances, and (iii) constitute, pursuant to sections 364 and 503 of the Bankruptcy Code, a superpriority administrative expense claim in each of Seller’s bankruptcy estates with priority over any and all administrative expense claims.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
Section 10.01 Survival.
(a) The representations and warranties of Sellers contained herein and in any certificate or other writing delivered by Sellers pursuant hereto shall terminate upon and not survive the Closing and there shall be no liability (whether arising in contract, tort or otherwise, or whether at law or in equity, and regardless of the legal theory under which any entitlement, remedy or recourse may be sought or imposed (including all rights afforded by any statute which limits the effects of a release with respect to unknown claims)) thereafter in respect thereof. Each of the covenants of Sellers contained in this Agreement shall terminate upon the Closing except to the extent that performance under such covenant is to take place after Closing, in which case such covenant shall survive the Closing until the earlier of (i) performance of such covenant in accordance with this Agreement or, (ii) (A) if time for performance of such covenant is specified in this Agreement, thirty (30) days following the expiration of the time period for such performance or (B) if time for performance of such covenant is not specified in this Agreement, the expiration of applicable statute of limitations with respect to any claim for any failure to perform such covenant. The intended effect of termination of Sellers’ representations, warranties, covenants and agreements is to bar, from and after the date of termination, any claim or cause of action based on (x) the alleged inaccuracy of such representation or breach of such warranty or (y) such alleged breach or failure to fulfill such covenant or agreement; provided that if a written notice of any claim with respect to any covenant to be performed after Closing is given to Sellers prior to the expiration of such covenant then such covenant shall survive until, but only for purposes of, the resolution of such claim by final, non-appealable judgment or settlement. Buyer shall not have any recourse against any Seller Indemnified Party or any of their Affiliates or their respective lenders or creditors from and after Closing for any Losses relating to the Assets or this Agreement (including title and environmental matters) or Sellers’ breach of any representations and warranties, covenants or other provision of this Agreement, subject to Buyer’s rights under Section 11.11 with respect to those covenants of Sellers the performance of which is to take place after closing, as contemplated by this Section 10.01(a).
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(b) All representations and warranties of Buyer contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby until the date that is twelve (12) months after the Closing (the “Survival Date”); provided that the Buyer Fundamental Representations shall survive the Closing indefinitely. Each of the covenants of Buyer contained in this Agreement shall terminate upon the Closing except to the extent that performance under such covenant is to take place after Closing, in which case such covenant shall survive the Closing until the earlier of (i) performance of such covenant in accordance with this Agreement or, (ii) (A) if time for performance of such covenant is specified in this Agreement, thirty (30) days following the expiration of the time period for such performance or (B) if time for performance of such covenant is not specified in this Agreement, the expiration of applicable statute of limitations with respect to any claim for any failure to perform such covenant. Notwithstanding anything herein to the contrary, Buyer will not be liable with respect to any claim for the breach or inaccuracy of any representation or warranty pursuant to Section 10.02(a)(i), unless written notice of a claim thereof is delivered to Buyer prior to the Survival Date.
(c) Subject to Section 10.01(a), the remainder of this Agreement shall survive the Closing without time limit. Representations, warranties, covenants, obligations and agreements of Sellers shall be of no further force and effect after the date of their expiration as set forth in Section 10.01(a). For the avoidance of doubt, nothing in this Agreement shall prohibit Sellers from ceasing operations or winding up its affairs following the Closing.
(d) Any representation and warranty insurance policy obtained by Buyer in connection with the transactions contemplated by this Agreement shall include a complete and unconditional (except in cases of fraud) waiver of subrogation and contribution rights against all of the Seller Indemnified Parties, and neither Buyer nor any of its Affiliates shall amend or waive such waiver in any respect without the prior written consent of Sellers.
Section 10.02 Indemnification by Buyer.
(a) From and after Closing, Buyer hereby assumes and agrees to release, defend, indemnify and hold Sellers and their Affiliates, and each of their respective officers, managers, directors, employees, equity owners, agents and successors (collectively, the “Seller Indemnified Parties”) harmless from and against any and all losses, liabilities, obligations, damages, costs and expenses (individually, a “Loss” and, collectively, “Losses”) to the extent based upon, attributable to or resulting from:
(i) any breach of any representation or warranty of Buyer set forth in Article IV hereof, or any representation or warranty contained in any certificate delivered by or on behalf of Buyer pursuant to this Agreement;
(ii) any breach of any covenant or other agreement on the part of Buyer under this Agreement;
(iii) the Assumed Liabilities;
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(iv) except to the extent attributable to an Excluded Liability, the Assets or Buyer’s ownership or operation of the Assets after the Closing Date;
(v) Buyer Taxes; and
(vi) any other indemnity obligations of Buyer and its Affiliates expressly set forth in this Agreement.
(b) The aggregate amount of all payments made by the Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a)(i) shall not exceed an amount equal to fifty percent (50%) of the Purchase Price (the “Cap”); provided that the Cap shall not apply with respect to any Losses resulting from, arising out of or relating to breaches of the Buyer Fundamental Representations or the Buyer Financial Representations.
(c) Notwithstanding anything herein to the contrary, (i) Buyer shall not be required to indemnify any Seller Indemnified Party, and no Seller Indemnified Party will be entitled to indemnification, under Section 10.02(a)(i) with respect to the Buyer Financial Representations unless and until the aggregate amount of all Losses suffered by the Seller Indemnified Parties in respect of breaches of the Buyer Financial Representations for which Buyer would otherwise owe an indemnification obligation under Section 10.02(a)(i) exceeds $500,000, and then only to the extent such Losses are in excess thereof; and (ii) the aggregate amount of all payments made by Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a)(i) with respect to the Buyer Financial Representations shall not exceed an amount equal to ten percent (10%) of the Purchase Price.
(d) In no event shall the aggregate amount of all payments made by Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a)(i) exceed the Adjusted Purchase Price actually paid by Buyer
Section 10.03 Indemnification Procedures.
(a) In the event that any Proceedings shall be instituted or that any claim or demand shall be asserted by any Indemnified Party in respect of which payment may be sought under Section 10.02 (an “Indemnification Claim”), the Indemnified Party shall reasonably and promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge which is covered by this indemnity to be forwarded to the Indemnifying Party. The Indemnifying Party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the Indemnified Party, and to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder. If the Indemnifying Party elects to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, it shall within thirty (30) days (or sooner, if the nature of the Indemnification Claim so requires) notify the Indemnified Party of its intent to do so. If the Indemnifying Party elects not to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, the Indemnified Party may defend against, negotiate, settle or otherwise deal with such Indemnification Claim. If the Indemnifying Party shall assume the defense of any Indemnification Claim, the Indemnified Party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided, however, that such Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (i) so requested by the Indemnifying Party to participate or (ii) in the reasonable opinion of counsel to the Indemnified Party a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable; and provided, further, that the Indemnifying Party shall not be required to pay for more than one such counsel for all Indemnified Parties in connection with any Indemnification Claim. The Parties agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Indemnification Claim. Notwithstanding anything in this Section 10.03 to the contrary, neither the Indemnifying Party nor the Indemnified Party shall, without the written consent of the other party, settle or compromise any Indemnification Claim or permit a default or consent to entry of any judgment unless the claimant and such party provide to such other party an unqualified release from all liability in respect of the Indemnification Claim. If the Indemnifying Party makes any payment on any Indemnification Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance benefits or other claims of the Indemnified Party with respect to such Indemnification Claim.
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(b) After any final decision, judgment or award shall have been rendered by a Governmental Authority of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the Indemnified Party and the Indemnifying Party shall have arrived at a mutually binding agreement with respect to an Indemnification Claim hereunder, the Indemnified Party shall forward to the Indemnifying Party notice of any sums due and owing by the Indemnifying Party pursuant to this Agreement with respect to such matter.
Section 10.04 Express Negligence. THE INDEMNIFICATION, RELEASE, ASSUMED LIABILITIES, WAIVER AND LIMITATION OF LIABILITY PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY INDEMNIFIED PARTY. BUYER AND SELLERS ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
Section 10.05 Tax Treatment of Indemnity Payments. The Parties agree to treat any indemnity payment made pursuant to this Article X as an adjustment to the Purchase Price for U.S. federal, state, local and foreign income tax purposes. Any indemnity payment under this Article X shall be treated as an adjustment to the value of the asset upon which the underlying Indemnification Claim was based, unless a final determination (within the meaning of section 1313 of the Code) with respect to the Indemnified Party or any of its Affiliates causes any such payment not to be treated as an adjustment to the value of the asset for U.S. federal income tax purposes.
Section 10.06 Sole and Exclusive Remedy. Except for the post-Closing payments contemplated in Section 2.07, the remedies provided in this Article X shall be the sole and exclusive legal and equitable remedies of the Parties, from and after the Closing, with respect to this Agreement and the transactions contemplated hereby, and no Person will have any other entitlement, remedy or recourse, whether in contract, tort or otherwise, or whether at law or in equity, and regardless of the legal theory under which such entitlement, remedy or recourse may be sought or imposed (including all rights afforded by any statute which limits the effects of a release with respect to unknown claims), it being agreed that all of such other remedies, entitlements and recourse are expressly waived and released by the Parties to the fullest extent permitted by law. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or representative of Sellers or any of their Affiliates (the “Seller Non-Party Group”) shall have any liability for any obligations or liabilities of Sellers under this Agreement of or for any Claim based on, in respect of, or by reason of, the transactions contemplated hereby. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or representative of Buyer or any of its Affiliates (the “Buyer Non-Party Group”) shall have any liability for any obligations or liabilities of Buyer under this Agreement of or for any Claim based on, in respect of, or by reason of, the transactions contemplated hereby.
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ARTICLE XI
MISCELLANEOUS
Section 11.01 Notices. All notices and communications which are required or may be given to a Party hereunder shall be in writing, addressed as indicated below and shall be deemed to have been duly given upon the earliest of: (a) if by personal delivery, then the date of delivery if such date is a Business Day during normal business hours, or, if such date is not a Business Day during normal business hours, then the next Business Day, (b) if sent by U.S. certified mail, postage prepaid, return receipt requested, then the date shown as received on the return notice, (c) if sent by email, with delivery receipt to sender or upon an affirmative reply by email by the intended recipient that such email was received, or (d) if by Federal Express overnight delivery (or other reputable overnight delivery service), the date shown on the notice of delivery if such date is a Business Day during normal business hours, or, if such date is not a Business Day during normal business hours, then on the next Business Day:
if to Buyer, to:
Axis Energy Services Holdings, LLC
P.O. Box 170
Gainesville, Texas 76241 Attention: Will Petter
Email: will.petter@axisofs.com
with a copy to:
Lime Rock Management, LP
1111 Bagby St. #4600
Houston, Texas 77002
Attention: Jeff Scofield
Email: js@lrpartners.com
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with a copy to (which will not constitute notice):
Willkie Farr & Gallagher LLP
600 Travis Street, Suite 2100
Houston, Texas 77002
Attn: Michael D. Piazza; Jennifer Hardy
E-mail: mpiazza@willkie.com; jhardy@willkie.com
if to Sellers, to:
c/o Basic Energy Services, Inc.
801 Cherry Street, Suite 2100
Fort Worth, Texas 76102
Attention: Robert J. Reeb, III
Email: RReeb@BasicES.com
with a copy to:
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: Rodney L. Moore
Email: Rodney.Moore@weil.com
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ray C. Schrock, P.C.
Sunny Singh
Email: Ray.Schrock@weil.com
Sunny.Singh@weil.com
The Parties may change the identity, address and email addresses to which such communications are to be addressed by giving written notice to the other Parties in the manner provided in this Section 11.01.
Section 11.02 Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party to this Agreement, or in the case of a waiver, by the Party against whom the waiver is to be effective.
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(b) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 11.03 Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.
Section 11.04 Successors and Assigns/Liquidating Trust.
(a) Subject to Section 11.04(b), the provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided that no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement, in whole or in part, by operation of law or otherwise, without the prior written consent of each other Party hereto; provided, however, that Sellers may assign their respective rights and obligations under this Agreement to any liquidating trust or other representative of Sellers created or appointed pursuant to a Bankruptcy Court order; provided, further, that Buyer may assign its rights and obligations under this Agreement to an Affiliate, provided that no such transfer or assignment will release Buyer of its obligations hereunder or enlarge, alter or change any obligation of Sellers to Buyer.
(b) If a Liquidating Trust is established, from and after the formation of the Liquidating Trust all rights and obligations of Sellers under this Agreement shall accrue to and be for the benefit of and shall be exercisable by the Liquidating Trust, as provided by any order of the Bankruptcy Court and the Liquidating Trustee shall be entitled to exercise all of the rights of Sellers under this Agreement.
Section 11.05 Governing Law. EXCEPT TO THE EXTENT THE MANDATORY PROVISIONS OF THE BANKRUPTCY CODE APPLY, THIS AGREEMENT, THE TRANSACTION DOCUMENTS, AND ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED PURSUANT HERETO, AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS AGREEMENT OR THE NEGOTIATION, EXECUTION, TERMINATION, PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, INCLUDING ITS STATUTES OF LIMITATIONS, WITHOUT REGARD TO ANY CONFLICTS OF LAW OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.
Section 11.06 Jurisdiction. Each Party agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contained in or contemplated by this Agreement and the Transaction Documents (whether in contract or tort), exclusively in (a) the Bankruptcy Court so long as the Bankruptcy Cases remain open and (b) after the close of the Bankruptcy Cases, or in the event that the Bankruptcy Court determines that it does not have jurisdiction, the United States District Court for the Southern District of Texas in Harris County, Texas or any Texas state court sitting in Harris County, Texas (together with the Bankruptcy Court, the “Chosen Courts”), and solely in connection with claims arising under this Agreement or any other Transaction Document or the Transactions (whether in contract or tort) (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 11.01.
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Section 11.07 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.08 Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when all Parties shall have received a counterpart hereof signed by all of the other Parties. Until and unless all Parties have received a counterpart hereof signed by the other Parties, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the Parties and their respective successors and assigns prior to Closing; provided, however, (a) the Seller Indemnified Parties are intended to be, and shall be, third party beneficiaries of the rights of Seller Indemnified Parties specified in Article X, (b) the Seller Non-Party Group are intended to be, and shall be, third party beneficiaries of the rights of Seller Indemnified Parties specified in Section 10.02, (c) the Seller Non-Party Group and the Buyer Non-Party Group are intended to be, and shall be, third party beneficiaries of Section 10.06 and (d) third party acquirors of Excluded Assets pursuant to an Excluded Asset PSA are intended to be, and shall be, third party beneficiaries of the rights of third party acquirors of Excluded Assets pursuant to an Excluded Asset PSA specified in Section 5.03(e). From and after the establishment of the Liquidating Trust, the Liquidating Trustee shall be a third party beneficiary of Sellers’ rights under this Agreement.
Section 11.09 Entire Agreement. This Agreement, the Confidentiality Agreement and the other Transaction Documents constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the Parties with respect to the subject matter hereof and thereof.
Section 11.10 Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; and in lieu of each such invalid, void or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such invalid, void or unenforceable provision as may be valid, binding and enforceable.
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Section 11.11 Specific Performance. Without limiting Sellers’ rights under Section 9.02(b), the Parties agree that, from and after Closing, irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement (without posting any bond or other undertaking) or to enforce specifically the performance of the terms and provisions hereof in addition to any other remedy to which they are entitled at law or in equity.
Section 11.12 Certain Acknowledgements and Limitations.
(a) Any and all duties and obligations which any Party may have to any other Party with respect to or in connection with this Agreement, the other Transaction Documents or the Transactions are limited to those specifically set forth in this Agreement and the other Transaction Documents. Neither the duties nor obligations of any Party, nor the rights of any Party, shall be expanded beyond the terms of this Agreement and the other Transaction Documents on the basis of any legal or equitable principle or on any other basis whatsoever. Neither any equitable or legal principle nor any implied obligation of good faith or fair dealing nor any other matter requires any Party to incur, suffer or perform any act, condition or obligation contrary to the terms of this Agreement and the other Transaction Documents, whether or not existing and whether foreseeable or unforeseeable. Each of the Parties acknowledges that it would be unfair, and that it does not intend, to increase any of the obligations of the other Party on the basis of any implied obligation or otherwise.
(b) UNDER NO CIRCUMSTANCES SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE FOR ANY EXEMPLARY OR PUNITIVE DAMAGES FOR LIABILITIES ARISING OUT OF ANY ACTUAL, ALLEGED OR INTENTIONAL BREACH OF THIS AGREEMENT (EXCEPT TO THE EXTENT INDEMNIFIABLE PURSUANT TO ARTICLE X BECAUSE PAYABLE BY A SELLER INDEMNIFIED PARTY TO A THIRD PARTY).
Section 11.13 Disclosure Schedules. All references to Schedules and Disclosure Schedules in Article III of this Agreement refer to Schedules contained in the Disclosure Schedule. The information in the Disclosure Schedule constitutes exceptions, qualifications and/or supplements to particular representations or warranties of Sellers or of Buyer (as applicable) as set forth in this Agreement. The Disclosure Schedule shall not be construed as indicating that any disclosed information is required to be disclosed, and no disclosure shall be construed as an admission that such information is material to, outside the ordinary course of business of, or required to be disclosed by, Sellers or constitutes a Seller Material Adverse Effect. Capitalized terms used in the Disclosure Schedule that are not defined therein and are defined in this Agreement shall have the meanings given to them in this Agreement. The captions contained in the Disclosure Schedule are for the convenience of reference only, and shall not be deemed to modify or influence the interpretation of the information contained in the Disclosure Schedules or this Agreement. The statements in each Schedule of the Disclosure Schedule qualify and relate to the corresponding provisions in the Sections of this Agreement to which they expressly refer and to each other provision in this Agreement to which the applicability of a statement or disclosure in a particular Schedule of the Disclosure Schedule is reasonably apparent on its face.
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Section 11.14 Preparation of Agreement. The Parties and their counsel have reviewed the provisions of this Agreement and have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE XII
DEFECTS; FINAL ACCOUNTING
Section 12.01 Defects. If Buyer or its Representatives discover any matter, condition or circumstance that Buyer determines in good faith (i) causes, or would reasonably be expected to cause, any Asset (or any Seller with respect to any Asset) or the operation thereof as currently conducted by Sellers to be in violation of any Environmental Law or any Environmental Permit, or (ii) requires, or would reasonably be expected to require, remedial or corrective action under any Environmental Law (any such matter, condition or circumstance described in clause (i) or (ii), an “Environmental Defect”), then, if Buyer asserts any such Environmental Defect by written notice (a “Defect Notice”) delivered to Sellers no later than 5:00 pm, central time, on the Bid Deadline (the “Defect Notice Deadline”), subject to Section 12.03, the Purchase Price shall be subject to reduction as and to the extent provided in this Article XII:
(a) The Defect Notice shall set forth, with respect to any relevant Environmental Defect asserted thereby:
(i) a description of the alleged Environmental Defect (including the applicable Environmental Law(s) or permit(s) violated or implicated thereby);
(ii) identification of the Asset(s) affected by the Environmental Defect (each, an “Affected Asset”);
(iii) the Environmental Allocated Value of each Affected Asset;
(iv) supporting documents reasonably necessary for Sellers to evaluate the existence of the alleged Environmental Defect (to the extent in the possession or control of Buyer); and
(v) Buyer’s determination of the dollar amount of each such Environmental Defect (an “Asserted Defect Amount”), which shall be a good faith estimate and shall not in any event exceed the Lowest Cost Response;
and shall be accompanied by all environmental reports prepared by or for Buyer with respect to the Assets forming the basis of any Environmental Defect asserted by Buyer in the Defect Notice or the dollar amount or value thereof as reasonably requested by Sellers (together with the materials delivered pursuant to Section 12.01(a)(iv), the “Defect Reports”). Buyer agrees that copies of each Defect Notice and all the Defect Reports may be delivered by Sellers to any Potential Bidders. Buyer shall not take any action that would restrict Sellers’ ability to share copies of the Defect Reports as contemplated by the preceding sentence, nor shall Buyer, in the case of Defect Reports prepared by third parties, take any action that would prevent any Potential Bidder from negotiating directly with such third party preparer with respect to such Potential Bidder’s right to rely on the Defect Report(s) prepared by such third party preparer.
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(b) The failure of a Defect Notice to include any of the information and/or documentation identified in Section 12.01(a) shall not render such Defect Notice void and/or ineffective if it otherwise materially complies with the requirements set forth in Section 12.01(a).
(c) Upon receipt of a Defect Notice, Sellers shall have the right and opportunity, but not the obligation, to Cure any Environmental Defect, or, if the Asserted Defect Amount is greater than the Environmental Allocated Value of the Affected Asset, to exclude from the Transactions such Asset(s) to which such Environmental Defect relates and reduce the Purchase Price by an amount equal to the Environmental Allocated Value of such Asset(s) (and such Asset(s) shall thereafter be Excluded Assets for all purposes under this Agreement), as provided in this Article XII.
(d) Buyer shall have no right to assert as an Environmental Defect (and the term Environmental Defect shall not include) any matter disclosed on Disclosure Schedule 3.07 or any Environmental Defect that is not included in a timely delivered Environmental Defect Notice.
(e) From the Execution Date until the Defect Notice Deadline, Buyer shall provide Sellers weekly written updates as to any Environmental Defects discovered by Buyer as of the date of such update, but such update shall not constitute a Defect Notice unless expressly stated in such update. Buyer may deliver one or more Defect Notices prior to the Defect Notice Deadline.
(f) The agreed allocation of the Purchase Price as to the Assets for purposes of Article XII is as set forth on Schedule 12.01 and each allocated value identified as applicable to any such Assets on Schedule 12.01 shall constitute the “Environmental Allocated Value” for such Asset
Section 12.02 Resolution of Environmental Defects.
(a) If Buyer delivers a Defect Notice as provided in Section 12.01, Sellers may object to (or elect to attempt to Cure) any Environmental Defect and/or any Asserted Defect Amount as set forth in the Defect Notice, which objection (or election) shall be in writing, delivered prior to Closing (a “Seller Dispute Notice”) and shall identify:
(i) those Environmental Defects that Sellers dispute exist;
(ii) those Asserted Defect Amounts that Sellers disagree with (including any Asserted Defect Amounts attributable to an Environmental Defect that Sellers do not dispute exists); and
(iii) those Environmental Defects that Sellers desire to attempt to Cure.
(b) Subject to Section 12.03, if Sellers fail to object to (or fail to elect to Cure) an Environmental Defect or Asserted Defect Amount set forth in a Defect Notice prior to Closing, then, at Closing, the Purchase Price shall be reduced by an amount equal to the Asserted Defect Amount of such Environmental Defect.
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(c) If Sellers timely deliver a Seller Dispute Notice, Buyer and Sellers shall use good faith efforts to agree on the following prior to Closing:
(i) the validity and amount of each Environmental Defect claim disputed by Sellers; and
(ii) the effect of any effort by Sellers to Cure any Environmental Defect (the dollar amount of Environmental Defect claims agreed to by Buyer and Sellers (including the Asserted Defect Amount of all Environmental Defects identified in the Defect Notice that Sellers did not dispute in the Seller Dispute Notice or attempt to cure pursuant to Section 12.03(a)(ii)) is referred to as the “Agreed Defect Amount”).
If Buyer and Sellers do not agree on the validity or amount of any Environmental Defect claim disputed by Sellers (the “Disputed Defect Claims”) within five (5) days after Sellers’ delivery of the Seller Dispute Notice (or, if earlier, as of Closing), either Buyer or Sellers may engage the Arbiter in accordance with Article XII to determine the Final Disputed Defect Amount, which shall be based on the Lowest Cost Response (such that the Final Disputed Defect Amount shall not exceed the amount required to remove, remediate or otherwise resolve, to standards as required by a Lowest Cost Response, the matter giving rise to the Environmental Defect), and if Buyer or Sellers elect to engage the Arbiter the Closing (and the End Date) shall be extended to the second business day after the Final Disputed Defect Amount is determined by the Arbiter (provided Sellers may elect to accept Buyer’s position on Disputed Defect Claims by delivery of notice to Buyer and proceed to Closing (or if requested by Sellers, Buyer and Sellers will use good faith efforts to agree on an escrow arrangement pursuant to which the parties can proceed to Closing and place proceeds related to any Disputed Defect Claim that remains unresolved in escrow pending the resolution of such Disputed Defect Claim)).
Section 12.03 Cure; Purchase Price Adjustment.
(a) Sellers may, at their option, with respect to each Environmental Defect (i) elect to include the cost to Cure such Environmental Defect in the calculation of the Closing Date Defect Amount in accordance with Section 12.03(c), (ii) subject to Section 12.03(b), take such action as may be necessary to Cure such Environmental Defect prior to Closing to Buyer’s reasonable satisfaction, or (iii) if the Asserted Defect Amount is greater than the Environmental Allocated Value of the Affected Asset, retain an Affected Asset, in which case such Affected Asset shall be deemed to be an Excluded Asset and the Purchase Price shall be reduced by an amount equal to the Environmental Allocated Value, if any, of such Affected Asset as provided in Section 12.03(c). If Sellers Cure an Environmental Defect prior to Closing, then any Asserted Defect Amount with respect to such Environmental Defect shall be disregarded for purposes of Section 12.03(c) and otherwise in calculating the Closing Date Defect Amount and any reduction of the Purchase Price.
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(b) If Sellers elect to attempt to Cure any Environmental Defect prior to Closing, the Cure will not be accomplished prior to the Closing Date and the Affected Assets are not retained by Sellers pursuant to Section 12.03(a)(iii), then Sellers shall notify Buyer prior to the Closing Date of Sellers’ inability to fully Cure such Environmental Defect (the “Remaining Cure Notice”) and shall include the remaining cost to Cure (the “Remaining Cure Cost”) such Environmental Defect in the calculation of the Closing Date Defect Amount in accordance with Section 12.03(c). If Buyer and Sellers do not agree on the effectiveness or completeness of Sellers’ attempted Cure or the validity or amount of any Remaining Cure Cost, within three (3) Business Days after Sellers’ delivery of the Remaining Cure Notice (or, if earlier, as of Closing), either Buyer or Sellers may engage the Arbiter in accordance with Section 12.04 to determine what further Cure is needed and/or the value of the Remaining Cure Cost, which shall be treated as a Disputed Defect Claim for purposes of Section 12.03(c) and Section 12.04, and if Buyer or Seller elects to engage the Arbiter the Closing (and the End Date) shall be extended to the second Business Day after such determination by the Arbiter (provided Sellers may elect to accept Buyer’s position on such matters by delivery of notice to Buyer and proceed to Closing (or if requested by Sellers, Buyer and Sellers will use good faith efforts to agree on an escrow arrangement pursuant to which the parties can proceed to Closing and place proceeds related to any Disputed Defect Claim that remains unresolved in escrow pending the resolution of such Disputed Defect Claim)). For the avoidance of doubt, the failure of Sellers to provide a Remaining Cure Notice shall not mean that a Cure was in fact accomplished.
(c) The “Closing Date Defect Amount” shall be the sum of (without duplication):
(i) the Agreed Defect Amount or Remaining Cure Costs, as applicable, of each Environmental Defect related to an Asset to be included in the Transaction;
(ii) the Environmental Allocated Value of any Affected Asset to be excluded from the Transaction pursuant to this Article XII; and
(iii) the sum of all Final Disputed Defect Amounts determined pursuant to Section 12.02 of each Environmental Defect related to an Asset to be included in the Transaction.
(d) Notwithstanding anything to the contrary in this Agreement, Buyer shall not be entitled to any adjustment to the Purchase Price under this Article XII for purposes of determining the Adjusted Purchase Price pursuant to Section 2.04(b)(iii) unless and until the Closing Date Defect Amount exceeds $500,000.00 (the “Defect Deductible,” and the amount by which the Closing Date Defect Amount exceeds the Defect Deductible is referred to as the “Defect Excess”), at which time Buyer would be entitled to an adjustment to the Purchase Price for purposes of determining the Adjusted Purchase Price pursuant to Section 2.04 in an amount equal to the Defect Excess.
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Section 12.04 Engagement of Arbiter.
(a) In the event the Parties are unable to reach agreement on any Disputed Defect Claim either Buyer or Sellers may engage an independent environmental consulting firm mutually acceptable to Buyer and Sellers (such firm, the “Arbiter”) to determine the validity or value, as applicable, of any such matter. The Arbiter’s engagement shall be limited to the determination of the validity and/or value of the matter submitted to the Arbiter as being in dispute. In connection with the engagement of the Arbiter, each of Buyer and Sellers shall execute any engagement, indemnity, and other agreements as the Arbiter shall require as a condition to such engagement. If Buyer and Sellers are unable to agree upon the designation of a Person to act as Arbiter, then Buyer or Sellers, or any of them, may in writing request the Bankruptcy Court to appoint the Arbiter; provided that such Person so appointed shall be an independent environmental consulting firm with no material relationships with Buyer or Sellers or their respective Affiliates in the three (3) prior years and shall have experience with companies engaged in oil field services activities.
(b) The Arbiter shall determine the validity and/or value of the matters submitted to it within thirty (30) days after the matter is submitted to it. If any matters are submitted to the Arbiter for resolution, (i) each of Buyer and Sellers shall furnish to the Arbiter such workpapers and other documents and information relating to such matters as the Arbiter may request and are available to that Party or its Affiliates and will be afforded the opportunity to present to the Arbiter any material relating to the determination of the matters in dispute and to discuss such determination with the Arbiter prior to any written notice of determination hereunder being delivered by the Arbiter, (ii) the Arbiter shall not assign a value to any item that is submitted to the Arbiter that is greater than the Asserted Defect Amount or less than the smallest value for such item claimed by either Party, and (iii) the determination by the Arbiter of the validity and/or value of a Disputed Defect Claim (such validity and/or value of a Disputed Defect Claim as determined by the Arbiter or by the agreement of Sellers and Buyer after such Disputed Defect Claims is submitted to the Arbiter, the “Final Disputed Defect Amount”) as set forth in a written notice delivered to Sellers and Buyer by the Arbiter shall be made in accordance with this Agreement and shall be binding and conclusive on the Parties and shall constitute an arbitral award that is final, binding and unappealable and upon which a judgment may be entered by a court having jurisdiction thereof.
(c) The fees and expenses of the Arbiter shall be paid by and apportioned between Buyer and Sellers based on the aggregate dollar amount in dispute and the relative recovery as determined by the Arbiter of Sellers and Buyer, respectively (such that, by way of example, if the amount in dispute is $100 and it is resolved $70 in favor of Buyer and $30 in favor of Sellers, then Sellers would bear 70% of the cost and Buyer would bear 30% of the cost).
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| SELLERS: | |
| BASIC ENERGY SERVICES, INC. |
| By: | /s/ Keith L. Schilling |
| Name: | Keith L. Schilling |
| Title: | President and Chief Executive Officer |
| BASIC ENERGY SERVICES, L.P. |
| By: | Basic Energy Services GP, LLC, its general partner |
| By: | /s/ Keith L. Schilling |
| Name: | Keith L. Schilling |
| Title: | President and Chief Executive Officer |
| C&J WELL SERVICES, INC. |
| By: | /s/ Keith L. Schilling |
| Name: | Keith L. Schilling |
| Title: | President and Chief Executive Officer |
| KVS TRANSPORTATION, INC. |
| By: | /s/ Keith L. Schilling |
| Name: | Keith L. Schilling |
| Title: | President and Chief Executive Officer |
Signature
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Asset Purchase Agreement
| SELLERS: | |
| AXIS ENERGY SERVICES HOLDINGS, LLC |
| By: | /s/ Jeffrey Scofield |
| Name: | Jeffrey Scofield |
| Title: | Director |
Signature
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Asset Purchase Agreement
Exhibit A
| (a) | Definitions. |
“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations as promulgated thereunder.
“365 Contracts” means all Applicable Contracts and other executory contracts and unexpired leases to which a Seller is a party that relate to the Assets, in each case that may be assumed by one or more Sellers pursuant to section 365 of the Bankruptcy Code.
“Accounts Receivable” means the accounts receivable and any other unbilled revenue of Sellers that are attributable to the Business that are current assets, as determined in accordance with GAAP, as of the Measurement Time.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person. For such purposes, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Alternative Transaction” means, (a) a sale, transfer or other disposition, directly or indirectly, of all or a material portion of the Assets (except any such sale, transfer or other disposition to the extent permitted by Section 5.01(b)(i)) to another buyer or buyers other than Buyer, (b) a sale, transfer or other disposition, directly or indirectly, of all or a material portion of the Assets used for a particular business segment of Sellers or all or a material portion of the Assets used in a particular geographic region of Sellers (except any such sale, transfer or other disposition to the extent permitted by Section 5.01(b)(i)), (c) the consummation of any state court foreclosure action as to a material portion of the Assets, (d) successful credit bid transaction with respect to the Assets or (e) a plan of reorganization or liquidation that does not contemplate the sale of the Assets to the Buyer or an Affiliate thereof in accordance with the terms of this Agreement.
“Applicable Contracts” means (a) all Contracts to which a Seller is a party or is bound to the extent covering, attributable to or relating to the conduct of the Business, any of the Assets or to which an Asset is subject or bound, (b) all Surface Leases, and (c) all Vehicle Finance Leases, including without limitation, in the case of clause (a) of this definition, those Contracts described on Annex F.
“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, order, injunction or judgment adopted or promulgated by a Governmental Authority (or under the authority of the New York Stock Exchange) that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
“Applicable Schedule 3.06 Consent” means any Consent set forth on Disclosure Schedule 3.06 relating to an Applicable Contract for which the counterparty’s consent to assignment would be required for such Applicable Contract to be assumed and assigned to Buyer, after giving effect to sections 365(c)(1) and 365(f)(1) of the Bankruptcy Code.
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“Assigned Contracts” means the Desired 365 Contracts and all other Applicable Contracts that are not 365 Contracts (other than Excluded Assets).
“Assumed Liabilities” means:
(a) all Liabilities under or associated with or appurtenant to the Assets to the extent related to periods from and after the Closing Date, including without limitation all such Liabilities arising out of the operation and/or ownership of the Assets from and after the Closing Date;
(b) all Assumed Prepetition Accounts Payable;
(c) [reserved];
(d) all asset retirement obligations related to the Assets;
(e) all Liabilities associated with the Assets arising under Environmental Law, including with respect to Environmental Claims whether arising on, before or after the Closing Date, including without limitation those related to the control, storage, handling, transporting and disposing of or discharge of all materials, substances and wastes from the Assets, including produced water, hydrogen sulfide gas, drilling fluids, NORM and other wastes;
(f) Buyer Taxes;
(g) all Liabilities with respect to the Cure Costs required to be paid by Buyer in accordance with Section 5.02(g); and
(h) all Liabilities required to be assumed by Buyer pursuant to Section 7.05.
“Auction” means the auction for the sale of the Assets, if any, to be conducted in accordance with the Bid Procedures.
“Avoidance Action” means any claim, right or cause of action of Sellers arising under chapter 5 of the Bankruptcy Code and any analogous state or federal statutes and common law relating to the Assets, the Purchased Contracts and the Assumed Liabilities.
“Back-up Bidder” has the meaning set forth in the Bid Procedures Order.
“Back-up Termination Date” means the first to occur of (a) sixty (60) days after the entry of the order of the Bankruptcy Court approving an Alternative Transaction with a Successful Bidder other than Buyer or (b) consummation of an Alternative Transaction with the Successful Bidder (other than Buyer) at the Auction.
“Bankruptcy Code” means title 11 of the United States Code, as amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas or any other court having jurisdiction over the Bankruptcy Cases from time to time.
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“Basic Parent” means Basic Energy Services, Inc., a Delaware corporation.
“Bid Deadline” has the meaning set forth in the Bid Procedures.
“Bid Procedures” means the Bidding Procedures, substantially in the form attached as Exhibit 1 to the Bid Procedures Order, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Bid Procedures Order” means an order of the Bankruptcy Court, substantially in the form attached hereto as Exhibit I, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Business” means the business as conducted by Sellers with the Assets prior to and after the Petition Date.
“Business Day” means any day, excluding Saturdays, Sundays or legal holidays, on which commercial banks are open for business in New York, NY.
“Buyer Entities” means (a) Buyer and (b) each of Buyer’s Subsidiaries.
“Buyer Financial Representations” means the representation and warranties of Buyer contained in Section 4.13 and Section 4.14.
“Buyer Fundamental Representations” means the representations and warranties of Buyer contained in Section 4.05, Section 4.06, Section 4.10 and Section 4.12.
“Buyer LLC Agreement” means that certain Amended and Restated Limited Liability Company Agreement of Buyer dated as of July 9, 2018, as amended by that certain Amendment to Amended and Restated Limited Liability Company Agreement dated September 14, 2018, that certain Second Amendment to Amended and Restated Limited Liability Company Agreement dated March 25, 2021, that certain Third Amendment to Amended and Restated Limited Liability Company Agreement dated May 4, 2021 and that certain Fourth Amendment to Amended and Restated Limited Liability Company Agreement dated August 16, 2021 (the “Fourth Amendment to Company Agreement”).
“Buyer Material Adverse Effect” means a material adverse effect on the ability of Buyer to consummate the Transactions or to perform its obligations hereunder and under the other Transaction Documents to which it is or will be a party.
“Buyer Parent” means Lime Rock Partners VIII, L.P., a Delaware limited partnership.
“Buyer Taxes” means any Taxes that are allocable to (or payable by) Buyer pursuant to Section 7.06(a) (including Non-Income Taxes that are due with respect to the Assets for the taxable period that includes the Closing Date and assumed by Buyer as provided in Section 7.06(a)(ii) and Section 7.06(b)) other than Taxes resulting from a breach of a representation or warranty set forth in Section 3.11.
“Buyer’s Knowledge” means the actual knowledge of Dirk Lee, Will Petter and Ryan Phillips.
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“Claim” means a claim against any Seller as defined in Bankruptcy Code section 101(5).
“Class D-1 Units” means equity interests in Buyer designated as “Class D-1 Units” as provided in the Buyer LLC Agreement.
“Closing Cash Payment Amount” means an amount equal to (i) the Closing Date Adjusted Purchase Price minus (ii) the Closing Date Equity Purchase Price minus (iii) the Escrow Funds.
“Closing Date” means the date of the Closing.
“COBRA” means the continuation coverage requirements of sections 601 et seq. of the Employee Retirement Income Security Act of 1974 and section 4980B of the Code.
“Code” means the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” means the Confidentiality and Non-Disclosure Agreement between Buyer Parent and Basic Parent, dated effective as of May 29, 2021.
“Contract” means any contract or agreement, but excluding, however, (a) any lease, easement, right-of-way (including any Surface Leases) or other instrument, in each case, creating any real property interests, or (b) any Permit.
“Cure” means correction of a condition, matter, issue or circumstance that addresses the condition, matter, issues or circumstance such that, as corrected, such correction is sufficient to cause such condition, matter, issue or circumstance to comply in all respects with Environmental Laws.
“Deposit Escrow Agreement” means that certain Escrow Agreement dated as of the Execution Date, by and among Sellers, Buyer and the Escrow Agent.
“Designation Deadline” means 5:00 p.m. (Central Prevailing Time) on the date that is two (2) days prior to the date of the Auction, or such later date as Buyer and Sellers shall mutually agree and, if applicable, as the Bankruptcy Court may authorize.
“Disclosure Schedule” means the letter dated as of the Execution Date, executed by Sellers on the Execution Date in connection with the execution and delivery of this Agreement, which letter is identified therein as the Disclosure Schedule for purposes of this Agreement.
“Environmental Claim” means any affirmative obligation to affect cleanup or remediation under, or resolve noncompliance with, any Environmental Law and any Liability associated with or arising therefrom.
“Environmental Law” means any Applicable Law or any binding agreement with any Governmental Authority relating to the protection of occupational or human health and safety (to the extent relating to exposure to Hazardous Substances), the environment (including ambient air, soil, surface water or groundwater, or subsurface strata), protection of natural resources, endangered, threatened or candidate species, biological or cultural resources, the release into the indoor or outdoor environment of pollutants, contaminants, wastes, chemicals, or toxic or other hazardous substances (or the cleanup thereof) or concerning the exposure to, or the Release or remediation of any Hazardous Substances. The term “Environmental Laws” does not include good or desirable operating practices or standards that may be employed or adopted by other salt water disposal well operators or recommended, but not required, by a Governmental Authority.
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“Environmental Permit” means any Permit issued pursuant to or otherwise required under Environmental Laws.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means, with respect to any Person, any entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes such Person, or that is a member of the same “controlled group” as such Person pursuant to Section 4001(a)(14) of ERISA.
“Escrow Account” means the escrow account established pursuant to the Deposit Escrow Agreement.
“Escrow Agent” means that certain Third Party that is a party, as escrow agent, to the Deposit Escrow Agreement.
“Excess Cure Costs” means, with respect to any individual 365 Contract, the amount of Cure Costs with respect to such 365 Contract that exceeds the amount set forth on the 365 Schedule for such 365 Contract as of the Designation Deadline (or, if any 365 Contract is first identified to Buyer by Sellers after the Designation Deadline, as of (1) Business Day after such identification) multiplied by 110%.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Records” means any items, including items referenced in the definition of “Data,” that are (a) Tax records of Sellers (other than copies of Tax records as described in Section 2.01(f)), (b) not transferable without payment of additional consideration (unless Buyer has agreed in writing to pay such additional consideration) or that Sellers and their Affiliates would not be able to otherwise compile and prepare for transfer using commercially reasonable efforts, (c) e-mails or other electronic files on Sellers’ or their Affiliates’ servers and networks, (d) employee files and personnel records not involving any Continuing Employee, (e) legal records and legal files of Sellers, (f) all work product of and attorney-client communications with Sellers’ legal counsel or any other documents or instruments that may be protected by an attorney-client privilege (but excluding any title opinions), (g) economic projections, (h) data, correspondence, materials, documents, descriptions or records relating to the Auction, marketing, sales negotiation or sale of any of the Assets, including the existence or identities of any prospective inquirers, bidders or prospective purchasers of any of the Assets, any bids received from and records of negotiations with any such prospective purchasers and any analyses of such bids by any Person, (i) correspondence between or among any Seller or its Affiliate or their respective representatives, and any prospective purchaser other than Buyer, and correspondence between any Seller or its Affiliates or any of their respective representatives with respect to any of the bids, the prospective purchasers or the Transactions, or (j) originals of the Data that relate to both the Assets and any Excluded Assets (but that relate primarily to any Excluded Assets) (provided that Buyer shall be provided a copy of such Data as contemplated by Section 2.01(f)) and copies of all other Data.
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“Existing Letters of Credit” means all performance bonds, surety bonds, letters of credit, guarantees, security deposits and similar assurances in effect as of the Execution Date that relate to the Assets.
“Expenses” means any and all notices, actions, suits, proceedings, claims, demands, assessments, judgments, costs, penalties and expenses, including attorneys’ and other professionals’ fees and disbursements incident to the foregoing.
“Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction with respect to the subject matter, (a) which has not been reversed, stayed, modified, amended, enjoined, set aside, annulled or suspended and (b) with respect to which no stay shall be in effect.
“GAAP” means generally accepted accounting principles in the United States.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental unit, authority, department, court, administrative body, agency or official, including any political subdivision thereof, or any tribal authority.
“Hazardous Substances” means any pollutant, contaminant, waste, chemical, chemical compound, substance or material or any toxic, radioactive, infectious, carcinogenic, flammable ignitable, corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, whether solid, liquid or gas, including any quantity of asbestos in any form, urea formaldehyde, polychlorinated biphenyls, toxic mold, radon gas, radioactive materials, crude oil or any fraction thereof, all forms of natural gas, and petroleum, its derivatives, by-products and other hydrocarbons, per and polyfluoroalkyl substances and any substance, waste or material regulated under any Environmental Law.
“Indemnified Party” means a Party entitled to, or seeking to assert rights to, indemnification under Article X, whether on behalf of itself or, with respect to Sellers, any of the Seller Indemnified Parties.
“Indemnifying Party” means a Party from whom indemnification is sought under Article X by an Indemnified Party.
“Intellectual Property” means (a) inventions and invention disclosures; (b) patents and patent applications (including statutory invention registrations) or utility models (whether or not filed); (c) trademarks, service marks, logos, trade dress, trade names, domain names, and other indicia of commercial source or origin, including registrations and applications for registration thereof and goodwill associated with any of the foregoing (collectively, “Trademarks”); (d) copyrights (whether registered or unregistered) and other works of authorship (whether or not published) including registrations and applications for registration thereof; (e) trade secrets, know-how, software, formulae, customer lists, manufacturer lists, data (including seismic data), processes, protocols, specifications, analyses, plans, techniques, and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as notebooks, samples, studies and summaries); and (f) other intellectual property.
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“Liability” means any direct or indirect liability, indebtedness, obligation, commitment, expense, loss, claim, deficiency, or guaranty of or by any Person of any types, whether known or unknown, and whether accrued, absolute, contingent, matured or unmatured.
“Lien” means, with respect to any property or asset, any mortgage, lien, interest pledge, charge, security interest, or encumbrance, easement, servitude, transfer restriction, mechanics’ lien, materialman’s lien, statutory lien or right, and any other consensual or non-consensual lien, whenever granted and including without limitation those charges or interests in property within the meaning of “lien” under section 101(37) of the Bankruptcy Code.
“Liquidating Trust” means a liquidating or similar trust as may be established with respect to Sellers’ estates in conjunction with the Bankruptcy Cases.
“Liquidating Trustee” means the trustees or other representative of the Liquidating Trust.
“Lowest Cost Response” means the response or corrective action that fully addresses the condition, matter, issues or circumstance present at the lowest reasonable cost allowed under Environmental Law. The Lowest Cost Response may include taking no action, leaving the condition unaddressed, periodic monitoring, or the recording of notices in lieu of remediation, if such responses are allowed under Environmental Law. The Lowest Cost Response shall not include (and Sellers shall have no liability for) (a) the costs of Buyer’s and/or its Affiliates’ employees, project manager(s), or attorneys, (b) expenses for matters that are costs of doing business, e.g., those costs that would ordinarily be incurred in the day-to-day operations of the Assets, or in connection with permit renewal/amendment activities, maintenance on active Resource Conservation and Recovery Act of 1976, as amended (“RCRA”), waste management units, and operation and oversight of active RCRA waste management units, (c) overhead costs of Buyer and/or its Affiliates, (d) costs and expenses that would not have been required under Environmental Law as it existed at the Execution Date, (e) costs or expenses to the extent incurred in connection with remedial or corrective action that is designed to achieve standards that are more stringent than those required for similar facilities or that fails to reasonably take advantage of applicable risk reduction or risk assessment principles allowed under applicable Environmental Law, and/or (f) any costs or expenses to the extent relating to the assessment, remediation, removal, abatement, transportation, and disposal of any asbestos, asbestos containing materials, or NORM”.
“Measurement Time” means 11:59 p.m. on the date immediately prior to the Closing Date.
“Non-Income Tax” means any Tax other than U.S. federal income Tax, and income, franchise, capital gains, or similar Tax imposed by any U.S. state or local jurisdiction (including the Texas Margin Tax), the federal Heavy Highway Vehicle Use Tax and Transfer Taxes, but including any property Tax, severance Tax, production Tax or sales and use Tax (other than the federal Heavy Highway Vehicle Use Tax).
“Ordinary Course of Business” means the ordinary course of business of Sellers, consistent in all material respects with past custom and practice of Sellers, including changes in response to the COVID-19 pandemic and the governmental actions related thereto. Without limiting the effect of the foregoing, the term “Ordinary Course of Business” as used herein shall be no broader than the term “ordinary course of business” as used in section 363 of the Bankruptcy Code.
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“Organizational Documents” means, with respect to any Person, the certificate or articles of incorporation, bylaws, certificate of formation or organization, partnership agreement, operating agreement, limited liability company agreement or any other similar organizational documents of such Person.
“Permits” means all governmental (whether federal, state or local) permits, licenses, franchises, certificates, approvals or other similar authorizations.
“Person” means any person, entity or Governmental Authority of any nature whatsoever, specifically including an individual, firm, company, corporation, partnership, trust, joint venture, association, joint stock company, limited liability company, estate, unincorporated organization or other entity or organization.
“Petition Date” means the date of commencement of the Bankruptcy Cases.
“Plan” means, if applicable, the joint plan of reorganization of Sellers under chapter 11 of the Bankruptcy Court with respect to the Bankruptcy Cases.
“Prepetition Accounts Payable” means the accounts payable attributable to the Assets, in each case in such amount as is outstanding as of the Petition Date to the extent remaining outstanding as of the Measurement Time.
“Proceeding” means any action, claim, demand, audit, hearing, complaint, investigation, litigation, or suit commenced, brought, conducted, or heard by or before any Governmental Authority.
“Properties” means the lands covered by the Surface Tracts and the Surface Leases.
“Property Agreements” means the Surface Leases and any other real property leases, licenses, subleases, rental or occupancy agreements, concessions and other agreements (written or oral) pursuant to which any Seller holds any of the Assets constituting interests in real property.
“Property Expenses” means all expenses, charges and capital expenses that are attributable to the ownership, maintenance and operation of Sellers’ interest in the Assets during the period in question (other than Taxes).
“Release” means releasing, disposing, discharging, injecting, spilling, leaking, leaching, dumping, pouring, emitting, escaping, emptying, seeping, placing, migrating and the like into or upon any land or water or air or otherwise entering into the environment.
“Replacement Letters of Credit” means any Existing Letter of Credit that is provided as security for, or performance assurance under, any Asset, excluding the letters of credit described under the heading “Letters of Credit” on Disclosure Schedule 3.14.
“Representatives” means, with respect to any Person, the officers, directors, employees, members, managers, partners, investment bankers, attorneys, accountants, consultants or other advisors, agents or representatives of such Person, when acting in such capacity on behalf of such Person.
“Sale Hearing” has the meaning set forth in the Bid Procedures Order.
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“Sale Order” means an order of the Bankruptcy Court, substantially in the form attached hereto as Exhibit J, approving this Agreement and all of the terms and conditions hereof, and approving and authorizing Sellers to consummate the Transactions, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Seller Fundamental Representations” means the representations and warranties of Sellers contained in Section 3.15 and Section 3.16.
“Seller Material Adverse Effect” means a material adverse effect on (a) the ownership, operation, financial condition or value of the Assets, considered as a whole, or (b) the ability of either Seller to perform its respective obligations under the Transaction Documents or consummate the Transactions; provided that any such material adverse effect that results from any of the following matters shall not be taken into account in determining whether a material adverse effect has occurred under clause (a) of this definition: (i) entering into this Agreement or the announcement of the Transactions; (ii) changes in financial or securities markets generally; (iii) changes in general economic or political conditions in the United States or worldwide; (iv) changes in conditions or developments generally applicable to the oil and gas industry in the area where the Assets are located, including, but not limited to, changes in the market price of oil, natural gas or other hydrocarbon products or changes in general market prices in the produced water disposal, gathering and/or transportation industry generally; (v) acts of God, including hurricanes, storms or other naturally occurring events; (vi) acts or failures to act of Governmental Authorities; (vii) matters disclosed on any Exhibit or Annex or in the Disclosure Schedule; (viii) actions taken or omissions made after the Execution Date as permitted under this Agreement or with the express written consent of Buyer; (ix) any epidemic, pandemic or disease outbreak (including the COVID-19 virus) or hostilities, terrorist activities or war or any similar disorder and, in each case, governmental actions related thereto; (x) matters that are cured or no longer exist by the earlier of Closing and the termination of this Agreement, including matters to the extent a purchase price adjustment is provided for under this Agreement; (xi) any change in laws or in GAAP and any interpretations thereof from and after the Execution Date; (xii) Casualty or Condemnation Loss; (xiii) the commencement or pendency of the Bankruptcy Cases; (xiv) the departure of officers, managers or directors of Sellers after the Execution Date; (xv) any objections in the Bankruptcy Court to (A) this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, (B) the reorganization of any Seller and any related plan of reorganization or disclosure statement, (C) the Bid Procedures or the sale motion or (D) the assumption or rejection of any Purchased Contract; and (xvi) any order of the Bankruptcy Court (except any such order that would preclude or prohibit Sellers from consummating the Transactions) or any actions or omissions of Sellers in compliance therewith.
“Sellers’ Knowledge” means the actual knowledge of Keith L. Schilling, Adam Hurley and James F. Newman.
“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.
“Straddle Period Payroll Obligations” means all payroll obligations (include applicable payroll taxes) to the Continuing Employees incurred in the ordinary course and related to any incomplete payroll period between (x) the end of the final full payroll period prior to the Closing and (y) the Closing Date.
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“Successful Bidder” has the meaning set forth in the Bid Procedures Order.
“Tax” means any tax, governmental fee or other like assessment or charge of any kind whatsoever in the nature of a tax (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition of any such tax (domestic or foreign), and any liability for any of the foregoing by reason of a contract, assumption, transferee or successor liability, operation of law or otherwise.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Taxing Authority” has the meaning set forth in the definition of Tax.
“Third Party” means any Person other than a Party or its Affiliates.
“Transaction Documents” means this Agreement, the Assignment and Bill of Sale, the Assumption Agreement, the Surface Deeds, the IP Assignment Agreement, the Fourth Amendment to Company Agreement, any other agreement between or among Buyer and any Seller that expressly states that it constitutes a Transaction Document for purposes of this Agreement, and all other agreements, documents and instruments entered into by Buyer, on the one hand, and a Seller, on the other hand, as of or after the Execution Date and at or prior to Closing in connection with the transactions contemplated hereby (as each such document, agreement and instrument may be amended, supplemented or modified).
“Transactions” means the transactions contemplated by this Agreement and the other Transaction Documents, including the purchase and sale of Assets for the Purchase Price and the assumption of the Assumed Liabilities in accordance with this Agreement and the other Transaction Documents.
“Willful Breach” means, with respect to any Party, that such Party knowingly does one or more of the following: (a) such Party willfully and intentionally breaches in any material respect (by refusing to perform or taking an action prohibited) any material pre-Closing covenant, obligation or agreement applicable to such Party, or (b) such Party willfully and intentionally causes any of its representations or warranties under this Agreement to not be true and correct in all material respects after the Execution Date and prior to the Closing Date. For clarity, if a Party is obligated hereunder to use its commercially reasonable efforts to perform an action or to achieve a result, the material failure to use such commercially reasonable efforts would constitute a willful and intentional breach of this Agreement.
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| (b) | Each of the following terms is defined in the Section set forth opposite such term: |
| Term | Section |
| 2020 Audited Financial Statements | 4.13(a) |
| 2021 Interim Financial Statements | 4.13(a) |
| 365 Schedule | 5.02(a) |
| Accounting Firm | 7.06(c) |
| Accrued PTO | 7.05(f) |
| Acquired Accounts Receivable | 2.17 |
| Adjusted Purchase Price | 2.03(a) |
| Affected Asset | 12.01 |
| Aggregate Cap | 10.02(b) |
| Agreed Defect Amount | 12.02(b)(ii) |
| Agreement | Preamble |
| Agua Libre | Preamble |
| Allocated Value | 2.03(b) |
| Allocation | 7.06(c) |
| Arbiter | 12.04 |
| Asserted Defect Amount | 12.01(a)(v) |
| Assets | 2.01 |
| Assignment and Bill of Sale | 2.05(c)(i) |
| Assumed Prepetition Accounts Payable | 2.17 |
| Assumption Agreement | 2.05(c)(ii) |
| Audit Fees | 2.06(f) |
| Bankruptcy Cases | Recitals |
| Basic | Preamble |
| Basic LP | Preamble |
| Bid Procedures Motion | 7.02(b) |
| Break-Up Fee | 9.03(a) |
| Buyer | Preamble |
| Buyer Non-Party Group | 10.07 |
| Buyer Units | 4.12(a) |
| C&J | Preamble |
| Cap | 10.02(b) |
| Cash Purchase Price | 2.03(a) |
| Casualty or Condemnation Loss | 7.09(a) |
| Chosen Courts | 11.06 |
| Closing | 2.05 |
| Closing Amount Excess | 2.07(a) |
| Closing Amount Shortfall | 2.07(b) |
| Closing Date Adjusted Purchase Price | 2.04(d)(i) |
| Closing Date Defect Amount | 12.03(c) |
| Closing Date Equity Consideration | 2.04(e) |
| Closing Date Equity Purchase Price | 2.04(e) |
| Closing Statement | 2.04(d)(i) |
| Compensation Schedule | 7.05(b) |
| Consent | 3.06 |
| Consent Notice | 2.12 |
| Continuing Employee | 7.05(b) |
| A - 11 |
| Term | Section |
| Cure Costs | 5.02(a) |
| Data | 2.01(f) |
| Defect Deductible | 12.03(d) |
| Defect Excess | 12.03(d) |
| Defect Notice | 12.01 |
| Defect Notice Deadline | 12.01 |
| Defect Reports | 12.01 |
| Desired 365 Contracts | 5.02(b) |
| Disputed Defect Claims | 12.02 |
| Employment Offer | 7.05(a) |
| End Date | 9.01(b) |
| Environmental Allocated Value | 12.01(f) |
| Environmental Defect | 12.01 |
| Equitable Limitations | 3.03 |
| Equity Consideration | 2.03(a) |
| Equity Purchase Price | 2.03(a) |
| Equity Shortfall | 2.07(a) |
| Escrow Funds | 2.09(a) |
| Excess Recovery Amount | 7.08 |
| Excluded Asset PSA | 5.03(e) |
| Excluded Assets | 2.02 |
| Excluded Liabilities | 2.05(b) |
| Execution Date | Preamble |
| Expense Reimbursement | 9.03(a) |
| Final Dispute Defect Amount | 12.04(b) |
| Final Settlement Statement | 2.06(a) |
| Financial Statements | 4.13(a) |
| Indemnification Claim | 10.03(a) |
| Issuance Agreement | 2.05(c)(ix) |
| Loss | 10.02(a) |
| Losses | 10.02(a) |
| KVS | Preamble |
| Material Contract | 3.05(a) |
| Objection Notice | 2.06(c) |
| Party | Preamble |
| Parties | Preamble |
| Phase I Assessment | 5.03(b) |
| Post-Closing Consent Period | 2.12(c) |
| Potential Bidder | 7.02(f) |
| Preferential Purchase Rights | 3.15 |
| Prorated Expense Items | 2.04(c)(ii) |
| Purchase Price | 2.03(a) |
| Purchased Contracts | 2.01(e) |
| Referee | 2.06(d) |
| Remaining Cure Cost | 12.03(b) |
| A - 12 |
| Term | Section |
| Remaining Cure Notice | 12.03(b) |
| Required Consent | 2.12(a) |
| Schedule Update Notice | 7.07 |
| Seller | Preamble |
| Sellers | Preamble |
| Seller Dispute Notice | 12.02 |
| Seller Employee | 3.12(a) |
| Seller Indemnified Parties | 10.02(a) |
| Seller Non-Party Group | 10.07 |
| Surface Deeds | 2.05(c)(iii) |
| Surface Leases | 2.01(b) |
| Surface Tracts | 2.01(a) |
| Survival Date | 10.01(b) |
| Taxing Authority | Exhibit A – within “Tax” |
| Trademarks | Exhibit A – within “Intellectual Property” |
| Transfer Taxes | 7.06(b) |
| Transferred Intellectual Property | 3.09 |
| Vehicles | 2.01(g) |
| Vehicle Finance Leases | 2.01(g) |
| (c) | References and Rules of Construction. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein and defined herein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law. The word “or” will have the inclusive meaning represented by the phrase “and/or.” The phrase “and/or” when used in a conjunctive phrase, shall mean any one or more of the Persons specified in or the existence or occurrence of any one or more of the events, conditions or circumstances set forth in that phrase; provided, however, that when used to describe the obligation of one or more Persons to do any act, it shall mean that the obligation is the obligation of each of the Persons but that it may be satisfied by performance by any one or more of them. “Shall” and “will” have equal force and effect. The word “extent” in the phrase “to the extent” shall mean the degree or proportion to which a subject or other things extends, and such phrase shall not mean simply “if.” References to any date shall mean such date in Fort Worth, Texas and for purposes of calculating the time period in which any notice or action is to be given or undertaken hereunder, such period shall be deemed to begin at 12:01 a.m. on the applicable date in Fort Worth, Texas. If a date specified herein for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day. All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars. THE PARTIES AGREE THAT THE BOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS LEGENDS. |
| A - 13 |
Exhibit B
ASSIGNMENT AND BILL OF SALE
[Omitted]
Exhibit C
ASSUMPTION AGREEMENT
[Omitted]
Exhibit D
SURFACE DEED
[Omitted]
Exhibit E
SELLER CERTIFICATES
[Omitted]
Exhibit F
SELLER FIRPTA CERTIFICATE
[Omitted]
Exhibit G
IP ASSIGNMENT AGREEMENT
[Omitted]
Exhibit H
BUYER CERTIFICATE
[Omitted]
Exhibit I
BID PROCEDURES ORDER
[Omitted]
Exhibit J
SALE ORDER
[Omitted]
Exhibit K
ISSUANCE AGREEMENT
[Omitted]
Exhibit L
LLC AGREEMENT ADDENDUM
[Omitted]
Exhibit 2.3
ASSET PURCHASE AGREEMENT
dated as of
August 17, 2021
by and between
Basic Energy Services, Inc.,
Basic Energy Services, L.P.,
C&J Well Services, Inc. and
KVS Transportation, Inc.,
as Sellers,
and
Berry Corporation (bry),
as Buyer
TABLE OF CONTENTS
Page
| ARTICLE I DEFINITIONS | 1 | |
| Section 1.01 | Definitions | 1 |
| ARTICLE II PURCHASE AND SALE | 2 | |
| Section 2.01 | Purchase and Sale of the Assets | 2 |
| Section 2.02 | Excluded Assets | 4 |
| Section 2.03 | Consideration | 5 |
| Section 2.04 | Adjustments to the Purchase Price | 5 |
| Section 2.05 | Closing | 8 |
| Section 2.06 | Final Settlement Statement | 9 |
| Section 2.07 | Post-Closing Payments | 11 |
| Section 2.08 | No Duplicative Effect; Methodologies | 12 |
| Section 2.09 | Purchase Price Deposit | 12 |
| Section 2.10 | Division of Revenues | 13 |
| Section 2.11 | Division of Expenses | 13 |
| Section 2.12 | Consents to Assign | 13 |
| Section 2.13 | Consents for Purchased Contracts | 15 |
| Section 2.14 | Assets Sold “As Is, Where Is” | 15 |
| Section 2.15 | Presence of Wastes, NORM, Hazardous Substances and Asbestos | 16 |
| Section 2.16 | Reconciliation of Postpetition Accounts Payable | 17 |
| Section 2.17 | Withholding | 17 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS | 17 | |
| Section 3.01 | Organization | 17 |
| Section 3.02 | Authority and Authorization | 17 |
| Section 3.03 | Enforceability | 18 |
| Section 3.04 | Conflicts | 18 |
| Section 3.05 | Material Contracts | 19 |
| Section 3.06 | Approvals | 20 |
| Section 3.07 | Environmental Matters | 20 |
| Section 3.08 | Litigation | 21 |
| i |
| Section 3.09 | Intellectual Property | 22 |
| Section 3.10 | Insurance Coverage | 23 |
| Section 3.11 | Taxes | 24 |
| Section 3.12 | Letters of Credit | 24 |
| Section 3.13 | Preferential Purchase Rights | 24 |
| Section 3.14 | Broker | 24 |
| Section 3.15 | Real Property | 25 |
| Section 3.16 | Labor and Employment Matters | 26 |
| Section 3.17 | Employee Benefit Matters | 26 |
| Section 3.18 | [Reserved] | 27 |
| Section 3.19 | Material Customers and Suppliers | 27 |
| Section 3.20 | Transactions with Affiliates | 27 |
| Section 3.21 | Accounts Receivable | 27 |
| Section 3.22 | No Other Representations | 27 |
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER | 27 | |
| Section 4.01 | Organization | 27 |
| Section 4.02 | Authorization and Authority | 28 |
| Section 4.03 | Enforceability | 28 |
| Section 4.04 | Conflicts | 28 |
| Section 4.05 | Broker | 28 |
| Section 4.06 | Financial Ability | 29 |
| Section 4.07 | Approvals | 29 |
| Section 4.08 | Litigation | 29 |
| Section 4.09 | Bankruptcy | 29 |
| Section 4.10 | Investigation | 29 |
| Section 4.11 | Qualification | 30 |
| Section 4.12 | No Other Representations | 30 |
| ARTICLE V COVENANTS OF SELLERS | 30 | |
| Section 5.01 | Operating Covenants | 30 |
| Section 5.02 | Assumption and Rejection of Executory Contracts and Leases | 33 |
| Section 5.03 | Access | 35 |
| Section 5.04 | Permits | 36 |
| ii |
| ARTICLE VI COVENANTS OF BUYER | 36 | |
| Section 6.01 | Access | 36 |
| Section 6.02 | Data Retention | 37 |
| ARTICLE VII COVENANTS OF BUYER AND SELLERS | 37 | |
| Section 7.01 | Commercially Reasonable Efforts; Further Assurances | 37 |
| Section 7.02 | Bankruptcy Proceedings | 38 |
| Section 7.03 | Public Announcements | 40 |
| Section 7.04 | Confidentiality | 40 |
| Section 7.05 | Employee Matters | 40 |
| Section 7.06 | Tax Matters; Apportionment of Tax Liability | 43 |
| Section 7.07 | Disclosure Schedule Updates | 45 |
| Section 7.08 | Replacement of Existing Letters of Credit | 45 |
| Section 7.09 | Casualty or Condemnation Loss | 46 |
| Section 7.10 | Transition Services Agreement | 46 |
| ARTICLE VIII CONDITIONS TO CLOSING | 47 | |
| Section 8.01 | Conditions to Obligations of Buyer and Sellers | 47 |
| Section 8.02 | Conditions to Obligation of Buyer | 47 |
| Section 8.03 | Conditions to Obligation of Sellers | 48 |
| ARTICLE IX TERMINATION | 49 | |
| Section 9.01 | Grounds for Termination | 49 |
| Section 9.02 | Effect of Termination | 51 |
| Section 9.03 | Break-Up Fee; Expense Reimbursement | 52 |
| ARTICLE X SURVIVAL AND INDEMNIFICATION | 53 | |
| Section 10.01 | Survival; Limited Recourse Against Sellers | 53 |
| Section 10.02 | Indemnification by Buyer | 54 |
| Section 10.03 | Indemnification Procedures | 55 |
| Section 10.04 | Express Negligence | 55 |
| Section 10.05 | Tax Treatment of Indemnity Payments | 56 |
| Section 10.06 | Sole and Exclusive Remedy | 56 |
| Section 10.07 | Limitation on Indemnity Obligations | 56 |
| ARTICLE XI MISCELLANEOUS | 56 | |
| Section 11.01 | Notices | 56 |
| Section 11.02 | Amendments and Waivers | 58 |
| iii |
| Section 11.03 | Expenses | 58 |
| Section 11.04 | Successors and Assigns/Liquidating Trust | 58 |
| Section 11.05 | Governing Law | 58 |
| Section 11.06 | Jurisdiction | 59 |
| Section 11.07 | Waiver of Jury Trial | 59 |
| Section 11.08 | Counterparts; Effectiveness; Third Party Beneficiaries | 59 |
| Section 11.09 | Entire Agreement | 59 |
| Section 11.10 | Severability | 60 |
| Section 11.11 | Specific Performance | 60 |
| Section 11.12 | Certain Acknowledgements and Limitations | 60 |
| Section 11.13 | Disclosure Schedules | 60 |
| Section 11.14 | Preparation of Agreement | 61 |
| Section 11.15 | No Recourse | 61 |
| iv |
EXHIBITS, ANNEXES, SCHEDULES AND DISCLOSURE SCHEDULES
| Exhibits | |
| Exhibit A | Definitions |
| Exhibit B | Form of Assignment and Bill of Sale |
| Exhibit C | Form of Assumption Agreement |
| Exhibit D | Form of Surface Deed |
| Exhibit E | Form of Seller Certificate |
| Exhibit F | Form of Intellectual Property Assignment |
| Exhibit G | Form of Buyer Certificate |
| Exhibit H | Form of Bid Procedures Order |
| Exhibit I | Allocation Methodologies |
| Annexes | |
| Annex A | Surface Tracts |
| Annex B | Surface Leases |
| Annex C | Equipment |
| Annex D | Permits |
| Annex E | Vehicles and Vehicle Finance Leases |
| Annex F | Applicable Contracts |
| Schedules | |
| Schedule 1.01 | Assumed Indebtedness |
| Schedule 1.02 | Assumed Prepetition Accounts Payable |
| Schedule 2.02(k) | Excluded Contracts and Other Assets |
| Schedule 5.02(a) | 365 Schedule |
| Schedule 5.02(b) | Desired 365 Contracts |
| Disclosure Schedules | |
| Disclosure Schedule 3.05(a) | Material Contracts |
| Disclosure Schedule 3.05(b) | Material Contract Defaults |
| Disclosure Schedule 3.06 | Approvals |
| Disclosure Schedule 3.07 | Environmental Matters |
| Disclosure Schedule 3.08 | Litigation |
| Disclosure Schedule 3.09(b) | Intellectual Property |
| Disclosure Schedule 3.10 | Insurance Coverage |
| Disclosure Schedule 3.11 | Taxes |
| Disclosure Schedule 3.12 | Existing Letters of Credit |
| Disclosure Schedule 3.13 | Preferential Purchase Rights |
| Disclosure Schedule 3.15(a) | Owned Real Property |
| Disclosure Schedule 3.15(b) | Leased Real Property |
| Disclosure Schedule 3.16(a) | Seller Employees |
| Disclosure Schedule 3.16(b) | Labor and Employment Matters |
| Disclosure Schedule 3.17 | Employee Benefit Matters |
| Disclosure Schedule 3.19 | Material Customers and Suppliers |
| Disclosure Schedule 3.20 | Transactions with Affiliates |
| Disclosure Schedule 5.01 | Operating Covenants |
| v |
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) dated as of August 17, 2021 (the “Execution Date”), is entered into by and between Berry Corporation (bry), a Delaware corporation (“Buyer”), and Basic Energy Services, Inc., a Delaware corporation (“Basic”), Basic Energy Services, L.P., a Delaware limited partnership (“Basic LP”), C&J Well Services, Inc., a Delaware corporation (“C&J”), and KVS Transportation, Inc., a California corporation (“KVS” and, together with Basic, Basic LP and C&J, each a “Seller” and, collectively, “Sellers”). Buyer and Sellers are sometimes referred to collectively herein as the “Parties” and individually as a “Party.”
W I T N E S E T H:
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, the Assets (as defined below);
WHEREAS, Sellers and certain of their affiliates are contemplating filing voluntary petitions for relief (the “Bankruptcy Cases”) under chapter 11 of the Bankruptcy Code in the Bankruptcy Court;
WHEREAS, Sellers desire to sell, transfer and assign to Buyer, and Buyer desires to purchase and acquire from Sellers, the Assets, and, in connection therewith, the Parties desire for Buyer to assume the Assumed Liabilities; and
WHEREAS, Sellers’ ability and obligation to consummate the Transactions are subject to, among other things, the entry of the Sale Order.
NOW, THEREFORE, in consideration of the mutual promises, representations and warranties made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. The capitalized terms used but not defined herein and defined in Exhibit A shall have the meanings set forth in Exhibit A hereto, which is incorporated herein by reference.
ARTICLE II
PURCHASE AND SALE
Section 2.01 Purchase and Sale of the Assets. Subject to the terms and conditions and for the consideration herein set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers agree to sell, assign, convey and deliver to Buyer, and Buyer agrees to purchase and acquire from Sellers at the Closing, all of Sellers’ right, title and interest in, to and under the assets described below and other than the Excluded Assets (collectively, the “Assets”), in all cases free and clear of all Liens other than Permitted Liens:
(a) the fee surface tracts described on Annex A (collectively, the “Surface Tracts”);
(b) all surface leases, subleases or licenses described on Annex B (collectively, the “Surface Leases”) and all rights in respect thereof or appertaining thereto, including, without limitation, any surface facilities, yards, shops, and offices located on the Surface Leases, together with all fixtures, buildings, structures or other improvements thereon;
(c) (i) all equipment, machinery, fixtures, furniture, buildings, structures, improvements and other real, personal and mixed property, operational and nonoperational, located on the Properties (except for any such personal property leased from Third Parties), which shall include, but not be limited to, that property described on Part 1 of Annex C, provided that such property is located on the Properties, and (ii) all equipment, machinery, fixtures, furniture, buildings, structures, improvements and other real, personal and mixed property, operational or nonoperational, located off the Properties, used or held for use primarily in connection with, or otherwise primarily attributable to, the ownership of the Assets or the Business (except for any such personal property leased from Third Parties), which shall include, but not be limited to, that property described on Part 2 of Annex C;
(d) to the extent assignable, transferrable or re-issuable by Sellers to Buyer, all Permits set forth on Annex D (and, for the avoidance of doubt, to the extent consent is required under Applicable Law, solely to the extent the applicable Governmental Authority consents to or otherwise approves the assignment or transfer of the applicable Permit) (provided that Sellers shall use commercially reasonable efforts prior to Closing to obtain any necessary consent to assignment, but shall not be required to pay any fees or other amounts to Third Parties in connection with obtaining any such consents);
(e) all Assigned Contracts and any and all amendments, ratifications or extensions of the foregoing (collectively, the “Purchased Contracts”);
(f) to the extent, and only to the extent, in the possession of Sellers or their Affiliates and related primarily to the Assets or the Business, all books, records, files, reports, and accounting records and copies of Tax records, including: (i) land and title records (including lease files, Third Party brokerage information, run sheets, abstracts of title, surveys, maps, title opinions and title curative documents); (ii) Contract files; (iii) correspondence; (iv) facility files (including construction records); and (v) environmental, regulatory, accounting and copies of Tax records (such materials, excluding the Excluded Records, the “Data”); provided, however, that (1) rights to receive access to and copies of such Data from Third Parties shall accrue to Buyer only to the same extent as such rights are vested in Sellers and (2) Sellers shall be permitted to keep copies of the Data;
(g) all of the trucks, trailers, vehicles and other rolling stock described on Part 1 of Annex E (the “Vehicles”), and all finance leases described on Part 2 of Annex E corresponding to such Vehicles (the “Vehicle Finance Leases”);
(h) all Acquired Accounts Receivable;
| 2 |
(i) all rights, claims, causes, causes of action, remedies, warranties, indemnities, defenses rights of set-off, rights of recoupment, and rights to payment or to enforce payment and credits of any Seller to the extent arising from or related to the Assets (other than the Excluded Assets) or the Business or any Assumed Liability (other than any Excluded Liabilities), including all rights of any Seller under or pursuant to all warranties, representations and guarantees made by suppliers, vendors, manufacturers and contractors, to any Seller to the extent arising from or related to the Assets (other than the Excluded Assets) or the Business or any Assumed Liability (other than any Excluded Liabilities);
(j) all inventory wherever located, including all semi-finished and finished goods, raw materials, works in progress, packaging, supplies, tooling and parts, whether held at any location or facility of any Seller or in transit to any Seller, in each case, as of the Closing Date and primarily related to the Business;
(k) all Owned Intellectual Property and all of Sellers’ right, title, and interest in and to any Business Intellectual Property and Business IT Assets, and all goodwill associated therewith any symbolized thereby and all rights and privileges relating to or pertaining to the foregoing Intellectual Property, including all usernames, passwords, and credentials used to access, use, manage, maintain, or renew any domain names or social media accounts included in the foregoing (collectively, the “Purchased Intellectual Property”);
(l) all tangible personal property, including all computers and computer hardware, together with all users’ manuals, training manuals, sales literature and other system and operations documentation relating to such computers, including, in each case, all rights purchased subject to any conditional sales or title retention agreement in favor of any other Person used or held for use primarily in connection with, or otherwise attributable primarily to, the Business;
(m) all customer and supplier lists and other proprietary sales information related to the Business or the Assets;
(n) all goodwill of the Business;
(o) to the extent owned by Sellers, the names “Pool Services”, “C&J Well Services”, “KVS Trucking” and all variations and derivations thereof and any trademark, trade name, logo or symbol containing such names;
(p) all intangible rights, inchoate rights, transferable rights under warranties made by prior owners, manufacturers, vendors, contractors and Third Parties, and rights accruing under applicable statutes of limitation or prescription to the extent related or attributable to the Assets described in clauses (a) through (o) above on or after the Closing Date;
(q) all rights to any Tax refunds (or credits in lieu thereof) to the extent allocated to Buyer under Section 7.06(a); and
(r) all other properties, rights, titles, interests and other assets owned by Sellers, or in which Sellers have an interest, to the extent related primarily to or held for use primarily in connection with the Business to the extent the same are not Excluded Assets or Excluded Liabilities.
| 3 |
To the extent the assignment of any Asset to Buyer pursuant to this Agreement requires the consent of or payment of a fee to any Third Party notwithstanding the entry of the Sale Order then such Asset shall not be assigned to Buyer (and shall constitute an Excluded Asset) unless such consent is obtained or Buyer pays any fee required to effect such assignment (provided that Seller shall not be required to pay any fees or other amounts to Third Parties in connection with obtaining any such consents).
Section 2.02 Excluded Assets. Notwithstanding the foregoing provisions of this Article II, any assets of Sellers that are not described or otherwise identified as Assets in Section 2.01, together with all of the following assets, shall not constitute Assets and shall not be sold, assigned or conveyed to Buyer pursuant to this Agreement (such assets as described herein below, the “Excluded Assets”):
(a) all cash and cash equivalents of Sellers;
(b) all corporate and financial records of Sellers and all Excluded Records;
(c) all Contracts of insurance or indemnity, subject to Section 10.01;
(d) all proceeds, income or revenues attributable to the Assets, other than proceeds received on account of the Acquired Accounts Receivable or any Casualty or Condemnation Loss, with respect to any period of time prior to the Closing Date;
(e) all rights, claims, demands and causes of action of Sellers under this Agreement;
(f) all rights, claims (including any claim as defined in section 101 of the Bankruptcy Code), causes, causes of action, remedies, defenses rights of set-off, rights of recoupment, and rights to payment or to enforce payment and credits of any Seller except to the extent arising from or related directly to the Assets or the Business attributable to any period of time on or after the Closing Date or any Assumed Liability;
(g) all rights of Sellers to any Tax refunds (or credits in lieu thereof) other than the Tax refunds (or credits in lieu thereof) described in Section 2.01(q);
(h) any prepayments or good faith or other deposits submitted by any Third Party under the terms of the Bid Procedures Order;
(i) any of Sellers’ rights, claims and causes of action under the Bankruptcy Code and any Avoidance Actions in which Sellers have or will have rights;
(j) the name “Basic Energy” and all variations and derivations thereof and any trademark, trade name, logo or symbol containing such names;
(k) all Contracts and other assets listed on Schedule 2.02(k);
(l) any executory contracts or unexpired leases that are not Desired 365 Contracts;
| 4 |
(m) all Existing Letters of Credit and cash deposits and proceeds of such Existing Letters of Credit;
(n) all equipment and Data to the extent primarily related or used or held for use primarily in connection with Excluded Assets or Excluded Liabilities;
(o) all Permits, except as set forth in Section 2.01(d);
(p) except for the Vehicles, all trucks, trailers, vehicles and other rolling stock;
(q) all office equipment, computers and hardware of Sellers to the extent not primarily used in the Business;
(r) except for the Purchased Intellectual Property, all Intellectual Property owned by Sellers;
(s) all assets excluded pursuant to the express terms of this Agreement, including Section 2.12 or Section 5.02;
(t) except to the extent related to any Assumed Liabilities, all audit rights arising under any of the Applicable Contracts or otherwise with respect to (i) any period prior to the Closing Date, with respect to the Assets or (ii) any of the Excluded Assets or Excluded Liabilities;
(u) any assets or properties described in Section 2.01 that are not assignable to Buyer pursuant to this Agreement after giving effect to the Sale Order;
(v) all engagements and similar letters and agreements with Sellers’ legal advisors, it being agreed that Buyer shall have no right to claim, own or waive any attorney-client or similar privilege in favor of Sellers or any of their Affiliates with respect to the ownership or operation of the Assets;
(w) all equity interests of any Subsidiaries owned by any Seller; and
(x) any assets or properties otherwise expressly identified as Excluded Assets or Excluded Liabilities under this Agreement.
Section 2.03 Consideration. As consideration for the Assets, Buyer shall pay or deliver to Sellers in accordance with this Agreement, $27,000,000 in cash (the “Purchase Price”) and assume all Assumed Liabilities in accordance with this Agreement. The Purchase Price shall be paid as provided in Section 2.05 and shall be subject to adjustment as provided in Section 2.04 and Section 2.06. The Purchase Price, as increased or reduced, as applicable, in accordance with this Agreement, is referred to as the “Adjusted Purchase Price”.
Section 2.04 Adjustments to the Purchase Price. Adjustments to the Purchase Price shall be made according to this Section 2.04.
| 5 |
(a) Upward Adjustments. The Purchase Price shall be adjusted upward by the following, but only to the extent such items relate to the Assets:
(i) an amount equal to all Property Expenses (including prepaid Property Expenses, but excluding Taxes) attributable to the Assets paid or borne by Sellers (or applied by a Person against Property Expenses owed to such Person as an offset against amounts due and payable to Sellers) in the Ordinary Course of Business prior to the Closing Date, whether paid by (or applied as an offset against amounts due and payable to) Sellers (x) prior to the Closing Date or, (y) with the consent of Buyer, after the Closing Date but prior to the determination of the Adjusted Purchase Price, in all cases to the extent attributable to the period on or after the Closing Date;
(ii) the amount of Cure Costs, if any, by which the Purchase Price is to be increased pursuant to Section 5.02; and
(iii) the Acquired Accounts Receivable Adjustment Amount minus an amount equal to the sum of (x) the Assumed Prepetition Accounts Payable and (y) all Postpetition Accounts Payable that are Assumed Liabilities or are otherwise assumed by Buyer pursuant to Section 2.16, to the extent such sum is a positive number; provided that if such sum is a negative number there shall be no upward adjustment to the Purchase Price pursuant to this Section 2.04(a)(iii) and instead the absolute value of such negative number (the “AR/AP Reduction Amount”) shall be a downward adjustment to the Purchase Price pursuant to Section 2.04(b)(iii).
(b) Downward Adjustments. The Purchase Price shall be adjusted downward by the following:
(i) an amount equal to the Assumed Indebtedness, if any;
(ii) an amount equal to all Excess Cure Costs, if any, paid or economically borne by Buyer; and
(iii) an amount equal to the AR/AP Reduction Amount, if any.
(c) Tax Adjustments/Apportionment of Prepaid Expense Items.
(i) The Parties agree to adjust the Purchase Price (A) downward by the amount of any Non-Income Taxes allocated to Sellers pursuant to the provisions of Section 7.06 but that are or will be paid or economically borne by Buyer, and (B) upward by the amount of any Non-Income Taxes allocated to Buyer pursuant to the provisions of Section 7.06 but that are or will be paid or economically borne by Sellers.
| 6 |
(ii) For purposes of the Purchase Price, to the extent not otherwise expressly provided for under the definition of “Property Expenses,” Section 2.04(a) and Section 2.04(b), those other items of expenses and accounts payable in relation to the Assets (other than Taxes) that are paid or payable on an annual, quarterly, monthly or other regular periodic basis and relate to a period before or after the Closing Date (“Prorated Expense Items”) shall be prorated as of the Closing Date and apportioned, such that Buyer will receive the economic benefit or burden, as applicable, of all such items on and after the Closing Date and Sellers shall receive the economic benefit or burden, as applicable, of all such items for the period prior to the Closing Date. After the Closing Date, (x) if Buyer receives any bills or accounts or any reimbursement for prepaid expenses in relation to Prorated Expense Items that are attributable in whole to the period prior to the Closing Date, then Buyer shall promptly forward the same to Sellers (and Sellers shall, in the case of any such bills or accounts, promptly pay such amounts), (y) if Sellers receive any bills or accounts or any reimbursement for prepaid expenses in relation to the Prorated Expense Items that are attributable in whole to the period on or after the Closing Date, then Sellers shall promptly forward the same to Buyer (and Buyer shall, in the case of any such bills or accounts, promptly pay such amounts) and (z) if Buyer or Sellers receive any bills or accounts or any reimbursements for prepaid expenses in relation to the Prorated Expense Items that are attributable in part to the period prior to the Closing Date, and in part to the period on and after the Closing Date, the amount thereof shall be apportioned between Sellers, on the one hand, and Buyer, on the other hand, respectively, as of the Closing Date, based on the number of days in such period falling prior to the Closing Date, on the one hand, and on and after the Closing Date, on the other hand. In the case of bills or accounts referred to in clause (z), the party receiving the same shall be required to pay only such portion of such bill or account for which it is responsible in accordance with this Section 2.04(c)(ii).
(d) Closing Statement.
(i) Sellers shall prepare and deliver to Buyer, not less than five (5) Business Days before the Closing Date, a statement (the “Closing Statement”) setting forth Sellers’ calculation of the adjustments to the Purchase Price provided in this Section 2.04, using reasonable estimates where actual amounts are not known at such time, and Sellers’ calculation of the estimated Adjusted Purchase Price; such estimated Adjusted Purchase Price (as such may be modified pursuant to any changes proposed by Buyer and accepted by Sellers) shall be referred to as the “Closing Date Adjusted Purchase Price.” The Closing Statement shall be prepared by Sellers in good faith in accordance with this Agreement, including Section 2.08 and shall include reasonable supporting detail for each adjustment or estimate included therein. If Buyer has any questions or disagreements regarding the Closing Statement, then, upon written request by Buyer, at least two (2) Business Days prior to the Closing Date, Sellers and Buyer shall in good faith attempt to resolve any disagreements, and Sellers shall afford Buyer the opportunity to examine the Closing Statement and such supporting schedules, analyses and workpapers on which the Closing Statement is based or from which the Closing Statement is derived as are reasonably requested by Buyer. If (A) Buyer and Sellers agree on changes to the Closing Statement based on such discussions, then the Closing Date Adjusted Purchase Price shall be paid at Closing based on such changes; or (B) Buyer and Sellers do not agree on changes to the Closing Statement, then absent manifest error, the Closing Date Adjusted Purchase Price shall be paid at the Closing based on the amounts set forth in the Closing Statement; provided, however, that in either of clauses (A) or (B), appropriate adjustments to the Purchase Price shall be made after the Closing pursuant to Section 2.06.
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(ii) Sellers will include in the Closing Statement Sellers’ good faith calculation of the prorations provided for in Section 2.04(c). If final bills or accounts in relation to any Prorated Expense Items referred to in Section 2.04(c) are not available or have not been issued prior to that date for any Prorated Expense Item, Sellers shall estimate the amount of each such item in good faith and in accordance with customary industry practices, and such estimate shall be reflected in the Closing Statement. The amount payable by Buyer at the Closing will be increased or decreased to reflect the net amount owing between the Parties as shown on the Closing Statement, using such estimates where necessary. Final adjustment between the Parties as to any item used in the preparation of the Closing Statement in accordance with this Section 2.04 shall be made in accordance with Section 2.06 and Section 7.06.
Section 2.05 Closing. The closing of the purchase and sale of the Assets, the assumption by Buyer of the Assumed Liabilities and the other transactions contemplated herein (the “Closing”) shall take place at the offices Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite 300, Dallas, Texas 75201, as soon as possible, but in no event later than two (2) Business Days, after satisfaction or waiver by the requisite Parties of the conditions to Closing set forth in Article VIII (other than those conditions that by their nature cannot be satisfied until the time of Closing, but subject to the satisfaction or waiver by the requisite Parties of those conditions), or at such other time or place as Buyer and Sellers may agree in writing. At and as of the Closing:
(a) Pursuant to section 363 of the Bankruptcy Code, effective as of the Closing, Sellers shall sell, assign and convey all Assets (other than Excluded Assets) to Buyer free and clear of all Liens other than Permitted Liens;
(b) Buyer shall assume, and from and after the Closing, shall perform and pay when due, all Assumed Liabilities; provided that Buyer shall not assume and shall not be obligated to assume or be obligated to pay, perform or otherwise discharge any obligation of Sellers that are not expressly Assumed Liabilities, including, without limitation, any Excluded Liabilities;
(c) Sellers shall deliver to Buyer the following instruments, each dated as of the Closing Date, properly executed by an authorized officer or representative of the applicable Seller(s) and, where appropriate, acknowledged:
(i) an Assignment and Bill of Sale Without Warranty in the form of Exhibit B (the “Assignment and Bill of Sale”);
(ii) an Assumption Agreement between Sellers and Buyer in the form of Exhibit C (the “Assumption Agreement”);
(iii) a Deed Without Warranty pertaining to each Surface Tract in the form of Exhibit D (collectively, the “Surface Deeds”);
(iv) a certificate in the form of Exhibit E;
(v) a properly completed and duly executed IRS Form W-9 of each Seller, establishing that such Seller is not a “foreign person” within the meaning of Section 1445 of the Code and that such Seller is exempt from U.S. back-up withholding, in each case, in form and substance reasonably acceptable to Buyer;
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(vi) a Purchased Intellectual Property Assignment in the form of Exhibit F (the “Intellectual Property Assignment”);
(vii) executed documentation necessary to transfer title of the Vehicles from each applicable Seller to Buyer;
(viii) Joint Written Instructions; and
(ix) any other agreements, instruments and documents that are required by other terms of this Agreement to be executed and/or delivered by Sellers at or prior to the Closing;
(d) Buyer shall deliver to Sellers executed counterparts of the following instruments each dated the Closing Date, properly executed by an authorized officer or representative of Buyer and, where appropriate, acknowledged:
(i) a certificate in the form of Exhibit G;
(ii) the Assignment and Bill of Sale;
(iii) the Intellectual Property Assignment;
(iv) the Assumption Agreement;
(v) the Surface Deeds;
(vi) Joint Written Instructions; and
(vii) any other agreements, instruments and documents that are required by other terms of this Agreement to be executed and/or delivered by Buyer at or prior to the Closing;
(e) Buyer shall deliver an amount equal to the Closing Date Adjusted Purchase Price less an amount equal to the Escrow Funds, by wire transfer of immediately available funds, to one or more accounts designated by Sellers.
Section 2.06 Final Settlement Statement.
(a) As soon as practical and, in any event, no later than sixty (60) calendar days after the Closing Date, Buyer shall prepare and deliver to Sellers a statement (the “Final Settlement Statement”) setting forth Buyer’s calculation of the adjustments to the Purchase Price in accordance with Section 2.04). The Final Settlement Statement shall be prepared in accordance with this Agreement and on a basis consistent with the preparation of the Closing Statement as described in Section 2.04(d) and shall set forth Buyer’s calculation of the Adjusted Purchase Price.
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(b) Following the delivery of the Final Settlement Statement, Buyer shall afford Sellers the opportunity to examine the Final Settlement Statement and Buyer’s calculation of the Adjusted Purchase Price, and such supporting schedules and analyses as are reasonably necessary and appropriate in connection with such review. Buyer shall cooperate with Sellers in such examination, including responding to questions asked by Sellers, and Buyer shall make available to Sellers any records under Buyer’s control that are requested by Sellers in connection with such review.
(c) If, within fifteen (15) calendar days following delivery of the Final Settlement Statement to Sellers, Sellers have not delivered to Buyer written notice (the “Objection Notice”) of Sellers’ objections to the Final Settlement Statement or Buyer’s calculation of the Adjusted Purchase Price (which Objection Notice in order to be valid must contain a statement describing in reasonable detail the items objected to, the basis of such objections and Sellers’ calculation of the amount(s) for the items objected to that Sellers assert should be used for purposes of the Final Settlement Statement), then the Adjusted Purchase Price as set forth in such Final Settlement Statement shall be deemed final and conclusive. In addition, Buyer’s calculations of the Adjusted Purchase Price as set forth in the Final Settlement Statement which are not objected to in the Objection Notice shall be deemed final and conclusive.
(d) If Sellers deliver the Objection Notice satisfying Section 2.06(c) above, within such fifteen (15)-day period, then Sellers and Buyer shall endeavor in good faith to resolve the objections of Sellers set forth in the Objection Notice for a period not to exceed fifteen (15) calendar days from the date of delivery of the Objection Notice. If at the end of such fifteen (15)-day period there are any objections that remain in dispute, then either Buyer or Sellers may require by written notice to the other that the remaining objections in dispute be submitted for resolution to an independent accounting firm to be selected jointly by Buyer and Sellers within the ten (10) calendar days following a written request by Buyer or Sellers or, if Buyer and Sellers are unable to mutually agree within such ten (10)-day period, such accounting firm shall be the Dallas, Texas office of Grant Thornton LLP (such jointly selected accounting firm or Grant Thornton LLP, the “Referee”). The Referee’s engagement shall be limited to the resolution of disputed amounts set forth in the Final Settlement Statement that have been identified by Sellers in the Objection Notice, which resolution shall be in accordance with this Agreement and no other matter relating to the Final Settlement Statement shall be subject to determination by the Referee except to the extent affected by resolution of the disputed amounts. In connection with the engagement of the Referee, each of Buyer and Sellers shall execute any engagement, indemnity and other agreement as the Referee shall require as a condition to such engagement. If Grant Thornton LLP is unable or unwilling to serve as the Referee and Buyer and Sellers are unable to agree upon the designation of a Person as substitute arbitrator, then Buyer or Sellers, or either of them, may in writing request the Bankruptcy Court to appoint the substitute referee; provided that such Person so appointed shall be a national or regional accounting firm with no prior material relationships with Buyer or Sellers or their respective Affiliates and shall have experience in auditing companies engaged in oil and gas wellsite service activities.
(e) The Referee shall determine such items of the calculation of the Adjusted Purchase Price as are disputed within thirty (30) calendar days after the objections that remain in dispute are submitted to it.
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(f) If any disputed items are submitted to the Referee for resolution, (i) each of Buyer and Sellers shall furnish to the Referee such workpapers and other documents and information relating to such disputed items as the Referee may request and are available to that Party or its Affiliates (or its independent public accountants) and will be afforded the opportunity to present to the Referee any materials relating to the determination of the matters in dispute and to discuss such determination with the Referee prior to any written notice of determination hereunder being delivered by the Referee; (ii) the Referee shall not assign a value to such objection that is greater than the greatest value for such objection claimed by either Party or less than the smallest value for such objection claimed by either Party; (iii) the determination by the Referee of items of the calculation of the Adjusted Purchase Price, as applicable, as set forth in a written notice delivered to Sellers and Buyer by the Referee, shall be made in accordance with this Agreement and shall be binding and conclusive on the Parties and shall constitute an arbitral award that is final, binding and unappealable (absent manifest error or fraud) and upon which a judgment may be entered by a court having jurisdiction thereof; and (iv) the fees and expenses of the Referee (the “Audit Fees”) shall be paid by and apportioned between Buyer and Sellers based on the aggregate dollar amount in dispute and the relative recovery as determined by the Referee or Sellers and Buyer, respectively (such that, by way of example, if the amount in dispute is $100 and it is resolved $70 in favor of Buyer and $30 in favor of Sellers, then Sellers would bear 70% of the Audit Fees and Buyer would bear 30% of the Audit Fees).
Section 2.07 Post-Closing Payments.
(a) If the Closing Date Adjusted Purchase Price is greater than the Adjusted Purchase Price determined in accordance with Section 2.06 (the amount by which the Closing Date Adjusted Purchase Price exceeds the Adjusted Purchase Price herein referred to as the “Closing Amount Excess”), then Sellers and Buyer shall jointly instruct the Escrow Agent to release to (i) Buyer an amount equal to the Closing Amount Excess and (ii) to Sellers an amount equal to the difference between the Closing Amount Excess and the Purchase Price Escrow Amount, if any; provided that to the extent that the Closing Amount Excess exceeds the Purchase Price Escrow Amount, Sellers shall pay to Buyer such excess amount within five (5) Business Days of the final determination of the Adjusted Purchase Price in accordance with Section 2.06 in addition to the release of the full balance then-held in the Escrow Account.
(b) If the Adjusted Purchase Price determined in accordance with Section 2.06 is greater than the Closing Date Adjusted Purchase Price (the amount by which the Adjusted Purchase Price exceeds the Closing Date Adjusted Purchase Price herein referred to as the “Closing Amount Shortfall”), then (i) Sellers and Buyer shall jointly instruct the Escrow Agent to release to Sellers the full balance then-held in the Escrow Account and (ii) Buyer shall pay to Sellers the Closing Amount Shortfall within five (5) Business Days of the final determination of the Adjusted Purchase Price in accordance with Section 2.06.
(c) Sellers shall pay to Buyer, and Buyer shall pay to Sellers, as applicable, any post-Closing payments as may be required herein, including pursuant to Section 2.10, Section 2.11 or Section 7.06. Notwithstanding the foregoing, neither Party shall be obligated to account for or remit to the other Party any Property Expenses or proceeds attributable to the Assets or the Business after the date that is thirty (30) days following the date the final Adjusted Purchase Price is agreed by the Parties or finally determined by the Referee in accordance with Section 2.06.
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Section 2.08 No Duplicative Effect; Methodologies. The provisions of Section 2.04, Section 2.06, this Section 2.08 and of any other Transaction Document shall apply in such a manner so as not to give the components and calculations duplicative effect to any item of adjustment and the Parties covenant and agree that no amount shall be (or is intended to be) included, in whole or in part (either as an increase or reduction) more than once in the calculation of (including any component of) the Adjusted Purchase Price, or any other calculated amount pursuant to this Agreement if the effect of such additional inclusion (either as an increase or reduction) would be to cause such amount to be overstated or understated for purposes of such calculation. “Incurred”, as used in this Agreement, shall be interpreted in accordance with GAAP standards, as applied by Sellers consistent with past practice, subject to the other provisions in this Section 2.08; provided if not determinable pursuant to the foregoing, the date an item or work is ordered is not the date of a transaction or incurrence for settlement purposes in the Closing Statement or Final Settlement Statement and otherwise under this Agreement, as applicable, but rather the date on which the item ordered is delivered to the job site, or the date on which the work ordered is performed, is the relevant date, regardless of when the applicable invoice was sent. The Parties acknowledge and agree that, if there is a conflict between a determination, calculation, methodology, procedure or principle set forth in the definitions contained in this Agreement, as applicable, on the one hand, and those provided by GAAP, on the other hand, (i) the determination, calculation, methodology, procedure or principle set forth in this Agreement, as applicable, shall control to the extent that the matter is specifically provided for in this Agreement and (ii) the determination, calculation, methodology, procedure or principle prescribed by GAAP, as applied by Sellers consistent with past practice, shall control to the extent the matter is not so addressed in this Agreement, as applicable, or requires reclassification as an asset or liability to be included in a line item or specific adjustment.
Section 2.09 Purchase Price Deposit.
(a) Escrow Deposit. Not later than one (1) Business Day after the Execution Date, Buyer shall deposit into the Escrow Account, by wire transfer of immediately available funds, an amount equal to $2,700,000 (such amount, together with any interest earned thereon, the “Escrow Funds”).
(b) Distribution of Escrow Funds. The Escrow Funds shall be distributed as follows:
(i) if this Agreement is terminated prior to Closing for any reason, the Escrow Funds shall be delivered in accordance with Section 9.02; or
(ii) if the Closing shall occur, Buyer and Sellers shall execute and deliver written instructions at Closing to the Escrow Agent, directing the Escrow Agent to (A) retain $1,350,000 of the Escrow Funds (the “Purchase Price Escrow Amount”) for purposes of satisfying Sellers’ obligations pursuant to Section 2.06, which Purchase Price Escrow Amount shall be held and distributed in accordance with Section 2.09(c) and (B) disburse to Sellers an amount equal to (i) the Escrow Funds less (ii) the Purchase Price Escrow Amount to Sellers (the “Joint Written Instructions”) as a credit towards the Closing Date Adjusted Purchase Price.
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(c) Distribution of Purchase Price Escrow Amount. Upon final determination of the Adjusted Purchase Price pursuant to Section 2.06:
(i) if Buyer is entitled to a distribution of all or a portion of the Escrow Funds pursuant to Section 2.07(a), then Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to deliver (1) to Buyer out of the Escrow Funds an amount in cash equal to the Closing Amount Excess (or if the Closing Amount Excess exceeds the Purchase Price Escrow Amount, the full amount of cash in the Escrow Funds), (2) to the Referee an amount in cash equal to the amount of the Audit Fees payable by Buyer pursuant to Section 2.06(f), if applicable, and (3) to Sellers any cash remaining in the Escrow Funds after the payments in clauses (1) and (2) of this Section 2.09(c)(i) have been made; or
(ii) if Buyer is not entitled to a distribution of any portion of the Escrow Funds pursuant to Section 2.07(a), then Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to deliver (1) to the Referee an amount in cash equal to the Audit Fees payable by Buyer pursuant to Section 2.06(f), if applicable, and (2) to Sellers all of the cash remaining in the Escrow Funds upon such distribution.
Section 2.10 Division of Revenues. To the extent Sellers receive proceeds attributable to the Assets and related to periods from and after the Closing Date, Sellers shall deliver such proceeds received after Closing (net of (A) reasonable and documented out-of-pocket expenses (other than Property Expenses) incurred by Sellers in earning or receiving such proceeds and any fees payable or incurred in connection therewith not reimbursed to Sellers by a Third Party and (B) applicable Non-Income Taxes paid or borne by Sellers and not reimbursed to Sellers by a Third Party) to Buyer promptly upon Sellers’ receipt thereof. To the extent Buyer receives proceeds attributable to the Assets (other than proceeds received on account of the Acquired Accounts Receivable) and related to periods prior to the Closing Date, Buyer shall deliver such proceeds received after Closing Date (net of (A) reasonable and documented out-of-pocket expenses (other than Property Expenses) incurred by Buyer in earning or receiving such proceeds and any fees payable or incurred in connection therewith not reimbursed to Buyer by a Third Party and (B) applicable Non-Income Taxes paid or borne by Buyer and not reimbursed to Buyer by a Third Party) to Seller promptly upon Buyer’s receipt thereof.
Section 2.11 Division of Expenses. For purposes of determining the amount of the adjustments to the Purchase Price provided for in Section 2.04, the principles set forth in this Section 2.11 shall apply except as expressly provided otherwise in this Agreement. As between Buyer and Sellers, (i) all Property Expenses attributable to periods prior to the Closing Date, other than Assumed Liabilities, shall be borne by Sellers and (ii) (A) all Property Expenses attributable to periods from and after the Closing Date and (B) all other Property Expenses assumed by Buyer as Assumed Liabilities shall be borne by Buyer.
Section 2.12 Consents to Assign. Sellers shall, within five (5) Business Days after the entry of the Bid Procedures Order (to the extent not sent prior to such date), send to the holder of each Applicable Schedule 3.06 Consent with respect to any Purchased Contract that is not a 365 Contract (for which notices regarding 365 Contracts are addressed in Section 5.02) a notice in compliance with the contractual provisions applicable to such Applicable Schedule 3.06 Consent seeking such holder’s consent to the transactions contemplated hereby or such other notice (which may be included in the sale notice related to the Sale Order) as necessary to permit the assignment of such Purchased Contract to Buyer pursuant to this Agreement upon entry of the Sale Order (a “Consent Notice”). With respect to each Consent relating to a Contract for which the counterparty’s consent to assignment would be required for such Contract to be assumed and assigned to Buyer, after giving effect to sections 365(c)(1) and 365(f)(1) of the Bankruptcy Code, but which Consent is not set forth on Disclosure Schedule 3.06 and is discovered by Sellers (including, if applicable, any such Consent that is identified by Buyer) prior to Closing, all such Consents shall thereafter be Applicable Schedule 3.06 Consents and Sellers shall send to the holder of each such Consent a Consent Notice.
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(a) If Sellers fail to obtain a Applicable Schedule 3.06 Consent prior to Closing and (A) with respect to any Purchased Contract that is not a 365 Contract, (1) the failure to obtain such Applicable Schedule 3.06 Consent would cause the assignment of the Purchased Contract affected thereby to Buyer to be void or voidable, or (2) the failure to obtain such Applicable Schedule 3.06 Consent would result in the termination of such Purchased Contract or provide the counterparty thereunder the right to terminate such Purchased Contract under the express terms thereof upon the purported assignment of such Purchased Contract to Buyer pursuant to this Agreement or (B) with respect to any Purchased Contract, a party holding such Applicable Schedule 3.06 Consent right has objected to the assignment of the affected Purchased Contract in accordance with the terms of the relevant Applicable Schedule 3.06 Consent right or based on any anti-assignment or consent to assign provision contained in such Purchased Contract (each Consent as to which clause (A) or (B) is applicable, a “Required Consent”), then, unless the Bankruptcy Court has entered an order approving (or in the case of clause (B), such objection is resolved to permit) the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent, the Purchased Contract affected by such un-obtained Required Consent shall be excluded from the Assets to be assigned to Buyer at Closing (and shall be considered Excluded Assets hereunder). In the event that any such Required Consent with respect to any such excluded Purchased Contract is obtained during the Post-Closing Consent Period (or if during the Post-Closing Consent Period the Bankruptcy Court enters an order providing that (x) such Required Consent is not required to consummate the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (y) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent), then, (1) Sellers shall so notify Buyer and (2) promptly and in any event no later than the tenth (10th) Business Day after the date such Consent is obtained and Sellers shall assign the Purchased Contract that was so excluded as a result of such previously un-obtained Consent to Buyer pursuant to an instrument in substantially the same form as the Assignment and Bill of Sale (and such Purchased Contract shall no longer be considered Excluded Assets hereunder) and Buyer shall assume all Assumed Liabilities with respect thereto. Notwithstanding anything to the contrary in this Agreement, without limiting any of the rights of Buyer hereunder, from and after the Closing, Buyer and Sellers shall reasonably cooperate in a reasonable arrangement to provide Buyer with all of the benefits of, or under, each Purchased Contract excluded pursuant to this Section 2.12(a), including enforcement (at Buyer’s cost) for the benefit of Buyer, if applicable, of any and all rights of Sellers against any party with respect to such Purchased Contract arising out of the breach or cancellation with respect to such Purchased Contract by such party; provided, further, that to the extent that any such arrangement has been made to provide Buyer with the benefits of, under or with respect to, an excluded Purchased Contract, from and after the Closing, Buyer shall be responsible for, and shall promptly pay and perform all payment and other obligations under such Purchased Contract for the period during which Buyer is receiving the benefits under the applicable Purchased Contract to the same extent as if such Purchased Contract had been assigned or transferred at the Closing.
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(b) If Sellers fail to obtain a Consent prior to Closing and such Consent is not a Required Consent (or if prior to Closing the Bankruptcy Court enters an order providing that (x) such Required Consent is not required to consummate the sale of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (y) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent), then the Purchased Contract subject to such un-obtained Consent shall nevertheless be assigned by Sellers to Buyer at Closing as part of the Assets and Buyer shall have no claim against the Seller Indemnified Parties, and the Seller Indemnified Parties shall have no Liability for, the failure to obtain any such Consent.
(c) Prior to Closing and until the earlier to occur of (x) the confirmation of the Plan and (y) the ninetieth (90th) day after Closing (the period from Closing until the earlier of clause (x) or (y), the “Post-Closing Consent Period”), with respect to any un-obtained Required Consents with respect to which the Bankruptcy Court shall not have entered an order providing that (A) such Required Consent is not required to consummate the sale and assignment of the affected Purchased Contract to Buyer pursuant to this Agreement without obtaining such Required Consent or (B) the affected Purchased Contract may be sold and assigned to Buyer pursuant to this Agreement free and clear of such Required Consent, Sellers shall use their commercially reasonable efforts to obtain all Consents; provided, however, that Sellers shall not be required to incur any Liability, pay any money or provide any other consideration in order to obtain any such Consent. Buyer shall use its commercially reasonable efforts (without any obligation to incur any Liability, pay money or provide any other consideration) to assist and cooperate with Sellers in furtherance of Sellers’ efforts pursuant to this Section 2.12(c).
Section 2.13 Consents for Purchased Contracts. For all purposes of this Agreement (including all representations and warranties of Sellers contained herein), Sellers shall be deemed to have obtained all required Consents in respect of the assumption and assignment of any Purchased Contract if, and to the extent that, (a) Sellers have properly served under the Bankruptcy Code notice of assumption and assignment on the counterparty to such Purchased Contract, (b) any objections to assumption and assignment of such Purchased Contracts filed by such counterparty have been withdrawn or overruled (including pursuant to the Sale Order or other order of the Bankruptcy Court), and (c) pursuant to the Sale Order or such other order of the Bankruptcy Court, Sellers are authorized to assume and/or assign such Purchased Contracts to Buyer pursuant to section 365 of the Bankruptcy Code or otherwise.
Section 2.14 Assets Sold “As Is, Where Is”.
(a) BUYER ACKNOWLEDGES AND AGREES THAT THE ASSETS SOLD PURSUANT TO THIS AGREEMENT ARE SOLD, CONVEYED, TRANSFERRED AND ASSIGNED ON AN “AS IS, WHERE IS” BASIS “WITH ALL FAULTS” AND WITHOUT WARRANTY OF TITLE AND THAT, EXCEPT AS SET FORTH IN ARTICLE III OF THIS AGREEMENT, SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES, TERMS, CONDITIONS, UNDERSTANDINGS OR COLLATERAL AGREEMENTS OF ANY NATURE OR KIND, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, CONCERNING THE ASSETS OR THE CONDITION, DESCRIPTION, QUALITY, USEFULNESS, QUANTITY OR ANY OTHER THING AFFECTING OR RELATING TO THE ASSETS, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHICH WARRANTIES ARE ALSO HEREBY EXPRESSLY DISCLAIMED. BUYER FURTHER ACKNOWLEDGES THAT SELLERS HAVE MADE NO AGREEMENT OR PROMISE TO REPAIR OR IMPROVE ANY OF THE ASSETS BEING SOLD TO BUYER, AND THAT BUYER TAKES ALL SUCH ASSETS IN THE CONDITION EXISTING ON THE CLOSING DATE “AS IS, WHERE IS” AND “WITH ALL FAULTS” AND WITHOUT WARRANTY OF TITLE.
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(b) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE III OF THIS AGREEMENT AND WITHOUT LIMITING THE GENERALITY OF SECTION 2.14(a), SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) TITLE TO ANY OF THE ASSETS, (ii) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (iii) THE CONDITION, QUALITY, SUITABILITY OR MARKETABILITY OF THE ASSETS, (iv) THE AVAILABILITY OF ANY UTILITIES TO ANY PROPERTY OR ANY PORTION THEREOF INCLUDING, WITHOUT LIMITATION, WATER, SEWAGE, GAS AND ELECTRIC AND INCLUDING THE UTILITY AVAILABILITY CAPACITIES ALLOCATED TO ANY PROPERTY BY THE RELEVANT GOVERNMENTAL OR REGULATORY AUTHORITY, (v) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY OR ON BEHALF OF SELLERS OR THIRD PARTIES WITH RESPECT TO THE ASSETS, AND (vi) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO BUYER OR ANY AFFILIATE OF BUYER, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO. ANY AND ALL SUCH DATA, INFORMATION AND OTHER MATERIALS FURNISHED BY OR ON BEHALF OF SELLERS IS PROVIDED TO BUYER AS A CONVENIENCE, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE RISK.
Section 2.15 Presence of Wastes, NORM, Hazardous Substances and Asbestos. BUYER ACKNOWLEDGES THAT THE ASSETS HAVE BEEN USED FOR GATHERING, TRANSPORTING, TREATING, DISPOSING AND/OR OTHER SERVICES RELATED TO THE HANDLING OF PRODUCED WATER AND THAT THERE MAY BE PETROLEUM, PRODUCED WATER, WASTES OR OTHER SUBSTANCES OR MATERIALS LOCATED IN, ON OR UNDER THE ASSETS OR ASSOCIATED WITH THE ASSETS. ADDITIONALLY, THE ASSETS MAY CONTAIN ASBESTOS, HAZARDOUS SUBSTANCES OR NORM. NORM MAY AFFIX OR ATTACH ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE OR IN OTHER FORMS, AND NORM-CONTAINING MATERIAL MAY HAVE BEEN BURIED OR OTHERWISE DISPOSED OF ON THE ASSETS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THE ASSETS BY REASON THEREOF. SPECIAL PROCEDURES MAY BE REQUIRED FOR REMEDIATION, REMOVING, TRANSPORTING AND DISPOSING OF ASBESTOS, NORM, HAZARDOUS SUBSTANCES AND OTHER MATERIALS FROM THE ASSET. Buyer assumes all liability for the assessment, remediation, removal, transportation and disposal of these materials and associated activities with respect to the Assets actually acquired by Buyer at Closing hereunder.
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Section 2.16 Reconciliation of Postpetition Accounts Payable. If, as of the Closing, the aggregate amount of Postpetition Accounts Payable exceeds $1,500,000, then Buyer shall deliver to Sellers at Closing (or as soon as practicable thereafter) a list of the specific Postpetition Accounts Payable that Buyer will assume (for the avoidance of doubt, the aggregate amount of such assumed Postpetition Accounts Payable shall not exceed nor be lower than $1,500,000), and all of the other Postpetition Accounts Payable will be retained by Sellers.
Section 2.17 Withholding. Buyer and its Affiliates and Escrow Agent shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to the making of such payment under Applicable Law; provided that, to the extent that each Seller delivers an IRS Form W-9 in accordance with Section 2.05(c)(v), no amount shall be deducted or withheld from the amounts payable pursuant to this Agreement other than to the extent required as a result of a change in Applicable Law following the date hereof. To the extent any amounts are so deducted or withheld and paid over to the appropriate Taxing Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction or withholding was made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as follows, except as set forth in the Disclosure Schedule (and subject to Section 11.13):
Section 3.01 Organization. Each Seller is an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Laws of the jurisdiction of its organization. Each Seller is duly qualified or licensed to do business and is in good standing (if applicable) in each jurisdiction where the nature of its business or properties makes such qualification or licensing necessary, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Seller Material Adverse Effect.
Section 3.02 Authority and Authorization. Each Seller has full power and authority to carry on its business as presently conducted and to enter into this Agreement and the other Transaction Documents to which such Seller is or will be a party and, subject to the entry of the Bid Procedures Order and the entry of the Sale Order, to perform its obligations under this Agreement and the other Transaction Documents to which such Seller is or will be a party and to consummate the transactions contemplated hereby and thereby and no other proceeding or action on the part of any Seller (including its equityholders) is necessary to approve and authorize such Seller’s execution and delivery of any Transaction Document to which such Seller is or will be a party or the performance of such Seller’s obligations hereunder or thereunder or to consummate the transactions contemplated hereby or thereby. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is or will be a party, and the performance by each Seller of its obligations under this Agreement and the other Transaction Documents to which such Seller is or will be a party and the transactions contemplated hereby and thereby have been or will be duly and validly authorized by all requisite limited liability company action on the part of such Seller.
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Section 3.03 Enforceability. This Agreement has been duly executed and delivered on behalf of each Seller and (assuming due authorization, execution and delivery thereof by Buyer), subject to requisite Bankruptcy Court approval, will constitute the legal, valid and binding obligation of each Seller enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, reorganization or moratorium statutes, or other similar Applicable Laws affecting the rights of creditors generally or equitable principles (collectively, “Equitable Limitations”). At the Closing, all other Transaction Documents required hereunder to be executed and delivered by each Seller shall be duly executed and delivered and (assuming due authorization, execution and delivery thereof by the other parties thereto) shall constitute legal, valid and binding obligations of such Seller enforceable against it in accordance with their terms, except as enforceability may be limited by Equitable Limitations, subject to the entry of the Sale Order and provided no stay exists with respect to the Sale Order.
Section 3.04 Conflicts. The execution and delivery by each Seller of this Agreement and the other Transaction Documents to which such Seller is or will be a party does not, and the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which such Seller is or will be a party shall not, (a) violate or be in conflict with, or require the consent (other than consents that have been obtained), notice or other action of any Person or entity under, any provision of such Seller’s Organizational Documents, (b) subject to the entry of the Bid Procedures Order and the Sale Order and obtaining the consents described on Disclosure Schedule 3.06, conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice, or both would constitute a default) under, require any notice or other action with respect to or give rise to any right to termination, cancellation or acceleration under, or result in a loss of any benefits by any Seller under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or instrument to which such Seller is a party or by which it or any of its properties or assets may be bound, (c) subject to the entry of the Bid Procedures Order and the Sale Order, violate any provision of or require any consent, authorization or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to any Seller or (d) result in the creation of any Lien on any of the Assets, other than Liens that may arise or be deemed to arise with respect to such Assets as a result of the transactions contemplated by this Agreement.
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Section 3.05 Material Contracts.
(a) To Sellers’ Knowledge, Disclosure Schedule 3.05(a) sets forth a complete list, as of the Execution Date, of all Applicable Contracts of the type described below and any and all amendments, extensions, or other modifications thereof (each, such Contract listed on Disclosure Schedule 3.05(a), other than any such Contract that is an Excluded Asset or an Excluded Liability a “Material Contract”):
(i) any Applicable Contract that has or that could reasonably be expected to result in aggregate payments by a Seller in excess of $75,000 in the current or any future calendar year;
(ii) any Applicable Contract that constitutes a lease under which a Seller is the lessor or the lessee of real or personal property that (A) cannot be terminated by Sellers without penalty upon sixty (60) days’ or less notice and (B) involves an annual base rental of more than $25,000;
(iii) any Applicable Contract that is an Intellectual Property Agreement;
(iv) any Contract with any Affiliate of Sellers that will be binding on Buyer after the Closing;
(v) any Contract to sell, lease, assign, sublease or otherwise dispose of any Sellers’ interests in any of the Assets;
(vi) any tax partnership or joint venture Contract;
(vii) any Contract with any labor union, works council, or other labor association (collectively, “Union”);
(viii) any Contract containing any preferential purchase rights, rights of purchase, rights of first offer, right of first refusal or other similar rights affecting the Assets;
(ix) any Applicable Contract that is an indenture, mortgage, loan, credit agreement, sale-leaseback, guaranty of financial obligation, bond, letter of credit or similar financial Contract the obligations under which are secured by a Lien on any Asset created by, through or under Sellers;
(x) Contracts pursuant to which a third party has granted to any Seller a license under, or a covenant not to sue in respect of, material Business Intellectual Property, other than (A) agreements relating to commercially available off the shelf computer software pursuant to which the annual license fees are less than $100,000 in the aggregate and (B) licenses granted by customers, vendors, suppliers or distributors in the Ordinary Course of Business;
(xi) any Applicable Contract that is material to the Business as currently conducted by Sellers and contains a most favored nation or similar provision that will be binding on Buyer or the Assets after the Closing;
(xii) any Contract that will be binding on Buyer or the Assets after the Closing and contains any non-competition, non-solicitation or similar provision that will materially prohibits Buyer after the Closing from freely engaging in the Business in any geographic region in which Sellers currently conduct the Business; or
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(xiii) any outstanding material settlement offers or other arrangements related to the Assets or the Business, in each case that will be binding on Buyer after the Closing.
(b) Except as set forth on Disclosure Schedule 3.05(b), subject to entry of the Sale Order and payment of all Cure Costs, as of the Execution Date, all of the Material Contracts are, to Sellers’ Knowledge, in full force and effect and are legal, valid and binding obligations of such Seller party thereto and, to Seller’s Knowledge, each other party to such Material Contract, and, to Sellers’ Knowledge, is enforceable against the applicable Seller, and, to Seller’s Knowledge, each other party to such Material Contract, in accordance with its terms. No Seller nor, to Sellers’ Knowledge, any other party to any such Material Contract is in breach of or default, or with the lapse of time or the giving of notice, or both, would be in breach or default, with respect to any of its obligations thereunder, except to the extent that such breaches or defaults do not constitute a Seller Material Adverse Effect. As of the Execution Date, Sellers have made available to Buyer (electronically or otherwise) copies of all Material Contracts listed on Disclosure Schedule 3.05(a) that are in the possession or control of Sellers or any of their respective Affiliates and, to Sellers’ Knowledge, such copies are complete and accurate copies of such Material Contracts.
Section 3.06 Approvals. To Sellers’ Knowledge, Disclosure Schedule 3.06 contains a complete and accurate list or description of all approvals, consents, filings and notifications required to be obtained, made or given by Sellers, after giving effect to the entry of the Bid Procedures Order and the Sale Order, for the consummation of the Transactions (each, a “Consent”), other than (a) for Preferential Purchase Rights, (b) under Contracts that are terminable without cost upon not greater than sixty (60) days’ notice, (c) any approvals, consents, filings and notifications of or with any Governmental Authority of the type customarily obtained, made or given after Closing and (d) approvals as to which the failure to obtain, make or give would materially adversely affect the ability of any Seller to timely consummate any of the transactions contemplated hereby, perform its obligations hereunder or otherwise as would not reasonably be expected to be material to the Business taken as a whole.
Section 3.07 Environmental Matters.
(a) Except as set forth on Disclosure Schedule 3.07, the Business, the Assets and Sellers’ ownership and operation of the Assets are and for the past three (3) years have been in compliance with all Environmental Laws except for noncompliance that would not result in a material Liability for which Buyer would be responsible for based on the Assets acquired pursuant to this Agreement.
(b) Except as set forth on Disclosure Schedule 3.07 and as would not result in a material Liability for which Buyer would be responsible for based on the Assets acquired pursuant to this Agreement, (i) the Business, the Assets and Sellers’ ownership and operation of the Assets are and for the past three (3) years have been in compliance with all Permits issued pursuant to or otherwise required under Environmental Laws (collectively, “Environmental Permits”), (ii) each such Environmental Permit is valid and in full force and effect, and there are no pending or, to Sellers’ Knowledge, threatened Proceedings relating to the appeal, revocation, withdrawal, non-renewal, suspension, cancellation or termination of such Environmental Permits, and (iii) any applications for renewal of such Environmental Permits due under Environmental Laws or the terms of such Environmental Permit as of the date of the Execution Date have been duly filed with the applicable Governmental Authority within the time frame required under applicable Environmental Laws.
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(c) Except as set forth on Disclosure Schedule 3.07, Sellers are not subject to any Proceeding, order, decree or judgment issued relating to the Business or the Assets or against Sellers by a Governmental Authority or other Person under, based on, or arising out of any Environmental Laws or Environmental Permit that presently require any remedial or other corrective action or that would reasonably be expected to result in a material Liability for which Buyer would be responsible for based on the Assets acquired pursuant to this Agreement.
(d) Except as set forth on Disclosure Schedule 3.07, no Seller has received any written notice from any Governmental Authority in the three (3)-year period immediately preceding the Execution Date alleging that a violation of Environmental Law or Environmental Permit has occurred at any Asset, or alleging any Liability under Environmental Law or Environmental Permit related to any Asset, that remains unresolved as of the Execution Date and that would reasonably be expected to result in a material Liability for which Buyer would be responsible for based on the Assets acquired pursuant to this Agreement.
(e) Except as set forth on Disclosure Schedule 3.07, no Hazardous Substances are present, or have been generated, handled, used, managed, stored, transported, processed, treated, disposed or arranged for the disposal of, released, migrated or have escaped on, in, from, under or in connection with the Assets in a manner that would reasonably be expected to result in a material Environmental Claim or that would reasonably be expected to result in a material Liability for which Buyer would be responsible for based on the Assets acquired pursuant to this Agreement.
(f) To Sellers’ Knowledge, all environmental reports (including without limitation all Phase I and Phase II environmental site assessments), studies, Environmental Permits, or other material documents addressing environmental conditions at the Assets that would reasonably be expected to result in an Environmental Claim or that would reasonably be expected to result in a material Liability for which Buyer would be responsible for based on the Assets acquired pursuant to this Agreement, if any, that are in Sellers’ possession or control have been made available for Buyer’s review.
This Section 3.07 shall constitute Sellers’ sole representation and warranty as to Environmental Claims, compliance with Environmental Laws or environmental conditions of or affecting the Assets.
Section 3.08 Litigation. Except as set forth in Disclosure Schedule 3.08, as of the Execution Date, there is no Proceeding pending or, to Seller’s Knowledge, threatened in writing, against or involving any Seller or the Assets that (a) if determined or resolved adversely would reasonably be expected to, individually or in the aggregate, be material to the Business, taken as a whole, (b) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions or (c) affects the execution, delivery or performance by any Seller of this Agreement or any other Transaction Document to which any Seller is or will be a party. Except as set forth in Disclosure Schedule 3.08, as of the Execution Date, no Seller is party to, and none of them or any of their respective material assets, rights or properties is subject to, any outstanding order, judgment, writ, injunction award or decree related to the Assets or the Business that would be binding on Buyer following the Closing.
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Section 3.09 Intellectual Property.
(a) Sellers collectively solely and exclusively own (free and clear of all Liens other than licenses of Intellectual Property granted by any of the Sellers in the Ordinary Course of Business) all right, title, and interest in, or have a valid written license or other permission to use, all Business Intellectual Property, in each case, except where the failure to so own or have a valid license or other permission to use such Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. All Owned Intellectual Property is subsisting and, to the Sellers’ Knowledge, all registrations and issuances included in the Owned Intellectual Property are valid and enforceable. To the Sellers’ Knowledge, no interference, opposition, reissue, reexamination or other Proceeding is pending or threatened in which the ownership, validity or enforceability of any material Owned Intellectual Property is being contested or challenged, in each case, other than prosecution Proceedings to register any Owned Intellectual Property with the appropriate Governmental Authority.
(b) Disclosure Schedule 3.09(b) contains an accurate and complete list of the Intellectual Property that is registered or applied for registration with any Governmental Authority and included in the Owned Intellectual Property (the “Registered Intellectual Property”), including the jurisdiction where each item of such Registered Intellectual Property is registered or applied for registration, the applicable patent or registration number and application number and the record owner. None of the Owned Intellectual Property is software. All material Registered Intellectual Property has been maintained effective by the filing of all necessary filings, maintenance, and renewals, and timely payment of requisite fees with the relevant Governmental Authority, except whether the failure to do so would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. To the Sellers’ Knowledge, no loss or expiration of any material Owned Intellectual Property is threatened or pending, except for material patents expiring at the end of their statutory terms, and not as a result of any intentional act or omission by any of the Sellers (including failure by any Seller to pay any required maintenance fees).
(c) Sellers have taken commercially reasonable actions to maintain and protect all of the material Owned Intellectual Property. Sellers have taken commercially reasonable measures to protect (i) the confidentiality of all material trade secrets and any other material confidential information, in each case, that is Owned Intellectual Property and (ii) any confidential information owned by any Person to whom any Seller has a confidentiality obligation with respect to such confidential information. To the Sellers’ Knowledge, no material trade secrets or material confidential information, in each case, that is Owned Intellectual Property have been disclosed by any of the Sellers to any Person other than pursuant to a written agreement restricting the disclosure and use of such material trade secrets and material confidential information by such Person or other than to a Person who otherwise has a duty to keep such material trade secrets and such material confidential information confidential. To the Sellers’ Knowledge, no Person has any right, title, or interest in whole or in part, in any Owned Intellectual Property (other than licenses of Intellectual Property granted by any of the Sellers in the Ordinary Course of Business).
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(d) To the Sellers’ Knowledge, the Business IT Assets are operational, fulfill the purposes for which they were acquired, and have security, back-ups, and disaster recovery arrangements in place which are sufficient in all material respects for the current needs of Sellers for the conduct of the Business. Sellers have disaster recovery, data back-up, and security plans and procedures and have taken commercially reasonable steps to safeguard the availability and security of the Business IT Assets and all material data and material information stored thereon. To the Sellers’ Knowledge, the Business IT Assets have not suffered any material failure in availability or accuracy of operation in the last year that has not been completely remedied.
(e) To the Sellers’ Knowledge, the current conduct of the Business and the products and services of the Business, and the material Owned Intellectual Property have not, in the last year, infringed, misappropriated, or otherwise violated, and do not infringe, misappropriate, or otherwise violate, any Intellectual Property of any Person. To the Sellers’ Knowledge, no Seller is the subject of any pending legal proceeding that alleges a claim of infringement, misappropriation, or other violation of any Intellectual Property of any Person that relates to the Business and no such claims have been asserted or threatened against any Seller. To Sellers’ Knowledge, no Person has, in the last year, infringed, misappropriated or otherwise violated, or is infringing, misappropriating or otherwise violating, any material Owned Intellectual Property. No written or, to the Sellers’ Knowledge, oral claims alleging any infringement, misappropriation, or other violation of material Owned Intellectual Property have been made against any Person by any Seller.
(f) Except as would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (i) the consummation of the transactions contemplated hereby will not result in the loss or impairment of Buyer’s right to own or use any Business Intellectual Property, (ii) immediately subsequent to the Closing, the Business Intellectual Property will be owned or available for use by Buyer on substantially the same terms and conditions to those under which the Seller owns or uses the Business Intellectual Property immediately prior to the Closing and (iii) upon consummation of the transactions contemplated hereby, Sellers will have no right, title or interest in or to any Purchased Intellectual Property.
Section 3.10 Insurance Coverage. Disclosure Schedule 3.10 sets forth a list of all material insurance policies and fidelity bonds of Sellers in effect as of the Execution Date relating to the Assets. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date will have been paid, and no notice of pending or threatened cancellation or termination has been received by any Sellers with respect to any such policy. To Sellers’ Knowledge, neither the Sellers nor any of their Subsidiaries is in material default with respect to any provision contained in any such insurance policy or has failed to give any notice or present any material claim under any such insurance policy in due and timely fashion.
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Section 3.11 Taxes.
(a) (i) all Tax Returns with respect to Non-Income Taxes relating to the Assets have, to the extent required by Applicable Law to be filed (taking into account valid extensions of time within which to file), been filed when due in accordance with all Applicable Law, (ii) all such Tax Returns are true, correct and complete in all material respects, (iii) all Non-Income Taxes with respect to the Assets that are due and payable (whether or not shown or required to be shown on any Tax Return) have been duly and timely paid in full, (iv) all Taxes required to be withheld with respect to the Assets have been duly and timely withheld and remitted to the appropriate Taxing Authority in accordance with applicable Law, and (v) all Non-Income Taxes with respect to the Assets not yet due and payable have been fully accrued on the books of the applicable Seller;
(b) there is no claim, audit, action, suit, proceeding or investigation pending or threatened in writing in respect of Non-Income Taxes with respect to the Assets;
(c) no Governmental Authority has ever made a claim in writing that any Seller is or may be obligated to file a Tax Return with respect to Non-Income Taxes or pay Non-Income Taxes with respect to the Assets in a jurisdiction where such Seller does not file Tax Returns or pay Non-Income Taxes;
(d) no Seller has executed or filed with any Governmental Authority any agreement or other document extending the statute of limitations for the assessment, collection, or imposition of any Non-Income Tax;
(e) no Non-Income Tax deficiency with respect to the Assets has been proposed, asserted or assessed in writing that has not been fully paid;
(f) there are no Liens for Taxes (other than for Taxes that are not due and payable) on any of the Assets that arose in connection with any Tax; and
(g) no Asset is subject to any Tax partnership agreement or provisions requiring a partnership income Tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code (the “Code”).
This Section 3.11 shall constitute Sellers’ sole representations and warranties as to Tax matters.
Section 3.12 Letters of Credit. Disclosure Schedule 3.12 lists all Existing Letters of Credit.
Section 3.13 Preferential Purchase Rights. Except as set forth on Disclosure Schedule 3.13, to Sellers’ Knowledge, there are no preferential purchase rights, rights of first refusal, drag-along rights, tag-along rights or other similar rights that are applicable to the transfer of the Assets in connection with the Transactions (the “Preferential Purchase Rights”).
Section 3.14 Broker. Other than amounts as may be payable by Sellers for which Buyer shall have no liability, no broker, finder, investment banker or other similar person is or will be, in connection with the transactions contemplated by this Agreement or the other Transaction Documents, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on behalf of Sellers.
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Section 3.15 Real Property.
(a) Owned Real Property. Disclosure Schedule 3.15(a) sets forth a true, correct and complete list and description of all real property and interests in real property owned by Sellers and used in connection with the Business (including all Surface Tracts) (which such description shall include the address of each parcel, are referred to collectively as the “Owned Real Property”). To Sellers’ Knowledge, the Owned Real Property and all fixtures, buildings, structures and other improvements thereon (collectively, “Improvements”), are not subject to any options to purchase, rights of first refusal, rights of first offer, preferential rights or similar rights, and no Person has any right or option to purchase or otherwise acquire the Owned Real Property or Improvements, or any part thereof or interest therein, from Sellers. To Sellers’ Knowledge, the Owned Real Property and Improvements are not subject to any leases, subleases, licenses, concessions or other agreements, written or oral, granting to any Person other than Sellers the right or option of use or occupancy of any of the Owned Real Property or Improvements. To Sellers’ Knowledge, there are no Persons (other than Sellers) in possession of any of the Owned Real Property or Improvements. Except as set forth on Disclosure Schedule 3.15(a), Seller does not own fee title to any other real property (other than the Surface Tracts) used or held for use in connection with the Business.
(b) Surface Leases. Disclosure Schedule 3.15(b) sets forth a true, correct, and complete list and description of all real property leased, subleased, licensed, or otherwise occupied by Sellers, including the Surface Leases, with respect to the Business, together with all of Sellers’ rights to any Improvements thereon (the “Leased Real Property”, and the Leased Real Property together with the Owned Real Property, the “Real Property”), which such description in Disclosure Schedule 3.15(b) shall include: (i) the address of each parcel of Leased Real Property; and (ii) a true, correct, and complete list of all leases, subleases, licenses or other occupancy agreements granting Sellers the right to use and occupy the Leased Real Property and any assignments, amendments, modifications, supplements, side letters, estoppels, consents and other agreements relating thereto (each, a “Real Property Lease” and collectively, the “Real Property Leases”).
(c) Title Documents. To Sellers’ Knowledge, Sellers have made available Buyer with true, correct, and complete copies of all of Sellers’ prior and existing title insurance policies, title reports and title commitments in the possession or control of Sellers or any of their respective Subsidiaries with respect to the Real Property, including legible copies of any exceptions referenced therein, all surveys of the Real Property in the possession or control of Sellers, and copies of all deeds vesting title to the Owned Real Property into Sellers that are in the possession or control of Sellers.
(d) Real Property Leases. Sellers have made available to Buyer true, correct, and complete copies of the Real Property Leases. To Sellers’ Knowledge, all of the Real Property Leases are valid, binding and in full force and effect. Sellers have not received any notice of any breach of or default under any of the Real Property Leases, and Sellers and, to Sellers’ Knowledge, each other party thereto, is in compliance with all obligations of such party thereunder. Sellers is currently in possession of the Surface Leases, and Sellers have not subleased, assigned, or otherwise granted to any Person the right to use or occupy such Surface Leases or any portion thereof. Each Seller’s possession, occupancy, and quiet enjoyment of the Surface Leases under each Real Property Lease to which it is a party has not been disturbed.
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(e) Compliance. Since January 1, 2021, to Sellers’ Knowledge, Sellers have not received any written notice of breach or violation or alleged breach or violation of any applicable building, zoning, subdivision, health and safety, and other land use statutes, laws or ordinances.
(f) Zoning and Condemnation Proceedings. There is no pending or, to the Knowledge of Sellers, threatened zoning application or proceeding or condemnation, eminent domain, or taking proceeding with respect to any of the Real Property or the Improvements located thereon.
Section 3.16 Labor and Employment Matters.
(a) Disclosure Schedule 3.16(a) contains a true, correct and complete list of all employees of Sellers and their Affiliates engaged in the Business.
(b) To Sellers’ Knowledge, Sellers and their Affiliates are, and have been for the past three (3) years, in compliance in all material respects with all Applicable Laws relating to labor and employment, including all Applicable Laws pertaining to employment, employee safety, occupational health, employee classification and employment practices, including those relating to labor management relations, wages, payroll, social insurance, pension fund contributions, social security contributions, employment taxes, hours, overtime, vacation pay, severance pay, discrimination, sexual harassment, human rights, pay equity, civil rights, affirmative action, work authorization, and immigration. Except as set forth on Disclosure Schedule 3.16(b), there are no charges, arbitrations, grievances, complaints, or other Proceedings pending or, to Sellers’ Knowledge, threatened in writing against any Seller or any of their Affiliates relating to the employment or termination of employment of any individual or group of individuals by any Seller or any Affiliate of any Seller.
(c) To Sellers’ Knowledge, with respect to any current or former employee or independent contractor of any of the Seller or any of their Affiliates: (i) there is no pending or threatened, either presently or at any time in the past three (3) years, employee strike, work stoppage or labor dispute, (ii) no union representation question exists and no collective bargaining agreement, collective agreement, works council, or other similar agreement with a Union exists or is being negotiated, or has existed or has been negotiated at any time in the past three (3) years, and (iii) during the past three (3) years, no demand has been made or threatened for recognition by any Union by or with respect to any employees, and no representation or certification proceedings or petitions seeking a representation have been filed or threatened.
(d) To Sellers’ Knowledge, no Seller or Affiliate of any Seller has incurred any liability under the Worker’s Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq. or similar Applicable Laws of any jurisdiction (the “WARN Act”), which remains unpaid or unsatisfied, nor has any Seller or any Affiliate of any Seller terminated the employment of any employees, separately or as a group, that triggered any obligations under the WARN Act without giving the notices required thereunder.
Section 3.17 Employee Benefit Matters. Neither the Sellers nor any of their ERISA Affiliates sponsors, maintains or contributes to, or has in the past six (6) years sponsored, maintained or contributed to, (i) any plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code, including any single employer defined benefit pension plan, (ii) any “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) any “multiple employer plan” (as defined in Section 413(c) of the Code), or (iv) any “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA).
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Section 3.18 [Reserved].
Section 3.19 Material Customers and Suppliers. Disclosure Schedule 3.19 (i) lists the top fifteen (15) customers (by revenue) of Sellers related to the Business for the year ended December 31, 2020 (each such customer, a “Material Customer”) and (ii) lists the top fifteen (15) vendors and suppliers (by fees paid or payable) of Sellers related to the Business for the year ended December 31, 2020 (each such supplier, a “Material Supplier”).
Section 3.20 Transactions with Affiliates. Except as disclosed on Disclosure Schedule 3.20, (i) there are no (and since January 1, 2021 there have not been any) contracts, agreements or other arrangements between Sellers or any of their Subsidiaries, on the one hand, and any officer, director (or equivalent), employee or Affiliate of Sellers or any of their Subsidiaries (excluding the Sellers and their Subsidiaries, but including Sellers and their Subsidiaries), on the other hand, except for employment or consulting agreements entered into in the Ordinary Course of Business that have been made available to Buyer, and (ii) no such officer, director (or equivalent), employee or Affiliate of any Seller or any of its Subsidiaries owns any material interest in or any material property (real, personal or mixed, tangible or intangible) of, Sellers and their Subsidiaries, other than equity interests of any Subsidiaries owned by such Seller.
Section 3.21 Accounts Receivable. All accounts receivable of the Company and its Subsidiaries are valid receivables arising from bona fide arm’s length transactions in the Ordinary Course of Business, and such accounts receivable have been recorded in accordance with the GAAP.
Section 3.22 No Other Representations. Neither Buyer nor any other Person (on behalf of Buyer or otherwise) has made or is making any representation or warranty whatsoever, express or implied, at law or in equity, with respect to Buyer, this Agreement or the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in Article IV, and no Seller is relying on and has not relied on any representation or warranty other than those representations or warranties set forth in Article IV and any reliance by any Seller on any representation or warranty other than those representations and warranties set forth in Article IV is hereby expressly disclaimed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.01 Organization. Buyer is an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Laws of the jurisdiction of its organization. Buyer is duly qualified or licensed to do business and is in good standing (if applicable) in each jurisdiction where the nature of its business or properties makes such qualification or licensing necessary, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect.
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Section 4.02 Authorization and Authority. Buyer has full power and authority to carry on its business as presently conducted, to enter into this Agreement and the other Transaction Documents to which Buyer is or will be a party, to purchase the Assets on the terms described in this Agreement and to perform its other obligations under this Agreement and the other Transaction Documents to which Buyer is or will be a party and to consummate the transactions contemplated hereby and thereby and no other proceeding or action on the part of Buyer (including its equityholders) is necessary to approve and authorize Buyer’s execution and delivery of any Transaction Document to which Buyer is or will be a party or the performance of Buyer’s obligations hereunder or thereunder or to consummate the transactions contemplated hereby or thereby. The execution and delivery by Buyer of this Agreement and the other Transaction Documents to which Buyer is or will be a party, and the performance by Buyer of this Agreement and the other Transaction Documents to which Buyer is or will be a party and the transactions contemplated hereby and thereby, have been or will be duly and validly authorized by all requisite action on the part of Buyer.
Section 4.03 Enforceability. This Agreement has been duly executed and delivered on behalf of Buyer, and (assuming in each case due authorization, execution and delivery thereof by Sellers) constitutes a legal, valid and binding obligation of Buyer enforceable against it in accordance with its terms, except as enforceability may be limited by Equitable Limitations. At the Closing all other Transaction Documents required hereunder to be executed and delivered by Buyer shall be duly executed and delivered and (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) shall constitute legal, valid and binding obligations of Buyer enforceable against it in accordance with their terms, except as enforceability may be limited by Equitable Limitations.
Section 4.04 Conflicts. The execution and delivery by Buyer of this Agreement and the other Transaction Documents to which Buyer is or will be a party does not, and the consummation by Buyer of the transactions contemplated by this Agreement and the other Transaction Documents to which Buyer is or will be a party shall not, (a) violate or be in conflict with, or require the consent (other than consents that have been obtained), notice or other action of any Person under, any provision of Buyer’s Organizational Documents, (b) conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice, or both, would constitute a default), require any notice or other action with respect to or give rise to any right to termination, cancellation or acceleration under any agreement or instrument to which Buyer is a party or is bound, or (c) violate any provision of or require any consent, authorization or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to Buyer.
Section 4.05 Broker. Other than a fee payable by Buyer to Simmons Energy, a division of Piper Sandler & Co., no broker, finder, investment banker or other similar person is or will be, in connection with the transactions contemplated by this Agreement or any other Transaction Documents, entitled to any brokerage, finders or other fee or compensation based on any arrangement or agreement made by or on behalf of Buyer.
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Section 4.06 Financial Ability. As of the Execution Date, Buyer has sufficient funds committed and unconditionally available to it to perform all of Buyer’s obligations under this Agreement, including without limitation to pay the Adjusted Purchase Price in accordance with the terms of this Agreement and to assume the Assumed Liabilities. Buyer’s ability to consummate the transactions contemplated hereby is not contingent upon its ability to secure any financing or to complete any public or private placement of securities prior to or upon Closing.
Section 4.07 Approvals. There are no approvals, consents, filings or notifications required to be obtained, made or given by Buyer as a condition to or in connection with the performance by Buyer of its obligations under this Agreement or any other Transaction Documents to which Buyer is or will be a party or the consummation by Buyer of the transactions contemplated by this Agreement or such other Transaction Documents.
Section 4.08 Litigation. There are no Proceedings pending to which Buyer is a party or, to Buyer’s Knowledge, which have been threatened against Buyer which affect the execution and delivery by Buyer of this Agreement or the other Transaction Documents to which Buyer is or will be a party, the performance by Buyer of its obligations under this Agreement or such other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.
Section 4.09 Bankruptcy. There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to Buyer’s Knowledge, threatened against Buyer.
Section 4.10 Investigation.
(a) Buyer has such expertise, knowledge and sophistication in financial and business matters generally that it is capable of evaluating, and has evaluated, the merits and economic risks of its investment in the Assets. Buyer is knowledgeable of the oil and gas wellsite service business and of the usual and customary practices of providers of oil and gas wellsite services, including those in the areas where the Assets are located. Further, Buyer is capable of making such investigation, inspection, review and evaluation of the Assets as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the Assets, their value, operation and suitability.
(b) Buyer has had the opportunity to examine all aspects of the Assets that Buyer has deemed relevant and has had access to all information requested by Buyer with respect to the Assets in order to enter into this Agreement. In connection with the Transactions, Buyer has had the opportunity to ask such questions of, and has received sufficient answers from, the Representatives of Sellers and obtain such additional information about the Assets as Buyer deems necessary to enter into this Agreement.
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(c) Buyer confirms, acknowledges and agrees that Buyer is relying entirely upon the representations and warranties of Sellers in this Agreement and its own investigations and inspections of the books, records and assets of Sellers, including the Assets, prior to the execution of this Agreement in entering into this Agreement and proceeding with the Transactions on the terms as set forth herein. Buyer acknowledges and agrees that any description of Sellers, their businesses, operations and assets (including the Assets) in this Agreement, the Disclosure Schedules or any other Transaction Document is for the sole purpose of identification only and no representation, warranty or condition is or will be given by Sellers in respect of the accuracy of any description. In deciding to enter into this Agreement, and to consummate the Transactions, other than the express representations and warranties of Sellers set forth in Article III, Buyer has relied solely upon its own knowledge, investigation, judgment and analysis and not on any disclosure or representation made by, or any duty to disclose on the part of, Sellers or Sellers’ Representatives.
Section 4.11 Qualification. At the Closing, Buyer (or an Affiliate of Buyer to which the Assets are assigned at Closing) will be qualified to own and, where applicable, assume operatorship of the Assets in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated by this Agreement will not cause Buyer to be disqualified as such an owner or operator, except for such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect. To the extent required by the applicable state and federal Governmental Authorities, as of Closing Buyer (or, if applicable, Buyer’s operating Affiliate) will have (a) such lease bonds, area-wide bonds or any other surety bonds or insurance policies in each case as required by, and in accordance with, any Governmental Authorities with jurisdiction over the ownership or operatorship of such Assets and (b) such consents and approvals enabling Buyer to operate the Vehicles as required by, and in accordance with, any Governmental Authorities with jurisdiction over such Vehicles.
Section 4.12 No Other Representations. Neither Sellers nor any other Person (on behalf of Sellers or otherwise) has made or is making any representation or warranty whatsoever, express or implied, at law or in equity, with respect to Sellers, the Assets, this Agreement or the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in Article III (as modified by the Disclosure Schedules), and Buyer is not relying on and has not relied on any representation or warranty other than those representations or warranties set forth in Article III (as modified by the Disclosure Schedules) and any reliance by Buyer on any representation or warranty other than those representations and warranties set forth in Article III (as modified by the Disclosure Schedules) is hereby expressly disclaimed.
ARTICLE V
COVENANTS OF SELLERS
Section 5.01 Operating Covenants. From the Execution Date until the Closing or, if earlier, the termination of this Agreement, except (s) as expressly required by this Agreement or any other Transaction Document, (t) as expressly required by any lease, Contract or instrument listed on any Annex, Disclosure Schedule or Schedule, as applicable, (u) as required by any Applicable Law or any Governmental Authority (including by order or directive of the Bankruptcy Court) or any requirements or limitations resulting from the Bankruptcy Cases, (v) to the extent related solely to the Excluded Assets and/or Excluded Liabilities, (w) for renewal of expiring insurance coverage in the Ordinary Course of Business, (x) for emergency operations, (y) for matters identified on Disclosure Schedule 5.01 or (z) as otherwise consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed):
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(a) Sellers shall, and shall cause any applicable Affiliates to:
(i) use commercially reasonable efforts to, as applicable, operate the Business in the Ordinary Course of Business, maintain and preserve intact the Assets substantially in their current condition (subject to ordinary wear and tear) and, preserve in all material respects the present business operations, organization and goodwill of the Business, and the present relationships with Material Customers and Material Suppliers of the Business;
(ii) maintain or cause its Affiliates to maintain the books of account and records relating to the Assets in the usual, regular and ordinary manner, in accordance with its usual accounting practices;
(iii) give written notice to Buyer as soon as is practicable of any material damage or casualty to or destruction or condemnation of any Asset of which Sellers have Knowledge;
(iv) use reasonable best efforts to maintain insurance coverage on the Assets in the amounts and types described on Disclosure Schedule 3.10;
(v) use commercially reasonable efforts to pay or cause to be paid in the Ordinary Course of Business all accounts payable, bills and invoices related to the Business or attributable to the Assets that are or were incurred by Sellers following the Petition Date and that are due and payable prior to the Closing, in each case in accordance with the standard terms and conditions with respect thereto;
(vi) use its commercially reasonable efforts to keep and maintain possession of and compliance with the terms of all Permits required by law or used in, held for use in, or otherwise necessary for the operation of the Business including by using commercially reasonable efforts to take all actions and submitting all payments, applications, and filings necessary to renew any such Permit due to expire at any time before the Closing Date; and
(vii) use its commercially reasonable efforts to protect, defend and maintain the validity and enforceability of all material Purchased Intellectual Property, including by taking all actions and timely submitting all payments and filings due before the Closing Date; and
(b) Sellers shall not, and shall not permit any of their Affiliates to:
(i) sell, lease, license or otherwise transfer any non-de minimis Asset, or otherwise voluntarily divest or relinquish any right or asset, other than (A) sales or other dispositions of materials, supplies, machinery, equipment, improvements or other personal property or fixtures in the Ordinary Course of Business which are obsolete or have been replaced with an item of substantially equal suitability, (B) dispositions of Excluded Assets and (C) as required under any Applicable Law, any order entered by the Bankruptcy Court or this Agreement;
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(ii) materially amend or terminate any Material Contract or enter into any Contract that if entered into prior to the Execution Date would be required to be listed in Disclosure Schedule 3.05(a) other than (A) Contracts of the type described in Section 3.05(a)(ii), Section 3.05(a)(vi) and Section 3.05(a)(vii) entered into in the Ordinary Course of Business, and (B) confidentiality agreements entered into in accordance with the Bid Procedures Order but subject to the other provisions of this Agreement;
(iii) amend or modify in any material respect or terminate any Purchased Contract (other than termination or expiration in accordance with its terms);
(iv) to the extent any of the following could reasonably be expected to have the effect of increasing the Non-Income Tax liability of Buyer for any period after the Closing Date, make any material Non-Income Tax election inconsistent with past practices, change or revoke any Non-Income Tax election, surrender the right to any Non-Income Tax refund, incur any Non-Income Taxes outside the Ordinary Course of Business, file an amended Tax Return with respect to any Non-Income Taxes, or enter into any agreement with any Governmental Authority (including a “closing agreement” within the meaning of Section 7121 of the Code);
(v) change the methods of accounting or accounting practice by Sellers, except as required by concurrent changes in Applicable Law or GAAP as agreed to by its independent public accountants;
(vi) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division;
(vii) authorize or enter into any Contract, arrangement, or commitment to which Buyer would be bound following the Closing if Buyer did not elect to assume such Contract;
(viii) transfer, to the extent that following such transfer such amounts would be treated as Excluded Assets, any security deposits, prepaid rentals, unbilled charges, fees, deposits, cash, cash equivalents or negotiable instruments, in each case constituting Assets;
(ix) satisfy any Excluded Liability with an Asset;
(x) abandon, cancel, permit to lapse or otherwise dispose of or forfeit to the public any rights in, to or for the use of any Assets or Permits;
(xi) grant a release, immunity or covenant not to sue under any Asset; or
(xii) enter into any legally binding commitment with respect to any of the foregoing.
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Section 5.02 Assumption and Rejection of Executory Contracts and Leases.
(a) Schedule 5.02(a) (as may be amended from time to time or supplemented with written notice to Buyer) sets forth each 365 Contract and Sellers’ good faith estimate of the amount of the Cure Costs payable in respect of each such 365 Contract (and if no Cure Cost is estimated to be payable in respect of any 365 Contract, the amount of such Cure Cost designated for such 365 Contract shall be “$0.00”) (as such schedules may from time to time be amended or supplemented with written notice to Buyer, the “365 Schedule”).
(b) Subject to Buyer’s rights under Section 5.02(d) below to subsequently amend such designations, Schedule 5.02(b) sets forth a complete list of the 365 Contracts listed on the 365 Schedule that Buyer desires to be assumed by Sellers and transferred and conveyed to Buyer as a Purchased Contract, which shall include each Vehicle Finance Lease (collectively, and as further modified by Buyer pursuant to the provisions of this Section 5.02(b), the “Desired 365 Contracts”). Any 365 Contracts that are not Desired 365 Contracts shall be an Excluded Asset for all purposes hereof and, for the avoidance of doubt, Buyer shall have no liability on account of any 365 Contracts that are not Desired 365 Contracts.
(c) Promptly following entry of the Bid Procedures Order (to the extent not previously filed), Sellers shall file the 365 Schedule with the Bankruptcy Court and deliver a written notice, in a form reasonably acceptable to Buyer, of the proposed assignments of the Desired 365 Contracts and the proposed Cure Costs for each Desired 365 Contract (consistent with Sellers’ good faith estimates set forth on Schedule 5.02(a)) to all non-debtor parties of the Desired 365 Contracts, which notice shall notify each non-debtor party to such Desired 365 Contract of (i) the proposed Cure Cost for such Desired 365 Contract and (ii) an objection deadline for such non-debtor party to object to the proposed Cure Cost. To the extent that any objections are received from such non-debtor parties in response to such notice, Sellers shall take all reasonably necessary actions to resolve such disputes with the applicable non-debtor party.
(d) Notwithstanding the foregoing, (i) at any time prior to the Designation Deadline (or, if any 365 Contract is first identified to Buyer by Sellers after the Designation Deadline and prior to the commencement of the Sale Hearing, within one (1) Business Day after such identification and the provision of a copy of such 365 Contract to Buyer, to the extent not already provided to Buyer), Buyer may designate any 365 Contract that has not been rejected as a Desired 365 Contract and upon receipt of any such notice Sellers shall use commercially reasonable efforts to effect the assumption of such 365 Contract by Sellers in accordance with the Bankruptcy Code and, if Sellers are successful in effecting such assumption as of Closing, such 365 Contract shall become a Desired 365 Contract and transferred and conveyed to Buyer as a Purchased Contract and (ii) Buyer may revise Schedule 5.02(b) by excluding one or more Desired 365 Contracts at any time prior to the Designation Deadline; provided, however, that Buyer may not exclude from Schedule 5.02(b) any Desired 365 Contract that is a Vehicle Finance Lease. If a Desired 365 Contract is subject to a cure dispute or other dispute as to the assumption or assignment of such Desired 365 Contract that has not been resolved to the satisfaction of Buyer, in Buyer’s sole discretion prior to the Designation Deadline, then the Designation Deadline shall be extended (but only with respect to such Desired 365 Contract) to no later than the earliest of (A) the date on which such dispute has been resolved to the mutual satisfaction of Buyer and Sellers, (B) the date on which such 365 Contract is deemed rejected by operation of sections 365(d)(4) or 1123(b)(2) of the Bankruptcy Code, as applicable, or (C) the date required by the Bankruptcy Court and set forth in the Sale Order. Schedule 5.02(b) and the definition of Desired 365 Contracts shall be deemed automatically amended to reflect changes made pursuant to this Section 5.02(d).
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(e) If Buyer exercises its rights in Section 5.02(d) or (f) to designate a 365 Contract (including a 365 Contract that was a Desired 365 Contract immediately before such designation) as an Excluded Asset, there shall be no change in the Purchase Price as a result of such designation or change in designation.
(f) Notwithstanding anything in this Agreement to the contrary, Sellers shall not reject any 365 Contracts without the prior written consent of Buyer in its sole discretion; provided that, after the Designation Deadline, Sellers may reject 365 Contracts (other than Desired 365 Contracts) without the consent of Buyer so long as such 365 Contracts were identified to Buyer in writing prior to the Designation Deadline. In the event that Sellers identify (whether before or after the Designation Deadline) any additional 365 Contracts capable of being assumed or rejected that were not previously identified as such, Sellers shall promptly notify Buyer of (i) such 365 Contracts (which notice shall include a copy of such 365 Contract to the extent not already provided to Buyer) and (ii) Sellers’ good faith estimate of the amount of the Cure Costs payable in respect of each such 365 Contract and, subject to Section 5.02(d), Buyer may designate each such additional 365 Contract as a Desired 365 Contract or an Excluded Asset pursuant to this Section 5.02(f), notwithstanding the passage of the Designation Deadline. Schedule 5.02(b) and the definition of Desired 365 Contracts shall be deemed automatically amended to reflect changes made pursuant to this Section 5.02(f).
(g) Notwithstanding anything in this Agreement to the contrary, including Section 5.02(d) above, Vehicle Finance Leases shall at all times constitute Desired 365 Contracts and shall be assigned to Buyer at the Closing.
(h) Buyer shall provide adequate assurance of future performance of all of the Desired 365 Contracts so that all Desired 365 Contracts can be assumed by Sellers and assigned to Buyer at or prior to the Closing in accordance with the provisions of section 365 of the Bankruptcy Code and this Agreement, provided that Buyer shall cooperate with Sellers in providing such adequate assurance of future performance of all of the Desired 365 Contracts and Buyer acknowledges that such cooperation may require Buyer to provide information regarding Buyer and its Subsidiaries, as well as a commitment of performance by Buyer and/or its Subsidiaries with respect to the Desired 365 Contracts from and after the Closing to demonstrate adequate assurance of the performance of the Desired 365 Contracts, and Sellers’ obligation to assume and assign such Desired 365 Contracts is subject to the cooperation and providing of such information and commitment by Buyer. Sellers shall have no liability for Cure Costs with respect to the Desired 365 Contracts, other than Excess Cure Costs.
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(i) At the Closing, (i) the Purchase Price shall be increased by, pursuant to section 365 of the Bankruptcy Code, if applicable under section 1123(b)(2) of the Bankruptcy Code, and the Sale Order, any and all cure and reinstatement costs or expenses that are required to be paid under sections 365(b)(1)(A), 365(b)(1)(B) and if applicable 1123(b)(2), or any other applicable provision of the Bankruptcy Code to effectuate the assumption and assignment of the Desired 365 Contracts (such costs or expenses required to be paid by Sellers, the “Cure Costs”) with respect to the Desired 365 Contracts actually paid by Sellers prior to Closing; provided that the Purchase Price shall not be increased by the amount of any Excess Cure Costs; and (ii) Buyer (and not Sellers) shall pay all Cure Costs with respect to the Desired 365 Contracts that have not been paid by Sellers prior to the Closing (for the avoidance of doubt, there shall not be any adjustment to the Purchase Price for any Cure Cost that is not actually paid by Seller). Notwithstanding anything to the contrary herein, if any Desired 365 Contract is subject to a dispute as to Cure Costs that has not been resolved as of Closing and such Desired 365 Contract is assigned to Buyer (at or after Closing) then, upon resolution of such Cure Costs, Buyer shall pay such Cure Costs; provided that, any and all resolutions of disputes related to Cure Costs for any Desired 365 Contract shall be acceptable to Buyer in Buyer’s reasonable discretion; provided, further, that Buyer retains any and all rights under Section 5.02(d) of this Agreement with respect to the 365 Contracts. To the extent any Cure Costs are Postpetition Accounts Payable due and payable at or prior to the Closing, such Cure Costs shall be the responsibility of, and paid by, Sellers.
Section 5.03 Access.
(a) Each Seller shall afford to Buyer and its authorized Representatives (including accountants, consultants, counsel and representatives of financing sources) from the Execution Date until the Closing Date, during normal business hours, reasonable access to all management personnel, properties and facilities with respect to the Business, the Assets or Assumed Liabilities (subject to the terms, conditions and restrictions of agreements related to Assets and Assumed Liabilities to which such Seller is a party and the consent of the operator, as applicable) and to such Seller’s title, Surface Leases, Contracts, Vehicles, environmental and legal materials, books, records, statements and operating data and information relating to the Assets, Assumed Liabilities or the Business available as of the Execution Date and that becomes available to any Seller at any time prior to the Closing Date, together with the opportunity to make copies of such books, records and other documents at Buyer’s expense, together with the opportunity to discuss the Business with members of management and officers of Sellers and their Representatives and Sellers shall use commercially reasonable efforts to cause such members of management and officers to reasonably cooperate with Buyer and its Representatives in connection therewith, and will furnish to Buyer such other information in Sellers’ possession with respect to the Assets as Buyer may reasonably request; provided, however, that all such information shall be held in confidence by Buyer in accordance with the terms of the Confidentiality Agreements; provided, further, that in no event shall Sellers be obligated to provide (i) access or information in violation of Applicable Law, (ii) any information the disclosure of which would cause the loss of any legal privilege available to any Seller relating to such information or would cause any Seller to breach a confidentiality obligation to which it is bound; provided that the applicable Seller has used its reasonable efforts to protect the privilege or to obtain a waiver of the applicable contractual obligation, or (iii) copies of bids, letters of intent, expressions of interest or other proposals received from other Persons in connection with the transactions contemplated by this Agreement or information and analyses relating to such communications, except to the extent required in the Bid Procedures Order.
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(b) BUYER SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD EACH SELLER, EACH OF THEIR SUCCESSORS, THEIR AFFILIATES AND ALL OF THEIR RESPECTIVE DIRECTORS AND OFFICERS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS AND LOSSES CAUSED DIRECTLY OR INDIRECTLY BY THE ACTS OR OMISSIONS OF BUYER, BUYER’S AFFILIATES OR ANY PERSON ACTING ON BUYER’S OR ITS AFFILIATE’S BEHALF IN CONNECTION WITH ANY DUE DILIGENCE CONDUCTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY SITE VISITS CONDUCTED PURSUANT TO SECTION 5.03(a), EXCEPTING ONLY LIABILITIES TO THE EXTENT ACTUALLY RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF ANY SELLER OR ANY SELLER INDEMNIFIED PARTIES. Buyer shall comply with all rules, regulations, policies and instructions reasonably required by Sellers, or any Third Party operator of any Assets, which are provided to Buyer regarding Buyer’s actions while upon, entering or leaving any Asset, including any insurance requirements that Sellers may reasonably impose, or any such Third Party operator may impose, on contractors authorized to perform work on any Asset owned or operated by Sellers (or any such Third Party operator, as applicable).
(c) From and after the Closing, Buyer shall afford to each third party acquiror (and their respective Representatives) of Excluded Assets pursuant to a definitive agreement that is approved by the Bankruptcy Court (each, an “Excluded Asset PSA”), reasonable access to the Properties for the purpose of inspecting and removing such Excluded Assets in each case (x) on the same terms as Sellers are affording access to Buyer pursuant to this Section 5.03, mutatis mutandis and (y) solely to the extent such Excluded Asset PSA contains a covenant substantially similar to this Section 5.03(c) for the benefit of Buyer; provided that, the cost of any such inspection or removal shall be at the sole cost of the applicable third party acquiror. Each such third party acquiror shall be a third party beneficiary of this Section 5.03(c). Sellers shall require each Excluded Asset PSA to include a covenant substantially similar to this Section 5.03(c) for the benefit of Buyer.
Section 5.04 Permits. Notwithstanding any other provision in this Agreement, Buyer shall 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 to transfer to Buyer all transferable Permits listed on Annex D. Sellers agree to provide reasonable assistance to support Buyer’s efforts to accomplish such transfer.
ARTICLE VI
COVENANTS OF BUYER
Section 6.01 Access. Buyer agrees that, following the Closing, and subject to Applicable Law and except as may be necessary to protect any applicable legal privilege, it shall (and shall cause its Subsidiaries to) give to Sellers and their Representatives reasonable access during normal business hours in a manner so as not to unreasonably interfere with the normal operations of Buyer or its Affiliates to the offices, books and records relating to the Assets or any operations relating thereto for any and all periods prior to and including the Closing Date as Sellers and their Representatives may reasonably request and to make copies at Sellers’ expense of the same in connection with (a) the preparation of Tax Returns or information returns, (b) reports or other obligations by Sellers to Governmental Authorities, (c) with respect to the administration of the Excluded Assets or Excluded Liabilities, (d) with respect to the administration of the Bankruptcy Cases, (e) pursuing, prosecuting or commencing litigation on account of or relating to Excluded Assets, including avoidance actions, (f) objecting to proofs of claims or administrative expense claims, (g) preparing the Final Settlement Statement and any other matters contemplated by Section 2.06 and (h) any final determination of any audit or examination, Proceeding or determination. Buyer shall (and shall cause its Subsidiaries to) preserve all such books and records for a period of three (3) years after the Closing; provided, however, that Buyer shall have the right at any time after the second (2nd) anniversary of the Closing Date to request in writing that Sellers take any such records and, if Sellers do not agree to take such records within ninety (90) Business Days after receipt of the request, Buyer (or its Subsidiaries, as applicable) may dispose of such records. Notwithstanding the foregoing, in no event shall Buyer be obligated to provide (i) access or information in violation of Applicable Law or (ii) any information the disclosure of which would cause the loss of any legal privilege available to any Buyer relating to such information or would cause Buyer to breach a confidentiality obligation to which it is bound; provided that Buyer has used its reasonable efforts to protect the privilege or to obtain a waiver of the applicable contractual obligation.
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Section 6.02 Data Retention. Buyer, for a period of seven (7) years following Closing, will (a) retain the Data and (b) provide Sellers, their Affiliates, and Sellers and their Affiliates and their respective Representatives with reasonable access to the Data during normal business hours in a manner so as not to unreasonably interfere with the normal operations of Buyer or its Affiliates for review and copying at Sellers’ expense and subject to the limitations set forth in Section 6.01; provided that Buyer may destroy Data from time to time and prior to the end of such period in accordance with its normal document retention policy as long as Buyer notifies Sellers at least thirty (30) days in advance and provides Sellers an opportunity to remove or copy such Data.
ARTICLE VII
COVENANTS OF BUYER AND SELLERS
Section 7.01 Commercially Reasonable Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, including Section 7.02(e), and subject to the Bankruptcy Code and any orders of the Bankruptcy Court, Buyer and Sellers each agree to use 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 to consummate the Transactions; provided that the Parties understand and agree that the commercially reasonable efforts of any Party shall not be deemed to include, except as expressly set forth in this Agreement, entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the Transactions; provided that this Section 7.01 shall not (i) limit or affect the obligation of any Party to perform its obligations and covenants expressly set forth in this Agreement or (ii) require any Party to incur any obligations or pay any fees or amounts to Third Parties not otherwise required under this Agreement. Sellers and Buyer agree to execute and deliver or cause to be executed and delivered 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 in accordance with the terms and conditions of this Agreement.
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Section 7.02 Bankruptcy Proceedings.
(a) Buyer agrees that it will promptly take such actions as are reasonably requested by Sellers to assist in (i) consummating the Transactions in accordance with this Agreement and (ii) obtaining entry of the Sale Order and finding of adequate assurance of future performance by Buyer, including furnishing affidavits or other documents or information for filing with the Bankruptcy Court for the purposes, among others, of providing necessary assurances of performance by Buyer under this Agreement and demonstrating that Buyer is a “good faith” purchaser under section 363(m) of the Bankruptcy Code. In the event the entry of the Sale Order or the Bid Procedures Order shall be appealed, each of Sellers and Buyer shall use their respective commercially reasonable efforts to defend such appeal, subject to the Auction.
(b) Each Party acknowledges that this Agreement and the sale of the Assets and assumption and assignment of the Purchased Contracts are subject to Bankruptcy Court approval and the consideration by Sellers of higher or better competing transactions (including any competing bids, plan of reorganization or recapitalization or restructuring transaction) in respect of all or any part of the Assets in accordance with the Bid Procedures Order.
(c) From and after the Execution Date and until the Closing, no Seller shall take any action which is intended to (or is reasonably likely to), or fail to take any action the intent (or the reasonably likely result) of which failure to act is to, result in the reversal, voiding, modification or staying of the Bid Procedures Order. If Buyer is the Successful Bidder at the Auction, Sellers shall not take any action which is intended to (or is reasonably likely to), or fail to take any action the intent (or the reasonably likely result) of which failure to act is to, result in the reversal, voiding, modification or staying of the Sale Order or this Agreement.
(d) From and after the Execution Date and until the Closing, to the extent reasonably practicable under the circumstances, Sellers shall make reasonable efforts to consult and cooperate with Buyer regarding (i) any pleadings, motions, notices, statements, applications, schedules, reports or other papers to be filed with the Bankruptcy Court in relation to the implementation of the Transactions, (ii) any discovery taken in connection with the seeking entry of the Sale Order (including any depositions) and (iii) any hearing relating to the Sale Order, including the submission of any evidence, including witnesses testimony, in connection with such hearing.
(e) The bidding procedures to be employed with respect to this Agreement shall be those approved by the Bankruptcy Court pursuant to the Bid Procedures Order. Buyer acknowledges and agrees that from the Execution Date until the termination of this Agreement in accordance with its terms, Sellers and their respective Affiliates and Representatives shall be permitted to take such actions as permitted under the Bid Procedures Order with respect to an Alternative Transaction and may take any other affirmative action to evaluate and accept a qualifying offer from a qualified bidder for an Alternative Transaction not otherwise prohibited under the Bid Procedures Order and the taking of such actions shall not be deemed a breach by Sellers of this Agreement; provided, however, that any affirmative action by Sellers or any of their respective Representatives to promote, engage on, assist with or provide feedback in respect of any offer for an Alternative Transaction at any time after the Successful Bidder has been determined in accordance with the Bid Procedures Order shall be deemed a material breach of this Agreement. Without limiting the foregoing, until the Successful Bidder has been determined in accordance with the Bid Procedures Order, Sellers may, directly or indirectly through Representatives of Sellers, (i) solicit inquiries, proposals or offers from Third Parties (a “Potential Bidder”) for the Assets (and negotiate the terms of such proposals or offers) in connection with any Alternative Transaction, (ii) engage in discussions and negotiations regarding an Alternative Transaction with any Potential Bidder and any Potential Bidder’s Representatives in accordance with or as otherwise permitted under the Bid Procedures Order in connection with the solicitation of one or more proposals relating to an Alternative Transaction, (iii) subject to the proceeding sentence in this Section 7.02(e), enter into any agreement or letter of intent with respect to any Alternative Transaction and (iv) furnish to any Potential Bidder and its Representatives public or non-public information relating to any Seller and afford to any such Potential Bidder access to any properties, assets, books or records of any Seller or the business of Sellers. Notwithstanding any herein to the contrary, in no event shall any Seller or their Representatives of Affiliates enter into a definitive written agreement with any Person (other than Buyer or its Affiliates) in connection with a competing transaction prior to the entry of the Bid Procedures Order.
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(f) Without limiting the requirements of Section 7.02(a) through Section 7.02(e), from and after the Execution Date until the earlier of (x) the conclusion of the Auction if Buyer is not a Successful Bidder at the Auction or (y) the Closing, Sellers and Buyer agree to:
(i) support and take all steps reasonably necessary and desirable to consummate the Transactions in accordance with this Agreement;
(ii) to the extent any legal or structural impediment arises that would prevent, hinder or delay the consummation of the Transactions, support and take all steps reasonably necessary and desirable to address any such impediment;
(iii) negotiate in good faith and use commercially reasonable efforts to execute and deliver the definitive documents and any other required agreements to effectuate and consummate the Transactions; and
(iv) consult and negotiate in good faith with material stakeholders and their advisors regarding the execution of definitive documents and the implementation of the Transactions.
(g) If an Auction is conducted and Sellers do not choose Buyer as the Successful Bidder, but instead chooses Buyer as the Back-up Bidder, Buyer will serve as the Back-up Bidder until the Back-Up Termination Date. If Buyer is chosen as the Back-up Bidder, Buyer will be required to keep its bid to consummate the Transactions on the terms and conditions set forth in this Agreement (as may be amended with Sellers’ written consent prior to or at the Auction) open and irrevocable until the Back-up Termination Date. If the agreement with the Successful Bidder (other than Buyer) is terminated prior to closing under such agreement, Buyer will be deemed to be the Successful Bidder and Buyer will forthwith consummate the Transactions on the terms and conditions set forth in this Agreement (as the same may be amended with Sellers’ written consent prior to or at the Auction), subject to the right of Buyer to elect to not serve as the Back-up Bidder at any time after the Back-up Termination Date.
(h) The Escrow Funds shall be applied as provided in this Agreement or returned to Buyer in accordance with this Agreement and the Bid Procedures. Any instructions provided by Sellers to the Escrow Agent in respect of the Escrow Funds shall be consistent with this Agreement and the Bid Procedures.
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Section 7.03 Public Announcements. Each Party agrees that, prior to Closing, the consent (as to both form and content), not to be unreasonably withheld, of the other Party shall be obtained prior to issuing any press release or making any public statement with respect to this Agreement or the other Transaction Documents or the Transactions, except to the extent such Party determines in good faith that such press release or other public announcement is required in connection with the Auction, the Bid Procedures Order, any order of the Bankruptcy Court or by Applicable Law (including federal securities laws); provided that Buyer Parent, Buyer and Sellers shall be permitted to issue a press release or make a public announcement upon the execution of this Agreement to announce such execution of this Agreement and will provide the other Parties with a copy of such press release or public announcement in advance of its release and provide such other Parties with a reasonable opportunity to comment on the same. From the Closing until one (1) month after the Closing, Buyer and Sellers will provide each other a copy of any press release or other public announcement with respect to this Agreement, the other Transaction Documents or the Transactions that Buyer Parent, Buyer or a Seller proposes to issue or make in advance of its release and provide the others with a reasonable opportunity to comment on the same, except to the extent that such press release or other public announcement is required by any order of the Bankruptcy Court or Applicable Law (including federal securities laws) and such prior notice is not practicable given the circumstances giving rise to the requirement to issue such release.
Section 7.04 Confidentiality. The Parties acknowledge that Buyer and Basic previously executed the Confidentiality Agreements. Notwithstanding anything to the contrary in the Confidentiality Agreements, to the extent of any conflict between the provisions of the Confidentiality Agreements and the terms hereof, the terms hereof shall prevail. The Parties acknowledge and understand that this Agreement will be filed with the Bankruptcy Court and may be made available by Sellers to Potential Bidders as contemplated by the Bid Procedures Order. The Parties agree that such disclosure shall not be deemed to violate any confidentiality obligations owing to any Party, whether pursuant to this Agreement, the Confidentiality Agreements or otherwise. Notwithstanding the foregoing, this Section 7.04 shall not in any way limit, to the extent required by Applicable Law, the disclosure of information by Sellers or their Affiliates in connection with the administration of the Bankruptcy Cases, pursuant to any provision of the Bankruptcy Code or any order of the Bankruptcy Court.
Section 7.05 Employee Matters.
(a) Pursuant to Section 6 of the Confidentiality Agreement, Buyer is subject to certain restrictions on the solicitation and hiring of the employees of Sellers and certain of their Affiliates. However, Sellers agree that, (i) solely during the period beginning on the Execution Date and ending on the earlier to occur of (A) the Closing Date and (B) the termination of this Agreement, Buyer or one of its Affiliates may make offers of employment to any or all of the employees of Sellers or their Affiliates listed on Disclosure Schedule 3.16(a) or any other employees of Sellers identified following the Execution Date by Sellers who are engaged in the Business (each such employee, a “Seller Employee” and each such offer, an “Employment Offer”); provided, however, that any such Employment Offer must comply with Section 7.05(f), and (ii) if, and only if, the Closing has occurred, Buyer or its applicable Affiliate(s) may hire any Seller Employee pursuant to any Employment Offer made in compliance with Section 7.05.
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(b) Within five (5) days after the Execution Date, Sellers will deliver to Buyer a schedule (the “Compensation Schedule”) showing for each Seller Employee: (i) name, job title or description of services, and location; (ii) date of hire or retention, seniority or service credit date if different from initial date of hire, and full-time or part-time status; (iii) each employee’s classification as exempt or non-exempt under the Fair Labor Standards Act or analogous applicable Law governing wages and overtime; (iv) current base compensation or wage rate; (v) any bonus payments and any other amounts due to each employee; and (vi) whether such employee is on leave and expected return date. Each Employment Offer shall provide for compensation and employee benefit plans and arrangements (subject to Sections 7.5(d)-(f)) on terms determined by Buyer, in its sole discretion, and shall be subject to and conditioned upon the occurrence of the Closing and any employment by Buyer or its Affiliates of any Seller Employee shall not become effective prior to the Closing. A copy of any Employment Offer shall be delivered to Sellers at least three (3) Business Days prior to being delivered to the applicable employee. Buyer shall provide to Sellers, not later than the Closing Date, the names of each Seller Employee who has then accepted, and not revoked, an Employment Offer from Buyer or any of its Affiliates (each Seller Employee who affirmatively accepts and does not revoke such an Employment Offer and actually becomes an employee of Buyer or its Affiliates as of the Closing or, if the Employment Offer permits, at a later time following Closing, in each case on terms consistent with the accepted offer, being a “Continuing Employee”) and the names of the Seller Employees who have then declined an Employment Offer from Buyer or its Affiliates. Each Continuing Employee shall, as of the Closing Date (if he or she is still employed by Sellers or their Affiliate), be terminated by Sellers or their Affiliate, as applicable (and Sellers shall and shall cause their Affiliates to release such Continuing Employee from all non-compete or similar restrictions that would restrict or be violated in any way by, such Continuing Employee’s activities as an employee of Buyer or its Affiliate) and become an employee of Buyer or its Affiliate.
(c) Sellers shall reasonably assist Buyer and its Affiliates, as applicable, in communicating with the employees of Sellers and their Affiliates regarding potential employment with Buyer or its Affiliates and, if requested will transmit offers to employees, as and when reasonably requested by Buyer; provided that, Buyer shall coordinate with a Person designated by Sellers in discussing Employment Offers with the Seller Employees and shall not directly communicate with any Seller Employee regarding potential employment by Buyer or its Affiliates other than as directed or consented to by such designee.
(d) Buyer shall, and shall cause its Affiliates to, credit Continuing Employees for service earned on and prior to the Closing Date with Sellers and their Affiliates or predecessors to the extent that such service would be credited pursuant to the applicable employee benefit plan, program or arrangement maintained by Sellers, in addition to service earned with Buyer and its Affiliates on or after the Closing Date to the extent that service is relevant for purposes of eligibility, vesting, or paid-leave entitlement under any employee benefit plan, program or arrangement of Buyer or any of its Affiliates for the benefit of the Continuing Employees on or after the Closing Date, but not for the purposes of benefit accrual under any defined benefit pension plan or any equity or equity-linked incentive program; provided, however, that nothing herein shall result in a duplication of benefits with respect to the Continuing Employees or retroactive contributions.
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(e) Buyer shall, and shall cause its Affiliates to, use commercially reasonable efforts to waive any pre-existing condition or actively at work limitations, evidence of insurability and waiting periods for the Continuing Employees and their eligible spouses and dependents under any employee benefit plan, program or arrangement of Buyer or any of its Affiliates for the benefit of the Continuing Employees on or after the Closing Date. Buyer shall, and shall cause its Affiliates to use commercially reasonable efforts to credit for purposes of determining and satisfying annual deductibles, co-insurance, co-pays, out-of-pocket limits and other applicable limits under the comparable health plans and arrangements offered to Continuing Employees, deductibles, co-insurance, co-pays and out-of-pocket covered expenses incurred by Continuing Employees and their respective covered spouses and dependents under Sellers or any of their respective Affiliates’ health plans in the plan year in which the Closing Date occurs.
(f) Buyer or its Affiliates shall provide each Continuing Employee with credit for the same number of vacation, paid time off, sick days and personal days such Continuing Employee has accrued but not used as of the Closing Date; provided that, neither Buyer nor any of its Affiliates shall be obligated to provide a Continuing Employee with such credit in an amount greater than thirty (30) days; provided, further, that in no event shall Buyer or its Affiliates be obligated to pay any such credit in cash to any applicable Continuing Employee and to the extent any such credit is required by Applicable Law to be paid in cash, the obligation to pay such amount in cash shall be retained by Sellers and not deemed an Assumed Liability.
(g) On the Closing Date, Sellers and their Affiliates shall cease to provide health and welfare coverage to each Continuing Employee and his or her covered dependents and beneficiaries, and Buyer or its Affiliate shall commence providing such coverage to Continuing Employees and his or her covered dependents and beneficiaries. Buyer and its “buying group” (as defined in Treasury Regulation section 54.4980B-9, Q&A-2(c)) shall be solely responsible for providing continuation coverage under COBRA to those individuals who are or become M&A qualified beneficiaries (as defined in Treasury Regulation section 54.490B-9, Q&A-4(a)) with respect to the transactions contemplated by this Agreement. Buyer and its Affiliates shall provide coverage required by COBRA to Continuing Employees and their eligible dependents or beneficiaries under group health plans maintained by Buyer or an Affiliate of Buyer with respect to qualifying events occurring on and after the Closing Date.
(h) The provisions of this Section 7.05 are for the sole benefit of the parties to this Agreement only and shall not be construed to grant any rights, as a third party beneficiary or otherwise, to any person who is not a party to this Agreement, nor shall any provision of this Agreement be deemed to be the adoption of, or an amendment to, any employee benefit plan, as that term is defined in Section 3(3) of ERISA, or otherwise to limit the right of Buyer to amend, modify or terminate any such employee benefit plan. In addition, nothing contained herein shall be construed to (i) prohibit any amendments to or termination of any employee benefit plans or (ii) prohibit the termination or change in terms of employment of any employee (including any Continuing Employee) as permitted under applicable law. Nothing herein, expressed or implied, shall confer upon any employee (including any Continuing Employee) any rights or remedies (including, without limitation, any right to employment or continued employment for any specified period) of any nature or kind whatsoever, under or by reason of any provision of this Agreement.
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(i) Buyer acknowledges that, except for solicitations expressly permitted by Section 7.05(a)(i) and hiring expressly permitted by Section 7.05(a)(ii), Buyer remains subject to the restrictions on the solicitation of the employees of Sellers and their Affiliates contained in Section 6 of the Confidentiality Agreement.
Section 7.06 Tax Matters; Apportionment of Tax Liability.
(a) Non-Income Taxes.
(i) All Non-Income Taxes (and any refunds thereof or credits in lieu of such refunds) with respect to the Assets attributable to the period before the Closing Date shall be for Sellers’ account and all Non-Income Taxes (and any refunds thereof or credits in lieu of such refunds) with respect to the Assets attributable to the period after and including the Closing Date shall be for Buyer’s account. All real estate, personal property, and similar ad valorem Taxes (and any refunds thereof or credits in lieu of such refunds) assessed with respect to the Assets for the taxable period that begins prior to the Closing Date and ends on or after the Closing Date shall be prorated based on the number of full days in such period that occur before the Closing Date, on the one hand, and the number of days in such period that occur on or after the Closing Date, on the other hand. All other Non-Income Taxes (and refunds thereof or credits in lieu of such refunds) with respect to the Assets shall be allocated between Sellers and Buyer as though the taxable period that begins prior to the Closing Date and ends on or after the Closing Date ended as of the close of business on the day before the Closing Date, and all such Non-Income Taxes with respect to the Assets attributable to taxable periods ending as of the close of business on the day before the Closing Date shall be for Sellers’ account and all such Non-Income Taxes with respect to the Assets attributable to taxable periods beginning on or after the Closing Date shall be for Buyer’s account. For the avoidance of doubt, any payroll or other employment Taxes of Sellers with respect to any Continuing Employee for any taxable period (or portion thereof) ending before the Closing Date that are deferred pursuant to Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748), the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster for the Secretary of the Treasury, issued by the Executive Office of the President on August 8, 2020 or IRS Notice 2020-65 shall be treated as attributable to the period before the Closing Date.
(ii) The apportionment of Non-Income Taxes (and any refunds thereof or credits in lieu of such refunds) with respect to the Assets between the Parties shall take place in the Closing Statement and the Final Settlement Statement. If the Closing Date (or final determination of the Final Settlement Statement) shall occur before the applicable Tax rate or assessment is fixed for the taxable period that includes the Closing Date, the apportionment of such Non-Income Taxes shall be based upon the most recently ascertainable Non-Income Tax bills. Notwithstanding Section 7.06(a)(i), all Non-Income Taxes with respect to the Assets for the taxable period that includes the Closing Date that remain unpaid as of the date of the Closing Statement or the Final Settlement Statement shall be timely paid by Buyer, and Sellers’ allocable portion of any such Non-Income Taxes (as determined pursuant to this Section 7.06(a)) that are paid by Buyer shall be reflected as a downward adjustment to the Purchase Price pursuant to Section 2.04(c)(i). The Parties shall work together in good faith to promptly “true-up” the relevant Non-Income Taxes after the applicable Non-Income Tax bills become available or the applicable Tax Returns have been filed.
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(b) Transfer Taxes. Buyer shall be liable for fifty percent (50%) and Sellers shall be liable for fifty percent (50%) of any sales, use, transfer, documentary, stamp, registration or similar Taxes due as a result of the transfer of the Assets pursuant to this Agreement (“Transfer Taxes”) that are not eliminated in connection with the Bankruptcy Cases. Sellers and Buyer shall reasonably cooperate in the preparation and filing of any Tax Return related to Transfer Taxes, including by signing and delivering such resale and other certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce) any Transfer Taxes.
(c) Purchase Price Allocation. Buyer shall provide to Sellers a statement (the “Allocation”) allocating the Purchase Price and any other items that are treated as additional consideration for Tax purposes among the Assets in accordance with section 1060 of the Code and the Treasury Regulations promulgated thereunder, and in accordance with the methodologies on Exhibit I within ninety (90) days after the final determination of the Adjusted Purchase Price in accordance with Section 2.06. Such allocation shall become conclusive and binding on the Parties fifteen (15) days after delivery by Buyer unless Sellers object in writing to the Allocation. If Sellers object, the Parties shall use commercially reasonable efforts to resolve any disputes within fifteen (15) days after Buyer’s receipt of written notice of Sellers’ objection. Any unresolved disputes shall be submitted to the Referee or an accounting firm selected pursuant to the procedures in Section 2.06(d) (the “Accounting Firm”), provided that the Accounting Firm shall utilize the methodologies set forth on Exhibit I in determining the fair market value of the Assets. The resolution of the dispute by the Accounting Firm shall be conclusive and binding on all Parties and the Allocation shall be updated to reflect such resolution. Sellers and Buyer shall use commercially reasonable efforts to update the Allocation in a manner consistent with section 1060 of the Code following any adjustment to the Purchase Price pursuant to this Agreement. Sellers and Buyer shall, and shall cause their Affiliates to, report consistently with the Allocation, as adjusted, in all Tax Returns, including IRS Form 8594, which Buyer and Sellers shall file with the Internal Revenue Service or any other Governmental Authority and neither Sellers nor Buyer shall take any position in any such Tax Return that is inconsistent with the Allocation, as adjusted, in each case, unless required to do so by a determination as defined in section 1313(a) of the Code. Sellers and Buyer agree to promptly advise each other regarding the existence of any Tax audit, controversy or litigation related to the Allocation.
(d) Cooperation. Sellers shall reasonably (i) assist Buyer in the preparation and timely filing of any Tax Return (including any claim for a Tax refund) with respect to Non-Income Taxes relating to the Assets; (ii) assist Buyer in any audit or other proceeding with respect to Non-Income Taxes or Tax Returns relating to the Assets; (iii) make available any information, records, or other documents relating to any Non-Income Taxes or Tax Returns relating to the Assets; and (iv) provide any information necessary or reasonably requested to allow Buyer to comply with any information reporting or withholding requirements contained in the Code or other Applicable Laws or to compute the amount of payroll or other employment Taxes due with respect to any payment made in connection with this Agreement. For the avoidance of doubt, nothing in this Section 7.06(d) shall prohibit Sellers from ceasing operations or winding up its affairs following the Closing, and the obligation of each Seller under this Section 7.06(d) shall not survive any such ceasing or winding up.
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Section 7.07 Disclosure Schedule Updates. From and after the Execution Date until the Closing, Sellers shall be entitled to update, amend or modify the Disclosure Schedules relating to the representations and warranties of Sellers set forth in Article III to reflect any facts, circumstances or events first arising or, in the case of representatives given to the Knowledge of Sellers, becoming known to Sellers subsequent to the Execution Date, by providing Buyer with written notice (“Schedule Update Notice”) setting forth the update, amendment or modification and specifying the Disclosure Schedule or Disclosure Schedules affected thereby, and such update, amendment or modification shall amend and supplement the applicable Disclosure Schedules previously delivered; provided, however, that if any such Disclosure Schedules are updated, amended or modified in a manner that discloses any matter or circumstance that would otherwise give rise to a failure of the condition in Section 8.02(b) to be satisfied as of the date of such Schedule Update Notice (determined as if the date of such Schedule Update Notice were the Closing Date), Buyer may terminate this Agreement pursuant to Section 9.01(d)(ii), provided if Buyer provides written notice to terminate this Agreement pursuant to Section 9.01(d)(ii) then, if such breach giving rise to the failure of such condition is capable of being cured, upon written notice of Sellers to Buyer within one (1) Business Day of receipt of Buyer’s written notice to terminate this Agreement pursuant to Section 9.01(d)(ii) that Sellers elect to attempt to cure such breach such termination shall not be effective unless (and until) as of the end of the applicable cure period set forth in Section 9.01(d)(ii) such breach shall not have been cured to the extent necessary to no longer cause a failure of the condition in Section 8.02(b) to be satisfied. If Buyer fails to timely provide written notice to terminate this Agreement pursuant to Section 9.01(d)(ii) with respect to any update, amendment or modification of the Disclosure Schedules as provided in this Section 7.07, then Buyer, in respect of such matters disclosed by update, amendment or modification, shall be deemed to have waived its right to terminate this Agreement or prevent the consummation of the transactions contemplated by this Agreement pursuant to Section 8.02(b) or Section 9.01(d)(ii), as applicable, and to have accepted such updated Disclosure Schedules for all purposes under this Agreement.
Section 7.08 Replacement of Existing Letters of Credit. The Parties acknowledge that none of the Existing Letters of Credit, if any, posted by Sellers, whether with Governmental Authorities or otherwise, relating to the Assets are to be transferred to Buyer. On or before Closing, Buyer shall endeavor to obtain, or cause to be obtained in the name of Buyer, and Sellers shall reasonably assist Buyer (at Buyer’s expense) in obtaining or causing to be obtained in the name of Buyer, replacements for all Replacement Letters of Credit as necessary to permit the cancellation of the Replacement Letters of Credit at Closing and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit. Buyer may also provide evidence that such replacements are not necessary as a result of existing bonds, letters of credit or guarantees that Buyer has previously posted as long as such existing bonds, letters of credit or guarantees are adequate to secure the cancellation of the Replacement Letters of Credit and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit at Closing. Notwithstanding the foregoing, in the event Buyer is unable to obtain any such bonds, letters of credit and guarantees prior to Closing adequate to secure the cancellation of the Replacement Letters of Credit and the release to Sellers of all cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit, the Parties shall nonetheless proceed with Closing and Buyer shall (a) at Closing deliver to Sellers an amount equal to the cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit that are not released at Closing and (b) indemnify and hold Sellers harmless for any failure to obtain such bonds, letters of credit and guarantees. If Sellers receive any amounts after the Closing as a return of the cash or cash equivalent deposits of Sellers with respect to such Replacement Letters of Credit (such amount returned to Sellers, the “Excess Recovery Amount”), Sellers shall deliver to Buyer the Excess Recovery Amount.
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Section 7.09 Casualty or Condemnation Loss. If, after the Execution Date but prior to the Closing Date, any portion of the Assets is damaged or destroyed or otherwise impaired by fire, explosion, tornado, hurricane, earthquake, earth movement, flood, water damage or other casualty or is taken in condemnation or under right of eminent domain (in each case, a “Casualty or Condemnation Loss”), then Buyer shall nevertheless be required to close the transactions contemplated by this Agreement without any change to the Purchase Price and from and after the Closing, Sellers shall use commercially reasonable efforts to file and pursue under such applicable insurance policies for such Casualty or Condemnation Loss on behalf of Buyer. To the extent that Sellers or their Affiliates collect proceeds under any applicable insurance policy pursuant to this Section 7.09, Sellers or their Affiliates, as applicable, shall pay to Buyer all sums paid to Sellers or their Affiliates by Third Parties by reason of such Casualty or Condemnation Loss insofar as with respect to the Assets (net of amounts spent or incurred by Sellers prior to Closing with respect to replacement or repair of any such Casualty or Condemnation Loss) and shall assign, transfer and set over to Buyer or subrogate Buyer to all of Sellers’ and their Affiliates’ right, title and interest (if any) in insurance claims, unpaid awards and other rights against Third Parties (excluding any Liabilities, other than insurance claims, of or against any Seller Indemnified Parties) arising out of such Casualty or Condemnation Loss insofar as with respect to the Assets; provided, however, that Sellers shall reserve and retain (and Buyer shall assign to Sellers) all rights, title, interests and claims against Third Parties for the recovery of Sellers’ costs and expenses incurred prior to the Closing in pursuing or asserting any such insurance claims or other rights against Third Parties with respect to any such Casualty or Condemnation Loss. Except as expressly set forth hereinabove or in Section 2.01, Sellers shall retain all rights to insurance, condemnation awards and other claims against Third Parties with respect to the casualty or taking except to the extent the Parties otherwise agree in writing. Sellers shall not, and shall cause their Affiliates and representatives not to, without the prior written consent of Buyer, amend, modify or waive any of its rights under the applicable insurance policies to the extent that doing so could reasonably be expected to adversely affect any coverage thereunder of Buyer, the Assets or the Business. Subject to the following sentence, Sellers or their Affiliates, as applicable, shall retain the exclusive right to control claims related to any Casualty or Condemnation Loss, provided that Buyer shall have the right, but not the duty, to monitor such claims and Sellers shall keep Buyer reasonably informed with respect thereto.
Section 7.10 Transition Services Agreement. If requested by Buyer, the Parties shall negotiate in good faith and enter into a customary transition services agreement on reasonably acceptable terms prior to the Closing, pursuant to which Sellers and their respective applicable Affiliates will make available to Buyer certain services and the benefits of any assets, properties or rights held by any Seller or any of their respective Affiliates that have been used in, and are reasonably necessary for the operation of, the Business, including payroll, systems and ticketing, on customary terms, on a cost plus 5% basis and for a term of forty-five (45) days after the Closing; provided that, nothing in this Section 7.10 or such transition services agreement will require Sellers to maintain sufficient personnel to perform any services after Closing, and Sellers shall have no obligation to procure any services from Third Parties or employ any personnel in connection with the performance of any services and Sellers shall have no obligation to provide any services under such transition services agreement to the extent Sellers do not have sufficient personnel to provide such services; provided further that, for a period of forty-five (45) days after the Closing, Sellers shall not voluntarily terminate the employment of any employee necessary for the performance of any information technology functions included in the services contemplated in the transition services agreement other than for cause (as determined in Sellers’ sole discretion and consistent with past practices) or materially reduce the base salary or benefits provided to any such employee unless, after giving effect to such termination or any resignation of any such employee, Sellers shall have available to it sufficient employees to perform such services.
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ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Buyer and Sellers. The obligations of Buyer and Sellers to consummate the Closing are subject to the satisfaction (or, in the case of clauses (b) and (c) of this Section 8.01, waiver by each to the extent permitted under Applicable Law) of each of the following conditions:
(a) no Applicable Law shall prohibit the Transactions or the consummation of the Closing;
(b) all actions by or in respect of or filings with any Governmental Authority required to permit the consummation of the Closing shall have been taken, made or obtained (other than those actions or filings that are customarily obtained after the Closing); and
(c) no injunction, order, decree or judgment of any Governmental Authority of competent jurisdiction shall be in effect which prohibits, restrains or enjoins the consummation of the Transactions; provided that the Party seeking to rely on this Section 8.01(c) as a basis not to consummate the Closing must have used commercially reasonable efforts to prevent the entry of such injunction, order, decree or judgment.
Section 8.02 Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction (or waiver by Buyer) of each of the following further conditions:
(a) each Seller shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date;
(b) (i) the Seller Fundamental Representations shall be true and correct in all respects at and as of the Execution Date and at and as of the Closing Date, with the same force and effect as though such representations and warranties had been made at and as of the Closing Date (except to the extent that any such representation or warranty is expressly made as of a specified date, in which case it shall be true and correct as of such specified date) and (ii) the other representations and warranties set forth in Article III of this Agreement shall be true and correct at and as of the Execution Date and at and as of the Closing Date, as if made at and as of the Closing Date, other than those representations and warranties that are made as of a specific earlier date which representations and warranties need not be true and correct as of the Closing Date but must be true and correct as of such specific earlier date (provided, that, in each case, for purposes of this Section 8.02(b)(ii), in determining whether such representations and warranties are true and correct, all qualifications in such representations or warranties as to “material,” “in all material respects,” Seller Material Adverse Effect or similar materiality qualifiers shall be disregarded), except for those failures to be true and correct that, individually or in the aggregate, do not constitute a Seller Material Adverse Effect;
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(c) the Bid Procedures Order and the Sale Order shall have been entered by the Bankruptcy Court and each such order shall be a Final Order and in full force and effect;
(d) Sellers shall have delivered each of the items required by Section 2.05(c) to be delivered by Sellers at the Closing; and
(e) no Seller Material Adverse Effect shall have occurred since the Execution Date.
Section 8.03 Conditions to Obligation of Sellers. The obligation of Sellers to consummate the Closing is subject to the satisfaction (or waiver by Sellers) of the following further conditions:
(a) (i) Buyer shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date; (ii) (A) the Buyer Fundamental Representations shall be true and correct in all respects at and as of the Execution Date and at and as of the Closing Date, with the same force and effect as though such representations and warranties had been made at and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of a specified date, in which case it shall be true and correct as of such specified date); and (iii) the other representations and warranties set forth in Article IV of this Agreement shall be true and correct at and as of the Execution Date and at and as of the Closing Date, as if made at and as of the Closing Date, other than those representations and warranties that are made as of a specific earlier date which representations and warranties need not be true and correct as of the Closing Date but must be true and correct as of such specific earlier date (provided, that, in each case, for purposes of this Section 8.03(a)(iii), in determining whether such representations and warranties are true and correct, all qualifications in such representations or warranties as to “material,” “in all material respects,” Buyer Material Adverse Effect or similar materiality qualifiers shall be disregarded), except for those failures to be true and correct that, individually or in the aggregate, do not constitute a Buyer Material Adverse Effect;
(b) the Bid Procedures Order and the Sale Order, together with any other order of the Bankruptcy Court required to consummate the Transactions, shall have been entered by the Bankruptcy Court and each such order shall be a Final Order and in full force and effect; and
(c) (i) Buyer shall have delivered each of the items required by Section 2.05(d) to be delivered by Buyer at the Closing and (ii) Buyer shall have made the payment of the Closing Date Adjusted Purchase Price as required by Section 2.05(e).
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ARTICLE IX
TERMINATION
Section 9.01 Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Sellers and Buyer;
(b) by Sellers upon written notice to Buyer or by Buyer upon written notice to Sellers if the Closing shall not have been consummated on or before the date that is sixty (60) days after the Execution Date (the “End Date”), unless extended by mutual written agreement of Buyer and Sellers;
(c) by Sellers upon written notice to Buyer or by Buyer upon written notice to Sellers if a Governmental Authority of competent jurisdiction shall have issued an order, injunction or judgment or law that permanently restrains, prohibits, enjoins or declares illegal the transactions contemplated by this Agreement and such order, injunction or judgment becomes final and non-appealable;
(d) by Buyer upon written notice by Buyer to Sellers if:
(i) (x) an Auction occurs and Buyer is not the Successful Bidder or the Back-up Bidder at the Auction and Sellers do not close the transactions contemplated by this Agreement by the End Date or (y) the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction which agreement has been approved by the Bankruptcy Court; provided that Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01(d)(i)(y) if Buyer is the Back-up Bidder except upon the earlier of (1) the consummation of such Alternative Transaction or (2) the Back-up Termination Date;
(ii) Sellers shall have breached of any of their representations, warranties, covenants or other obligations contained in this Agreement which would give rise to the failure of a condition set forth in Section 8.02 and (A) such breach is not waived in writing by Buyer (subject to Sellers’ right to cure such breach as described in clause (B)) or (B) solely to the extent such breach is capable of being cured, following written notice thereof from Buyer to Sellers specifying the reason such condition is unsatisfied, such breach remains uncured for a period of ten (10) Business Days after Sellers’ receipt of such written notice from Buyer;
(iii) any condition set forth in Section 8.01 or Section 8.02 that has not been waived by Buyer shall have become incapable of being satisfied by the End Date; or
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(iv) (x) if a trustee or examiner is appointed in the Chapter 11 Cases prior to the Closing, (y) if Sellers (either directly or indirectly through an agent or designee) object to, delay, impede, or take any other action to interfere with acceptance, implementation, or consummation of the Closing or otherwise with respect to the sale, transfer and conveyance of the Assets to Buyer, as contemplated by this Agreement and the Transaction Documents, or (z) Sellers or any of their respective Affiliates file any motion, pleading, or other document with the Bankruptcy Court or any other court (including any modifications or amendments thereof) that, in whole or in part, is not materially consistent with this Agreement or the consummation of the Closing and the sale and conveyance of the Assets to the Buyers and the Transaction Documents, provided that any action taken by Sellers as permitted under Section 7.02(e) or the Bid Procedures Order shall not give rise to any right of termination under the foregoing clauses (y) or (z).
provided that each deadline set forth in clauses (i) and (ii) of this Section 9.01(d) shall be subject to the Bankruptcy Court’s docket, and accordingly, (A) shall be deemed extended through the date of the hearing set by the Bankruptcy Court for consideration of the applicable pleading if, after using reasonable efforts, Sellers are unable to obtain a docket setting for such hearing prior to such deadline, (B) shall be deemed extended through the date(s) of any continued hearing set by the Bankruptcy Court for consideration of such pleading if, after using reasonable efforts, Sellers are unable to conclude such hearing(s) prior to such deadline and (C) shall be deemed extended as required to comply with any notice periods required under the Bankruptcy Code which, as a result of any extensions described under the foregoing clauses (A) and (B), cannot be complied with prior to such deadline; or
(e) by Sellers upon written notice by Sellers to Buyer if:
(i) (x) an Auction occurs and Buyer is not the Successful Bidder or the Back-up Bidder at the Auction or (y) the Bankruptcy Court shall have approved any Alternative Transaction or Sellers shall have entered into any definitive agreement with respect to any Alternative Transaction;
(ii) Buyer shall have breached any of its representations, warranties, covenants or other obligations contained in this Agreement which would give rise to the failure of a condition set forth in Section 8.03 and (A) such breach is not waived in writing by Sellers (subject to Buyer’s right to cure such breach as described in clause (B)) or (B) solely to the extent such breach is capable of being cured, following written notice thereof from Sellers to Buyer specifying the reason such condition is unsatisfied, such breach remains uncured for a period of ten (10) Business Days after Buyer’s receipt of such written notice from Sellers;
(iii) any condition set forth in Section 8.01 or Section 8.03 that has not been waived by Sellers shall have become incapable of being satisfied by the End Date; or
(iv) Buyer shall not have deposited the Escrow Funds in the Escrow Account within one (1) Business Day after the Execution Date.
Notwithstanding the foregoing, (x) Sellers shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if Sellers are in breach of any of their representations and warranties in this Agreement or shall have failed to perform or comply with any of their covenants and agreements in this Agreement such that either (A) the condition to closing set forth in Section 8.02 shall not be satisfied or (B) such breach or failure to perform or comply by Sellers is the primary cause of the occurrence of any event giving Sellers a right to terminate this Agreement or the failure of the Closing to have occurred, and (y) Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if Buyer is in breach of its respective representations and warranties in this Agreement or shall have failed to perform or comply with any of its covenants and agreements in this Agreement such that either (A) the condition to closing set forth in Section 8.03(a) shall not be satisfied or (B) such breach or failure to perform or comply by Buyer is the primary cause of the occurrence of any event giving Buyer a right to terminate this Agreement or the failure of the Closing to have occurred.
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Section 9.02 Effect of Termination.
(a) If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 9.01, then, except for the provisions of Section 5.03(b), Section 7.04, this Section 9.02, Section 9.03 and Article XI and such of the defined terms on Exhibit A necessary to give context to the surviving provisions, this Agreement shall forthwith become void and the Parties shall have no liability or obligation hereunder.
(b) If Sellers are entitled to terminate this Agreement pursuant to (i) Section 9.01(e)(ii) or (ii) Section 9.01(b) and, in the case of clause (ii), (A) Buyer is then in Willful Breach of this Agreement, or (B) Buyer has failed to close in the instance where, as of the End Date, (1) all of the conditions in Section 8.01 and Section 8.02 (in each case excluding conditions that, by their terms, cannot be satisfied until the Closing) have been satisfied by Sellers (or waived by Buyer), (2) each Seller is ready, willing and able to perform its obligations under Section 2.05(c), and (3) Buyer nevertheless fails to close, then, in each such event, Sellers shall be entitled to, at their option (x) obtain specific performance in lieu of termination or (y) terminate this Agreement and receive a distribution of the Escrow Funds (or if Buyer terminates this Agreement pursuant to Section 9.01(b) at a time when Sellers had the right to terminate this Agreement and receive a distribution of the Escrow Funds pursuant to this Section 9.02(b), Sellers shall be entitled to a distribution of the Escrow Funds) as liquidated damages for such termination (the Parties agree that the foregoing liquidated damages are reasonable considering all of the circumstances existing as of the Execution Date, shall not serve as a penalty and constitute the Parties’ good faith estimate of the actual damages reasonably expected to result from such termination of this Agreement by Sellers). Sellers agree that, to the fullest extent permitted by Applicable Law, Sellers’ rights set forth in the preceding sentence shall be the sole and exclusive remedies of Sellers (other than with respect to those provisions that survive termination pursuant to Section 9.02(a)) if the Closing does not occur as a result of the termination of this Agreement in the circumstances described in this Section 9.02(b). Nothing herein shall be construed to prohibit Sellers from first seeking specific performance in accordance with the last sentence of this Section 9.02(b), but thereafter terminating this Agreement and receiving a distribution of the Escrow Funds as liquidated damages in lieu of fully prosecuting its claim for specific performance; provided that under no circumstance shall Sellers be permitted or entitled to receive both a grant of specific performance or other equitable relief and any money damages (including the Escrow Funds). Each Party acknowledges that the remedies at law of Sellers for a breach or threatened breach of this Agreement by Buyer as contemplated pursuant to this Section 9.02(b) may be inadequate and, in recognition of this fact, Sellers, without posting any bond or the necessity or proving the inadequacy as a remedy of monetary damages, and in addition to all other remedies that may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available. If at any time Sellers are entitled to receive a distribution of the Escrow Funds pursuant to this Section 9.02(b), Sellers and Buyer shall promptly and jointly instruct the Escrow Agent to distribute to Sellers all of the Escrow Funds.
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(c) If this Agreement is terminated prior to the Closing by Sellers or by Buyer pursuant to Section 9.01 other than under the circumstances described in Section 9.02(b), within two (2) Business Days after such termination, Sellers and Buyer shall jointly instruct the Escrow Agent to distribute to Buyer all of the Escrow Funds.
(d) Subject to this Section 9.02 and Section 9.03, upon the termination of this Agreement, no Party shall have any other liability or obligation hereunder, and Sellers shall be free to immediately enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
Section 9.03 Break-Up Fee; Expense Reimbursement.
(a) If (i) this Agreement is terminated by (A) Buyer pursuant to and in accordance with Section 9.01(d)(i) or (B) Sellers pursuant to and in accordance with Section 9.01(e)(i), (ii) Buyer shall not have breached any of its representations or warranties or failed to perform or comply with any of its covenants or agreements contained in this Agreement such that the condition set forth in Section 8.03(a) shall not be satisfied and (iii) any Seller or Sellers consummate any Alternative Transaction prior to the date that is twelve (12) calendar months following such termination of the Agreement, Sellers shall, subject to entry of the Bid Procedures Order, pay to Buyer a termination fee in the amount of (A) $810,000 (the “Break-Up Fee”) plus (B) the reasonable and documented costs and expenses incurred by Buyer in connection with the Transactions, up to a maximum of $540,000 (the “Expense Reimbursement”), which Break-Up Fee and Expense Reimbursement shall be payable upon consummation of such Alternative Transaction from proceeds of such sale.
(b) Notwithstanding anything contained herein to the contrary, Buyer agrees that, upon any termination of this Agreement under circumstances where the Break-Up Fee and Expense Reimbursement is payable by Sellers pursuant to this Section 9.03 and such Break-Up Fee and Expense Reimbursement is paid in full to Buyer by Sellers, Buyer shall be precluded from any other remedy against Sellers, at law or in equity or otherwise, and Buyer shall not seek to obtain any recovery, judgment or damages of any kind, including consequential, indirect or punitive damages, against Sellers or any of their respective Representatives, equityholders or Affiliates in connection with this Agreement or the Transactions and Sellers and their respective Representatives, equityholders and Affiliates shall be fully released and discharged from any liability or obligation under or resulting from this Agreement and the Transactions.
(c) Buyer represents to Sellers that this Section 9.03 is a condition precedent to its execution of this Agreement and is necessary to ensure that Buyer will continue to pursue the Transaction, and each Seller acknowledges that the Break-Up Fee and Expense Reimbursement, if payable hereunder, (i) constitutes an actual and necessary cost and expense of preserving Sellers’ estates, within the meaning of section 503(b) of the Bankruptcy Code, (ii) is of substantial benefit to Sellers, (iii) is reasonable and appropriate, including in light of the size and nature of the Transactions and the efforts that have been or will be expended by Buyer, notwithstanding that the proposed Transactions are subject to higher or better offers, and (iv) was negotiated by the Parties at arms’-length and in good faith.
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(d) Sellers’ obligation to pay the Break-Up Fee and Expense Reimbursement, as provided herein, shall (i) survive termination of this Agreement pursuant to Section 9.01(d)(i) or Section 9.01(e)(i), (ii) be paid, in cash, on the date of consummation of the first Alternative Transaction consummated by Sellers or, to the extent that is not reasonably possible, within one (1) Business Day thereafter, solely from the sale proceeds of such Alternative Transaction and (iii) constitute an administrative expense Claim against any Seller under section 503(b) or 507(a)(2) of the Bankruptcy Code (for the avoidance of doubt and notwithstanding anything to the contrary herein, such claim will have priority of all other administrative expense claims (other than as provided in any order entered by the Bankruptcy Court in connection with debtor-in-possession financing, if applicable)).
ARTICLE X
SURVIVAL AND INDEMNIFICATION
Section 10.01 Survival; Limited Recourse Against Sellers.
(a) The representations and warranties of Sellers contained herein and in any certificate or other writing delivered by Sellers pursuant hereto shall terminate upon and not survive the Closing and there shall be no liability (whether arising in contract, tort or otherwise, or whether at law or in equity, and regardless of the legal theory under which any entitlement, remedy or recourse may be sought or imposed (including all rights afforded by any statute which limits the effects of a release with respect to unknown claims)) thereafter in respect thereof. Each of the covenants of Sellers contained in this Agreement shall terminate upon the Closing except to the extent that performance under such covenant is to take place after Closing, in which case such covenant shall survive the Closing until the earlier of (i) performance of such covenant in accordance with this Agreement or, (ii) (A) if time for performance of such covenant is specified in this Agreement, thirty (30) days following the expiration of the time period for such performance or (B) if time for performance of such covenant is not specified in this Agreement, the expiration of applicable statute of limitations with respect to any claim for any failure to perform such covenant. The intended effect of termination of representations, warranties, covenants and agreements is to bar, from and after the date of termination, any claim or cause of action based on (x) the alleged inaccuracy of such representation or breach of such warranty or (y) such alleged breach or failure to fulfill such covenant or agreement; provided that if a written notice of any claim with respect to any covenant to be performed after Closing is given to Sellers prior to the expiration of such covenant then such covenant shall survive until, but only for purposes of, the resolution of such claim by final, non-appealable judgment or settlement.
(b) Buyer shall have no recourse against any Seller Indemnified Party or any of their Affiliates or their respective lenders or creditors from and after Closing for any Losses relating to the Assets or this Agreement (including title and environmental matters) or Sellers’ breach of any representations and warranties, covenants or other provision of this Agreement, subject to Buyer’s rights under Section 11.11 with respect to those covenants of Sellers the performance of which is to take place after Closing, as contemplated by Section 10.01(a). Notwithstanding anything to the contrary herein, none of the Sellers, any of their Affiliates or any of their respective lenders or creditors shall have recourse against Buyer from and after Closing for any Losses relating to any Excluded Assets or any Excluded Liabilities.
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(c) Subject to Section 10.01(a), the remainder of this Agreement shall survive the Closing without time limit. Representations, warranties, covenants, obligations and agreements of Sellers shall be of no further force and effect after the date of their expiration as set forth in Section 10.01(a). For the avoidance of doubt, nothing in this Agreement shall prohibit Sellers from ceasing operations or winding up its affairs following the Closing.
(d) Any representation and warranty insurance policy obtained by Buyer in connection with the transactions contemplated by this Agreement shall include a complete and unconditional (except in cases of fraud) waiver of subrogation and contribution rights against all of the Seller Indemnified Parties, and neither Buyer nor any of its Affiliates shall amend or waive such waiver in any respect without the prior written consent of Sellers.
Section 10.02 Indemnification by Buyer. From and after Closing, Buyer hereby assumes and agrees to release, defend, indemnify and hold Sellers and their Affiliates, and each of their respective officers, managers, directors, employees, equity owners, agents and successors (collectively, the “Seller Indemnified Parties”) harmless from and against any and all losses, liabilities, obligations, damages, costs and expenses (individually, a “Loss” and, collectively, “Losses”) based upon, attributable to or resulting from:
(a) any breach of any representation or warranty of Buyer set forth in Article IV hereof, or any representation or warranty contained in any certificate delivered by or on behalf of Buyer pursuant to this Agreement;
(b) any breach of any covenant or other agreement on the part of Buyer under this Agreement;
(c) the Assumed Liabilities (excluding any Excluded Liabilities);
(d) the Assets or Buyer’s ownership or operation of the Assets after the Closing Date (excluding any that pertain to any Excluded Assets or Excluded Liabilities);
(e) any Buyer Taxes;
(f) any and all Expenses incident to the foregoing (excluding any Expenses that the Sellers or any of their Affiliates are responsible for under this Agreement); and
(g) any other indemnity obligations of Buyer and its Affiliates expressly set forth in this Agreement.
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Section 10.03 Indemnification Procedures.
(a) In the event that any Proceedings shall be instituted or that any claim or demand shall be asserted by any Indemnified Party in respect of which payment may be sought under Section 10.02 (an “Indemnification Claim”), the Indemnified Party shall reasonably and promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge which is covered by this indemnity to be forwarded to the Indemnifying Party. The Indemnifying Party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the Indemnified Party, and to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder. If the Indemnifying Party elects to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, it shall within thirty (30) days (or sooner, if the nature of the Indemnification Claim so requires) notify the Indemnified Party of its intent to do so. If the Indemnifying Party elects not to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, the Indemnified Party may defend against, negotiate, settle or otherwise deal with such Indemnification Claim. If the Indemnifying Party shall assume the defense of any Indemnification Claim, the Indemnified Party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided, however, that such Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (i) so requested by the Indemnifying Party to participate or (ii) in the reasonable opinion of counsel to the Indemnified Party a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable; and provided, further, that the Indemnifying Party shall not be required to pay for more than one such counsel for all Indemnified Parties in connection with any Indemnification Claim. The Parties agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Indemnification Claim. Notwithstanding anything in this Section 10.03 to the contrary, neither the Indemnifying Party nor the Indemnified Party shall, without the written consent of the other party, settle or compromise any Indemnification Claim or permit a default or consent to entry of any judgment unless the claimant and such party provide to such other party an unqualified release from all liability in respect of the Indemnification Claim. If the Indemnifying Party makes any payment on any Indemnification Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance benefits or other claims of the Indemnified Party with respect to such Indemnification Claim.
(b) After any final decision, judgment or award shall have been rendered by a Governmental Authority of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the Indemnified Party and the Indemnifying Party shall have arrived at a mutually binding agreement with respect to an Indemnification Claim hereunder, the Indemnified Party shall forward to the Indemnifying Party notice of any sums due and owing by the Indemnifying Party pursuant to this Agreement with respect to such matter.
Section 10.04 Express Negligence. THE INDEMNIFICATION, RELEASE, ASSUMED LIABILITIES, WAIVER AND LIMITATION OF LIABILITY PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY INDEMNIFIED PARTY. BUYER AND SELLERS ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
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Section 10.05 Tax Treatment of Indemnity Payments. The Parties agree to treat any indemnity payment made pursuant to this Article X as an adjustment to the Purchase Price for federal, state, local and foreign income tax purposes, except as required by applicable law.
Section 10.06 Sole and Exclusive Remedy. Except for the post-Closing payments contemplated in Section 2.07, the remedies provided in this Article X shall be the sole and exclusive legal and equitable remedies of the Parties, from and after the Closing, with respect to this Agreement and the transactions contemplated hereby, and no Person will have any other entitlement, remedy or recourse, whether in contract, tort or otherwise, or whether at law or in equity, and regardless of the legal theory under which such entitlement, remedy or recourse may be sought or imposed (including all rights afforded by any statute which limits the effects of a release with respect to unknown claims), it being agreed that all of such other remedies, entitlements and recourse are expressly waived and released by the Parties to the fullest extent permitted by law. Notwithstanding the foregoing, nothing in this Agreement shall prevent Buyer from, prior to the Closing, enforcing rights and remedies in connection with any alleged breach of this Agreement in the Bankruptcy Court, including but not limited to filing a proof of claim.
Section 10.07 Limitation on Indemnity Obligations. The aggregate amount of all payments made by the Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a) shall not exceed an amount equal to fifty percent (50%) of the Purchase Price (the “Cap”); provided that (A) the Cap shall not apply with respect to any Losses resulting from, arising out of or relating to breaches of the Buyer Fundamental Representations and (B) in no event shall the aggregate amount of all payments made by Buyer in satisfaction of claims for indemnification pursuant to Section 10.02(a) exceed the Adjusted Purchase Price actually paid by Buyer. Notwithstanding anything to the contrary herein, including Section 11.04, the rights of a Seller Indemnified Party under Section 10.03, including, without limitation, to be indemnified, released and defended by Buyer, is in each case personal to such Seller Indemnified Party and may not be assigned, sold, conveyed or otherwise transferred to any other Person (other than, in the case of Sellers and their controlled Affiliates, to the Liquidating Trust, if one is established for Sellers and their controlled Affiliates, as contemplated by Section 11.04(b)), in whole or in part, directly or indirectly, by operation of law or otherwise, and any such assignment, sale, conveyance, merger or other transfer shall be void ab initio.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Notices. All notices and communications which are required or may be given to a Party hereunder shall be in writing, addressed as indicated below and shall be deemed to have been duly given upon the earliest of: (a) if by personal delivery, then the date of delivery if such date is a Business Day during normal business hours, or, if such date is not a Business Day during normal business hours, then the next Business Day, (b) if sent by U.S. certified mail, postage prepaid, return receipt requested, then the date shown as received on the return notice, (c) if sent by email, with delivery receipt to sender or upon an affirmative reply by email by the intended recipient that such email was received, or (d) if by Federal Express overnight delivery (or other reputable overnight delivery service), the date shown on the notice of delivery if such date is a Business Day during normal business hours, or, if such date is not a Business Day during normal business hours, then on the next Business Day:
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| if to Buyer, to: | |
| Berry Corporation (bry) | |
| 16000 N. Dallas Pkwy., Suite 500 | |
| Dallas, Texas 75248 | |
| Attention: | Danielle Hunter, EVP, General Counsel and Corporate Secretary |
| Email: | dhunter@bry.com |
| with a copy to: | |
| Kirkland& Ellis LLP | |
| 609 Main Street | |
| Houston, Texas 77002 | |
| Attention: | Adam D. Larson, P.C.; John D. Furlow |
| Email: | adam.larson@kirkland.com; john.furlow@kirkland.com |
| if to Sellers, to: | |
| c/o Basic Energy Services,Inc. | |
| 801 Cherry Street, Suite 2100 | |
| Fort Worth, Texas 76102 | |
| Attention: | Robert J. Reeb,III |
| Email: | RReeb@BasicES.com |
| with a copy to: | |
| Weil, Gotshal& Manges LLP | |
| 200 Crescent Court, Suite 300 | |
| Dallas, Texas 75201 | |
| Attention: | Rodney L. Moore |
| Email: | Rodney.Moore@weil.com |
| and | |
| Weil, Gotshal& Manges LLP | |
| 767 Fifth Avenue | |
| New York, New York 10153 | |
| Attention: | Ray C. Schrock, P.C. |
| Sunny Singh | |
| Email: | Ray.Schrock@weil.com |
| Sunny.Singh@weil.com | |
The Parties may change the identity, address and email addresses to which such communications are to be addressed by giving written notice to the other Parties in the manner provided in this Section 11.01.
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Section 11.02 Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party to this Agreement, or in the case of a waiver, by the Party against whom the waiver is to be effective.
(b) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 11.03 Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.
Section 11.04 Successors and Assigns/Liquidating Trust.
(a) Subject to Section 11.04(b), the provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided that no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement, in whole or in part, by operation of law or otherwise, without the prior written consent of the other Party hereto; provided, however, that Sellers may assign their respective rights and obligations under this Agreement to any liquidating trust or other representative of Sellers created or appointed pursuant to a Bankruptcy Court order; provided, further, that Buyer may assign its rights and obligations under this Agreement to any Affiliate of Buyer without prior consent of Sellers, provided that no such transfer or assignment will release Buyer of its obligations hereunder or enlarge, alter or change any obligation of Sellers to Buyer.
(b) If a Liquidating Trust is established, from and after the formation of the Liquidating Trust all rights and obligations of Sellers under this Agreement shall accrue to and be for the benefit of an shall be exercisable by the Liquidating Trust, as provided by any order of the Bankruptcy Court and the Liquidating Trustee shall be entitled to exercise all of the rights of Sellers under this Agreement.
Section 11.05 Governing Law. EXCEPT TO THE EXTENT THE MANDATORY PROVISIONS OF THE BANKRUPTCY CODE APPLY, THIS AGREEMENT, THE TRANSACTION DOCUMENTS, AND ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED PURSUANT HERETO, AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS AGREEMENT OR THE NEGOTIATION, EXECUTION, TERMINATION, PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, INCLUDING ITS STATUTES OF LIMITATIONS, WITHOUT REGARD TO ANY CONFLICTS OF LAW OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.
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Section 11.06 Jurisdiction. Each Party agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contained in or contemplated by this Agreement and the Transaction Documents (whether in contract or tort), exclusively in (a) the Bankruptcy Court so long as the Bankruptcy Cases remain open and (b) after the close of the Bankruptcy Cases, or in the event that the Bankruptcy Court determines that it does not have jurisdiction, the United States District Court for the Southern District of Texas in Harris County, Texas or any Texas state court sitting in Harris County, Texas (together with the Bankruptcy Court, the “Chosen Courts”), and solely in connection with claims arising under this Agreement or any other Transaction Document or the Transactions (whether in contract or tort) (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 11.01.
Section 11.07 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.08 Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when all Parties shall have received a counterpart hereof signed by all of the other Parties. Until and unless all Parties have received a counterpart hereof signed by the other Parties, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the Parties and their respective successors and assigns prior to Closing; provided, however, (a) the Seller Indemnified Parties are intended to be, and shall be, third party beneficiaries of the rights of Seller Indemnified Parties specified in Article X, (b) the Buyer Non-Recourse Parties and the Seller Non-Recourse Parties are intended to be, and shall be, third party beneficiaries of the rights of the Buyer Non-Recourse Parties and the Seller Non-Recourse Parties, as applicable, specified in Section 11.15 and (c) third party acquirors of Excluded Assets pursuant to an Excluded Asset PSA are intended to be, and shall be, third party beneficiaries of the rights of third party acquirors of Excluded Assets pursuant to an Excluded Asset PSA specified in, and subject to the terms of, Section 5.03(c). From and after the establishment of the Liquidating Trust, the Liquidating Trustee shall be a third party beneficiary of Sellers’ rights under this Agreement.
Section 11.09 Entire Agreement. This Agreement, the Confidentiality Agreement and the other Transaction Documents constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the Parties with respect to the subject matter hereof and thereof.
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Section 11.10 Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; and in lieu of each such invalid, void or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such invalid, void or unenforceable provision as may be valid, binding and enforceable.
Section 11.11 Specific Performance. Without limiting Sellers’ rights under Section 9.02(b), the Parties agree that, from and after Closing, irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement (without posting any bond or other undertaking) or to enforce specifically the performance of the terms and provisions hereof in addition to any other remedy to which they are entitled at law or in equity.
Section 11.12 Certain Acknowledgements and Limitations.
(a) Any and all duties and obligations which any Party may have to any other Party with respect to or in connection with this Agreement, the other Transaction Documents or the Transactions are limited to those specifically set forth in this Agreement and the other Transaction Documents. Neither the duties nor obligations of any Party, nor the rights of any Party, shall be expanded beyond the terms of this Agreement and the other Transaction Documents on the basis of any legal or equitable principle or on any other basis whatsoever. Neither any equitable or legal principle nor any implied obligation of good faith or fair dealing nor any other matter requires any Party to incur, suffer or perform any act, condition or obligation contrary to the terms of this Agreement and the other Transaction Documents, whether or not existing and whether foreseeable or unforeseeable. Each of the Parties acknowledges that it would be unfair, and that it does not intend, to increase any of the obligations of the other Party on the basis of any implied obligation or otherwise.
(b) WITHOUT LIMITING SECTION 10.03(b), UNDER NO CIRCUMSTANCES SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE FOR (i) ANY EXEMPLARY OR PUNITIVE DAMAGES OR (ii) ANY CONSEQUENTIAL, EXPECTANCY, SPECIAL OR INDIRECT DAMAGES, IN EITHER CASE, FOR LIABILITIES ARISING OUT OF ANY ACTUAL, ALLEGED OR INTENTIONAL BREACH OF THIS AGREEMENT (EXCEPT (x) IN THE CASE OF CLAUSE (i), TO THE EXTENT ANY SUCH DAMAGES WOULD OTHERWISE BE RECOVERABLE UNDER APPLICABLE LAW IN AN ACTION FOR BREACH OF CONTRACT OR (y) IN THE CASE OF CLAUSE (i) OR CLAUSE (ii), ANY SUCH DAMAGES TO THE EXTENT INDEMNIFIABLE PURSUANT TO ARTICLE X BECAUSE PAYABLE BY A SELLER INDEMNIFIED PARTY TO A THIRD PARTY).
Section 11.13 Disclosure Schedules. All references to Schedules and Disclosure Schedules in Article III of this Agreement refer to Schedules contained in the Disclosure Schedule. The information in the Disclosure Schedule constitutes exceptions, qualifications and/or supplements to particular representations or warranties of Sellers as set forth in this Agreement. The Disclosure Schedule shall not be construed as indicating that any disclosed information is required to be disclosed, and no disclosure shall be construed as an admission that such information is material to, outside the Ordinary Course of Business of, or required to be disclosed by, Sellers or constitutes, individually or in the aggregate, a Seller Material Adverse Effect. Capitalized terms used in the Disclosure Schedule that are not defined therein and are defined in this Agreement shall have the meanings given to them in this Agreement. The captions contained in the Disclosure Schedule are for the convenience of reference only and shall not be deemed to modify or influence the interpretation of the information contained in the Disclosure Schedules or this Agreement. The statements in each Schedule of the Disclosure Schedule qualify and relate to the corresponding provisions in the Sections of this Agreement to which they expressly refer and to each other provision in this Agreement to which the applicability of a statement or disclosure in a particular Schedule of the Disclosure Schedule is reasonably apparent on its face.
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Section 11.14 Preparation of Agreement. The Parties and their counsel have reviewed the provisions of this Agreement and have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
Section 11.15 No Recourse.
(a) Notwithstanding anything that may be expressed or implied in this Agreement or any other Transaction Document, each Seller, on behalf of itself and its Affiliates and their respective representatives and the Seller Indemnified Parties, covenants, agrees and acknowledges that no Person other than Buyer (and its successors or assignees, as applicable) has any obligation hereunder and that, neither Sellers, their respective Affiliates or their respective representatives, or any Seller Indemnified Parties, shall have any right of recovery under this Agreement or any other Transaction Document against, and no personal liability under this Agreement or any Transaction Document shall attach to, any of Buyer’s former, current or future debt or equity financing sources, equity holders, controlling Persons, directors, officers, employees, general or limited partners, members, managers, Affiliates or agents, or any former, current or future equity holder, controlling Person, director, officer, employee, general or limited partner, member, manager, Affiliate or agent of any of the foregoing (collectively, each of the foregoing but not including Buyer, a “Buyer Non-Recourse Party”), through Sellers or otherwise, whether by or through attempted piercing of the corporate, limited partnership or limited liability company veil, by or through a claim by or on behalf of Sellers or any Seller Indemnified Party against any Buyer Non-Recourse Party, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any applicable Law, whether in contract, tort or otherwise.
(b) Notwithstanding anything that may be expressed or implied in this Agreement or any other Transaction Document, Buyer, on behalf of itself and its Affiliates and their respective representatives, covenants, agrees and acknowledges that no Person other than Sellers (and their successors or assignees, as applicable) has any obligation hereunder and that, neither Buyer, its Affiliates or its representatives, shall have any right of recovery under this Agreement or any other Transaction Document against, and no personal liability under this Agreement or any Transaction Document shall attach to, any of Sellers’ former, current or future debt or equity financing sources, equity holders, controlling Persons, directors, officers, employees, general or limited partners, members, managers, Affiliates or agents, or any former, current or future equity holder, controlling Person, director, officer, employee, general or limited partner, member, manager, Affiliate or agent of any of the foregoing (collectively, each of the foregoing but not including Sellers, a “Seller Non-Recourse Party”), through Buyer or otherwise, whether by or through attempted piercing of the corporate, limited partnership or limited liability company veil, by or through a claim by or on behalf of Buyer against any Seller Non-Recourse Party, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any applicable Law, whether in contract, tort or otherwise.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| SELLERS: | ||
| BASIC ENERGY SERVICES,INC. | ||
| By: | /s/ Keith L. Schilling | |
| Name: | Keith L. Schilling | |
| Title: | President and Chief Executive Officer | |
| BASIC ENERGY SERVICES, L.P. | ||
| By: | /s/ Keith L. Schilling | |
| Name: | Keith L. Schilling | |
| Title: | President and Chief Executive Officer | |
| C&J WELL SERVICES,INC. | ||
| By: | /s/ Keith L. Schilling | |
| Name: | Keith L. Schilling | |
| Title: | President and Chief Executive Officer | |
| KVS TRANSPORTATION,INC. | ||
| By: | /s/ Keith L. Schilling | |
| Name: | Keith L. Schilling | |
| Title: | President and Chief Executive Officer | |
Signature
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Asset Purchase Agreement
| BUYER: | ||
| BERRY CORPORATION (BRY) | ||
| By: | /s/ Danielle Hunter | |
| Name: | Danielle Hunter | |
| Title: | Executive Vice President and General Counsel | |
Signature
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Asset Purchase Agreement
Exhibit A
| (a) | Definitions. |
“365 Contracts” means all Applicable Contracts and other executory contracts and unexpired leases to which a Seller is a party that relate to the Assets, in each case that may be assumed by one or more Sellers pursuant to section 365 of the Bankruptcy Code.
“Acquired Accounts Receivable” means the accounts receivable of Sellers attributable to the Business that are current assets, as determined in accordance with GAAP, as of the Measurement Time.
“Acquired Accounts Receivable Adjustment Amount” mean an amount equal to the sum of (i) the aggregate amount of Acquired Accounts Receivable for the accounts of California Resources Corporation, Aerea Energy LLC and Chevron Texaco and (ii) the product of 0.975 multiplied by the aggregate amount of all other Acquired Accounts Receivable (without duplication).
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person. For such purposes, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Alternative Transaction” means, other than the Transactions or any transactions effected in the Ordinary Course of Business, any (a) sale, transfer or other disposition, directly or indirectly, of all or substantially all of the Assets (except any such sale, transfer or other disposition to the extent permitted by Section 5.01(b)), (b) the consummation of any state court foreclosure action as to a material portion of the Assets or (c) successful credit bid transaction with respect to the Assets.
“Applicable Contracts” means (a) all Contracts to which a Seller is a party or is bound to the extent covering, attributable to or relating to any of the Assets or to which an Asset is subject or bound, (b) all Intellectual Property Agreements, (c) all Surface Leases and (d) all Vehicle Finance Leases, including without limitation, in the case of each of clause (a) of this definition, those Contracts described on Annex F.
“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, order, injunction or judgment adopted or promulgated by a Governmental Authority (or under the authority of the New York Stock Exchange) that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
“Applicable Schedule 3.06 Consent” means any Consent set forth on Disclosure Schedule 3.06 relating to an Applicable Contract for which the counterparty’s consent to assignment would be required for such Applicable Contract to be assumed and assigned to Buyer, after giving effect to sections 365(c)(1) and 365(f)(1) of the Bankruptcy Code.
“Assigned Contracts” means the Desired 365 Contracts and all other Applicable Contracts that are not 365 Contracts (other than Excluded Assets).
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“Assumed Liabilities” means all of the following (in each case, other than Excluded Liabilities):
(a) all Liabilities under or associated with or appurtenant to the Assets to the extent related to periods from and after the Closing Date (other than Excluded Liabilities and Property Expenses for which the Purchase Price is increased pursuant to Section 2.04(a)), including without limitation all such Liabilities arising out of the operation and/or ownership of the Assets from and after the Closing Date;
(b) all Assumed Prepetition Accounts Payable;
(c) subject to Section 2.16, all Postpetition Accounts Payable up to an aggregate maximum amount of $1,500,000;
(d) subject to clause (f) of the definition of Excluded Liabilities, all Liabilities of the Sellers arising from or relating to the Assets arising under Environmental Law, including without limitation those related to the control, storage, handling, transporting and disposing of or discharge of all materials, substances and wastes from the Assets (including produced water, hydrogen sulfide gas, drilling fluids, NORM and other wastes);
(e) all Liabilities with respect to the Cure Costs required to be paid by Buyer in accordance with Section 5.02(i);
(f) Buyer Taxes;
(g) all Liabilities required to be assumed by Buyer pursuant to Section 7.05(f), excluding any Liabilities specifically allocated to Sellers thereunder; and
(h) all Debt that is described on Schedule 1.01 (the “Assumed Indebtedness”).
“Assumed Prepetition Accounts Payable” means the accounts payable attributable to the Assets that are specifically identified on Schedule 1.02 with respect to which the payees thereof have valid rights to assert or have asserted mechanics’ liens against customers of Sellers, in each case in such amount as is outstanding as of the Petition Date to the extent remaining outstanding as of the Measurement Time.
“Auction” means the auction for the sale of the Assets, if any, to be conducted in accordance with the Bid Procedures.
“Avoidance Action” means any claim, right or cause of action of Sellers arising under chapter 5 of the Bankruptcy Code and any analogous state or federal statutes and common law relating to the Assets, the Purchased Contracts and the Assumed Liabilities.
“Back-up Bidder” has the meaning set forth in the Bid Procedures Order.
“Back-up Termination Date” means the first to occur of (a) thirty (30) days after the entry of the order of the Bankruptcy Court approving an Alternative Transaction with a Successful Bidder other than Buyer or (b) consummation of an Alternative Transaction with the Successful Bidder (other than Buyer) at the Auction.
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“Bankruptcy Code” means title 11 of the United States Code, as amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas or any other court having jurisdiction over the Bankruptcy Cases from time to time.
“Bid Procedures” means the Bidding Procedures, substantially in the form attached as Exhibit 1 to the Bid Procedures Order, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Bid Procedures Order” means an order of the Bankruptcy Court, substantially in the form attached hereto as Exhibit H, with such changes, if any, as shall be reasonably acceptable in form and substance to Buyer and Sellers.
“Business” means the business of Sellers as conducted by Sellers in the State of California prior to and after the Petition Date and all other business activities reasonably related thereto or which flow therefrom or for which any Seller has taken reasonable steps to pursue, including, with respect to (i) well servicing and maintenance, including the installation and removal of downhole equipment and the completion of the well bore to initiate production of oil and natural gas business segment, (ii) the water logistics business segment (subject to clause (x) below), (iii) the trucking business segment, including the services provided through KVS and (iv) completion and remedial services segment, including fishing and specialized rental tool and equipment service lines and coiled tubing services line, in each case; provided that the Business shall not include (x) the operational midstream water logistic segment of Sellers conducted by or through Agua Libre Holdco LLC and its Subsidiaries or (y) any business segment of Sellers or their Affiliates conducted in geographic areas outside of the State of California, in each case prior to and after the Petition Date.
“Business Day” means any day, excluding Saturdays, Sundays or legal holidays, on which commercial banks are open for business in New York, NY.
“Business Intellectual Property” means all Owned Intellectual Property and all Intellectual Property used or held for use primarily in the Business.
“Business IT Assets” means all systems, servers, computers, hardware, firmware, middleware, networks, data communications lines, routers, hubs, switches, and all other information technology equipment, in each case, used or held for use primarily in the Business.
“Buyer Fundamental Representations” means the representations and warranties of Buyer set forth in Section 4.01 (Organization), Section 4.02 (Authorization and Authority), Section 4.03 (Enforceability), Section 4.05 (Brokers), Section 4.06 (Financial Ability) and Section 4.10 (Investigation).
“Buyer Material Adverse Effect” means a material adverse effect on the ability of Buyer to consummate the Transactions or to perform its obligations hereunder and under the other Transaction Documents to which it is or will be a party.
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“Buyer Taxes” means (a) any Taxes that are allocated to (or otherwise payable by) Buyer pursuant to Section 7.06(a) and (b) the portion of any Transfer Taxes allocated to Buyer pursuant to Section 7.06(b); provided, however, that “Buyer Taxes” shall not include any Seller Taxes.
“Buyer’s Knowledge” means the actual knowledge of Danielle Hunter, A.T. Smith, Cary Baetz and Fernando Araujo.
“Claim” means a claim against any Seller as defined in Bankruptcy Code section 101(5).
“Closing Date” means the date of the Closing.
“COBRA” means the continuation coverage requirements of sections 601 et seq. of the Employee Retirement Income Security Act of 1974 and section 4980B of the Code.
“Confidentiality Agreements” means the Confidentiality and Non-Disclosure Agreement between Buyer and Basic, dated effective as of August 2, 2021.
“Contract” means any contract, agreement undertaking, indenture, note, bond, mortgage, license, sublicense, sales order, purchase order or other instrument or commitment that purports to be binding on any Person or any part of its property, but excluding, however, (a) any lease, easement, right-of-way (including any Surface Leases) or other instrument, in each case, creating any real property interests, or (b) any Permit.
“Debt” means, without duplication, the aggregate amount of: (1) all indebtedness of the Sellers (including the principal amount thereof and, if applicable, the amount of accrued and unpaid interest thereon) (x) represented by bonds, debentures, notes or other securities, (y) with respect to any letters of credit (solely to the extent drawn and/or due and owing), bankers’ acceptances or surety, performance or other bonds or similar instruments or (z) for the repayment of money borrowed, (2) all obligations of Sellers under a lease of real or personal property which is classified as a capital lease or is required to be classified as a capital lease in accordance with the GAAP, (3) any payment obligation of any Seller under any interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement entered into for the purpose of limiting or managing interest rate risks or relating to derivative instruments or hedging activities and any liabilities related to any margin accounts in respect of commodity derivative instruments or hedging activities, (4) all indebtedness for borrowed money secured by any Lien existing on property owned by any Seller, (5) all guaranties of the Sellers in respect of indebtedness for borrowed money or other Debt of others the repayment of which is guaranteed by any Seller, (6) all deferred and contingent obligations for purchase price of property, services or assets purchased (assuming the maximum payment), in each case, solely with respect to acquisitions that have closed prior to the date hereof, and (7) all fees, expenses, premiums, penalties, breakage costs, change of control payments or make-whole payments related to any of the foregoing.
“Deposit Escrow Agreement” means that certain Escrow Agreement dated as of the Execution Date, by and among Sellers, Buyer and the Escrow Agent.
“Designation Deadline” means 5:00 p.m. (Central Prevailing Time) on the date that is two (2) days prior to the date of the Auction, or such later date as Buyer and Sellers shall mutually agree and, if applicable, as the Bankruptcy Court may authorize.
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“Disclosure Schedule” means the letter dated as of the Execution Date, executed by Sellers and delivered to Buyer on the Execution Date in connection with the execution and delivery of this Agreement, which letter is identified therein as the Disclosure Schedule for purposes of this Agreement.
“Environmental Claim” means any obligation to affect cleanup or remediation under, or resolve noncompliance with, any Environmental Law and any Liability associated with or arising out of Environmental Law.
“Environmental Law” means any Applicable Law or any agreement with any Governmental Authority relating to the protection of human health and safety, the environment or to the release into the indoor or outdoor environment of pollutants, contaminants, wastes, chemicals, or toxic or other hazardous substances.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“ERISA Affiliate” means any Person treated as a single employer with the Sellers under Section 414(b), (c), (m), or (o) of the Code.
“Escrow Account” means the escrow account established pursuant to the Deposit Escrow Agreement.
“Escrow Agent” means that certain Third Party that is a party, as escrow agent, to the Deposit Escrow Agreement.
“Excess Cure Costs” means, with respect to any individual 365 Contract, the amount of Cure Costs with respect to such 365 Contract that exceeds the amount set forth on the 365 Schedule for such 365 Contract as of the Designation Deadline (or, if any 365 Contract is first identified to Buyer by Sellers after the Designation Deadline, as of (1) Business Day after such identification) multiplied by 105%.
“Excluded Liabilities” means the following Liabilities of Sellers:
(a) any indebtedness for borrowed money and other obligations evidenced by notes, bonds, debentures or similar instruments other than the Assumed Indebtedness;
(b) any Liability to the extent arising out of any Excluded Asset;
(c) any Liability for Seller Taxes;
(d) except as provided in Section 7.05, any employee benefit plans (within the meaning of Section 3(3) of ERISA), and each other material retirement, welfare benefit, bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, employment, retention, termination, or severance programs or agreements, in each case, pursuant to which any of any Seller currently has any obligation with respect to any Seller’s employees or former employees;
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(e) Liabilities relating to amounts to be paid by Sellers hereunder, including any brokers, advisory or similar fees;
(f) any environmental Liabilities arising out of, or relating to: (A) Excluded Assets; (B) any properties other than the Properties; (C) any Liabilities that the Sellers or their Affiliates have assumed by Contract from a Third Party prior to the Closing Date that are not Purchased Contracts; (D) properties that Sellers do not own, lease or operate as of the Closing Date; (E) any environmental Liabilities that arise under a Contract that is not a Purchased Contracts; (F) any penalties, assessments or fines for violations of Environmental Law that occurred prior to the Closing Date; (G) environmental Liabilities that were discharged in any prior bankruptcy proceedings of any Seller or Affiliate thereof; and/or (H) any environmental Liabilities assumed from Sellers by any Third Party, pursuant to an Excluded Asset PSA or otherwise;
(g) all Liabilities arising under section 503(b)(9) of the Bankruptcy Code;
(h) other than the Assumed Prepetition Accounts Payable and the Postpetition Accounts Payable, all Liabilities owed to vendors, suppliers, service providers and customers that are provided goods or services to, or purchased products or services from, the Company prior to the Closing and all other Liabilities in respect of prepetition accounts payable or trade payables;
(i) all Liabilities of any Seller arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants, consultants, advisers, and any other Person;
(j) all Liabilities in respect of any pending or threatened Proceeding arising out of, relating to, or otherwise in respect of the operation of the Business or the Assets to the extent such Proceeding relates to such operation on or prior to the Closing Date (including, for the avoidance of doubt, all of the Proceedings identified on Disclosure Schedules 3.08 and 3.16(b) and all Liabilities arising out of or resulting therefrom);
(k) all product Liability or similar claim for injury to a Person or property that arises out of or is based upon any express or implied representation, warranty, agreement, or guaranty made by a Seller, or by reason of the improper performance or malfunctioning of a product, improper design or manufacture, failure to adequately package, label, or warn of hazards or other related product defects of any products at any time manufactured or sold or any service performed by a Seller;
(l) all recall, design defect, or similar claims of any products manufactured or sold or any service performed by any Seller prior to the Closing;
(m) all Liabilities for injury to a Person or for any loss, damage, or injury sustained by any present or former employee or independent contractor of any Seller or any other Person while engaging in manufacturing, engineering or similar activities in connection with any Asset prior to the Closing;
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(n) all Liabilities to indemnify, reimburse, or advance amounts to any present or former officer, director, employee, agent or other Person of any Seller (including with respect to any breach of fiduciary obligations by same);
(o) other than the Assumed Prepetition Accounts Payable and the Postpetition Accounts Payable, all Liabilities under any Contracts that are not validly and effectively assigned to Buyer pursuant to this Agreement;
(p) all Liabilities arising out of, in respect of, or in connection with the failure by any Seller or any of their respective Affiliates to comply with any Applicable Law;
(q) all accounts payable other than Assumed Prepetition Accounts Payable and Postpetition Accounts Payable; and
(r) all other Liabilities of Sellers of any kind, whether known or unknown, contingent, matured, or otherwise, whether currently existing or hereinafter created, other than the Assumed Liabilities.
“Excluded Records” means any items, including items referenced in the definition of “Data,” that are (a) Tax records (other than Tax records described in Section 2.01(f)), (b) not transferable without payment of additional consideration (unless Buyer has agreed in writing to pay such additional consideration provided that Buyer shall be afforded the opportunity, in each instance to pay such consideration) or that Sellers and their Affiliates would not be able to otherwise compile and prepare for transfer using commercially reasonable efforts, (c) e-mails or other electronic files on Sellers’ or their Affiliates’ servers and networks (to the extent not primarily related to the Assets or Assumed Liabilities), (d) employee files and personnel records, (e) legal records and legal files of Sellers, including all work product of and attorney-client communications with Sellers’ legal counsel or any other documents or instruments that may be protected by an attorney-client privilege (but excluding any title opinions and excluding any legal records and legal files exclusively related to the Assets or Assumed Liabilities and reasonably determined by Buyer to be necessary for operation of the Business or the Assets in the ordinary course of business after the Closing), (f) economic projections, (g) data, correspondence, materials, documents, descriptions or records relating to the Auction, marketing, sales negotiation or sale of any of the Assets, including the existence or identities of any prospective inquirers, bidders or prospective purchasers of any of the Assets, any bids received from and records of negotiations with any such prospective purchasers and any analyses of such bids by any Person, (h) correspondence between or among any Seller or its Affiliate or their respective representatives, and any prospective purchaser other than Buyer, and correspondence between any Seller or its Affiliates or any of their respective representatives with respect to any of the bids, the prospective purchasers or the Transactions, or (i) originals of the Data that relate to both the Assets and any Excluded Assets and copies of all other Data.
“Existing Letters of Credit” means all performance bonds, surety bonds, letters of credit, guarantees, security deposits and similar assurances in effect as of the Execution Date that relate to the Assets.
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“Expenses” means any and all notices, actions, suits, proceedings, claims, demands, assessments, judgments, costs, penalties and expenses, including attorneys’ and other professionals’ fees and disbursements incident to the foregoing.
“Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction with respect to the subject matter, (a) which has not been reversed, stayed, modified, amended, enjoined, set aside, annulled or suspended and (b) with respect to which no stay shall be in effect.
“GAAP” means generally accepted accounting principles in the United States, consistently applied.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental unit, authority, department, court, administrative body, agency or official, including any political subdivision thereof, or any tribal authority.
“Hazardous Substances” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under or for which Liability or standards of conduct may be imposed any Environmental Law.
“Indemnified Party” means a Party entitled to, or seeking to assert rights to, indemnification under Article X whether on behalf of itself or, with respect to Sellers, any of the Seller Indemnified Parties.
“Indemnifying Party” means a Party from whom indemnification is sought under Article X by an Indemnified Party.
“Intellectual Property” means: (a) inventions and invention disclosures; (b) patents and patent applications (including statutory invention registrations), industrial designs, and utility models and applications for any of the foregoing, including all provisionals, divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of any of the foregoing and all rights to claim priority of any of the foregoing; (c) trademarks, service marks, logos, trade dress, trade names, domain names, and other indicia of commercial source or origin, including registrations and applications for registration thereof, and goodwill associated with any of the foregoing; (d) copyrights, including registrations and applications for registration thereof; (e) trade secrets, know-how, software, formulae, customer lists, data (including seismic data), processes, protocols, specifications, analyses, plans, techniques, and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as notebooks, samples, studies and summaries); and (f) any other intellectual property.
“Intellectual Property Agreements” means any Contract for the development or ownership of any material Owned Intellectual Property.
A-8
“Liability” means any direct or indirect liability, indebtedness, obligation, commitment, expense, loss, claim, deficiency, or guaranty of or by any Person of any types, whether known or unknown, and whether accrued, absolute, contingent, matured or unmatured.
“Lien” means, with respect to any property or asset, any mortgage, lien, interest pledge, charge, security interest, or encumbrance, mechanics’ lien, materialman’s lien, statutory lien or right, and other consensual or non-consensual lien, whenever granted and including without limitation those charges or interests in property within the meaning of “lien” under section 101(37) of the Bankruptcy Code.
“Liquidating Trust” means a liquidating or similar trust as may be established with respect to Sellers’ estates in conjunction with the Bankruptcy Cases.
“Liquidating Trustee” means the trustees or other representative of the Liquidating Trust.
“Malicious Code” means any (i) back door, time bomb, drop dead device, or other software routine designed to disable a computer program automatically with the passage of time or under the positive control of a Person other than the user of the program; (ii) virus, Trojan horse, worm, or other software routine or hardware component designed to permit unauthorized access, to disable, erase, or otherwise harm software, hardware, or data; and (iii) similar programs.
“Measurement Time” means 11:59 p.m. on the date immediately prior to the Closing Date.
“Non-Income Tax” means any Tax other than U.S. federal income Tax, income Tax imposed by any state or subdivision of the U.S. or any non-U.S. jurisdiction, and any franchise Tax (including the Texas Margin Tax), but including (without limitation) any property Tax, ad valorem Tax, severance Tax, excise Tax, production Tax, and sales and use Tax.
“Ordinary Course of Business” means the ordinary course of business of Sellers, consistent in all material respects with past custom and practice of Sellers, including reasonable and prudent changes in response to the COVID-19 pandemic and the governmental actions related thereto. Without limiting the effect of the foregoing, the term “Ordinary Course of Business” as used herein shall be no broader than the term “ordinary course of business” as used in section 363 of the Bankruptcy Code.
“Organizational Documents” means, with respect to any Person, the certificate or articles of incorporation, bylaws, certificate of formation or organization, partnership agreement, operating agreement, limited liability company agreement or any other similar organizational documents of such Person.
“Owned Intellectual Property” means all Intellectual Property owned or purported to be owned by the Sellers that is used or held for use primarily in the Business.
“Permits” means all governmental (whether federal, state or local) permits, licenses, franchises, certificates, approvals or other similar authorizations.
A-9
“Permitted Liens” means (i) all Applicable Laws and all rights reserved to or vested in any Governmental Authority: (1) to control or regulate the Assets in any manner, (2) by the terms of any right, power, franchise, grant, license or Permit issued by any Governmental Authority, or by any provision of Applicable Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture of any Asset; or (3) to enforce any obligations or duties affecting the Assets to any Governmental Authority with respect to any franchise, grant, license or permit; (ii) the terms, conditions, restrictions, exceptions, reservations, limitations and other matters contained (1) in the Assigned Contracts and (2) the Preferential Purchase Rights disclosed on Disclosure Schedule 3.13; (iii) Liens for Taxes or other governmental fees not yet due and payable or that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been recorded in accordance with the GAAP; (iv) Liens securing Assumed Liabilities; (v) utility easements, zoning, entitlement, building, subdivision, environmental and other similar restrictions; (vi) Liens created under Assigned Contracts, Permits, easements or rights-of-way, or by operation of law in respect of future obligations; and (vii) zoning and planning ordinances and municipal regulations.
“Person” means any person, entity or Governmental Authority of any nature whatsoever, specifically including an individual, firm, company, corporation, partnership, trust, joint venture, association, joint stock company, limited liability company, estate, unincorporated organization or other entity or organization.
“Petition Date” means the date of commencement of the Bankruptcy Cases.
“Plan” means, if applicable, the joint plan of reorganization of Sellers under chapter 11 of the Bankruptcy Court with respect to the Bankruptcy Cases.
“Postpetition Accounts Payable” means all accounts payable exclusively related to the Business or that are directly attributable to the maintenance and operation of the Assets (and not any Excluded Assets or other assets subject of any Excluded Assets PSA) with respect to which the payees thereof have valid rights to assert or have asserted mechanics’ liens against customers of Sellers, in each case that are incurred in the Ordinary Course of Business from the Petition Date until the Measurement Time and remain outstanding as of the Measurement Time.
“Proceeding” means any action, claim, demand, audit, hearing, complaint, investigation, litigation, or suit commenced, brought, conducted, or heard by or before any Governmental Authority.
“Properties” means the lands covered by the Surface Tracts and the Surface Leases.
“Property Expenses” means all expenses, charges, capital expenses, development expenses, workover expenses that are attributable to the ownership, maintenance and operation of Sellers’ interest in the Assets during the period in question, in each case, other than Taxes.
“Replacement Letters of Credit” means any Existing Letters of Credit that are provided as security for, or performance assurance under, any Asset, excluding the letters of credit described under the heading “Letters of Credit” on Disclosure Schedule 3.12.
“Representatives” means, with respect to any Person, the officers, directors, employees, members, managers, partners, investment bankers, attorneys, accountants, consultants or other advisors, agents or representatives of such Person, when acting in such capacity on behalf of such Person.
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“Sale Hearing” has the meaning set forth in the Bid Procedures Order.
“Sale Order” means an order or orders of the Bankruptcy Court in the form and containing such terms, to the extent such terms pertain to the transactions contemplated by this Agreement, as are reasonably acceptable to Buyer and Sellers, approving this Agreement and all of the terms and conditions hereof, and approving and authorizing Sellers to consummate the Transactions.
“Seller Fundamental Representations” means the representations and warranties of Sellers set forth in Section 3.01 (Organization), Section 3.02 (Authorization and Authority), Section 3.03 (Enforceability) and Section 3.14 (Brokers).
“Seller Material Adverse Effect” means any change, effect, event, occurrence, condition, circumstance, state of facts or development that, individually or in the aggregate, (1) materially impairs the ability of any Seller to consummate the transactions contemplated by this Agreement or (2) has or would reasonably be expected to have a material adverse effect on (a) the ownership, operation, financial condition or value of the Assets, the Assumed Liabilities or the Business, considered as a whole; provided that any such material adverse effect that results from any of the following matters shall not be taken into account in determining whether a material adverse effect has occurred under clause (a) of this definition: (i) entering into this Agreement or the announcement of the Transactions; (ii) changes in financial or securities markets generally; (iii) changes in general economic or political conditions in the United States or worldwide; (iv) general economic changes in conditions or developments generally applicable to the oil and gas industry in the area where the Assets are located, including, but not limited to, changes in the market price of oil, natural gas or other hydrocarbon products or changes in general market prices in the produced water disposal, gathering and/or transportation industry generally; (v) acts of God, including hurricanes, storms or other naturally occurring events; (vi) effects arising from changes in laws or regulations from and after the Execution Date; (vii) matters disclosed on Disclosure Schedules 3.05(b), 3.07 and 3.08; (viii) actions taken or omissions made after the Execution Date that are expressly contemplated by this Agreement or are taken or made with the express written consent of Buyer; (ix) any epidemic, pandemic or disease outbreak (including the COVID-19 virus) or hostilities, terrorist activities or war or any similar disorder and, in each case, governmental actions related thereto; (x) matters that are fully cured or no longer exist by the earlier of Closing and the termination of this Agreement, including matters to the extent a purchase price adjustment is provided for under this Agreement; (xi) any change in laws or in GAAP and any interpretations thereof from and after the Execution Date; (xii) the commencement or pendency of the Bankruptcy Cases and the impact on the Business as a result of the commencement or pendency of the Bankruptcy Cases; (xiii) the departure of officers, managers or directors of Sellers after the Execution Date; and (xiv) any objections in the Bankruptcy Court to (A) this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, (B) the reorganization of any Seller and any related plan of reorganization or disclosure statement, or (C) the Bid Procedures or the sale motion; provided that the matters described in the foregoing clauses (ii), (iii), (iv), (v), (vi) and (ix) shall be taken into account in determining the occurrence or existence of a “Seller Material Adverse Effect” to the extent any such matter has, or would reasonably be expected to have, a disproportionate effect on the business, operations, assets, rights, liabilities, properties, financial condition or results of operations of the Assets, the Assumed Liabilities or the Business, taken as a whole, relative to the other Persons in the industries and locations in which Sellers operate; or (b) the ability of Sellers to perform their respective obligations under the Transaction Documents or consummate the Transactions.
A-11
“Seller Taxes” means (a) any Taxes (other than Non-Income Taxes or Transfer Taxes) of Sellers of its Affiliates, (b) any Taxes allocated to Sellers under the provisions of this Agreement, (c) the portion of any Transfer Taxes allocated to Sellers pursuant to Section 7.06(b), (d) any Taxes (other than Taxes described in clause (a), (b) or (c) of this definition) imposed on or with respect to the ownership, use, or operation of the Assets attributable to any period, or portion thereof, ending prior to the Closing Date, and (e) any Taxes imposed on or with respect to the Excluded Assets.
“Sellers’ Knowledge” means the actual knowledge of Keith L. Schilling, Adam Hurley, James F. Newman and Jack Renshaw.
“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.
“Successful Bidder” has the meaning set forth in the Bid Procedures Order.
“Tax” means any tax, duty, impost, levy, fee assessments, governmental fee or other like assessment or charge of any kind whatsoever (including, without limitation, any net or gross income, net or gross receipts, net or gross proceeds, capital gains, capital stock, sales, use, user, leasing, lease, transfer, natural resources, premium, ad valorem, value added, franchise, profits, gaming, license, capital, withholding, payroll or other employment, estimated, goods and services, severance, excise, stamp, fuel, interest equalization, registration, recording, occupation, premium, turnover, personal property (tangible and intangible), real property, alternative or add-on, windfall or excess profits, environmental (including Section 59A of the Code), social security, disability, and unemployment taxes), together with any interest, penalty, addition to tax or additional amounts assessed or imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition, administration or collection of any such tax (domestic or foreign), in each case, whether disputed or not, and any liability for any of the foregoing payable by reason of contract or assumption, as transferee or successor of another Person, by operation of law or otherwise.
“Tax Return” means any return, filing, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Taxing Authority” has the meaning set forth in the definition of Tax.
“Third Party” means any Person other than a Party or its Affiliates.
“Transaction Documents” means this Agreement, the Assignment and Bill of Sale, the Assumption Agreement, the Surface Deeds, the Intellectual Property Assignment, the Deposit Escrow Agreement any other agreement between or among Buyer and any Seller that expressly states that it constitutes a Transaction Document for purposes of this Agreement, and all other agreements, documents and instruments entered into by Buyer, on the one hand, and a Seller, on the other hand, as of or after the Execution Date and at or prior to Closing in connection with the transactions contemplated hereby (as each such document, agreement and instrument may be amended, supplemented or modified).
A-12
“Transactions” means the transactions contemplated by this Agreement and the other Transaction Documents, including the purchase and sale of Assets for the Purchase Price and the assumption of the Assumed Liabilities in accordance with this Agreement and the other Transaction Documents.
“Willful Breach” means, with respect to any Party, that such Party knowingly does one or more of the following: (a) such Party willfully and intentionally breaches in any material respect (by refusing to perform or taking an action prohibited) any material pre-Closing covenant, obligation or agreement applicable to such Party, or (b) such Party willfully and intentionally causes any of its representations or warranties under this Agreement to not be true and correct in all material respects after the Execution Date and prior to the Closing Date. For clarify, if a Party is obligated hereunder to use its commercially reasonable efforts to perform an action or to achieve a result, the failure to use such commercially reasonable efforts would constitute a willful and intentional breach of this Agreement.
| (b) | Each of the following terms is defined in the Section set forth opposite such term: |
| Term | Section |
| 365 Schedule | 5.02(a) |
| Accounting Firm | 7.06(c) |
| Adjusted Purchase Price | 2.03 |
| Agreement | Preamble |
| Allocation | 7.06(c) |
| AR/AP Reduction Amount | 2.04(a)(iii) |
| Assets | 2.01 |
| Assignment and Bill of Sale | 2.05(c)(i) |
| Assumed Indebtedness | Exhibit A – within “Assumed Liabilities” |
| Assumption Agreement | 2.05(c)(ii) |
| Audit Fees | 2.06(f) |
| Bankruptcy Cases | Recitals |
| Basic | Preamble |
| Basic LP | Preamble |
| Break-Up Fee | 9.03(a) |
| Buyer | Preamble |
| Buyer Non-Recourse Party | 11.15(a) |
| C&J | Preamble |
| Cap | 10.07 |
| Casualty or Condemnation Loss | 7.09 |
| Chosen Courts | 11.06 |
| Closing | 2.05 |
| Closing Amount Excess | 2.07(a) |
| Closing Amount Shortfall | 2.07(b) |
| Closing Date Adjusted Purchase Price | 2.04(d)(i) |
| Closing Statement | 2.04(d)(i) |
A-13
| Term | Section |
| Code | 3.11(j) |
| Compensation Schedule | 7.05(b) |
| Consent | 3.06 |
| Consent Notice | 2.12 |
| Continuing Employee | 7.05(b) |
| Cure Costs | 5.02(i) |
| Data | 2.01(f) |
| Desired 365 Contracts | 5.02(b) |
| Employment Offer | 7.05(a) |
| End Date | 9.01(b) |
| Environmental Permits | 3.07(b) |
| Equitable Limitations | 3.03 |
| Escrow Funds | 2.09(a) |
| Excess Recovery Amount | 7.08 |
| Excluded Asset PSA | 5.03(c) |
| Excluded Assets | 2.02 |
| Execution Date | Preamble |
| Expense Reimbursement | 9.03(a) |
| Final Settlement Statement | 2.06(a) |
| Improvements | 3.15(a) |
| Indemnification Claim | 10.03(a) |
| Intellectual Property Assignment | 2.05(c)(vi) |
| Joint Written Instructions | 2.09(b)(ii) |
| Loss | 10.02(a) |
| Losses | 10.02(a) |
| KVS | Preamble |
| Leased Real Property | 3.15(b) |
| Material Contract | 3.05(a) |
| Material Customer | 3.19 |
| Material Supplier | 3.19 |
| Objection Notice | 2.06(c) |
| Owned Real Property | 3.15(a) |
| Party | Preamble |
| Parties | Preamble |
| Post-Closing Consent Period | 2.12(c) |
| Potential Bidder | 7.02(e) |
| Preferential Purchase Rights | 3.13 |
| Prorated Expense Items | 2.04(c)(ii) |
| Purchase Price | 2.03 |
| Purchase Price Escrow Amount | 2.09(b)(ii) |
| Purchased Contracts | 2.01(e) |
| Purchased Intellectual Property | 2.01(l) |
| Real Property | 3.15(b) |
| Real Property Lease | 3.15(b) |
| Real Property Leases | 3.15(b) |
A-14
| Term | Section |
| Referee | 2.06(d) |
| Registered Intellectual Property | 3.09(b) |
| Required Consent | 2.12(a) |
| Schedule Update Notice | 7.07 |
| Seller | Preamble |
| Sellers | Preamble |
| Seller Employee | 7.05(a) |
| Seller Indemnified Parties | 10.02(a) |
| Seller Non-Recourse Party | 11.15(b) |
| Surface Deeds | 2.05(c)(iii) |
| Surface Leases | 2.01(b) |
| Surface Tracts | 2.01(a) |
| Taxing Authority | Exhibit A – within “Tax” |
| Transfer Taxes | 7.06(b) |
| Union | 3.05(a)(viii) |
| Vehicles | 2.01(g) |
| Vehicle Finance Leases | 2.01(g) |
| WARN Act | 3.16(d) |
| (a) | References and Rules of Construction. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein and defined herein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law. The word “or” will have the inclusive meaning represented by the phrase “and/or.” The phrase “and/or” when used in a conjunctive phrase, shall mean any one or more of the Persons specified in or the existence or occurrence of any one or more of the events, conditions or circumstances set forth in that phrase; provided, however, that when used to describe the obligation of one or more Persons to do any act, it shall mean that the obligation is the obligation of each of the Persons but that it may be satisfied by performance by any one or more of them. “Shall” and “will” have equal force and effect. The word “extent” in the phrase “to the extent” shall mean the degree or proportion to which a subject or other things extends, and such phrase shall not mean simply “if.” References to any date shall mean such date in Fort Worth, Texas and for purposes of calculating the time period in which any notice or action is to be given or undertaken hereunder, such period shall be deemed to begin at 12:01 a.m. on the applicable date in Fort Worth, Texas. If a date specified herein for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day. All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars. THE PARTIES AGREE THAT THE BOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS LEGENDS. |
A-15
Exhibit B
ASSIGNMENT AND BILL OF SALE
[Omitted]
Exhibit C
ASSUMPTION AGREEMENT
[Omitted]
Exhibit D
SURFACE DEED
[Omitted]
Exhibit E
SELLER CERTIFICATES
[Omitted]
Exhibit F
INTELLECTUAL PROPERTY ASSIGNMENT
[Omitted]
Exhibit G
BUYER CERTIFICATE
[Omitted]
Exhibit H
BID PROCEDURES ORDER
[Omitted]
Exhibit I
ALLOCATION METHODOLOGIES
[Omitted]
Exhibit 10.1
DEBTOR IN POSSESSION SECURED
MULTI-DRAW TERM PROMISSORY NOTE
| $ 35,000,000 | New York, New York |
| August 18, 2021 |
On August 18, 2021 (the “Petition Date”), BASIC ENERGY SERVICES, INC., a Delaware corporation (the “Borrower”) and certain of its Subsidiaries commenced Chapter 11 Cases, which cases are being jointly administered under Chapter 11 Case No. 21-90002 (each a “Chapter 11 Case” and collectively, the “Chapter 11 Cases”) by filing separate voluntary petitions for reorganization relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”), with the United States Bankruptcy Court for the Southern District of Texas Houston Division (the “Bankruptcy Court”). The Loan Parties (as defined herein) continue to operate their respective businesses and manage their respective properties as debtors and debtors in possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. The Borrower has requested that the lenders (the “DIP Lenders”) from time to time party to this Debtor in Possession Secured Multi-Draw Term Promissory Note (as amended, restated, amended and restated, supplemented, waived, extended, or otherwise modified from time to time, this “Note”) make Term Loans (as defined herein) evidenced by this Note on the dates and subject to the terms and conditions of this Note. Certain Subsidiaries of the Borrower who comprise the other debtors in the Chapter 11 Cases wish to guaranty the Borrower’s Obligations under this Note (collectively, the “Guarantors”), and are simultaneously executing Guarantees in favor of Guggenheim Credit Services, LLC, as agent (in such capacity, the “Agent”) for the DIP Lenders. The Borrower intends to utilize the Term Loans, subject to the Financing Orders, to (i) repay in full the Super Priority Credit Agreement (as defined herein), (ii) fund general corporate needs, including without limitation working capital and other needs, (iii) pay costs, premiums, fees, and expenses incurred to administer or related to of the Chapter 11 Cases, including fees and expenses of professionals, and (iv) to provide for adequate protection for certain Prepetition Secured Parties (as defined herein), in each case in accordance with the Budget (as defined herein), subject to any Permitted Variance (as defined herein). Capitalized terms used herein and not otherwise defined herein shall have the meanings provided in Section 18 of this Note.
1. Term Loans.
(a) Subject to the terms and conditions hereof including the Agent’s receipt of a Borrowing Request (as defined below), the DIP Lenders agree to provide the Borrower with Term Loans on the Closing Date in the principal amount of up to $35,000,000 (the “Term Loans”). Subject to the terms and conditions hereof, to the extent the Interim Order does not permit the full amount of the Term Loans to be incurred by the Borrower on the Closing Date, the DIP Lenders shall advance any remainder amount of the Term Loans that are authorized in the Final Order in one draw on the date or during the period permitted by the Final Order (any such Term Loans, the “Final Order Term Loans”). The Final Order Term Loans shall be Term Loans for all purposes of this Note. The Borrower may request the Term Loans pursuant to written notice (which may be by email) (a “Borrowing Request”) delivered to the Agent no later than 3:00 p.m. one (1) Business Day prior to the proposed borrowing date of the Term Loans (or such shorter period as the Agent may agree) or, with respect to any Final Order Term Loans, three (3) Business Days prior to the proposed borrowing day of the Final Order Term Loans (or such shorter period as the Agent may agree). The Borrowing Request shall be in a form reasonably satisfactory to the Agent. Each DIP Lender shall provide each Term Loan in an aggregate amount not to exceed its Commitment with respect to such Term Loan and the obligation of each DIP Lender to make the Term Loans under this Note shall be several and not joint and several. Upon receipt of a Borrowing Request with respect to any Term Loan, subject to the satisfaction (or waiver) of the conditions hereof, each DIP Lender shall simultaneously and proportionately to its Pro Rata Share of its Commitment with respect to such Term Loan, make the proceeds of such Term Loan available to the Borrower or the Agent on the applicable date of funding of the Term Loan by transferring immediately available funds equal to such proceeds to the Escrow Account (or to the Agent, which will then transfer such proceeds to the Escrow Account); provided that on the Closing Date (x) up to $6,500,000 of the proceeds of the Term Loans will be transferred directly to the Borrower and (y) the portion of the proceeds of the Term Loans allocated to the repayment of the obligations outstanding under the Super Priority Credit Agreement shall be remitted to the administrative agent under the Super Priority Credit Agreement in accordance with the Super Priority Credit Agreement Payoff Letter. The relevant Commitment of each DIP Lender shall be permanently reduced upon the making of the relevant Term Loan in an amount equal to such Term Loan advanced by such DIP Lender. The Borrower may request Withdrawals from the Escrow Account in accordance with Section 2 of this Note; provided that, until entry of the Final Order, the Borrower may not withdraw more than $27,000,000 from the Escrow Account. Any principal amount of the Term Loan which is repaid or prepaid may not be reborrowed.
(b) The aggregate principal amount of Terms Loans outstanding shall not exceed $35,000,000, subject to any limitation of credit extensions under this Note and the Financing Orders (the “Maximum Amount”).
(c) The Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Borrowing Request or similar notice believed by the Agent to be genuine. The Agent may assume that each Person executing and/or delivering any such notice was duly authorized, unless the responsible individual acting thereon for the Agent has actual knowledge to the contrary.
(d) The Borrower shall utilize the proceeds of Term Loans, subject to the Financing Orders, to (i) repay in full the Super Priority Credit Agreement, (ii) fund general corporate needs, including without limitation working capital and other needs, (iii) pay costs, premiums, fees, and expenses incurred to administer or related to of the Chapter 11 Cases, including fees and expenses of professionals (including funding of the Carve-Out in accordance with the Financing Orders), and (iv) to provide for adequate protection for certain Prepetition Secured Parties, in each case in accordance with the Budget, subject to any Permitted Variance); provided, that, unless otherwise provided in the Budget, subject to any Permitted Variance, or approved by the Required Lenders, no portion of any Term Loans shall be used, directly or indirectly: (a) except as permitted by Section 15(d), to make any payment in respect of, or repurchase, redeem, retire or defease any, prepetition Indebtedness, except pursuant to the terms of the Financing Orders or to finance or make any Restricted Payment, (b) to pay any fees or similar amounts payable to any Person who has proposed or may propose to purchase interests in any of the Borrower or any of its respective Subsidiaries or affiliates or who otherwise has proposed or may propose to invest in the Borrower or any of its respective Subsidiaries or affiliates (including so-called “topping fees,” “exit fees,” and similar amounts), or (c) to make any distribution under a plan of reorganization in the Chapter 11 Cases or any similar proceeding of any of the Subsidiaries or affiliates of any of the Borrower.
(e) The Borrower shall not transfer any amounts from the DIP Holding Account other than to the ABL Holding Account, and in no event shall any amounts transferred from the DIP Holding Account to the ABL Holding Account exceed, for any day or the immediately succeeding Business Day, the positive difference of (x) the amount of disbursements required to be paid on such day (the "Disbursement Amount") minus (y) the amount of funds in the ABL Holding Account on such day before giving effect to any such transfer. Any amounts transferred from the DIP Holding Account to the ABL Holding Account on any day shall be used to pay the Disbursement Amount for such day or the immediately succeeding Business Day).
(f) If cash on deposit in the DIP Holding Account as of 5:00 p.m. on each Friday after the Closing Date exceeds Anticipated Net Disbursements for the week immediately following such Friday, then on or before the immediately following Monday, the Borrower shall transfer the amount of such excess from the DIP Holding Account to the Escrow Account, which amount shall be available for withdrawal subject to Section 2; provided that if the amount of such excess exceeds the remaining amount then held in the DIP Holding Account, the Borrower shall only be required to transfer the remaining amount then held in the DIP Holding Account.
-2-
2. Certain Conditions to Making Term Loans and Withdrawals from the Escrow Account.
(a) The effectiveness of this Note and the obligation of each DIP Lender to fund the Term Loans requested to be made by it shall be subject to the prior or concurrent satisfaction (or waiver) of each of the conditions precedent set forth in this clause (a):
(1) the Borrower shall have paid any Obligations then payable hereunder (including the reasonable and documented out-of-pocket fees and expenses of counsel to the Agent) or under any other DIP Document;
(2) the Loan Parties shall have delivered corporate resolutions, incumbency certificates and similar documents, in form and substance reasonably satisfactory to Agent with respect to this Note and the other DIP Documents and the transactions contemplated hereby and thereby;
(3) the Escrow Agreement shall be in full force and effect and each of the Escrow Account and the DIP Holding Account shall not be subject to any Liens or claims, except as permitted herein or by the Financing Order;
(4) the Loan Parties shall have delivered guarantees of each of the Guarantors, each in form and substance reasonably satisfactory to the Required Lenders with respect to this Note and the other DIP Documents and the transactions contemplated hereby and thereby;
(5) the Loan Parties shall have delivered fully executed copies of all other DIP Documents, each in form and substance reasonably satisfactory to the Required Lenders;
(6) any representation or warranty by any Loan Party contained herein or in any other DIP Document shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such date, except to the extent that such representation or warranty expressly relates to an earlier date;
(7) (i) with respect to the Term Loan made on the Closing Date, (A) the Bankruptcy Court shall have entered the Interim Order; or (B) the Interim Order shall not have been stayed, vacated, reversed, modified or amended without the Required Lenders’ consent or (ii) with respect to the Final Order Term Loan, (A) the Bankruptcy Court shall have entered the Final Order; or (B) the Final Order shall have not been stayed, vacated, reversed, modified or amended without the Required Lenders’ consent;
(8) no Default or Event of Default shall have occurred and be continuing or would result after giving effect to the Term Loans and the transactions contemplated herein;
(9) after giving effect to the making of the Term Loans, the outstanding principal amount of all Term Loans would not exceed the Maximum Amount;
(10) the Agent shall have received and approved the Budget in accordance with this Note and the Financing Orders; provided that if the Budgeted Professional Fee Amounts included in the Budget are not acceptable to the Required Lenders as of the Closing Date, then this clause (10) may be deemed satisfied for purposes of the Closing Date provided that (i) the Borrower shall consult with the Required Lenders regarding revised Budgeted Professional Fee Amounts and (ii) not later than fourteen (14) days after the effectiveness of this Note in accordance with the Financing Orders such revised Budgeted Professional Fee Amounts shall be acceptable to the Required Lenders;
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(11) the Bankruptcy Court shall have entered an order, in form and substance reasonably acceptable to the Required Lenders, authorizing the Loan Parties to use Cash Collateral of the Prepetition Secured Parties in a manner consistent with the Budget;
(12) Borrower shall have delivered to Agent and DIP Lenders fully executed sale agreements, in form and substance and with purchasers satisfactory to the Required Lenders, with respect to the sale of the Designated Assets for an aggregate purchase price attributable to the Collateral on which the Agent and DIP Lenders have the first lien of at least $60,000,000 (the “Designated Asset Sale Agreements”);
(13) the Loan Parties shall have delivered to the Agent a termination, release and payoff letter (the “Super Priority Credit Agreement Payoff Letter”) with respect to the Super Priority Credit Agreement, duly executed by the administrative agent and collateral agent under the Super Priority Credit Agreement (the “Super Priority Agent”), together with forms of a termination of security interest in intellectual property for each assignment for security recorded in favor of the Super Priority Agent and UCC-3 termination statements for all UCC-1 financing statements filed in favor of the Super Priority Agent; and
(14) all “first day” orders intended to be entered by the Bankruptcy Court at or immediately after the Debtors’ “first day” hearing shall be in form and substance reasonably acceptable to the Required Lenders and shall have been entered by the Bankruptcy Court.
(b) The Borrower shall not request a Withdrawal (and no Withdrawal will be permitted), if, in each case, as of the date thereof:
(1) any representation or warranty by any Loan Party contained herein or in any other DIP Document shall be untrue or incorrect in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such date, except to the extent that such representation or warranty expressly relates to an earlier date;
(2) the Interim Order shall have been stayed, vacated, reversed, modified or amended without the Required Lenders’ consent;
(3) after the entry of the Final Order, the Final Order shall have been stayed, vacated, reversed, modified or amended without the Required Lenders’ consent;
(4) the Withdrawal Liquidity Condition shall not have been satisfied;
(5) the proceeds of such Withdrawal shall not have been directed to be deposited in the DIP Holding Account;
(6) any Default or Event of Default shall have occurred and be continuing or would result after giving effect to the advance of the Final Order Term Loans or any release of proceeds of the Term Loans from the Escrow Account; and
(7) the Agent shall have not received from the Borrower at least two (2) Business Days (or such shorter period as the Required Lenders may agree) prior to the date of such Withdrawal, a Withdrawal Notice and a calculation evidencing satisfaction of the Withdrawal Liquidity Condition, which calculation shall be in form satisfactory to the Required Lenders.
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Upon receipt of the Withdrawal Notice and satisfaction of the conditions set forth in this Section 2, the Agent shall promptly direct the Escrow Agent to disburse funds on the funding date set forth in the applicable Withdrawal Notice immediately following such Withdrawal Notice. Notwithstanding the foregoing, if the Agent determines in its sole discretion that the Borrower has failed to satisfy the conditions precedent set forth in this Section 2 for a Withdrawal Notice, the Agent shall decline to fund such Withdrawal and communicate the same to the Escrow Agent.
The request and acceptance in the Escrow Account by the Borrower of the proceeds of the Term Loans and the request of a Withdrawal shall, in each case, be deemed to constitute, as of the date of such request, acceptance or incurrence, a representation and warranty by the Borrower that (A) with respect to the request and acceptance in the Escrow Account by the Borrower of the proceeds of the Term Loans, the conditions in Section 2(a) have been satisfied and (B) with respect to the request of a Withdrawal, the conditions in Section 2(a) and 2(b) have been satisfied.
3. Payment of Principal. FOR VALUE RECEIVED, the Borrower promises to pay to the Agent, for the benefit of the DIP Lenders, the lesser of (x) $35,000,000 and (y) the unpaid principal amount of all Term Loans, on the Maturity Date, together with all accrued and unpaid interest, fees and expenses to the extent required by this Note.
4. Payment of Interest.
(a) Subject to the terms of this Note, the Term Loans or any portion thereof shall bear interest on the principal amount thereof from time to time outstanding, from the date of the Term Loans until repaid, at a rate per annum equal to LIBOR Rate plus 9.00%.
(b) Interest on the Term Loans shall be payable monthly, in arrears, on the last Business Day of each month, commencing on the last Business Day of the month in which the applicable Term Loans is made. If any payment of any of the Obligations becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.
(c) All computations of fees and interest shall be made by the Agent on the basis of a 360-day year, in each case for the actual number of days occurring in the period for which such fees or interest are payable (including the first day and last day). Each determination by the Agent of an interest rate hereunder shall be final, binding and conclusive on the Borrower (absent manifest error).
(d) So long as an Event of Default shall have occurred and be continuing, and at the election of the Required Lenders, the interest rate applicable to the Obligations shall be increased by two percentage points (2.00%) per annum above the rate of interest otherwise applicable hereunder (the “Default Rate”), and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest at the Default Rate shall accrue from the date of such Event of Default until such Event of Default is cured or waived (notwithstanding when the election by the Required Lenders was made) and shall be payable upon demand.
(e) It is the intention of the parties hereto that the Agent and each DIP Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby or by any other DIP Document would be usurious as to the Agent or any DIP Lender under laws applicable to it (including the laws of the United States of America and the State of New York or any other jurisdiction whose laws may be mandatorily applicable to the Agent or such DIP Lender notwithstanding the other provisions of this Note), then, in that event, notwithstanding anything to the contrary in this Note or any other DIP Document or any agreement entered into in connection with or as security for the Obligations, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to the Agent or any DIP Lender that is contracted for, taken, reserved, charged or received by the Agent or such DIP Lender under this Note or any other DIP Document or agreements or otherwise in connection with the Obligations shall under no circumstances exceed the maximum amount allowed by such applicable law, any excess shall be canceled automatically and if theretofore paid shall be credited by the Agent or such DIP Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by the Agent or such DIP Lender, as applicable, to the Borrower). If at any time and from time to time (x) the amount of interest payable to the Agent or any DIP Lender on any date shall be computed at the highest lawful rate applicable to the Agent or such DIP Lender pursuant to this Section 4(e) and (y) in respect of any subsequent interest computation period the amount of interest otherwise payable to the Agent or such DIP Lender would be less than the amount of interest payable to the Agent or such DIP Lender computed at the highest lawful rate applicable to the Agent or such DIP Lender, then the amount of interest payable to the Agent or such DIP Lender in respect of such subsequent interest computation period shall continue to be computed at the highest lawful rate applicable to the Agent or such DIP Lender until the total amount of interest payable to the Agent or such DIP Lender shall equal the total amount of interest which would have been payable to the Agent or such DIP Lender if the total amount of interest had been computed without giving effect to this Section 4(e).
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(f) If, after the date hereof, the DIP Lenders determine that (1) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (2) compliance by the DIP Lenders or its parent bank holding company with any guideline, request, or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on the DIP Lender’s or such holding company’s capital as a consequence of the DIP Lender’s Term Loans hereunder to a level below that which the DIP Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration the DIP Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount reasonably deemed by the DIP Lender to be material, then the DIP Lender may notify the Borrower thereof. Following receipt of such notice, the Borrower agrees to pay the DIP Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable promptly after presentation by the DIP Lender to the Borrower of a statement in the amount and setting forth in reasonable detail the DIP Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In determining such amount, the DIP Lender may use any reasonable averaging and attribution methods.
5. Payments. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds to the Agent at the account as shall be designated in a written notice delivered by the Agent to the Borrower. Each payment made hereunder shall be credited first to interest then due and payable and the remainder of such payment shall be credited to principal, and interest shall thereupon cease to accrue upon the principal so repaid. The Borrower shall make each payment required under this Note prior to 2:00 p.m. New York City time on the date when due, in immediately available funds. Any amounts received after such time on any date may, in the sole discretion of the Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.
6. Optional Prepayments. Subject to the terms and conditions of the Financing Orders, the Borrower shall have the right at any time and from time to time to prepay the Term Loans under this Note in whole or in part (without premium or penalty) upon two (2) Business Days’ written notice to the Agent by 1:00 p.m. New York City time (or such shorter time as the Required Lenders may agree); provided that each such prepayment shall be in a minimum amount of $100,000. Notice of prepayment having been given as aforesaid, the principal amount specified in such notice shall become due and payable on the prepayment date specified therein in the aggregate principal amount specified therein unless such repayment is conditioned on the receipt of any third party funds or the consummation of certain transactions which are not received or consummated. Any prepayment or repayment hereunder shall be accompanied by interest on the principal amount of the Note being prepaid or repaid to the date of prepayment or repayment. Any prepayment made pursuant to this Section 6 shall be applied (i) first to the Term Loans on a Pro Rata Basis until paid in full and (ii) second, to any remaining Obligations as the Required Lenders shall determine in their sole discretion.
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7. Mandatory Prepayments. In each case, subject to the terms and conditions of the Financing Orders and the Budget, upon not less than one (1) Business Day prior written notice by the Borrower to the Agent by 1:00 p.m. New York City time:
(a) No later than one (1) Business Day upon receipt by any Loan Party of cash proceeds of any asset disposition in excess of $250,000 in the aggregate with all other asset dispositions, unless the Required Lenders agree otherwise, the Borrower shall prepay the Term Loans in an amount equal to all such proceeds, net of (1) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by the Borrower or any Loan Party in connection therewith (in each case, paid to non-affiliates), (2) taxes reasonably expected to be payable by the Borrower in connection with such sale, and (3) with respect to proceeds from the disposition of assets securing obligations owed to a third party, which Lien is senior to the Liens securing the Obligations under this Note, the amount of such proceeds required by an order of the Bankruptcy Court to repay such third party obligations; provided that, in no event shall the proceeds of any Prepetition ABL Collateral be required to prepay the Term Loans until the Prepetition ABL Credit Facility is paid in full.
(b) No later than one (1) Business Day upon receipt by any Loan Party of cash proceeds of any debt securities or other indebtedness not permitted under this Note, the Borrower shall prepay the Term Loans in an amount equal to all such proceeds, net of underwriting discounts and commissions and other reasonable costs or fees paid to non-affiliates in connection therewith.
(c) No later than one (1) Business Day upon receipt by any Loan Party of any Extraordinary Receipts, the Borrower shall prepay the outstanding principal of the Term Loans in an amount equal to all such Extraordinary Receipts, net of (x) any expenses (including reasonable broker’s fees or commissions and legal fees) incurred in connection with such Extraordinary Receipts, (y) any taxes paid or reasonably estimated to be payable by the Loan Parties in connection therewith and (z) with respect to Extraordinary Receipts from assets securing obligations owed to a third party, which Lien is senior to the Liens securing the Obligations under this Note, the amount of such Extraordinary Receipts required by an order of the Bankruptcy Court to repay such third party obligations; provided further, in no event shall the proceeds of any Prepetition ABL Collateral be required to prepay the Term Loans until the Prepetition ABL Credit Facility is paid in full.
(d) Nothing in this Section 7 shall be construed to constitute the Agent’s or any DIP Lender’s consent to any transaction that is not permitted by other provisions of this Note or the other DIP Documents.
(e) Any prepayment made pursuant to this Section 7 shall be applied (i) first to the Term Loans on a Pro Rata Basis until paid in full, (ii) second, to any remaining Obligations as the Required Lenders shall determine in their sole discretion and (iii) third, any excess remaining to the Borrower.
8. Fees. Borrower shall pay to the Agent the following fees:
(a) Upfront Fee. The Borrower shall pay to the Agent, for the account of the DIP Lenders, an upfront fee in an aggregate amount equal to 5.0% of the aggregate principal amount of the Term Loans, which fee shall be fully earned upon the entry of the Interim Order and non-refundable when paid and which shall be capitalized upon the funding of each Term Loan when funded and treated as principal of the Term Loans for all purposes.
(b) Administration Fee. On or prior to the Closing Date, the Borrower shall pay to the Agent an administration fee equal to $175,000, which shall be fully earned upon the entry of the Interim Order and non-refundable when paid.
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(c) Exit Fee. On the earlier of (1) the date that all the Obligations under this Note are paid in full in cash and (2) the Maturity Date, the Borrower shall pay to the Agent for the benefit and account of the DIP Lenders, an exit fee equal to $350,000, which shall be fully earned upon the entry of the Final Order and non-refundable when paid.
9. Indemnity. The Borrower shall indemnify and hold harmless the Agent and each DIP Lender and each of their respective affiliates, and each such Person’s respective officers, directors, employees, attorneys, agents and representatives (each, an “Indemnified Person”), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys’ fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal but limited to the legal fees and reasonable and documented out-of-pocket costs and expenses of one legal counsel (and one local counsel in each relevant jurisdiction)) that may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Note and the other DIP Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, and legal costs and expenses arising out of or incurred in connection with disputes between the Agent and the DIP Lenders on the one hand and the Loan Parties on the other hand; provided, that (i) the Borrower shall not be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results solely from that Indemnified Person’s gross negligence, bad faith or willful misconduct or material breach of the DIP Documents as determined in a final nonappealable judgment by a court of competent jurisdiction and (ii) this Section 9 shall not apply with respect to taxes other than any taxes that represent losses, claims, damages, etc. arising from any non-tax claim. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY DIP DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY DIP DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
10. Adjustments for Withholding, Capital Adequacy Etc. All payments to the Agent by the Borrower under this Note shall be made free and clear of and without deduction or withholding for any and all taxes, duties, levies, imposts, deductions, charges or withholdings and all related liabilities (all such taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being referred to as “Taxes”) imposed by the United States of America or any other nation or jurisdiction (or any political subdivision or taxing authority of either thereof), unless such Taxes are required by applicable law to be deducted or withheld. If the Borrower shall be required by applicable law to deduct or withhold any such Taxes from or in respect of any amount payable under this Note other than taxes imposed on the Agent or any DIP Lender’s overall net income, then (A) if such Tax is an Indemnified Tax, the amount payable shall be increased as may be necessary so that after making all required deductions or withholdings, (including deductions or withholdings applicable to any additional amounts paid under this Note) the Agent receives an amount equal to the amount it would have received if no such deduction or withholding had been made, (B) the Borrower shall make such deductions or withholdings, and (C) the Borrower shall timely pay the full amount deducted or withheld to the relevant governmental entity in accordance with applicable law.
If the effect of the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (including without limitation any tax, duty, charge or withholding on or from payments due from the Borrower (but excluding Indemnified Taxes, Excluded Taxes, and taxation on the overall net income of the DIP Lenders)), or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, is to reduce the rate of return on the capital of the Agent with respect to this Note or to increase the cost to the Agent of making or maintaining amounts available under this Note, the Borrower agrees to pay to the Agent such additional amount or amounts as will compensate the Agent on an after-tax basis for such reduction or increase.
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The Borrower agrees to timely pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, financial institutions duties, debits taxes or similar levies (all such taxes, charges, duties and levies being referred to as “Other Taxes”) which arise from any payment made by the Borrower under this Note or from the execution, delivery or registration of, or otherwise with respect to, this Note.
The Borrower shall indemnify the Agent and each of the DIP Lenders for the full amount of Indemnified Taxes (including, without limitation, any Indemnified Taxes imposed by any jurisdiction on amounts payable by the Borrower hereunder) paid by the Agent or any DIP Lender and any liability (including penalties, interest and expenses) arising from or with respect to such Indemnified Taxes, whether or not they were correctly or legally asserted, excluding taxes imposed on the Agent or any DIP Lender’s overall net income. Payment under this indemnification shall be made upon demand. A certificate as to the amount of such Indemnified Taxes submitted to the Borrower by the Agent shall be conclusive evidence, absent manifest error, of the amount due from the Borrower to the DIP Lenders.
The Borrower shall furnish to the DIP Lenders the original or a certified copy of a receipt evidencing any payment of Taxes made by the Borrower pursuant to this Section 10 within thirty (30) days after the date of any such payment. If any Recipient becomes aware that it has received a refund of any Taxes with respect to which the Borrower has paid any amount pursuant to this Section 10, such Recipient shall pay the amount of such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such Recipient and without interest (other than any interest received from the relevant governmental authority with respect thereto), to the Borrower promptly after receipt thereof.
Any Recipient of a payment hereunder shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Agent on or prior to the date hereof (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), two properly completed and executed copies of IRS Forms W-8 or W-9 and properly completed and executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Agent to determine the withholding or deduction (if any) required to be made. In addition, any such Recipient, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent to determine whether or not such Recipient is subject to backup withholding or information reporting requirements. Each Recipient agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall timely update such form or certification or promptly notify the Borrower and the Agent in writing of its legal inability to do so.
11. Priority of Obligations and DIP Lenders’ Liens.
(a) To secure all of the Borrower’s Obligations now existing or hereafter arising, the Agent is granted (i) a super-priority administrative claim against each of the Borrower and Guarantors pursuant to Section 364(c)(1) of the Bankruptcy Code, and except as set forth in the Financing Orders (including with respect to the Carve-Out), having a priority over all other costs and expenses of administration of any kind, including those specified in, or ordered pursuant to, sections 105, 326, 328, 330, 331, 363, 364, 503, 506, 507, 546, 726, 1113 or 1114 or any other provision of the Bankruptcy Code or otherwise (whether incurred in these Chapter 11 Cases and any Successor Case), and, except as set forth in the Financing Orders (including with respect to the Carve-Out), shall at all times be senior to the rights of the Borrower or any domestic or foreign Subsidiary of the Borrower, any successor trustee or estate representative, or any other creditor or party in interest in the Chapter 11 Cases or any Successor Case, and (ii) pursuant to Sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code and subject to clause (b) below, Liens on, and security interests in, the Collateral; provided that no Liens shall be permitted on the Escrow Agreement or either of the Escrow Account or DIP Holding Account or amounts held therein or proceeds thereof other than the lien of the Agent and the Carve-Out. The security interests and Liens granted to the Agent hereunder pursuant to Sections 364(c)(2) shall not be (i) subject to any Lien or security interest which is avoided and preserved for the benefit of the Loan Parties’ estate under Section 551 of the Bankruptcy Code, or (ii) except as set forth in the Financing Orders, subordinated to or made pari passu with any other Lien or security interest under Section 364(d) of the Bankruptcy Code or otherwise.
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(b) The priority of the Agent’s Liens on the Collateral shall be as set forth in the Financing Orders.
(c) Notwithstanding anything herein to the contrary (i) all proceeds received by the Agent and the DIP Lenders from the Collateral subject to the Liens granted in this Section 11 and in each other DIP Document and by the Financing Orders shall be subject to the Carve-Out and Permitted Prior Liens (provided that the Escrow Agreement or either of the Escrow Account or DIP Holding Account or amounts held therein or proceeds thereof shall not be subject to Permitted Prior Liens), and (ii) no Person entitled to the Carve Out shall be entitled to sell, or otherwise dispose, or seek or object to the sale or other disposition of, such Collateral, subject to any such Person’s fiduciary obligations.
(d) Each of the Loan Parties agrees for itself that the Obligations of such Person shall constitute allowed administrative expenses in the Chapter 11 Cases, having priority over all administrative expenses of and unsecured claims against such Person now existing or hereafter arising, of any kind or nature whatsoever, including, without limitation, all administrative expenses of the kind specified in, or arising or ordered under, Sections 105, 326, 327, 328, 330, 331,361, 362, 363, 364, 365, 503(a), 503(b), 507(a), 507(b), 546(c), 546(d), 726, 1113 and 1114 of the Bankruptcy Code, except as set forth in the Financing Orders.
12. Further Assurances. The Borrower agrees that it shall, at the Borrower’s expense and upon the reasonable request of the Agent, duly execute and deliver or cause to be duly executed and delivered, to the Agent or such DIP Lender, as the Agent shall direct such Borrower such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of the Agent to carry out more effectively the provisions and purposes of this Note or any other DIP Document, including, upon the written request of the Agent and in form and substance reasonably satisfactory to the Agent, security agreements, UCC-l financing statements and other Collateral Documents confirming and perfecting the granting to the Agent, on behalf of the DIP Lenders, of the Liens (subject to the Financing Orders) in the Collateral to secure the Obligations.
13. [Reserved].
14. Affirmative Covenants.
The Borrower agrees that until the Commitments shall have expired or been terminated and the Obligations payable under the DIP Documents shall have been paid in full:
(a) Upon reasonable request of the Agent, the Loan Parties will permit any officer, employee, attorney or accountant or agent of the Agent to audit, review, make extracts from or copy, at the Borrower’s expense, any and all corporate and financial and other books and records of the Loan Parties at all times during ordinary business hours and, in the absence of an Event of Default, upon reasonable advance notice and to discuss the Loan Parties’ affairs with any of their directors, officers, employees, attorneys, or accountants. The Borrower will permit the Agent, or any of its officers, employees, accountants, attorneys or agent, to examine and inspect any Collateral or any other property of the Loan Parties at any time during ordinary business hours and, in the absence of an Event of Default, upon reasonable prior notice. Notwithstanding the foregoing, none of the Loan Parties will be required to disclose information to the Agent (or any agent or representative thereof) that is prohibited by applicable law, subject to confidentiality restrictions or is subject to attorney-client or similar privilege or constitutes attorney work product.
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(b) (i) The Borrower and its Subsidiaries will comply with all requirements of applicable law, the non-compliance with which could reasonably be expected to have a Material Adverse Effect, except as executed by, or otherwise prohibited by, the provisions of the Bankruptcy Code or as a result of the Chapter 11 Cases and (ii) the Borrower and its Subsidiaries will obtain, maintain in effect and comply with all permits, licenses and similar approvals necessary for the operation of its business as now or hereafter conducted other than to the extent contemplated by the Budget, the Bid Procedures Motion or the Financing Orders.
(c) The Borrower and its Subsidiaries will pay or discharge, when due, (i) all material taxes, assessments and governmental charges levied or imposed upon it or upon its income or profits, upon any properties of the Borrower and its Subsidiaries (including, without limitation, the Collateral) or upon or against the creation, perfection or continuance of the security interest, prior to the date on which penalties attach thereto, except in each case (1) where the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary or (2) taxes the nonpayment of which is permitted or required by the Bankruptcy Code or this Note, (ii) all federal, state and local taxes required to be withheld by it, and (iii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon any properties of Borrower and its Subsidiaries.
(d) (i) The Borrower and each of its Subsidiaries will keep and maintain the Collateral and all of its other properties necessary or useful in its business in good condition, repair and working order (normal wear and tear excepted) other than to the extent contemplated by the Budget, the Bid Procedures Motion or the Financing Orders, (ii) the Borrower and each of its Subsidiaries will defend the Collateral against all claims or demands of all Persons (other than Permitted Encumbrances) claiming the Collateral or any interest therein, and (iii) the Borrower and each of its Subsidiaries will keep all Collateral free and clear of all security interests, liens and encumbrances, except Permitted Encumbrances.
(e) The Borrower and its Subsidiaries will:
(1) Maintain insurance with respect to the Collateral, covering casualty, hazard, theft, malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best’s Financial Strength Rating of at least A, unless otherwise approved by the Required Lenders in their discretion) satisfactory to the Required Lenders. All proceeds under each policy covering Collateral shall be payable to the Agent as a lender loss payee/mortgagee, other than proceeds required by an order of the Bankruptcy Court to be applied to the repayment of debt secured by a Lien on the related assets that is senior to the Liens securing the Obligations under this Note; provided that, in no event shall the proceeds in respect of any Prepetition ABL Collateral be required to prepay the Term Loans until the Prepetition ABL Credit Facility is paid in full. From time to time upon request, the Borrower shall deliver to the Agent the originals or certified copies of its insurance policies. Unless the Required Lenders shall agree otherwise and subject to Section 14(k), each policy shall include satisfactory endorsements that (i) provide for not less than 30 days prior notice to the Agent of termination, lapse or cancellation of such insurance, (ii) with respect to insurance covering Collateral, name the Agent as loss payee/mortgagee and additional insured, and (iii) specify that the interest of the Agent shall not be impaired or invalidated by any act or negligence of any Loan Party or the owner of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by the policy. If the Borrower fails to provide and pay for any insurance, the Agent may, at its option, but shall not be required to, procure the insurance and charge the Borrower therefor. The Borrower agrees to deliver to the Agent, promptly as rendered, copies of all reports made to insurance companies. While no Event of Default exists, the Loan Parties may settle, adjust or compromise any insurance claim, as long as the proceeds are delivered to the Agent. If an Event of Default exists, only the Agent shall be authorized to settle, adjust and compromise such claims.
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(2) In addition to the insurance required under clause (e)(1) with respect to Collateral, maintain insurance with insurers (with a Best’s Financial Strength Rating of at least A, unless otherwise approved by the Required Lenders in their sole discretion) satisfactory to the Agent, with respect to the properties and business of the Loan Parties, of such type (including product liability, workers’ compensation, larceny, embezzlement, or other criminal misappropriation insurance), in such amounts, and with such coverages and deductibles as are at the time of placing such insurance customary for companies similarly situated and which are available at commercially reasonable rates.
(f) The Borrower and its Subsidiaries will preserve and maintain their existence and all of their rights, privileges and franchises necessary or desirable in the normal conduct of its business, except to the extent contemplated by the Budget, the Bid Procedures Motion or the Financing Orders or as permitted hereunder.
(g) The Borrower and its Subsidiaries shall at all times provide reasonable access for, and reasonable cooperation with, any financial advisors to the Agent.
(h) The Borrower and its Subsidiaries each agree that they shall take all actions necessary to cause each of the following to occur:
(1) no later than 2 days after the Petition Date, the Interim Order approving the Note shall be entered by the Bankruptcy Court;
(2) no later than 3 days following the Petition Date, the Loan Parties shall file one or more motions seeking entry of orders authorizing and approving bid and sale procedures for all of the Designated Assets (the “Bid Procedures Motion”), in form and substance reasonably acceptable to the Required Lenders;
(3) no later than 35 days after the Petition Date, the Final Order approving this Note shall be entered by the Bankruptcy Court;
(4) no later than 21 days after the Petition Date the Bankruptcy Court shall have entered one or more orders, in form and substance reasonably acceptable to the Required Lenders, granting the relief requested in the Bid Procedures Motion (including, if appropriate, approval of stalking horse and related protections);
(5) no later than 55 days after the Petition Date the Bankruptcy Court shall have entered one or more orders authorizing and approving the sale of all of the Designated Assets pursuant to one or a series of related or unrelated sale transactions; and
(6) no later than 65 days after the Petition Date the sale of all of the Designated Assets pursuant to one or a series of related or unrelated sale transactions shall have been consummated in full.
(i) The Borrower agrees that it shall deliver (which delivery may be made by electronic communication (including email)) to the Agent each of the reports and other items set forth on Annex A attached hereto no later than the times specified therein (or such later time as the Required Lenders may agree). No less than once per week, the Borrower shall make its senior management and its advisors available at reasonable times and upon reasonable notice to the Agent and DIP Lenders to discuss the financial position, cash flows, variances, operations, sale process and general case status of the Loan Parties.
(j) The Borrower and its Subsidiaries shall cause all (i) proposed material “second day” orders to be reasonably satisfactory to the Required Lenders and (ii) pleadings related to procedures for approval of significant transactions, including, without limitation, asset sale procedures, regardless of when filed or entered, to be reasonably satisfactory in form and substance to the Required Lenders.
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(k) Within thirty (30) days after the Closing Date (or such longer period as the Required Lenders may agree), the Borrower shall deliver or cause to be delivered to the Agent certificates of insurance and related endorsements that satisfy the requirements of Section 14(e).
(l) Within fourteen (14) days after the Closing Date (or such longer period as the Required Lenders may agree), the Borrower shall deliver or cause to be delivered to the Agent an updated franchise tax account status with respect to Indigo Injection #3, LLC reflecting active status.
15. Negative Covenants.
So long as any DIP Lender shall have any Commitment hereunder, any Term Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit any Subsidiary to, without the consent of the Required Lenders:
(a) Neither the Borrower nor any of its Subsidiaries shall directly or indirectly, by operation of law or otherwise, (i) form or acquire any Subsidiary, or (ii) merge with, consolidate with, acquire all or substantially all of the assets or Equity Interests of, or otherwise combine with or acquire, any Person, except in the case of this clause (ii), with respect to existing Subsidiaries to the extent consented to by the Required Lenders (which consent shall not be unreasonably withheld), other than, in each case, any such action approved by an order of the Bankruptcy Court in form and substance satisfactory to the Required Lenders.
(b) Neither the Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist any Indebtedness, except (without duplication), to the extent not prohibited by the Financing Orders, Permitted Indebtedness.
(c) Neither the Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist any Lien on or with respect to any of its properties or assets (whether now owned or hereafter acquired) except for Permitted Encumbrances.
(d) Neither the Borrower nor any of its Subsidiaries shall make any Restricted Payment, except dividends and distributions by Subsidiaries of the Borrower paid to the Borrower or other wholly-owned Subsidiaries of the Borrower.
(e) Neither the Borrower nor any of its Subsidiaries will assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person (other than the Borrower or any of its Subsidiaries), except the endorsement of negotiable instruments by Borrower and its Subsidiaries for the deposit or collection or similar transactions in the ordinary course of business; provided that, until satisfaction of the requirement of Section 14(l), no Debtor shall assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations (including any Indebtedness) of Indigo Injection #3, LLC.
(f) Neither the Borrower nor any of its Subsidiaries will convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereinafter acquired other than (i) the sale of inventory in the ordinary course of business, (ii) the sale or disposition of obsolete equipment, (iii) the sale of other property on terms acceptable to the Required Lenders, (iv) the consummation of the Ongoing Sales and (v) the transfer, sale or disposition of assets approved by an order of the Bankruptcy Court in form and substance satisfactory to the Required Lenders, including the sale of the Designated Assets; provided that, until satisfaction of the requirement of Section 14(l), no Debtor shall convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets to Indigo Injection #3, LLC.
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(g) Neither the Borrower nor any of its Subsidiaries shall consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, (i) the Financing Orders or (ii) the Prepetition Obligations. Except for (A) claims of employees for unpaid wages, bonuses, accrued vacation and sick leave time, business expenses and contributions to employee benefit plans for the period immediately preceding the Petition Date and prepetition severance obligations, in each case to the extent permitted to be paid by order of the Bankruptcy Court, and (B) payments permitted by the Financing Orders and the Budget, subject to Permitted Variance, neither the Borrower nor any of its Subsidiaries shall make any payment in respect of, or repurchase, redeem, retire or defease any, prepetition Indebtedness, except for other payments consented to by the Required Lenders in writing.
(h) Neither the Borrower nor any of its Subsidiaries shall make any investment in, or make loans or advances of money to, any Person (other than another Loan Party), through the direct or indirect lending of money, holding of securities or otherwise; provided that, until satisfaction of the requirement of Section 14(l), no investment, loan or advance shall be made to Indigo Injection #3, LLC.
(i) Neither the Borrower nor any of its Subsidiaries shall change its fiscal year.
(j) For each most recently ended Variance Testing Period, the Borrower shall not permit: (x) the Actual Cash Receipts to be less than Budgeted Cash Receipts (each calculated on a cumulative basis as opposed to on a line by line basis), in each case, for such Variance Testing Period, by more than the Permitted Variance for such Variance Testing Period, and (y) the aggregate amount of Actual Operating Disbursement Amounts and Actual Professional Fee Amounts to exceed the aggregate amount of Budgeted Operating Disbursement Amounts and Budgeted Professional Fee Amounts (each calculated on a cumulative basis as opposed to on a line by line basis), in each case, for such Variance Testing Period, by more than the Permitted Variance.
(k) Neither the Borrower nor any of its Subsidiaries shall directly or indirectly, use the Term Loans or the proceeds of the Term Loans, or lend, contribute or otherwise make available the Term Loans or the proceeds of the Term Loans to any Person, to fund any activities of or business with any Person, or in any Designated Jurisdiction, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as DIP Lender, Agent or otherwise) of Sanctions.
16. Events of Default; Rights and Remedies. Notwithstanding the provisions of Section 362 of the Bankruptcy Code and without application or motion to the Bankruptcy Court, the occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “Event of Default” hereunder:
(a) The Borrower (i) shall fail to make any payment of principal of, or interest on, or fees owing in respect of, the Term Loans or any of the other Obligations when due and payable, or (ii) shall fail to pay or reimburse the Agent on behalf of the DIP Lenders for any expense reimbursable hereunder or under any other DIP Document within three (3) Business Days following the Agent's demands for such reimbursement or payment.
(b) Any Loan Party shall fail to comply with any of the provisions of Sections 1(d), 1(e),1(f), 14(f), 14(g), 14(h), 14(i) and 15 of this Note.
(c) Any Loan Party shall fail to comply with any of other provision of this Note or any of the other DIP Documents (other than any provision embodied in or covered by any other clause of this Section 16) and the same, if capable of being remedied, shall remain unremedied for ten (10) Business Days after the earlier of the date a senior officer or any Loan Party becomes aware of such failure and the date written notice of such default shall have been given by the Agent to such Loan Party.
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(d) Except for defaults occasioned by the filing of the Chapter 11 Cases and defaults resulting from obligations with respect to which the Bankruptcy Code prohibits any Loan Party from complying or permits any Loan Party not to comply, a default or breach shall occur under any agreement, document or instrument to which any Loan Party is a party (other than agreements, documents and instruments evidencing Prepetition Obligations) that is not cured within any applicable grace period therefor, and such default or breach (i) involves the failure to make any payment when due in respect of any Indebtedness (other than the Obligations) of any Loan Party in excess of $50,000 in the aggregate, or (ii) causes, or permits any holder of such Indebtedness or a trustee to cause, Indebtedness or a portion thereof in excess of $50,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, regardless of whether such default is waived, or such right is exercised, by such holder or trustee.
(e) Any representation or warranty herein or in any other DIP Document or in any written statement, report, financial statement or certificate made or delivered to DIP Lenders by any Loan Party is untrue or incorrect in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of the date when made or deemed made.
(f) Any Loan Party shall bring a motion in any Chapter 11 Case: (i) to obtain financing from any Person other than DIP Lenders under Section 364(c) or 364(d) of the Bankruptcy Code, except to the extent the proceeds of such financing would be used to repay in full all of the Obligations under this Note, (ii) to grant any Lien other than Permitted Encumbrances upon or affecting any Collateral, except to the extent the proceeds of any such financing secured by such Lien would be used to repay in full all of the Obligations under this Note or (iii) to authorize any other action or actions materially adverse to the Agent or the DIP Lenders, or the Agent's rights and remedies hereunder or their interests in the Collateral .
(g) The entry of an order in any of the Chapter 11 Cases confirming a plan or plans of reorganization that does not contain a provision for the termination of the DIP Lenders’ commitment to make Term Loans and the repayment in full in cash of all the Obligations under this Note on or before the effective date of such plan or plans.
(h) The filing of any motion by the Borrower or any Loan Party against the DIP Lenders seeking, or the entry of any order in the Chapter 11 Cases in respect of, any claim or claims under Section 506(c) of the Bankruptcy Code against or with respect to any Collateral.
(i) [Reserved].
(j) The entry by the Bankruptcy Court of an order authorizing the appointment of an interim or permanent trustee in the Chapter 11 Cases or the appointment of an examiner in the Chapter 11 Cases with expanded powers to operate or manage the financial affairs, business, or reorganization of any Loan Party.
(k) The Chapter 11 Cases, or any of them, shall be dismissed or converted from cases under Chapter 11 to cases under Chapter 7 of the Bankruptcy Code.
(l) The entry of an order in any Chapter 11 Case avoiding or requiring repayment of any portion of the payments made on account of the Obligations owing under this Note or the other DIP Documents.
(m) The entry of an order in any Chapter 11 Case granting any other super-priority administrative claim or Lien equal to or superior to that granted to the Agent (other than any such claim or Lien permitted by the Financing Orders), unless (i) consented to by the Required Lenders or (ii) the Obligations are paid in full in cash and the DIP Lenders’ commitment to make Term Loans is terminated.
(n) The entry of an order by the Bankruptcy Court granting relief from or modifying the automatic stay of Section 362 of the Bankruptcy Code to allow any creditor (other than the Agent) to execute upon or enforce a Lien on any Collateral except with respect to Permitted Encumbrances arising prior to the Petition Date in an aggregate amount not to exceed $100,000.
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(o) The Financing Orders (or either of them) shall be stayed, amended, modified, reversed or revoked in any respect without the Required Lenders prior written consent.
(p) There shall commence any suit or action against the Agent or any DIP Lender by or on behalf of (i) any Loan Party or (ii) any official committee in the Chapter 11 Cases, in each case, that asserts a claim or seeks a legal or equitable remedy that would have the effect of subordinating the claim or Lien of DIP Lenders and, if such suit or action is commenced by any Person other than Borrower or any Subsidiary, officer, or employee of Borrower, such suit or action shall not have been dismissed or stayed within 10 days after service thereof on the Agent or any DIP Lender, as applicable, and, if stayed, such stay shall have been lifted.
(q) Any provision of any DIP Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms (or any Loan Party shall challenge the enforceability of any DIP Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any DIP Document has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any DIP Document shall cease to be a valid and perfected first priority Lien (except as otherwise permitted herein or in the Financing Orders) in any of the Collateral purported to be covered thereby.
(r) Termination of the use of Cash Collateral pursuant to the terms of the Financing Orders.
(s) Assets of any Loan Party with a fair market value of $200,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any Loan Party and such condition continues for ten (10) days or more.
(t) A breach by any Loan Party of the terms of the Financing Orders.
(u) The failure of the Loan Parties to maintain, at any time, Liquidity in an amount in excess of $500,000.
(v) Any Designated Asset Sale Agreement or any provision thereof (i) shall fail to be in full force and effect or binding upon and enforceable against any Loan Party (subject to entry of a sale order applicable to such Designated Asset Sale Agreement) or any other party thereto in accordance with its terms, (ii) has been amended or modified without the consent of the Required Lenders, or (iii) has been breached due to the action or inaction of any Loan Party or any other party thereto. Any party to a Designated Asset Sale Agreement shall have notified any other party to a Designated Sale Agreement of its intent to terminate such Designated Sale Agreement or any other event shall occur, or shall fail to occur, which, subject to a notice requirement or passage of time, would result in the termination of any Designated Asset Sale Agreement.
(w) Entry of an order authorizing and/or directing the reclamation of goods pursuant to section 546(c) of the Bankruptcy Code in excess of $50,000.
(x) Receipt by the Borrower of notice from the Required Lenders that no revised Budgeted Professional Fee Amounts proposed by the Borrower within fourteen days (14) after the effectiveness of this Note in accordance with the Financing Orders are acceptable to the Required Lenders.
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If any Event of Default shall have occurred and be continuing, then the Agent may, upon written notice to the Borrower and subject to the terms of the Financing Orders: (i) terminate the Commitment of each DIP Lender with respect to further Term Loans; (ii) declare all or any portion of the Obligations, including all or any portion of any Term Loan, to be forthwith due and payable; (iii) revoke the Borrower’s rights to use Cash Collateral in which the Agent and the DIP Lenders have an interest; and (iv) exercise any rights and remedies under the DIP Documents (including, without limitation, termination of the Escrow Account) or at law or in equity, all in accordance with the Financing Orders. Upon the occurrence of an Event of Default and the exercise by the Agent or the DIP Lenders of their rights and remedies under this Note and the other DIP Documents pursuant to clause (iv) above and subject to the Financing Orders, each Loan Party shall assist the Agent in effecting a sale or other disposition of the Collateral upon such terms as are designed to maximize the proceeds obtainable from such sale or other disposition. On any date on which the Term Loans shall have been accelerated, subject to the Financing Orders, any amounts remaining in either the Escrow Account or the DIP Holding Account (other than with respect to amounts to fund the Carve-Out) may be applied by the Agent to reduce the Term Loans and other Obligations then outstanding. None of the Loan Parties shall have (and each Loan Party hereby affirmatively waives) any right to withdraw, claim or assert any property interest in any funds on deposit in either the Escrow Account or the DIP Holding Account upon the occurrence and continuance of any Default or Event of Default.
Except as otherwise provided for in this Note or by applicable law, the Borrower waives: (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by the Agent on which the Borrower may in any way be liable, and hereby ratifies and confirms whatever the Agent may do in this regard; (b) all rights to notice and a hearing prior to the Agent taking possession or control of, or Agent’s replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Agent to exercise any of its remedies; and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.
To the extent permitted by law and subject in all respects to the terms of the Financing Orders, the Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as Agent deals with similar securities and property for its own account, the Agent’s duty of care with respect to Collateral in the custody or possession of a bailee or other third person shall be deemed fulfilled if the Agent exercises reasonable care in the selection of the bailee or other third person, and the Agent need not otherwise preserve, protect, insure or care for any Collateral, and the Agent shall not be obligated to preserve any rights any Loan Party may have against prior parties.
Any amount or payment received by the Agent or any DIP Lender from any Loan Party or from the proceeds of Collateral (subject to the terms of the Financing Orders) following (i) any acceleration of the Obligations under this Note or (ii) at the direction of the Required Lenders after any Event of Default, shall be applied to the Obligations as determined by the Agent (acting at the direction of the Required Lenders in their sole discretion) and once paid in full, any excess shall be paid to the Borrower or as otherwise required by applicable law.
17. Reference Agreements. This Note evidences the Term Loans that may be made to Borrower from time to time in the aggregate principal amount outstanding of up to $35,000,000 and is issued pursuant to and entitled to the benefits of the Financing Orders, to which reference is hereby made for a more complete statement of the terms and conditions under which the Term Loans evidenced by this Note are made and are to be repaid.
18. Definitions. The following terms used in this Note shall have the following meanings (and any of such terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference):
“ABL Holding Account” shall mean account number x2510 at Bank of America, N.A.
“Actual Cash Receipts” shall mean with respect to any period, the actual amount that corresponds to the line item “Total Operating Receipts” as determined by reference to the Budget as then in effect.
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“Actual Net Operating Cash Flow” shall mean with respect to any period, the actual amount that corresponds to the line item “Net Cash Flow” in the Budget as then in effect.
“Actual Operating Disbursement Amounts” shall mean with respect to any period, the actual amount that corresponds to the line item “Total Operational Disbursements” in the Budget as then in effect.
“Actual Outstanding Debt” shall mean with respect to any period, the actual amount that corresponds to the line item “Ending Balance” in the section titled “DIP Balance Rollforward” in the Budget as then in effect.
“Actual Professional Fee Amounts” shall mean, with respect to any period, the actual amount of Professional Fees described in the supporting materials provided with the Budget as then in effect.
"Anticipated Net Disbursements" shall mean, with respect to Friday of any week, the positive difference of (a) the amount of disbursements reasonably anticipated to be made during the week immediately following such Friday as set forth in the Budget (subject to Permitted Variance), minus (b) the sum of (x) the amount of cash receipts expected to be received by the Loan Parties during such week as set forth in the Budget (subject to Permitted Variance) and (y) estimated cash in the ABL Holding Account as of such Friday.
“Approved Budget Variance Report” shall mean a report provided by the Borrower to the Agent and the DIP Lenders (a) showing, in each case, on a line item by line item and a cumulative basis, the Actual Cash Receipts, the Actual Operating Disbursement Amounts, the Actual Professional Fee Amounts, the Actual Net Operating Cash Flow and the Actual Outstanding Debt, in each case as of the last day of the Variance Testing Period then most recently ended, noting therein (i) all variances, on a cumulative basis, from the Budgeted Cash Receipts, the Budgeted Operating Disbursement Amounts, the Budgeted Professional Fee Amounts, the Budgeted Net Operating Cash Flow and the Budgeted Outstanding Debt for such period as set forth in the Approved Budget as in effect for such period and (ii) containing an indication as to whether each variance is temporary or permanent and analysis and explanations for all material variances, (iii) certifying compliance or non-compliance in such Variance Testing Period with the Permitted Variances and (iv) including explanations for all material variances and violations, if any, of such covenant and if any such violation exists, setting forth the actions which the Borrower has taken or intend to take with respect thereto and (b) which such reports shall contain supporting information, satisfactory to the Required Lenders in their sole discretion.
“Bankruptcy Code” shall have the meaning given such term in the recital to this Note.
“Bankruptcy Court” shall have the meaning given such term in the recital to this Note.
“Bid Procedures Motion” shall have the meaning given such term in Section 14 of this Note.
“Borrower” shall have the meaning given such term in the recital to this Note.
“Budget” shall mean a rolling eight (8) week forecast of projected receipts, disbursements, net cash flow, liquidity and loans for the immediately following consecutive eight (8) weeks after the date of delivery, which shall be in substantially the form of the Initial Budget or otherwise in form and substance acceptable to the Required Lenders and shall be approved by the foregoing Required Lenders, in the Required Lenders’ sole discretion. The initial Budget (the “Initial Budget”) is attached hereto as Exhibit A.
“Budgeted Cash Receipts” shall mean with respect to any period, the amount that corresponds to the line item “Total Operating Receipts” in the Budget, as then in effect.
“Budgeted Net Operating Cash Flow” shall mean with respect to any period, the actual amount that corresponds to the line item “Net Cash Flow” in the Budget as then in effect.
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“Budgeted Operating Disbursement Amounts” shall mean with respect to any period, the amount that corresponds to the line item “Total Operational Disbursements” in the Budget.
“Budgeted Outstanding Debt” shall mean with respect to any period, the actual amount that corresponds to the line item “Ending Balance” in the section titled “DIP Balance Rollforward” in the Budget as then in effect.
“Budgeted Professional Fee Amounts” shall mean, with respect to any period, the amount of Professional Fees described in the supporting materials provided with the Budget as then in effect.
“Business Day” shall mean any day other than a Saturday, Sunday or legal holiday under the laws of the State of New York or any other day on which banking institutions located in the State of New York are authorized or required by law or other governmental action to close, and with respect to all notices, determinations, fundings and payments in connection with LIBOR, any day that is also a day for trading by and between banks in Dollar deposits in the London interbank market.
“Carve-Out” shall have the meaning given such term in the Financing Orders.
“Cash Collateral” shall have the meaning given to such term in the Financing Orders.
“Chapter 11 Case” and “Chapter 11 Cases” shall have the respective meanings given such terms in the recital to this Note.
“Closing Date” shall mean the Business Day when each of the conditions applicable to the funding of the Term Loans (other than any Final Order Term Loans) and listed in Section 2(a) of this Note shall have been satisfied or waived in a manner satisfactory to the Required Lenders.
“Collateral” shall mean the assets and property covered by the Financing Orders and the other Collateral Documents and any other assets and property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of the Agent on behalf of the DIP Lenders, to secure the Obligations and the Guaranteed Obligations. Without limiting the foregoing, the Collateral shall include all present and future property of each Loan Party under Section 541(a) of the Bankruptcy Code (including, without limitation, the proceeds of avoidance actions upon entry of the Final Order) and all proceeds thereof.
“Collateral Documents” shall mean the Security Agreement and each agreement entered into pursuant to Section 12 hereof and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations and the Guaranteed Obligations, including the Financing Orders and the Guaranty.
“Commitment” shall mean, with respect to each DIP Lender, the commitment of such DIP Lender to make its portion of the Term Loans to the Borrower in the principal amount set forth on Schedule I hereto, as the same may be terminated or reduced from time to time in accordance with the terms of this Note.
“Davis Polk” shall mean Davis Polk & Wardwell LLP.
“Debtors” shall have the meaning given to such term in the Financing Orders.
“Default” shall mean an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.
“Default Rate” shall have the meaning given such term in Section 4(d) of this Note.
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“Designated Assets” shall mean the assets of the Loan Parties more fully described on Annex B and Annex C attached hereto.
“Designated Asset Sale Agreements” shall have the meaning given such term in Section 2(a)(10).
“Designated Jurisdiction” shall mean any country or territory that is the target of a Sanction.
“DIP Documents” shall mean the Note, the Collateral Documents, the Guaranty, the Escrow Agreement and all other agreements, instruments, documents and certificates executed and delivered to, or in favor of the Agent in connection with this Note. Any reference in this Note or any other DIP Document to a DIP Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, amendments and restatements supplements or other modifications thereto, and shall refer to such DIP Document as the same may be in effect at any and all times such reference becomes operative.
“DIP Holding Account” shall mean account number x0091 at J.P. Morgan Chase & Co.
“DIP Lenders” shall have the meaning given such term in the recital to this Note.
“DIP Lender Advisor” shall mean Davis Polk or such other advisor as the DIP Lenders may designate in writing to the Borrower.
“Dollars” or “$” shall mean lawful currency of the United States of America.
“Ducera” shall mean Ducera Partners LLP.
“Equity Interests” shall mean, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination (provided, however, that debt securities that are or by their terms may be convertible or exchangeable into or for Equity Interests shall not constitute Equity Interests prior to conversion or exchange thereof).
“Escrow Account” shall mean an escrow account with the Escrow Agent into which the proceeds of the Term Loans (and amounts described in Section 1(f)) shall be deposited and retained subject to withdrawal thereof by the Borrower pursuant to the terms hereof for use in accordance with the terms hereof and of the Budget (subject to any Permitted Variance) or return thereof to the DIP Lenders upon the occurrence of the Maturity Date.
“Escrow Agent” shall mean U.S. Bank National Association.
“Escrow Agreement” shall mean an Escrow Agreement dated as of the Closing Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) among the Borrower, the Escrow Agent and the Agent (for and on behalf of the DIP Lenders) relating to the Escrow Account in form and substance reasonably satisfactory to the DIP Agent and the Borrower.
“Event of Default” shall have the meaning given such term in Section 16 of this Note.
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“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any DIP Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof), (b) in the case of a DIP Lender, federal withholding Taxes imposed on amounts payable to or for the account of such DIP Lender with respect to an applicable interest in Term Loans or Commitment pursuant to a law in effect on the date on which (i) such DIP Lender acquires such interest in the Term Loans or Commitment or (ii) such DIP Lender changes its lending office, except in each case to the extent that, pursuant to Section 10, amounts with respect to such Taxes were payable either to such DIP Lender’s assignor immediately before such DIP Lender became a party hereto or to such DIP Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to provide the Borrower with the tax documentation described in Section 10 hereof and (d) any withholding Taxes imposed under FATCA.
“Extraordinary Receipts” shall mean any cash received by Borrower or any of its Subsidiaries not in the ordinary course of business (and not consisting of proceeds described in Sections 7(a) and (b) hereof) from (i) foreign, United States, state or local tax refunds, (ii) pension plan reversions, (iii) proceeds of insurance, (iv) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, (v) condemnation awards (and payments in lieu thereof), (vi) indemnity payments and (vii) any purchase price adjustment received in connection with any purchase agreement.
“FATCA” shall mean Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Note (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among governmental authorities and implementing such Sections of the Internal Revenue Code.
“Final Order” shall mean the order of the Bankruptcy Court entered in the Chapter 11 Cases after a final hearing pursuant to Section 364 of the Bankruptcy Code and Bankruptcy Rule 4001, in form and substance satisfactory to the Required Lenders, together with all extensions, modifications and amendments thereto, authorizing Borrower to obtain credit, incur Indebtedness, and grant Liens under this Note and/or certain financing documentation, all as set forth in such order.
“Final Order Term Loan” shall have the meaning given such term in Section 1(a).
“Financing Orders” shall mean, collectively, the Interim Order and the Final Order, as applicable.
“GAAP” shall mean generally accepted accounting principles in the United States of America.
“Guaranteed Obligations” shall mean the obligations to be guaranteed by each Guarantor pursuant to the terms of the Guaranty.
“Guarantor” shall have the meaning given such term in the recital to this Note.
“Guaranty” shall mean the Guaranty, dated as of the date hereof, made by the Guarantors in favor of the Agent.
“Indebtedness” shall have the meaning given such term in the Prepetition ABL Credit Agreement (and the defined terms used in such definition and defined in the Prepetition ABL Credit Agreement shall have the meanings given such terms therein, unless any such term is also defined herein, in which case each such defined term used in such definition shall have the meaning provided herein) whether or not such agreement remains in effect and without giving effect to any amendments or other modifications thereto made after the Closing Date.
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“Indemnified Person” shall have the meaning given such term in Section 9 of this Note.
“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any DIP Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Interest Period” means, with respect to each Term Loan, a period commencing on the date of the making of such Term Loan and ending on the last Business Day of the then current month and thereafter commencing on the last day of the previous Interest Period and ending 1 month thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1 month after the date on which the Interest Period began, as applicable.
“Interim Order” shall mean the interim order of the Bankruptcy Court entered in the Chapter 11 Cases after an interim hearing (assuming satisfaction of the standards prescribed in Section 364 of the Bankruptcy Code and Bankruptcy Rule 4001 and other applicable law), together with all extensions, modifications and amendments thereto, satisfactory in form and substance to the Required Lenders, authorizing, on an interim basis, Borrower to execute and perform under the terms of this Note and the other DIP Documents.
“LIBOR” means, with respect to any Term Loan for any Interest Period, the London interbank offered rate as calculated by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate) and obtained through a nationally recognized service such as Bloomberg or Reuters (or on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Agent in its reasonable discretion; in each case, the “Screen Rate”), or a comparable or successor rate that has been approved by the Agent, at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided, that, if the Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to Dollars, then the LIBOR Rate shall be the Interpolated Rate at such time. “Interpolated Rate” means, at any time, the rate per annum determined by the Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the Screen Rate for the longest period (for which that Screen Rate is available in Dollars) that is shorter than the Impacted Interest Period and (b) the Screen Rate for the shortest period (for which that Screen Rate is available for Dollars) that exceeds the Impacted Interest Period, in each case, at such time. Notwithstanding anything herein to the contrary, if “LIBOR” shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“LIBOR Rate” means, for each Interest Period for each Term Loan, the greater of (a) the rate per annum determined by the Agent (rounded upwards if necessary, to the next 1/100%) by dividing (i) LIBOR for such Interest Period by (ii) 100% minus the Reserve Percentage and (b) 1.00%. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.
“Lien” shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction).
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"Liquidity" shall mean, as of any time of determination, the sum of (x) actual amounts of unrestricted cash of the Loan Parties deposited in the ABL Holding Account and the DIP Holding Account and (y) the amount on deposit in the Escrow Account.
“Loan Party” shall mean the Borrower and any Guarantor.
“Material Adverse Effect” shall mean a material adverse effect on (i) the operations, business, assets, properties or financial condition of the Loan Parties taken as a whole, (ii) the ability of the Loan Parties to perform payment or other material obligations under any DIP Document, (iii) the legality, validity or enforceability of this Note or any other DIP Document, (iv) the rights and remedies of the Agent and the DIP Lenders under any DIP Document, or (v) the validity, perfection or priority of a Lien in favor of DIP Lenders on any of the Collateral; provided, however that “Material Adverse Effect” shall expressly exclude any change, event or occurrence, arising individually or in the aggregate, from events that could reasonably be expected to result from the filing or commencement of the Chapter 11 Cases or the announcement of the filing or commencement of the Chapter 11 Cases.
“Maturity Date” shall mean the earliest to occur of (i) December 16, 2021, or if such date is not a Business Day the immediately following Business Day, (ii) September 22, 2021, if the Final Order has not been entered by the Bankruptcy Court on or prior to such date, or if such date is not a Business Day the immediately following Business Day, (iii) the consummation of both Trigger Sales; (iv) the substantial consummation of a plan of reorganization filed in the Chapter 11 Cases that is confirmed pursuant to an order of the Bankruptcy Court, or (v) the date on which the Term Loans are accelerated pursuant to Section 16.
“Maximum Amount” shall have the meaning given such term in Section 1 of this Note.
“Note” shall have the meaning given such term in the recital to this Note.
“Obligations” shall mean all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by Borrower to Agent and DIP Lenders arising under the Note or any of the other DIP Documents, and all covenants and duties regarding such amounts, of any kind or nature, present or future, arising under the Note or any of the other DIP Documents. This term includes all principal, interest, fees, charges, expenses, attorneys’ fees and any other sum chargeable to Borrower under the Note or any of the other DIP Documents.
“OFAC” shall mean the Office of Foreign Assets Control of the United States Department of the Treasury.
“Ongoing Sales” shall mean the sale of the assets of the Loan Parties more fully described on Annex D attached hereto.
“Other Taxes” shall have the meaning given such term in Section 10 of this Note.
“Participant Register” shall have the meaning given such term in Section 21 of this Note.
“Payment Office” shall mean such account, office or offices of the Agent as may be designated in writing from time to time by the Agent to Borrower.
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“Permitted Encumbrances” shall mean the following encumbrances: (a) Liens for taxes or assessments or other governmental charges (i) not yet due and payable, (ii) that are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP, or (iii) the nonpayment of which is permitted or required by the Bankruptcy Code; (b) pledges or deposits of money securing statutory obligations under workmen’s compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Loan Party is a party as lessee made in the ordinary course of business; (d) carriers’, warehousemen’s, suppliers’ or other similar possessory liens arising in the ordinary course of business; (e) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Loan Party is a party; (f) zoning restrictions, easements, licenses, or other restrictions on the use of any real estate or other minor irregularities in title (including leasehold title) thereto so long as the same do not materially impair the use, value, or marketability of such real estate; (g) the Agent’s and DIP Lenders’ Liens; (h) Liens existing on the Petition Date (to the extent valid, enforceable, perfected and not subject to avoidance as of the Petition Date or perfected after the Petition Date pursuant to section 546(b) of the Bankruptcy Code); (i) Liens in favor of the Prepetition Secured Parties and other Liens granted pursuant to the Financing Orders (including, to the extent constituting a Lien, the Carve-Out); and (j) to the extent constituting Liens, Liens on goods delivered to any Loan Party after the Petition Date under any consignment or similar title retention agreements; provided that no encumbrance (other than the Liens described in clause (g) above and the Carve-Out) on the Escrow Agreement or either of the Escrow Account or DIP Holding Account or amounts held therein or proceeds thereof shall be a Permitted Encumbrance.
“Permitted Indebtedness” shall mean: (a) current Indebtedness incurred in the ordinary course of business for inventory, supplies, equipment, services, taxes or labor; (b) Indebtedness arising under this Note and the other DIP Documents; (c) Prepetition Obligations; (d) deferred taxes and other expenses incurred in the ordinary course of business; (e) any Indebtedness existing on the Petition Date; and (f) administrative expenses of Borrower for which the Bankruptcy Court has not directed payment.
“Permitted Prior Liens” shall mean certain permitted senior liens as expressly set forth in the Financing Orders.
“Permitted Variance” shall mean, with respect to any Variance Testing Period, (a) in respect of the aggregate amount of Actual Operating Disbursement Amounts and Actual Professional Fee Amounts, (x) 15% for the Initial Two Week Disbursements Period, (y) 12.5% for the Initial Three Week Disbursements Period, and (z) 10% for the Initial Four Week Disbursements Period and each Four Week Disbursements Period and (b) in respect of Actual Cash Receipts, (x) 12.5% for the Initial Three Week Receipts Period and (y) 10% for the Initial Four Week Receipts Period and each Four Week Receipts Period.
“Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).
“Petition Date” shall have the meaning given such term in the recital to this Note.
“Prepetition ABL Credit Agreement” shall have the meaning given such term in the Financing Orders.
“Prepetition ABL Collateral” shall have the meaning given such term in the Financing Orders.
“Prepetition ABL Credit Facility” shall have the meaning given such term in the Financing Orders.
“Prepetition Obligations” shall have the meaning given such term in the Financing Orders.
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“Prepetition Secured Parties” shall have the meaning given such term in the Financing Orders.
“Professional Fees” shall mean the fees and expenses of all professionals retained by the Debtors or any committee appointed by the Office of the United States Trustee (including, without limitation, fees and expenses of counsel, financial advisors and investment bankers, but excluding any success or transaction based fee), in each case to the extent included in the Carve Out.
“Pro Rata Share” shall mean with respect to a DIP Lender’s obligation to make Term Loans and receive payments of interest, fees and principal with respect thereto, the percentage obtained by dividing (i) such DIP Lender’s Commitment by (ii) the Maximum Amount.
“Rapp & Krock” shall mean Rapp & Krock, PC.
“Recipient” shall mean the Agent or any DIP Lender, as applicable.
“Register” shall have the meaning given such term in Section 21 of this Note.
“Registered Loan” shall have the meaning given such term in Section 21 of this Note.
“Related Fund” shall mean, with respect to any Person, an affiliate of such Person, or a fund or account managed by such Person or an affiliate of such Person.
“Related Parties” shall mean, with respect to any specified Person, such Person’s affiliates and the respective managers, administrators, trustees, partners, investors, directors, officers, employees, agents, advisors, sub-advisors or other representatives of such Person and such Person’s affiliates.
“Required Lenders” shall mean, at any time, two or more unaffiliated DIP Lenders whose aggregate Pro Rata Shares exceed 50%; provided, that, any approval of the “Required Lenders” may be communicated via email by the DIP Lender Advisor.
“Reserve Percentage” means, on any day, for any DIP Lender, the maximum percentage prescribed by the Board (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities”) of that DIP Lender, but so long as such DIP Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero.
"Resignation Effective Date" shall have the meaning given such term in Section 20(g)(1).
“Restricted Payment” shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to any Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.
“Sanction” shall mean any sanction administered or enforced by the United States Government (including, without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.
"Security Agreement" shall mean the Security Agreement, dated the date hereof, among the Borrower, the Guarantors and the Agent.
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“Subsidiary” of a Person shall mean a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.
“Successor Case” shall have the meaning given such term in the Financing Orders.
“Super Priority Credit Agreement” shall mean the Super Priority Credit Agreement, dated as of May 3, 2021, among the Borrower, Cantor Fitzgerald Securities, as Administrative Agent, and the lenders party thereto, as amended, restated, amended and restated, modified, or supplemented from time to time prior to the Closing Date.
“Super Priority Credit Agreement Payoff Letter” shall have the meaning given such term in Section 2(a)(11).
“Taxes” shall have the meaning given such term in Section 10 of this Note.
“Term Loans” shall have the meaning given such term in Section 1 of this Note.
“Trigger Sales” shall mean the disposition through one or more transactions of the assets described on Annex C attached hereto.
"Variance Testing Period" shall mean each of (a) in respect of Actual Operating Disbursement Amounts and Actual Professional Fee Amounts, (w) the two week period ending on August 28, 2021 (“Initial Two Week Disbursements Period”), (x) the three week period ending on September 4, 2021 (“Initial Three Week Disbursements Period”), (y) the four week period ending on September 11, 2021 (“Initial Four Week Disbursements Period”), and (z) thereafter the rolling four week period ending on each Saturday (each a, “Four Week Disbursements Period”) and (b) in respect of Actual Cash Receipts, (w) the three week period ending on August 28, 2021 (“Initial Three Week Receipts Period”), (y) the four week period ending on September 11, 2021 (“Initial Four Week Receipts Period”), and (z) thereafter the rolling four week period ending on each Saturday (each a, “Four Week Receipts Period”).
“Withdrawal” means a withdrawal from the Escrow Account made in accordance with Section 2.
“Withdrawal Date” means the date of the making of any Withdrawal.
“Withdrawal Liquidity Condition” shall mean, with respect to any Withdrawal, that on the related Withdrawal Date the amount of such requested Withdrawal does not exceed the positive difference of (a) the amount of disbursements reasonably anticipated to be made during the period from such Withdrawal Date to the last Business Day of the week following such Withdrawal Date as set forth in the Budget (subject to Permitted Variance), minus (b) the sum of (x) the amount of cash receipts reasonably expected to be received by the Loan during the period from such Withdrawal Date to the last Business Day of the week following such Withdrawal Date as set forth in the Budget (subject to Permitted Variance), (y) estimated cash in the ABL Holding Account as of such Withdrawal Date and (z) cash in the DIP Holding Account as of such Withdrawal Date.
“Withdrawal Notice” shall mean a written notice substantially in the form of the Form of Written Direction attached as Exhibit A to the Escrow Agreement delivered by the Borrower to the Escrow Agent and the Agent from time to time to request a Withdrawal from the Escrow Account.
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19. Representations and Warranties. The Borrower and each of the other Loan Parties represents as follows:
(a) the Borrower and each of the Loan Parties are duly formed and/or organized and validly existing under the laws of their jurisdictions of incorporation or formation;
(b) upon entry of the Financing Orders, the execution and delivery of this Note and the other DIP Documents and the performance by the Borrower of the Borrower’s obligations hereunder and under the other DIP Documents are within its corporate powers, have been duly authorized by all necessary corporate action of the Borrower, have received all necessary bankruptcy, insolvency or governmental approvals, and do not and will not contravene or conflict with any provisions of applicable material law or of the Borrower’s corporate charter or by-laws or of any agreements binding upon or applicable to the Borrower or any of its Subsidiaries or any of their properties;
(c) the Chapter 11 Cases have been duly authorized by all necessary legal and corporate action by or on behalf of each Loan Party and have been duly and properly commenced;
(d) upon entry of the Financing Orders, this Note and each other DIP Document is the legal, valid and binding obligation, enforceable against the Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally, including the entry of the Financing Orders and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law;
(e) other than as a result of the Chapter 11 Cases and subject to any necessary orders or authorization of the Bankruptcy Court, the Borrower and the Loan Parties have good and marketable title to, or valid leasehold interests in, all of its material property and assets; none of the properties and assets of the Borrower and its Subsidiaries are subject to any Liens other than Permitted Encumbrances;
(f) no written statement furnished by or on behalf of the Borrower and its Subsidiaries to the DIP Lenders pursuant to the terms of this Note (other than any projections, the Budget, estimates and information of a general economic nature or general industry nature), when taken as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not materially misleading in light of all of the circumstances under which they were made;
(g) upon entry of the Financing Orders, the Liens granted to the DIP Lenders pursuant to the Collateral Documents and the Financing Orders will at all times be fully perfected Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Prior Liens or other Liens permitted to have such priority under the Financing Orders;
(h) except for proceedings in the Chapter 11 Cases, no action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of the Borrower, threatened against the Borrower of its Subsidiaries before any governmental authority or before any arbitrator or panel of arbitrators that challenges the rights or powers of the Borrower or its Subsidiaries to enter into or perform any of its obligations under the DIP Documents to which it is a party, or the validity or enforceability of any DIP Document or any action taken thereunder;
(i) each Loan Party is in compliance in all material respects with the requirements of all laws and regulations and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of law or regulation or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect;
(j) none of the Loan Parties is an “investment company”, “affiliated person”, “promoter” of, or “principal underwriter” of or for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended;
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(k) no Loan Party, nor, to the knowledge of the Loan Parties, any director, officer, employee, agent, affiliate or representative thereof, is an individual or entity that is, or is owned or controlled by any individual or entity that is, (a) currently the subject or target of any Sanctions or (b) located, organized or resident in a Designated Jurisdiction;
(l) since the Petition Date, there has been no event or circumstance that has had or would reasonably be expected to have a Material Adverse Effect; and
(m) the Borrower and its Subsidiaries have filed all material federal, state and other tax returns and reports required to be filed, and have paid all material federal, state and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable other than those not yet delinquent or are being contested in good faith by appropriate proceedings.
20. Agent.
(a) Appointment. Each DIP Lender hereby irrevocably appoints and authorizes the Agent to perform the duties of the Agent as set forth in this Note including: (i) to receive on behalf of each DIP Lender any payment of principal of or interest on the Term Loans outstanding hereunder and all other amounts accrued hereunder for the account of the DIP Lenders and paid to the Agent, and to distribute promptly to each DIP Lender its Pro Rata Share of all payments so received; (ii) to distribute to each DIP Lender copies of all material notices and agreements received by the Agent; (iii) to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Term Loans, and related matters and to maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Collateral and related matters; (iv) to execute or file any and all notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to this Note or any other DIP Document; (v) to perform, exercise, and enforce any and all other rights and remedies of the DIP Lenders with respect to the Borrower, the Obligations, or otherwise related to any of same to the extent reasonably incidental to the exercise by the Agent of the rights and remedies specifically authorized to be exercised by the Agent by the terms of this Note or any other DIP Document; (vi) to incur and pay such fees necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to this Note or any other DIP Document; and (vii) to take such action as the Agent deems appropriate on its behalf to administer the Term Loans and the DIP Documents and to exercise such other powers delegated to the Agent by the terms hereof or the other DIP Documents together with such powers as are reasonably incidental thereto to carry out the purposes hereof and thereof. The Agent may perform any of its duties hereunder or under the other DIP Documents by or through any one or more sub-agents or attorneys-in-fact appointed by the Agent. The Agent and any such sub-agent or attorney-in-fact may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Section 20 shall apply to any such sub-agent or attorney-in-fact and the Related Parties of the Agent, any such sub-agent and any such attorney-in-fact and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.
(b) Nature of Duties. The Agent shall have no duties or responsibilities except those expressly set forth in this Note or in the other DIP Documents.
(c) Rights, Exculpation, Etc. The Agent and its directors, officers, agents or employees shall not be liable for any action taken or omitted to be taken by them under or in connection with this Note or the other DIP Documents, except for their own gross negligence or willful misconduct as determined by a final nonappealable judgment of a court of competent jurisdiction.
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(d) Reliance. The Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Note or any of the other DIP Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.
(e) Indemnification. To the extent that the Agent is not reimbursed and indemnified by the Borrower, the DIP Lenders will reimburse and indemnify the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Note or any of the other DIP Documents or any action taken or omitted by the Agent under this Note or any of the other DIP Documents, in proportion to each DIP Lender’s Pro Rata Share.
(f) Collateral Matters.
(1) The DIP Lenders hereby irrevocably authorize the Agent, to release any Lien granted to or held by the Agent upon any Collateral upon cancellation of the Note and payment and satisfaction of the Term Loans and all other Obligations which have matured and which the Agent has been notified in writing are then due and payable; or constituting property being sold or disposed of in the ordinary course of the Borrower’s business or otherwise in compliance with or as permitted by the terms of this Note and the other DIP Documents; or if approved, authorized or ratified in writing by the DIP Lenders.
(2) Without in any manner limiting the Agent’s authority to act without any specific or further authorization or consent by the DIP Lenders, each DIP Lender agrees to confirm in writing, upon request by the Agent, the authority to release Collateral conferred upon the Agent under paragraph (f)(1) above.
The Agent shall have no obligation whatsoever to any DIP Lender to assure that the Collateral exists or is owned by the Loan Parties, or is cared for, protected or insured or has been encumbered or that the Lien granted to the Agent pursuant to this Note or any other DIP Document has been properly or sufficiently or lawfully created, perfected, protected or enforced or is entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Agent in this section or in any other DIP Document, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion, given the Agent’s own interest in the Collateral as one of the DIP Lenders and that the Agent shall have no duty or liability whatsoever to any other DIP Lender, except as otherwise provided herein.
(g) Successor Agent.
(1) The Agent may at any time give at least 30 days prior written notice of its resignation to the DIP Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right to appoint a successor Agent which is reasonably acceptable to the Borrower. If no such successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the "Resignation Effective Date"), then the retiring Agent may (but shall not be obligated to), on behalf of the DIP Lenders, appoint a successor Agent. Whether or not a successor Agent has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
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(2) With effect from the Resignation Effective Date, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other DIP Documents (except that in the case of any Collateral held by such Agent on behalf of the DIP Lenders under any of the DIP Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (ii) all payments, communications and determinations provided to be made by, to or through such retiring Agent shall instead be made by or to each DIP Lender directly, until such time, if any, as a successor Agent shall have been appointed as provided for above. Upon the acceptance of a successor's Agent's appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other DIP Documents. After the retiring Agent's resignation hereunder and under the other DIP Documents, the provisions of this Article, Section 9 and Section 21(b) shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by it while the retiring Agent was acting as Agent.
21. Miscellaneous.
(a) All notices and other communications provided for hereunder shall be in writing (including facsimile communication) and mailed, emailed or delivered as follows:
| If to Borrower: | Basic Energy Services, Inc. | ||
| 801 Cherry Street, Suite 2100 | |||
| Fort Worth, TX 76102 | |||
| Attn: Adam Hurley and Robby Reeb | |||
Email: |
AHurley@BasicES.com RReeb@BasicES.com | ||
| with copies to: | Weil, Gotshal & Manges LLP | ||
767 Fifth Avenue New York, NY 10153 Attn: Ray Schrock, Sunny Singh and Vynessa Nemunaitis | |||
| Email: | Ray.Schrock@weil.com | ||
| sunny.singh@weil.com | |||
| Vynessa.nemunaitis@weil.com | |||
| If to Agent or any Lender: | Guggenheim Credit Services, LLC 330 Madison Avenue, 10th Floor New York, NY 10017 Attn: GI Ops NY Loan Agency | ||
| Email: | GIOpsLoanAgency@guggenheimpartners.com | ||
| with copies to: | Guggenheim Credit Services, LLC 330 Madison Avenue, 10th Floor New York, NY 10017 Attn: GI Legal | ||
| Email: | GILegalTransactionsGroup@guggenheimpartners.com | ||
| Davis Polk & Wardwell LLP | |||
| 450 Lexington Avenue | |||
| New York, New York 10017 | |||
| Attn: Damian S. Schaible and Adam Shpeen | |||
| Email: | damian.schaible@davispolk.com | ||
| adam.shpeen@davispolk.com | |||
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All such notices and communications shall, when mailed or sent by overnight courier, be effective when deposited in the mails or delivered to the overnight courier, as the case may be, or when sent by email be effective when confirmation is received.
(b) The Borrower shall reimburse the Agent and the DIP Lenders for all reasonable and documented out-of-pocket expenses incurred in connection with the negotiation and preparation of the DIP Documents and the obtaining of approval of the DIP Documents by the Bankruptcy Court, including the reasonable and documented fees, costs and expenses of (i) Davis Polk, (ii) Ducera, (iii) Rapp & Krock and (iv) any other advisors. Subject to the foregoing, the Borrower shall reimburse the Agent and DIP Lenders for all reasonable and documented out-of-pocket fees, costs and expenses of (i) Davis Polk, (ii) Ducera (iii) Rapp & Krock and (iv) any other advisors, in connection with:
(1) any amendment, modification or waiver of, consent with respect to, or termination or enforcement of, any of the DIP Documents or advice in connection with the administration of the Term Loans made pursuant hereto or its rights hereunder or thereunder;
(2) the review of pleadings and documents related to the Chapter 11 Cases and any subsequent Chapter 7 case, attendance at meetings related to the Chapter 11 Cases and any subsequent Chapter 7 case, and general monitoring of the Chapter 11 Cases and any subsequent Chapter 7 case;
(3) any litigation, contest, dispute, suit, proceeding or action (whether instituted by the Agent, the Borrower or any other Person, and whether as a party, witness or otherwise) in any way relating to the Collateral, any of the DIP Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against Borrower or any other Person that may be obligated to the Agent by virtue of the DIP Documents, including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Term Loans during the pendency of one or more Events of Default;
(4) any attempt to enforce any remedies of the Agent against any or all of the Borrower or any other Person that may be obligated to the Agent by virtue of any of the DIP Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Term Loans during the pendency of one or more Events of Default;
(5) any work-out or restructuring of the Term Loans during the pendency of one or more Events of Default; and
(6) any efforts to (A) monitor the Term Loans or any of the other Obligations, (B) evaluate, observe or assess any of the Borrower or their respective affairs, (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral and (D) monitor any sales;
all of which shall be payable within 10 Business Days of the Borrower’s receipt of an invoice. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. All expenses incurred by the Agent shall receive super-priority administrative expense status per Section 364 of the Bankruptcy Code (subject to the Financing Orders). To the extent that the Borrower fails to pay any amount required to be paid under Section 9 hereof and this Section 21(b) to the Agent or any of its Related Parties, each DIP Lender severally agrees to pay to the Agent or such Related Party, as the case may be, such DIP Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent in its capacity as such or against any of its Related Parties acting for the Agent in connection with such capacity. For purposes hereof, a DIP Lender’s “Pro Rata Share” shall be determined based upon its share of the sum of the outstanding Term Loans and unused Commitments at the time. The obligations of the DIP Lenders under this subsection (b) are subject to the provisions of Section 10 hereof.
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(c) No failure or delay on the part of the Agent or any other holder of this Note to exercise any right, power or privilege under this Note and no course of dealing between Borrower and the Agent shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies expressly provided in this Note are cumulative to, and not exclusive of, any rights or remedies that the Agent would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Agent to any other or further action in any circumstances without notice or demand.
(d) Borrower and any endorser of this Note hereby consent to renewals and extensions of time at or after the maturity hereof without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.
(e) If any provision in or obligation under this Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
(f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND THE AGENT HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.
(g) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Bankruptcy Court and, if the Bankruptcy Court does not have (or abstains from) jurisdiction, the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Note or any DIP Document, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.
(h) THE BORROWER AND, BY THEIR ACCEPTANCE OF THIS NOTE, THE AGENT, ANY DIP LENDER AND ANY SUBSEQUENT HOLDER OF THIS NOTE, HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS NOTE AND THE AGENT’S/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and, by their acceptance of this Note, the Agent, any DIP Lender and any subsequent holder of this Note, each (i) acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this relationship, and that each will continue to rely on this waiver in their related future dealings and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING) THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS NOTE. In the event of litigation, this provision may be filed as a written consent a trial by the court.
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(i) The Borrower shall not have the right to assign their obligations or liabilities under this Note without the prior written consent of the DIP Lenders. The DIP Lenders may, with the prior written consent of the Agent and to the extent no Event of Default then exists the Borrower (which consent of the Agent or Borrower shall not be required for any assignment to the Agent, a DIP Lender, a Related Fund or an affiliate of the Agent or a DIP Lender or which consent shall not be unreasonably conditioned, withheld or delayed), assign to one or more entitles all or any part of, or may grant participation’s to one or more entities in or to all or any part of, the amounts outstanding hereunder, and to the extent of any such assignment or participation (unless otherwise stated therein) the assignee or participant shall have the same rights and benefits hereunder as it would have if it were a DIP Lender hereunder. An assigning DIP Lender shall deliver to the Agent (and notify the Borrower thereof) an assignment agreement in a form approved by the Agent, which shall include a description of the assignment and include customary instructions from the DIP Lender and such assignee with respect to the making of payments and other communications with the DIP Lender and such assignee, together with a processing and recordation fee of $3,500 and all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations.
(j) The Agent shall, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain, or cause to be maintained at one of its offices, a copy of each assignment notice delivered to and accepted by it and a register (the “Register”) for the recordation of the names and addresses of the Persons, if any, that take an assignment from it and the principal amount of the Term Loans and stated interest thereon (the “Registered Loans”) owing to each DIP Lender from time to time. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower and the Agent may treat each Person whose name is recorded in the Register as a DIP Lender hereunder for all purposes of this Note. The Register shall be available for inspection by Borrower and the DIP Lenders at any reasonable time and from time to time upon reasonable prior written notice.
(k) Upon receipt by the Agent of an assignment notice, subject to the consent rights in clause (i) above, the Agent shall accept such assignment and record the information contained therein in the Register.
(l) A Registered Loan may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Any assignment or sale of all or part of such Registered Loan may be effected only by registration of such assignment or sale on the Register. Prior to the registration of assignment or sale of any Registered Loan, the Agent shall treat the Person in whose name such Registered Loan is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary.
(m) In the event that a DIP Lender sells participations in a Registered Loan, such DIP Lender shall maintain a register for this purpose as a non-fiduciary agent of Borrower on which it enters the name of all participants in the Registered Loans held by it and the principal amount (and stated interest thereon) of the portion of the Registered Loan that is the subject of the participation (the “Participant Register”). A Registered Loan may be participated in whole or in part only by registration of such participation on the Participant Register. Any participation of such Registered Loan may be effected only by the registration of such participation on the Participant Register. The Participant Register shall be available for inspection by the Borrower and the DIP Lenders at any reasonable time and from time to time upon reasonable prior notice.
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(n) No provision of this Note may be amended or waived unless such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (or the Agent at the direction of the Required Lenders); provided that, without the consent of each adversely affected DIP Lender, no amendment, waiver or consent may (i) extend or increase the Commitment of any DIP Lender, (ii) postpone any date fixed by this Note or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to any DIP Lender, (iii) reduce the principal of, or the rate of interest specified herein on, any Term Loan or any fees or other amounts payable hereunder or under any other Loan Document (including interest accruing at the Default Rate pursuant to Section 4(d)), (v) change any provisions in this Note that would alter the pro rata sharing of payments of each DIP Lender, (vi) change any provision of this Section 21(n) or the definition of “Required Lenders” herein, (vii) release all or substantially all of the Collateral in any transaction or series of related transactions or (viii) release all or substantially all of the value of the Guaranty; provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the DIP Lenders required above, affect the rights and duties of the Agent under this Note or any other Loan Document.
(o) This Note may be executed and delivered in any number of counterparts, and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute one and the same instrument. Execution of this Note via facsimile or electronic mail shall be effective, and signatures received via facsimile or electronic mail shall be binding upon the parties hereto and shall be effective as originals. The parties hereto irrevocably and unreservedly agree that this Note may be executed by way of electronic signatures and the parties agree that neither this Note, nor any part hereof, shall be challenged or denied any legal effect, validity and/or enforceability solely on the ground that it is in the form of an electronic record.
(p) This Note, the other DIP Documents, and all Liens created hereby or pursuant to the Collateral Documents or any other DIP Document shall be binding upon the Borrower and each other Loan Party, the estates of the Borrower, and any trustee or successor in interest of the Borrower and each other Loan Party in the Chapter 11 Case or any subsequent case commenced under Chapter 7 of the Bankruptcy Code, and shall not be subject to Section 365 of the Bankruptcy Code. This Note and the other DIP Documents and the Financing Orders shall be binding upon, and inure to the benefit of, the successors of the Agent and the DIP Lenders and each of their respective permitted assigns, transferees and endorsees. The Liens created by this Note, and the other DIP Documents shall be and remain valid and perfected in the event of the substantive consolidation or conversion of the Chapter 11 Case or any other bankruptcy case of any Loan Party to a case under chapter 7 of the Bankruptcy Code or in the event of dismissal of the Chapter 11 Case or the release of any Collateral from the jurisdiction of the Bankruptcy Court for any reason, without the necessity that the Agent file financing statements or otherwise perfect its security interests or Liens under applicable law.
(q) In the event of any inconsistency between the terms and conditions of this Note and the Financing Orders, the provisions of the Financing Orders shall govern and control.
(r) THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
* * * * *
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IN WITNESS WHEREOF, the Borrower have caused this Note to be executed and delivered by its duly authorized officer as of the day and year and at the place first above written.
| BASIC ENERGY SERVICES, INC., as Borrower | |||
| By: | /s/ Keith L. Schilling | ||
| Name: | Keith L. Schilling | ||
| Title | President and Chief Executive Officer | ||
| Acknowledged and Agreed | |||
| GUGGENHEIM CREDIT SERVICES, LLC, as Agent | |||
| By: | /s/ Mark Joseph Brandmeyer | ||
| Name: | Mark Joseph Brandmeyer | ||
| Title: | Attorney-in-Fact | ||
| DIP Lender signatures on file with Agent | |||
Schedule I
Commitments
On file with Agent
EXHIBIT A
Budget
On file with Agent.
Annex A
Deliver (which delivery may be made by electronic communication (including email)) to the Agent, the monthly reports and quarterly reports and other information required by Section 6.01(b) (commencing with the fiscal quarter ending June 30, 2021) and (d) (whether or not a Monthly Financial Reporting Triggering Period is in effect), 6.02(d), (g), (h) and (i) of the Prepetition ABL Credit Agreement (and the defined terms used in such sections and defined in the Prepetition ABL Credit Agreement shall have the meanings given such terms therein, unless any such term is also defined herein, in which case each such defined term used in such definition shall have the meaning provided herein) (whether or not such agreement remains in effect and without giving effect to any amendments or other modifications thereto made after the Closing Date unless the Required Lenders shall otherwise agree) and each of the financial statements, reports, or other items set forth below at the following times in form reasonably satisfactory to the Required Lenders:
| on September 2, 2021 and every Thursday of each week ending thereafter | (a) a certificate which shall include such detail as is reasonably satisfactory to the Required Lenders (i) certifying that the Loan Parties are in compliance with the covenants contained in Section 15(j) and (ii) certifying that no Default or Event of Default has occurred or, if such a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, and attaching thereto the Approved Budget Variance Report which shall be prepared by the Borrower as of the last day of the most recently ended Variance Testing Period, |
| on September 2, 2021 and every second Thursday of each week ending thereafter | (b) a revised proposed budget (it being understood that upon written approval of such proposed budget by the Required Lenders (and not before such written approval), in their sole discretion, such proposed budget shall become the “Budget”) and timing changes with respect to any periods that were included in a previously delivered report and which shall be in form and substance acceptable to the Agent and DIP Lenders, |
| promptly, to the extent reasonably feasible, | (c) copies of all material pleadings, motions, applications or financial information filed by any Loan Party with the Bankruptcy Court; provided that any such documents that are publicly available shall be deemed to have been delivered, |
| promptly, but in any event within five (5) Business Days after Borrower has knowledge of any event or condition that constitutes a Default, | (d) notice of such event or condition and a statement of the curative action that Borrower proposes to take with respect thereto, |
| upon the reasonable request of the Required Lenders, | (e) any other information relating to the business, financial, legal or corporate affairs of the Borrower or its Subsidiaries. |
Annex B
Designated Assets – Part One
Assets contemplated to be purchased under that certain Asset Purchase Agreement, dated as of August 17, 2021, by and among Basic Energy Services, L.P., Agua Libre Midstream, LLC, Select Energy Services, Inc. and Select Energy Services, LLC (without giving effect to any amendment thereto that’s not consented to by the DIP Lenders).
Annex C
Designated Assets – Part Two
Assets contemplated to be purchased under that certain Asset Purchase Agreement, dated as of August 17, 2021, by and among Basic Energy Services, Inc., Basic Energy Services, L.P., C&J Well Services, Inc., KVS Transportation, Inc., and Axis Energy Services Holdings, LLC (without giving effect to any amendment thereto that’s not consented to by the DIP Lenders); and
Assets contemplated to be purchased under that certain Asset Purchase Agreement, dated as of August 17, 2021, by and among Basic Energy Services, Inc., Basic Energy Services, L.P., C&J Well Services, Inc., KVS Transportation, Inc., and Berry Corporation (bry) (without giving effect to any amendment thereto that’s not consented to by the DIP Lenders).
.
Annex D
Ongoing Sales
On file with Agent.
Exhibit 99.1
FOR IMMEDIATE RELEASE
Basic Energy Services Announces Asset Purchase Agreements with Axis Energy Services, Berry Corporation and Select Energy Services
Axis, Berry and Select to Serve as Proposed “Stalking Horse” Bidders in Court-Supervised Sale Process
Sale Processes to Be Facilitated Through Voluntary Chapter 11 Filing
FORT WORTH, Texas – August 17, 2021 – Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced that it has entered into asset purchase agreements with each of Axis Energy Services Holdings, LLC (“Axis”), Berry Corporation (NASDAQ: BRY) (“Berry”), and Select Energy Services, Inc. (NYSE: WTTR) (“Select”) pursuant to which, if consummated:
| · | Axis will acquire substantially all of the Company’s Well Servicing and Completion & Remedial segment assets outside of California. |
| · | Berry will acquire substantially all of the Company’s assets in California. |
| · | Select will acquire substantially all of the Company’s Water Logistics segment assets outside of California, including all of the assets of Agua Libre Midstream, LLC. |
To facilitate the sales, Basic has commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Texas. The transactions are being undertaken pursuant to Section 363 of the U.S. Bankruptcy Code, with Axis, Berry and Select serving as the “stalking horse” bidders in the court-supervised sale process. Accordingly, the proposed transactions are subject to higher and better offers, among other conditions.
The Company remains focused on serving customers and fully expects to continue operating without interruption, including paying its employees, during the court-supervised process.
“We believe the asset purchase agreements will enable us to maximize the value of our businesses and create the best path forward for our customers, partners, employees and the communities we serve,” said Keith Schilling, President and Chief Executive Officer of Basic. “The Company has faced extraordinary challenges as a result of the COVID-19 pandemic, and we thank the Basic team for their ongoing hard work and dedication as we continue to provide our customers outstanding service, experienced crews and a wide range of safe and efficient production services.”
If other qualified bids are submitted during the court-supervised sale process, the Company will conduct an auction or auctions with the agreements with Axis, Berry and Select setting the floor for the auction processes.
Basic has received a commitment for $35.0 million in debtor-in-possession (“DIP”) financing from Guggenheim Credit Services, LLC. Upon court approval, this new financing, together with cash generated from the Company’s ongoing operations, is expected to provide sufficient liquidity to support the Company during the court-supervised process.
Basic has filed a number of customary motions seeking court approval to continue operating its business in the normal course during the court-supervised process, including the continued payment of employee wages without interruption, as well as paying vendors and suppliers in full under normal terms for goods and services provided on or after the filing date. The Company expects to receive approval for these requests.
Basic’s vendors and suppliers can access court filings and other information related to the proceedings on a separate website administrated by the Company’s claims agent, Prime Clerk, LLC (“Prime Clerk”), at https://cases.primeclerk.com/basicenergy, by calling Prime Clerk toll-free at (877) 329-2031 (or +1 (917) 994-8420 for calls originating outside of the U.S.), or by sending an email to basicenergyinfo@primeclerk.com.
Weil, Gotshal & Manges LLP is serving as Basic’s legal counsel, Lazard is serving as financial advisor and AlixPartners LLP is serving as restructuring advisor.
About Basic Energy Services
Basic Energy Services provides wellsite services essential to maintaining production from the oil and gas wells within its operating areas. The Company’s operations are managed regionally and are concentrated in major United States onshore oil-producing regions located in Texas, California, New Mexico, Oklahoma, Arkansas, Louisiana, Wyoming, North Dakota, Colorado and Montana. Our operations are focused in prolific basins that have historically exhibited strong drilling and production economics in recent years as well as natural gas-focused shale plays characterized by prolific reserves. Specifically, the Company has a significant presence in the Permian Basin, Bakken, Los Angeles and San Joaquin Basins, Eagle Ford, Haynesville and Powder River Basin. We provide our services to a diverse group of over 2,000 oil and gas companies. Additional information on Basic Energy Services is available on the Company’s website at www.basices.com.
About Axis Energy Services Holdings, LLC
Axis is a data-driven energy services company committed to continuous improvement across the life of the well by utilizing innovative technologies, employee training, and best-in-class customer service. The proprietary Axis CORE® system is a data acquisition and analytics software platform offered with our services that enables safer, more efficient operations and a data-driven experience for our customers. Formed in 2018, Axis is a private company backed by Lime Rock Partners and B-29 Investments. Our leadership brings decades of experience to provide our customers with necessary service offerings, including completions, workovers, pressure control, and pumping services, as well as BOP equipment rentals, chemical mixing, nitrogen, fishing and rental services, and plug and abandonment services. Axis is headquartered in Longview, Texas with operations in the Bakken, Eagle Ford, Haynesville, Marcellus, Permian, and Utica basins.
About Berry Corporation
Berry is a publicly traded western United States independent upstream energy company focused on creating value for our shareholders through the development and production of conventional, long-lived oil reserves located primarily in the San Joaquin basin of California. Berry has a strong working relationship with the state of California and its regulatory agencies, and is vocal in their commitment to be part of the energy solution in California. Berry believes that locally producing and supplying equitable, affordable and reliable energy is critical to ensuring a safe and healthy future for their communities.
About Select Energy Services
Select Energy Services is a leading provider of sustainable full life cycle water and chemical solutions to the unconventional oil and gas industry in the United States. Select provides for the sourcing and transfer of water, both by permanent pipeline and temporary hose, prior to its use in the drilling and completion activities associated with hydraulic fracturing, as well as complementary water-related services that support oil and gas well completion and production activities, including containment, monitoring, treatment and recycling, flowback, hauling, gathering and disposal. Select also develops and manufactures a full suite of specialty chemicals used in the well completion process and production chemicals used to enhance performance over the producing life of a well. Select currently provides services to exploration and production companies and oilfield service companies operating in all the major shale and producing basins in the United States. For more information, please visit Select's website, http://www.selectenergy.com.
Safe Harbor Statement
This press release contains forward-looking statements that relate to future results and events that are not facts and constitute forward-looking statements. These forward-looking statements are based on the Company’s current expectations, estimates and assumptions and, as such, involve certain risks and uncertainties. The ability of the Company to predict results or the actual effects of its plans and strategies is subject to inherent uncertainty. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors. All statements other than statements of historical fact, including statements containing the words “intends,” “believes,” “expects,” “will,” and similar expressions, are statements that could be deemed to be forward-looking statements. In addition, the forward-looking statements represent the Company’s views as of the date as of which they were made. The Company anticipates that subsequent events and developments may cause its views to change. However, although Basic may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof.
Contacts:
Investors
Trey Stolz
Director of Financial Planning & Analysis
Basic Energy Services, Inc.
817-334-4100
Media
Andrew Siegel / James Golden / Aura Reinhard
Joele Frank Wilkinson Brimmer Katcher
212-355-4449
Cover |
Aug. 17, 2021 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Aug. 17, 2021 |
| Entity File Number | 1-32693 |
| Entity Registrant Name | Basic Energy Services, Inc. |
| Entity Central Index Key | 0001109189 |
| Entity Tax Identification Number | 54-2091194 |
| Entity Incorporation, State or Country Code | DE |
| Entity Address, Address Line One | 801 Cherry Street |
| Entity Address, Address Line Two | Suite 2100 |
| Entity Address, City or Town | Fort Worth |
| Entity Address, State or Province | TX |
| Entity Address, Postal Zip Code | 76102 |
| City Area Code | 817 |
| Local Phone Number | 334-4100 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Title of 12(b) Security | Common Stock, $0.01 par value per share* |
| Trading Symbol | BASX* |
| Entity Emerging Growth Company | false |