Asset Purchase Agreement American Rig Housing, Inc. dated February 25, 2008; Bill of Sale; Lease Agreement; Release

This Asset Purchase Agreement (“Agreement”) is made as of February 27, 2008, by and among (i) Best Energy Services, Inc., a Nevada corporation (“Buyer”), (ii) American Rig Housing, Inc., a Texas corporation (“Seller”), and (iii) Larry Hargave, a resident of Houston, Texas (“Shareholder”).

Seller desires to sell, assign, transfer and convey to Buyer certain assets and specified obligations and liabilities of Seller, and Buyer desires to purchase such assets from Seller and to assume such obligations and liabilities, each as described herein.

In consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

1.1 Definitions. For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article I:

“Agreement” – as defined in the Preamble of this Agreement.

“Assets” – as defined in Section 2.1.

“Assigned Seller Contracts” – as defined in Section 2.1(c).

“Balance Sheet” – as defined in Section 3.4.

“Bill of Sale” – as defined in Section 2.4(i).

“Board of Directors” – as defined in Section 3.2(b)(i).

“Buyer” – as defined in the Preamble of this Agreement.

“Buyer’s Closing Documents” – as defined in Section 4.2(a).

“Closing” – as defined in Section 2.3.

 

“Closing Date” – as defined in Section 2.3.

“Consent” – any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).

“Contemplated Transactions” – all of the transactions contemplated by this Agreement, including: (a) the sale of the Assets by Seller to Buyer; (b) the execution, delivery, and performance of the Bill of Sale, the Shareholder’s Release, the Yard Lease Agreement and all other documents or agreements executed, delivered and performed in connection with this Agreement; and (c) the performance by Buyer and Seller of their respective covenants and obligations under this Agreement.

“Contract” – any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding.

“Damages” – as defined in Section 8.2.

“Disclosure Schedule” – the disclosure schedule delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement.

“Effective Time” – as defined in Section 2.3.

“Encumbrance” – any charge, claim, community property interest or similar equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“Facilities” – any real property, leaseholds, or other interests in real property currently or formerly owned or operated by the Seller and any buildings, plants or structures currently or formerly owned or operated by the Seller. 

“GAAP” – generally accepted United States accounting principles, including the statements and interpretations of the U.S. Financial Accounting Standards Board.

“Governmental Authorization” – any approval, consent, license, permit, waiver, or other authorization issued, granted or given by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” – any: (a) federal, state, local, municipal, foreign, or other government; (b) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (c) multi-national organization or body; or (d) body properly exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“Indemnified Persons” – as defined in Section 8.2.

 

“Interim Balance Sheet” – as defined in Section 3.4.

“Law” – any statute, law, rule, regulation, ordinance or other pronouncement having the effect of law of any Governmental Body.

“Legal Requirement” – any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, Law, principle of common law, or treaty.

“Material Contract” – as defined in Section 3.8(a).

“Order” – any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

“Ordinary Course of Business” – an action taken by a Person will be deemed to have been taken in the “Ordinary Course of Business” only if such action is taken in the ordinary course of the normal day-to-day operations of such Person.

“Organizational Documents” – (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (e) any amendment to any of the foregoing.

“Person” – any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.

“Proceeding” – any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Purchase Price” – as defined in Section 2.2.

“Related Person” – with respect to a particular individual: (a) each other member of such individual's Family; (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; and (c) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity). With respect to a specified Person other than an individual: (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); and (c) any Related Person of any individual described in

 

 

clause (b). For purposes of this definition, the “Family” of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual.

“Representative” – with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, broker, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“Retained Liabilities” – as defined in Section 2.2(b).

“Securities Act” – the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

“Seller” – as defined in the Preamble of this Agreement.

“Seller Contract” – any Contract (a) under which the Seller has or may acquire any rights, (b) under which the Seller has or may become subject to any obligation or liability, or (c) by which the Seller or any of the assets owned or used by the Seller is or may become bound.

“Seller’s Closing Documents” – as defined in Section 3.2(a).

“Shareholder” – as defined in the Preamble of this Agreement.

“Shareholder’s Release” – as defined in Section 2.4(a)(ii).

“Subsidiary” – with respect to any Person (the “Owner”), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, “Subsidiary” means a Subsidiary of the Seller.

 

“Tax” – any tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

 

“Yard Lease Agreement” – as defined in Section 2.4(a)(iii).

1.2           Usage.

(a) Interpretation.  In this Agreement, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular

 

 

capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (v) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) “hereunder,” “hereof,” “hereto,”  and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof; (vii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (viii) “or” is used in the inclusive sense of “and/or”; (ix) references herein to an “Article” or “Section” without further reference to another agreement shall mean the specified Article or Section of this Agreement; (x) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”; and (xii) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

(b) Accounting Terms and Determinations.  Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

(c) Legal Representation of the Parties.  This Agreement has been jointly drafted by the parties hereto and the parties have had an opportunity to review this Agreement with counsel and no rule of construction strictly construing this Agreement against the drafter shall be applied by a court of competent jurisdiction.

 

2.1 Purchase and Sale of Assets. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, free and clear of all Encumbrances, all right, title and interest in and to all of the assets of Seller, including but not limited to all of the following assets, wherever located (collectively, the “Assets”):

 

 

(a)           all personal property, including but not limited to all equipment (including computer equipment), fixtures and furniture, inventory, finished goods, supplies, raw materials and work in process, and all Documents of Title (as such term is defined in the Uniform Commercial Code as in effect in the State of Texas) issued to Seller with regard thereto, including the Assets listed on Exhibit A;

 

 

(b)           all intangible property, including all intellectual property rights, of Seller, and all claims and causes of action of any kind for past, present or future infringements of any such intellectual property rights; and

(c)           all of the Seller’s rights, claims and interest in and under the Seller Contracts set forth on Exhibit B (the “Assigned Seller Contracts”).

 

2.2 Purchase Price; Assumption of Liabilities.

 

(a) The aggregate purchase price for the Assets will be 6,200,000 shares of the Buyer’s common stock, valued by Buyer and Seller at $2,271,000 (the “Purchase Price”).

(b)           Other than the liabilities related to the Assigned Seller Contracts being assigned to Buyer pursuant to Section 2.1(c), all liabilities of Seller of every kind or nature (the “Retained Liabilities”) shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by Seller.

 

2.3 Closing.  The purchase and sale provided for in this Agreement (the “Closing”) will take place at the offices of Buyer’s counsel at 100 Congress Avenue, Suite 1100, Austin, Texas, on February 27, 2008, or such other place agreed to by Buyer and Seller.  The Closing shall be deemed to have occurred at 11:59 p.m. C.S.T. (the “Effective Time”) on the date on which the Closing actually takes place (the “Closing Date”).

 

2.4 Closing Obligations.  At the Closing:

 

(a) Seller will deliver to Buyer: (i) a bill of sale, in the form mutually acceptable to Buyer and Seller, executed by of Seller (the “Bill of Sale”); (ii) a release, in the form mutually acceptable to Buyer and Seller, executed by Shareholder (collectively, “Shareholder’s Release”); and (iii) a lease agreement with respect to Cleveland, Texas yard, in the form mutually acceptable to Buyer and Seller, executed by the Company (the “Yard Lease Agreement”).

 

(b) Buyer will deliver to Seller: (i) the Purchase Price by delivery of a stock certificate; and (ii) the Yard Lease Agreement, executed by Buyer.

 

2.5 Allocation.  The Purchase Price shall be allocated in accordance with Exhibit 2.5, as mutually agreed to by Buyer and Seller prior to Closing. After the Closing, the parties shall make consistent use of the allocation, fair market value and useful lives specified in Exhibit 2.5 for all Tax purposes and in all filings, declarations and reports with the Internal Revenue Service in respect thereof, including the reports required to be filed under Section 1060 of the Internal Revenue Code of 1986, as amended. Buyer shall prepare and deliver Internal Revenue Service Form 8594 to Seller within 45 days after the Closing Date to be filed by Buyer with the Internal Revenue Service. In any Proceeding related to the determination of any Tax, neither Buyer nor Seller nor Shareholder shall contend or represent that such allocation is not a correct allocation.

 

Except with respect to each section in this Article III for such disclosures as are set forth (i) in the section of the Disclosure Schedule corresponding to such section in this Article III, or (ii) in any other section of the Disclosure Schedule to the extent it is reasonably apparent from the face of such disclosure that such disclosure qualifies such section in this Article III, Seller and Shareholder jointly and severally represent and warrant to Buyer, as follows:

 

3.1 Organization and Good Standing.

 

(a) The Seller is a corporation, duly organized, validly existing and in good standing under the laws of the State of Texas, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that the Seller purports to own or use, and to perform all of its obligations under the Seller Contracts. The Seller is duly qualified to do business and is in good standing under the laws of each jurisdiction in which either the ownership or use of the properties owned or used by the Seller, or the nature of the activities conducted by the Seller, requires such qualification.

 

(b) Seller has delivered or made available to Buyer copies of the Organizational Documents of the Seller, as currently in effect.

 

3.2 Authority; No Conflict.

(a) This Agreement constitutes the legal, valid, and binding obligation of Seller and Shareholder, enforceable against Seller and Shareholder in accordance with its terms. Upon the execution and delivery by Seller and Shareholder, as applicable, of the Bill of Sale, the Shareholder’s Release, the Yard Lease Agreement and all other documents or agreements executed by Seller in connection herewith, (collectively, the “Seller’s Closing Documents”), the Seller’s Closing Documents will constitute the legal, valid, and binding obligations of Seller and Shareholder, as applicable, enforceable against Seller and Shareholder, as applicable, in accordance with their respective terms. Seller and Shareholder, as applicable, has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Seller’s Closing Documents and to perform their respective obligations under this Agreement and the Seller’s Closing Documents.

(b) The consummation or performance of any of the Contemplated Transactions by the Seller will not directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Seller, or (B) any resolution adopted by the board of directors (the “Board of Directors”) or the shareholders of the Seller; (ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Seller, or any of the assets owned or used by the Seller, may be subject; (iii) contravene, conflict with, or result in a violation of any of the terms or

 

 

requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by the Seller; (iv) cause Buyer or the Seller to become subject to, or to become liable for the payment of, any tax; (v) cause any of the assets owned by the Seller to be reassessed or revalued by any taxing authority or other Governmental Body; (vi) contravene, conflict with, or result in a violation or breach of any material provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any material Seller Contract; or (vii) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Seller. Seller is not, nor will Seller be, required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

 

3.3 Financial Statements.  The Seller has delivered to Buyer: (a) reviewed balance sheets of the Seller as at December 31 in each of the years 2005 and 2006 (the balance sheet for the calendar year ended December 31, 2006, being hereinafter referred to as the “Balance Sheet”), and the related reviewed statements of income, changes in stockholders' equity, and cash flow for each of the fiscal years then ended (including the notes thereto), all of which were prepared in accordance with GAAP, (b) an unaudited consolidated balance sheet of the Seller as at November 30, 2007 (the “Interim Balance Sheet”) and the related unaudited consolidated statements of income and cash flow for the eleven months then ended, which were prepared in accordance with GAAP. Such financial statements fairly present in all material respects the financial condition and the results of operations, changes in stockholders' equity, and cash flow of the Seller as at the respective dates of and for the periods referred to in such financial statements, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes. The financial statements referred to in this Section 3.3 reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. No financial statements of any Person other than the Seller are required by GAAP to be included in the consolidated financial statements of the Seller.

 

3.4 Title to Property and Assets.  Seller is the sole legal and beneficial owner of all right, title and interest in and to the Assets free and clear of all Encumbrances.  All tangible personal property included in the Assets is in good operating condition and repair, normal wear and tear excepted. The Assets constitute all assets, properties and rights that are necessary to enable the Buyer following the Closing to own, conduct, operate and continue the Seller’s business as currently conducted and as proposed to be conducted by the Seller and otherwise to enjoy full rights to commercial exploitation of the Assets.

 

3.5 Compliance with Legal Requirements; Governmental Authorizations.

(a)           (i)           The Seller is, and at all times since January 1, 2003 has been, in full compliance with each material Legal Requirement that is or was applicable to the Seller or to the conduct or operation of its business or the ownership or use of any of its assets; (ii) no event has occurred since January 1, 2003, or circumstance exists that (with or without notice  or lapse

 

 

of time) (A) would reasonably be expected to constitute or result in a violation by the Seller of, or a failure on the part of the Seller to comply with, any material Legal Requirement, or (B) would reasonably be expected to give rise to any obligation on the part of the Seller to undertake, or to bear a material portion of the cost of, any remedial action of any nature; and (iii) the Seller has not received, at any time since January 1, 2003, any written notice or other written communication from any Governmental Body or any other Person regarding (A) any actual or potential violation of, or failure to comply with, any material Legal Requirement, or (B) any actual or potential obligation on the part of the Seller to undertake, or to bear a material portion of the cost of, any remedial action of any nature.

(b)           Schedule 3.5(b) of the Disclosure Schedule contains a complete and accurate list of each Governmental Authorization that is held by the Seller and that is material to the operation of the business of the Seller as currently conducted. Each Governmental Authorization listed or required to be listed in Schedule 3.5(b) of the Disclosure Schedule is valid and in full force and effect.  Except as set forth in Schedule 3.5(b) of the Disclosure Schedule: (i) the Seller is, and at all times since January 1, 2003, has been, in material compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 3.5(b) of the Disclosure Schedule; (ii) no event has occurred or circumstance exists that would reasonably be expected to (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any material term or requirement of any Governmental Authorization listed or required to be listed in Schedule 3.5(b) of the Disclosure Schedule, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Schedule 3.5(b) of the Disclosure Schedule; (iii) the Seller has not received, at any time since January 1, 2003, any written notice or other written communication from any Governmental Body or any other Person regarding (A) any actual or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or (B) any actual or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization; and (iv) all applications required to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Schedule 3.5(b) of the Disclosure Schedule have been duly filed on a timely basis with the appropriate Governmental Bodies.

 

3.6 Legal Proceedings; Orders.

(a)           Schedule 3.6 of the Disclosure Schedule sets forth a complete and accurate list of all Proceedings: (i) that have been commenced by or against the Seller; or (ii) to which the Seller is a party that challenges any of the Contemplated Transactions. No other such Proceedings have been threatened by any third party.  The Seller has delivered or made available to Buyer copies of all pleadings, correspondence, and other documents relating to each Proceeding listed in Schedule 3.6 of the Disclosure Schedule. The Proceedings listed in Schedule 3.6 of the Disclosure Schedule would not reasonably be expected to have a material adverse effect on the business, operations, assets or condition of the Seller.

(b)            There is no Order to which any of the Seller is subject; and no officer,

 

 

director, agent, or employee of the Seller is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of the Seller.

 

3.7 Absence of Certain Changes and Events.  For the period from the date of the Balance Sheet to the date hereof, the Seller has conducted its business only in the Ordinary Course of Business and there has not been any:

 

(a)           damage to or destruction or loss of any asset or property of the Seller, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, of the Seller, taken as a whole;

(b)           sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any material asset or property of the Seller or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Seller, including the sale, lease, or other disposition of any of the material intellectual property assets of the Seller;

(c)           cancellation or waiver in writing of any claims or rights with a value to the Seller in excess of $25,000 except to the extent reserved for in the Balance Sheet or Interim Balance Sheet, or that will be reserved for in the Closing Balance Sheet;

(d)           written agreement, by the Seller to do any of the foregoing.

 

3.8 Contracts; No Defaults.

 

(a)           Schedule 3.8(a) of the Disclosure Schedule contains a complete and accurate list, and the Seller has delivered or made available to Buyer true and complete copies, of (each, a “Material Contract”):

 

(b)           Each Material Contract is in full force and effect and is valid and enforceable in accordance with its terms and the Seller is in full compliance with all material terms and requirements of each Material Contract;

 

 

3.9 No Material Adverse Change.  Since November 30, 2007, there has not been any material adverse change in the business, operations, customer and employee relations, properties, assets or financial condition of the Seller and no event has occurred or circumstance exists that would reasonably be expected to result in such a material adverse change.

 

3.10 Solvency. Seller will not be insolvent after the consummation of the Contemplated Transactions. As used in this section, “insolvent” means, with respect to Seller, that (i) the aggregate of Seller’s property, exclusive of any property which it may have conveyed, transferred, concealed, removed or permitted to be concealed or removed, with intent to defraud, hinder or delay its creditors, shall not at a fair valuation be sufficient in amount to pay its debts; or (ii) Seller is unable, by its available assets or the honest use of credit, to pay its debts as they become due. Immediately after giving effect to the consummation of the Contemplated Transactions: (i) Seller will be able to pay its Liabilities as they become due in the usual course of its business; and (ii) Seller will have assets (calculated at fair market value) that exceed its Liabilities. The cash available to Seller, after taking into account all other anticipated uses of the cash, will be sufficient to pay such debts and judgments against Seller.

 

3.11 Disclosure.                                No representation or warranty of Seller in this Agreement, the Disclosure Schedule or any other certificate or document delivered by Seller pursuant to this Agreement, and no statement in this Agreement, the Disclosure Schedule or any other certificate or document delivered by Seller pursuant to this Agreement, omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. There is no fact known to Seller that has specific application to Seller or the Seller and that materially adversely affects the assets, business, prospects, financial condition, or results of operations of the Seller that has not been set forth in this Agreement or the Disclosure Schedule.

 

3.12 Brokers and Finders.  Neither Seller nor its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement.

Buyer represents and warrants to Seller as follows:

 

4.1 Organization and Good Standing.  Buyer is a corporation validly established, currently existing, and in good standing under the laws of State of Texas.

 

4.2 Authority; No Conflict.

(a) This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms.  Upon the execution and delivery by Buyer of the Yard Lease Agreement and all other documents or agreements executed by Buyer in connection herewith, (collectively, the “Buyer’s Closing Documents”), the Buyer’s Closing Documents will constitute the legal, valid, and binding obligations of

 

 

Buyer, enforceable against Buyer in accordance with their respective terms. Buyer has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Buyer’s Closing Documents and to perform its obligations under this Agreement and the Buyer’s Closing Documents.

(b) Except as set forth in Schedule 4.2, neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to: (i) any provision of Buyer's Organizational Documents; (ii) any resolution adopted by the Board of Directors or the shareholders of Buyer; (iii) any Legal Requirement or Order to which Buyer may be subject; or (iv) any Contract to which Buyer is a party or by which Buyer may be bound. Except as set forth in Schedule 4.2, Buyer is not, nor will it be, required to obtain any Consent from any third-party Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

 

4.3 Certain Proceedings.  There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions.

 

4.4 Brokers and Finders.  Neither Buyer, nor its officers and agents have incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement.

Buyer's obligation to purchase the Assets and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):

 

5.1 Accuracy of Representations.  Each of Seller’s representations and warranties in this Agreement must have been accurate in all respects as of the Closing Date.

 

5.2 Seller’s Performance.

(a) All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects.

(b) Each document required to be delivered by Seller pursuant to Section 2.4(a) must have been delivered.

 

 

5.3 Consents.  Each of the Consents identified in Schedule 4.2, if any, must have been obtained and must be in full force and effect.

 

5.4 Additional Documents.  Each of the following documents must have been delivered to Buyer:

(a) the certificate of incorporation and all amendments thereto of the Seller, duly certified as of a date not more than 30 days prior to the Closing Date by the Secretary of State of the State of Texas;

(b) certificates dated as of a date not more than 30 days prior to the Closing Date as to the good standing of the Seller executed by the Secretary of State of the State of Texas and the Texas Comptroller’s Office; and

 

(c) such other documents as Buyer may reasonably request for the purpose of (i)  evidencing the accuracy of any of Seller’s representations and warranties, (ii) evidencing the performance by Seller of, or the compliance by Seller with, any covenant or obligation required to be performed or complied with by Seller on or before the Closing Date, (iii) evidencing the satisfaction of any condition referred to in this Article V, or (v) otherwise facilitating the consummation or performance of any of the Contemplated Transactions.

 

5.5 Delivery of W-8 or W-9. On or prior to the Closing Date, Seller shall have delivered a fully-executed W-8 or W-9 IRS form, as applicable.

 

5.6 Due Diligence.  On or prior to the Closing Date, Buyer shall completed the business, legal, financial, tax and accounting due diligence review of the Seller to its sole satisfaction.

Seller’s obligation to sell the Assets and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Seller, in whole or in part):

 

6.1 Accuracy of Representations.  Each of Buyer's representations and warranties in this Agreement must have been accurate in all respects as of the Closing Date.

 

6.2 Buyer’s Performance.

(a) All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been performed and complied with in all material respects.

(b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 2.4(b) and must have made the payments required to be made by

 

 

Buyer pursuant to Section 2.4(b).

 

6.3 Consents.  Each of the Consents identified in Schedule 3.2 of the Disclosure Schedule, if any, must have been obtained and must be in full force and effect.

 

6.4 Additional Documents.  Buyer must have caused the following documents to be delivered to Seller such other documents as Seller may reasonably request for the purpose of (i) evidencing the accuracy of any representation or warranty of Buyer, (ii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, (iii) evidencing the satisfaction of any condition referred to in this Article VI, or (v) otherwise facilitating the consummation of any of the Contemplated Transactions.

7.1 Payment of All Taxes Resulting From Sale of Assets by Seller.  Seller shall pay in a timely manner all Taxes resulting from or payable in connection with the sale by Seller of the Assets pursuant to this Agreement, regardless of the Person on whom such Taxes are imposed by Legal Requirements.

7.2 Payment of Other Retained Liabilities.  If Buyer reasonably determines that Seller’s failure to make any payments related to the Retained Liabilities will impair Buyer’s use or enjoyment of the Assets or conduct of the business previously conducted by Seller with the Assets, Buyer may, upon ten business days’ notice to Seller, elect to make all such payments directly (but shall have no obligation to do so) and Seller shall immediately reimburse Buyer for such amounts.

7.3 Restrictions on Seller Dissolution and Distributions.  Seller shall not make any distribution of the proceeds received pursuant to this Agreement until Seller has paid, or made adequate provision for the payment, of all of its obligations pursuant to applicable Legal Requirements, including its obligations to pay or otherwise satisfy all Retained Liabilities.

7.4 Assistance in Proceedings.  For a period of two years after the Closing Date, Seller will cooperate with Buyer and its counsel in the contest or defense of, and make available its personnel and provide any testimony and access to its books and Records in connection with, any Proceeding involving or relating to (a) any Contemplated Transaction or (b) any action, activity, circumstance, condition, conduct, event, fact, failure to act, incident, occurrence, plan, practice, situation, status or transaction on or before the Closing Date involving Seller or its business.

 

7.5 Noncompetition, Nonsolicitation and Nondisparagement.

 

(a)           Noncompetition.  For a period of five years after the Closing Date, Seller shall not, anywhere in the world, directly or indirectly invest in, own, manage, operate, finance, control, advise, render services to or guarantee the obligations of any Person engaged in or

 

 

planning to become engaged in any business that is competitive with Seller’s business as of the Closing Date.

 

(b)           Nonsolicitation.  For a period of three years after the Closing Date, Seller shall not, directly or indirectly:

 

(i)           solicit the business of any Person who is a customer of Seller prior to the Closing or Buyer after the Closing with respect to the sale of products of the type sold by Seller;

 

(ii)           cause, induce or attempt to cause or induce any customer, supplier, licensee, licensor, franchisee, employee or consultant of Seller prior to the Closing or Buyer after the Closing to cease doing business with Buyer, to deal with any competitor of Buyer or in any way interfere with its relationship with Buyer;

 

(iii)           cause, induce or attempt to cause or induce any customer, supplier, licensee, licensor, franchisee, employee or consultant of Seller on the Closing Date or within the year preceding the Closing Date to cease doing business with Buyer, to deal with any competitor of Buyer or in any way interfere with its relationship with Buyer; or

 

(iv)           hire, retain or attempt to hire or retain any employee or independent contractor of Buyer or in any way interfere with the relationship between Buyer and any of its employees or independent contractors.

 

(c)           Nondisparagement.  After the Closing Date, Seller shall not disparage Buyer or any of Buyer’s directors, officers, employees or agents. After the Closing Date, Buyer shall not disparage Seller or any of Seller’s shareholders, directors, officers, employees or agents.

 

(d)           Modification of Covenant.  If a final judgment of a court or tribunal of competent jurisdiction determines that any term or provision contained in Section 7.5(a) through (c) is invalid or unenforceable, then the parties agree that the court or tribunal will have the power to reduce the scope, duration or geographic area of the term or provision, to delete specific words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. This Section 7.5 will be enforceable as so modified after the expiration of the time within which the judgment may be appealed. This Section 7.5 is reasonable and necessary to protect and preserve Buyer’s legitimate business interests and the value of the Assets and to prevent any unfair advantage conferred on Seller.

7.6 Customer and Other Business Relationships.  For a period of two years from the Closing Date, Seller will cooperate with Buyer in its efforts to continue and maintain for the benefit of Buyer those business relationships of Seller existing prior to the Closing and relating to the business of Seller to be operated by Buyer after the Closing, including relationships with lessors, employees, regulatory authorities, licensors, customers, suppliers and others, and Seller will satisfy the Retained Liabilities in a manner that is not detrimental to any of such

 

 

relationships. Seller will refer to Buyer all inquiries relating to such business. Neither Seller nor any of its officers, directors, shall take any action that would tend to diminish the value of the Assets after the Closing or that would interfere with the business of Buyer prior to the Closing or of Seller after the Closing.

7.7 Change of Name.  On or before the Closing Date, Seller shall (a) amend its Organizational Documents and take all other actions necessary to change its name to one sufficiently dissimilar to Seller’s present name, in Buyer’s judgment, to avoid confusion, and (b) take all actions requested by Buyer to enable Buyer or any of its Related Persons to change its name to Seller’s present name.

 

7.8 Further Assurance.  The parties shall cooperate reasonably with each other and with their respective Representatives in connection with any steps required to be taken as part of their respective obligations under this Agreement, and shall (a) furnish upon request to each other such further information; (b) execute and deliver to each other such other documents; and (c) do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the Contemplated Transactions.

 

 

8.1 Survival.  All representations, warranties, covenants, and obligations in this Agreement, the Disclosure Schedule and any other certificate or document delivered pursuant to this Agreement will survive the Closing.

 

8.2 Indemnification and Payment of Damages by Seller and Shareholder.  After the Closing, Seller and Shareholder will jointly and severally indemnify and hold harmless Buyer, and Buyer’s respective Representatives, stockholders, controlling persons, and affiliates (collectively, the “Indemnified Persons”) from and against, and will pay to the Indemnified Persons the amount of any loss, liability, claim, damage, expense (including reasonable costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third-party claim (collectively, “Damages”), arising, directly or indirectly, from or in connection with:

(a)           any Breach of any representation or warranty made by Seller in this Agreement, the Disclosure Schedule or any other certificate or document delivered by Seller pursuant to this Agreement;

(b)           any Breach by Seller of any covenant or obligation of Seller in this Agreement;

(c)           any product shipped or manufactured by, or any services provided by, the Seller prior to the Closing Date;

(d)           any noncompliance by Seller with the applicable provisions of any fraudulent transfer law or bulk sales laws in respect of the Contemplated Transactions;

 

 

(e)           any liability under the Worker Adjustment and Retraining Notification Act or any similar state or local Legal Requirement that may result from an “Employment Loss”, as defined by 29 U.S.C. sect. 2101(a)(6), caused by any action of Seller prior to the Closing or by Buyer’s decision not to hire previous employees of Seller; and

 

(f)           any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with the Seller or the Seller (or any Person acting on their behalf) in connection with any of the Contemplated Transactions.

Seller and Shareholder shall have no liability for indemnification with respect to claims under Section 8.2(a) until the total of all Damages with respect to such matters exceeds $25,000 at which time Seller shall be liable for indemnification for all Damages with respect to such claims (including the first $25,000 of such Damages). However, the immediately preceding sentence shall not apply to claims under Section 8.2(a) with respect to matters arising in respect of Sections 3.2(a), 3.4 and 3.12. Seller’s total liability for Damages pursuant to this Article VIII shall not exceed $1,700,000 except for (i) Damages relating to claims arising out of or related to Seller’s representations regarding ownership by Seller of the Assets free and clear of any Encumbrances as set forth in Section 3.4, or (ii) Damages from any intentional breach by Seller or Shareholder of any of Seller’s or Shareholder’s representations, warranties, covenants or obligations, and Seller and Shareholder will be jointly and severally liable for all Damages with respect to any such breaches.

 

8.3 Procedure for Indemnification – Third Party Claims.

(a)           Promptly after receipt by an Indemnified Person of notice of the commencement of any Proceeding against such Indemnified Person, such Indemnified Person will, if a claim is to be made against Seller under Section 8.2, give notice, setting forth the factual basis for such claim in reasonable detail to the extent known, to the Seller of the commencement of such claim, but the failure to notify Seller will not relieve Seller of any liability that Seller may have to any Indemnified Person, except to the extent that Seller is prejudiced by the Indemnified Person's failure to give such notice.

(b)           If any Proceeding referred to in Section 8.3(a) is brought against an Indemnified Person and such Indemnified Person gives notice to Seller of the commencement of such Proceeding, Seller will be entitled to participate in such Proceeding and, to the extent that Seller wishes (unless (i) Seller or Shareholder is also a party to such Proceeding and the Indemnified Person determines in good faith that joint representation would be inappropriate, or (ii) Seller fails to provide reasonable assurance to the Indemnified Person of Seller’s financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel reasonably satisfactory to such Indemnified Person and, after notice from Seller to the Indemnified Person of Seller’s election to assume the defense of such Proceeding, Seller will not, as long as Seller diligently conducts such defense, be liable to the Indemnified Person under this Article VIII for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the Indemnified Person in connection with the defense of such Proceeding. If Seller assumes the defense of a Proceeding, (i) no compromise or settlement of

 

 

such claims may be effected by Seller without the Indemnified Person's consent (not to be unreasonably withheld, delayed or conditioned) unless (A) there is no finding or admission of any violation of Legal Requirements, and (B) there is no liability or restriction on the Indemnified Person; and (ii) the Indemnified Person will have no liability with respect to any compromise or settlement of such claims effected without such Indemnified Person’s consent. If notice is given to Seller of the commencement of any Proceeding and Seller does not, within 20 days after the Indemnified Person's notice is given, give notice to the Indemnified Person of Seller’s election to assume the defense of such Proceeding, the Indemnified Person shall diligently conduct the defense and Seller will be bound by any determination made in such Proceeding or any compromise or settlement effected by the Indemnified Person.

 

8.4 Procedure for Indemnification – Other Claims.  A claim for indemnification for any matter not involving a third-party claim shall be promptly asserted by notice to Seller.

 

8.5 Payment of Indemnification Claims. All claims for indemnification made against by an Indemnified Person shall be paid by Seller or Shareholder to such Indemnified Person within 10 days of the later of (i) notice of such claim pursuant to Section 8.2 or Section 8.3, or (ii) the resolution thereof by the parties or pursuant to any Proceeding brought by an Indemnified Person with respect thereto.

 

9.1 Expenses.  Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of its Representatives.

 

9.2 Public Announcements.  Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer and Seller mutually agree.

 

9.3 Confidentiality.  Buyer and Seller will maintain in confidence, and will cause their respective Representatives to maintain in confidence, this Agreement, any related agreement and the Contemplated Transactions and not use to the detriment of another party or the Seller any written, oral, or other information obtained in confidence from another party or the Seller in connection with this Agreement or the Contemplated Transactions, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any Consent required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by legal proceedings.

 

9.4 Notices.  All notices, requests, demands and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or

 

 

facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties):

 

Seller:                      American Rig Housing, Inc.

1010 Lamar Avenue

Suite 1200

Houston, Texas 77002

Attention: Larry Hargrave

Facsimile No.:

Email: ***@***

Buyer:                     Best Energy Services, Inc.

1010 Lamar

Suite 1200

Houston, Texas 77002

Attention: Larry Hargrave, Chief Executive Officer

Facsimile No.: (713) 933-2602

Email: ***@***

with a copy (which shall not be considered notice) to:

Jackson Walker L.L.P.

100 Congress Avenue

Suite 1100

Austin, Texas 78701

Attention: Lawrence A. Waks, Esq.

Facsimile No.: (512) 236-2002

Email: ***@***

 

9.5 Further Assurances.  The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

 

9.6 Waiver.  Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a

 

 

waiver or renunciation of the claim or right unless in writing signed by Buyer, with respect to a waiver on behalf of Buyer, and by Seller, with respect to a waiver on behalf of Seller; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

 

9.7 Entire Agreement; Modification; Termination.  This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. This Agreement may be terminated by mutual consent of Buyer and Seller.

 

9.8 Assignments, Successors, and No Third Party Rights.  Neither party may assign any of its rights under this Agreement without the prior consent of the other parties except that Buyer may assign any of its rights under this Agreement to any Subsidiary or other Related Person of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties.  Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns.

 

9.9 Severability.  If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

9.10 Time of Essence.  With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

 

9.11 Governing Law.  This Agreement (including any claim or controversy arising out of or relating to this Agreement) shall be governed by the laws of the State of Texas, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Texas.

 

9.12 Jurisdiction; Service of Process.  Any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction may be brought in the courts of the State of Texas, County of Travis, or, if it has or can acquire jurisdiction, in the United States District Court for the Western District of Texas – Austin Division, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such Proceeding, waives any objection that any such party may now or hereafter have to venue or to convenience of forum,

 

 

agrees that all claims in respect of the Proceeding shall be heard and determined only in any such court and agrees not to bring any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction in any other court. The parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the parties irrevocably to waive any objections to venue or to convenience of forum. Process in any Proceeding referred to in the first sentence of this section may be served on any party anywhere in the world.

 

9.13 Counterparts; Facsimile Execution. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. The exchange of copies of this Agreement and of signature pages by facsimile transmission, PDF or other electronic file shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile, PDF or other electronic file shall be deemed to be their original signatures for all purposes.

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