ASSET PURCHASE AGREEMENT
Between
BOOTS & COOTS, L.P.
and
IWC SERVICES, INC.
Dated as of
July 22, 1997
TABLE OF CONTENTS
Page
PURCHASE AND SALE OF ASSETS OF SELLER...................................... 1
1.1 Purchase and Sale of Assets.................................... 1
1.2 Excluded Assets................................................ 3
1.3 Instruments of Transfer........................................ 3
1.4 Reserves....................................................... 4
PURCHASE PRICE............................................................. 4
2.1 Purchase Price and Payments.................................... 4
2.2 Assumption of Liabilities...................................... 6
2.3 Adjustments and Prorations..................................... 7
CLOSING.................................................................... 9
3.1 Closing Date................................................... 9
REPRESENTATIONS AND WARRANTIES OF SELLER................................... 10
4.1 Existence and Qualification.................................... 10
4.2 Authorization.................................................. 10
4.3 Approvals and Consents......................................... 10
4.4 Undisclosed Liabilities........................................ 11
4.5 Tax Returns and Audits......................................... 12
4.6 Necessary Contracts. etc....................................... 12
4.7 Material Contracts and Obligations............................. 13
4.8 Employees...................................................... 14
4.9 Absence of Certain Developments................................ 14
4.10 Real Property.................................................. 15
4.11 Title to Assets: Personal Property............................ 15
4.12 Necessary Property............................................. 16
4.13 Compliance with Laws........................................... 16
4.14 Transactions................................................... 16
4.15 Litigation and Legal Proceedings............................... 16
4.16 Financial Statements........................................... 17
4.17 Brokers' Fees.................................................. 17
4.18 Pensions and Other Deferred Compensation....................... 17
4.19 Benefit Plans.................................................. 18
4.20 Insurance, Surety Bonds, Damages............................... 18
4.21 Relationships with Affiliates.................................. 18
4.22 Relationships with Suppliers and Customers..................... 19
4.23 Subsidiaries................................................... 19
4.24 Representations of General Partners............................ 19
4.25 Representations and Warranties................................. 20
REPRESENTATIONS AND WARRANTIES OF BUYER.................................... 20
5.1 Organization................................................... 20
5.2 Authorization of Agreement..................................... 20
5.3 No Default..................................................... 21
5.4 Litigation..................................................... 21
5.5 Articles and Bylaws............................................ 21
5.6 Capitalization................................................. 21
5.7 No Conflicts; Required Approvals and Consents.................. 22
5.8 Undisclosed Liabilities........................................ 22
5.9 Necessary Contracts. etc....................................... 23
5.10 Absence of Certain Developments................................ 23
5.11 Title to Assets: Personal Property............................ 24
5.12 Compliance with Laws........................................... 24
5.13 Transactions................................................... 24
5.14 Financial Statements........................................... 25
5.15 Brokers' Fees.................................................. 25
5.16 Subsidiaries................................................... 25
5.17 Representations and Warranties................................. 25
CONDUCT OF BUSINESS PRIOR TO CLOSING........ 25
6.1 Seller's Restrictions on Operations Prior to Closing Date...... 25
6.2 Buyer's Restrictions on Operations Prior to Closing Date....... 27
INVESTIGATION BY BUYER...................... 28
7.1 Access to Records.............................................. 28
7.2 Confidentiality of Information................................. 28
FURTHER COVENANTS.......................................................... 29
8.1 Delivery of Documents to Buyer................................. 29
8.2 Transfer of Agreements......................................... 29
8.3 Further Assurances............................................. 30
8.4 Employee Benefit Matters....................................... 30
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................................ 31
9.l Compliance with Agreement...................................... 31
9.2 Correctness of Representations and Warranties.................. 31
9.3 Delivery of Documents.......................................... 31
9.4 No Adverse Change in Business or Properties.................... 31
9.5 Certificate of Officer......................................... 32
9.6 Opinion of Counsel............................................. 32
9.7 Absence of Litigation.......................................... 32
9.8 Consents....................................................... 32
9.9 Employment Agreements.......................................... 32
9.10 Proceedings and Documents...................................... 32
9.11 Receivables Report............................................. 33
9.12 Deliveries..................................................... 33
9.13 Private Placement Representations.............................. 33
9.14 Lockup Agreements.............................................. 33
9.15 Subsequent Schedules........................................... 33
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CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS............................... 34
10.1 Correctness of Representations and Warranties.................. 34
10.2 Compliance with Agreement...................................... 34
10.3 No Adverse Change in Business or Properties.................... 34
10.4 Certificate of Officer......................................... 34
10.5 Opinion of Counsel............................................. 35
10.6 Absence of Litigation.......................................... 35
10.7 Proceedings and Documents...................................... 35
EXPENSES OF NEGOTIATION AND TRANSFER....................................... 35
11. Expenses....................................................... 35
RIGHTS TO TERMINATE BREACH................................................. 35
12. Termination.................................................... 35
INDEMNIFICATION............................................................ 36
13.1 Indemnification by Seller and its General Partners............. 36
13.2 Indemnification by Buyer....................................... 37
13.3 Notice and Right to Defend Third Party Claims.................. 38
REGISTRATION RIGHTS........................................................ 39
14.1 Certain Definitions............................................ 39
14.2 Demand Registration............................................ 40
14.3 "Piggyback" Registration....................................... 41
14.4 Registration Procedures........................................ 42
14.5 Allocation of Expenses......................................... 44
14.6 Indemnification................................................ 44
NONCOMPETITION............................................................. 46
15.1 Noncompetition Agreement....................................... 46
MISCELLANEOUS.............................................................. 47
16.1 Survival....................................................... 47
16.2 Change of Seller's Name........................................ 47
16.3 Assignment..................................................... 47
16.4 Successors..................................................... 47
16.5 Entire Agreement............................................... 47
16.6 Power of Attorney.............................................. 47
16.7 Amendments in Writing.......................................... 47
16.8 Interpretation................................................. 48
16.9 Arbitration.................................................... 48
16.10 Notices........................................................ 48
16.11 Severability................................................... 49
16.12 Headings....................................................... 49
16.13 Counterparts................................................... 49
16.14 Telecopy Execution and Delivery................................ 49
16.15 Bulk Sales Law................................................. 49
16.16 Effectiveness.................................................. 49
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[PAGE 4 TO COME]
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LIST OF SCHEDULES
Schedule 1.1(A) - Real Property
Schedule 1.1(B) - Real Property Leases
Schedule l. l (C) - Equipment and Property
Schedule 1.1(D) - Choses-in-Action
Schedule 1.1(E) - Patents, Copyrights, Trademarks and Service Marks
Schedule 1.1(F) - Motor Vehicles
Schedule 1.1(G) - Subsidiaries
Schedule 1.2 - Excluded Assets
Schedule 2.1(A) - Promissory Notes
Schedule 2.1(B) - Designation of Series A and Series B Stock
Schedule 2.1(C) - Purchase Price Allocation
Schedule 2.2(A) - Assumption Agreement
Schedule 2.3(B) - Equipment Purchased by Seller at Buyer's Request
Schedule 4.3 - Approvals and Consents for Seller
Schedule 4.5 - Tax Returns
Schedule 4.6(A) - Necessary Contracts
Schedule 4.6(B) - Defaults under Necessary Contracts
Schedule 4.7(A) - Material Agreements
Schedule 4.7(B) - Defaults under Material Agreements
Schedule 4.8 - Employees
Schedule 4.9 - Certain Developments
Schedule 4.10 - Encumbrances on Real Property
Schedule 4.11 - Exceptions to Title - Personal Property
Schedule 4.14 - Material Adverse Changes
Schedule 4.15 - Litigation and Legal Proceedings
Schedule 4.16 - Financial Statements
Schedule 4.19 - Claims under Benefit Plans
Schedule 4.20 - Insurance
Schedule 4.21 - Relationships with Affiliates
Schedule 4.22 - Relationships with Suppliers and Customers
Schedule 4.23 - Interests in Other Entities
Schedule 5.5 - Outstanding Rights for Capital Stock of Buyer
Schedule 5.6 - Options, Warrants and Other Rights
Schedule 5.7 - Capitalization of Public Company
Schedule 5.8 - Approvals and Consents for Buyer
Schedule 5.11 - Certain Developments
Schedule 5.15 - Financial Statements
Schedule 5.17 - Subsidiaries
Schedule 6.2 - Exceptions to Buyer's Restrictions on Operations
Schedule 9.9(A) - Form of Employment Agreement
Schedule 9.13 - Form of Subscription Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, made and entered into as of this 22nd day of
July, 1997, by and between Boots & Coots, L.P., a Colorado limited partnership
("Seller"), and IWC Services, Inc., a Texas corporation ("Buyer").
WHEREAS, Seller owns and operates an oil well fire fighting and well
control business; and
WHEREAS, Seller in reliance upon the representations and warranties of
Buyer, desires to sell to Buyer and Buyer, in reliance upon the representations
and warranties of Seller, desires to purchase from Seller, all of the assets,
property and business relating to the oil well fire fighting and well control
business operated by Seller and its subsidiaries (such assets, properties and
business, collectively referred to herein as the "Business") but specifically
excluding those assets described in Section 1.2 hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
PURCHASE AND SALE OF ASSETS OF SELLER
1.1 Purchase and Sale of Assets.
Seller agrees to sell, assign, transfer, convey, bargain, grant and deliver
to Buyer, and Buyer agrees to purchase from Seller, all on the terms and
conditions hereinafter set forth, all right, title, interest and benefit,
including all of Seller's right, title, interest and benefit, of whatever kind
and nature, real, personal and mixed, tangible and intangible, whether or not
reflected on Seller's books and records, known or unknown, accrued, absolute,
contingent or otherwise, in and to the assets, properties and rights (but
excluding those assets described in Section 1.2 hereof) with respect to the
Business, all as the same exist on the Effective Date (as hereinafter defined),
free and clear of and expressly excluding all debts, liabilities, obligations,
taxes, liens and encumbrances of any kind, character or description, whether
accrued, absolute, contingent or otherwise (and whether or not reflected or
reserved against in the balance sheets, books of account and records of Seller)
(the foregoing collectively referred to as "Encumbrances"), except for the
assumption of obligations expressly provided for in Section 2.2 hereof,
including, without limitation:
(a) all the real property currently owned by Seller (the "Real Estate"),
all of which is described in Schedule 1.1(A) hereto, together with any real
property acquired by Seller between the date hereof and the Closing Date (as
hereinafter defined);
(b) all buildings, structures, and other improvements now or hereafter
actually or constructively attached to the Real Estate, and all modifications,
additions, restorations or replacements of the whole or any part thereof (the
"Improvements");
(c) all interests of Seller as landlord (whether named as such therein or
by assignment or otherwise) in all leases and subleases, if any, of the Real
Estate and the Improvements now existing or at any time hereafter made, and any
and all amendments, modifications, supplements, renewals and extensions thereof,
together with all rents, royalties, security deposits, revenues, issues,
earnings, profits, income and other benefits of the Real Estate or the
Improvements now due or hereafter to become due with respect to the Real Estate
or the Improvements or any part thereof, all of which are described in Schedule
1.1 (B) hereto;
(d) all of the equipment used by Seller in the operation of the business
including, but not limited to fire fighting equipment, blowout equipment, office
furnishings, machinery, and other property owned by Seller, all of which is
listed in Schedule l.l(C) hereto;
(e) all rights of Seller under those contracts, leases or other agreements
described and categorized in Schedule 4.6(A) and Schedule 4.7(A) hereto and
those contracts, leases or other agreements which are not required to be
disclosed pursuant to the provisions of Section 4.7 hereof because such
contracts, leases or other agreements involve payments of less than $1000
individually over the life of such agreements and $2000 in the aggregate for all
such agreements over the life of such agreements and which do not impose any
significant non-monetary obligations;
(f) all choses-in-action of Seller, all of which are described in Schedule
1.1(D) hereto;
(g) all patents, copyrights, trademarks, tradenames and service marks used
by Seller, including but not limited to the trade name "Boots & Coots", and all
of the rights associated therewith (including any and all applications,
registrations, extensions and renewals thereof), all of which are described in
Schedule 1.1(E) hereto;
(h) all engineering specifications, maps, plans, diagrams, billing service
reports, computer master tapes, books and records owned by Seller and relating
to the Business, other than its tax returns and financial records, provided,
however, that Buyer agrees to provide access,
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at Seller's expense, to such transferred books and records to Seller during
normal business hours upon reasonable notice if necessary for tax purposes for a
period not to exceed three years after Closing (as hereinafter defined); and
(i) all automotive equipment and motor vehicles utilized in the operation
of the Business by Seller, all of which are described in Schedule 1.1(F) hereto;
and
(j) all interest in each of the subsidiaries of Seller listed in Schedule
1.1(G) hereto (individually a "Subsidiary" and collectively the "Subsidiaries")
and their respective business and properties.
All of the foregoing business, assets, properties and rights to be
transferred to Buyer hereunder are collectively referred to herein as the
"Assets."
1.2 Excluded Assets.
Anything in the foregoing to the contrary notwithstanding, there shall be
excluded from the Assets (i) cash and cash equivalents (except as provided in
Section 1.4 hereof); (ii) accounts receivable for sales and services provided
prior to the Effective Time; (iii) obligations, commitments, contracts,
agreements and leases of Seller that are not expressly assumed by Buyer pursuant
to this Agreement; and (iv) such other assets as are listed on Schedule 1.2
hereto.
1.3 Instruments of Transfer.
At the Closing, Seller will deliver to Buyer (i) such deeds, bills of sale,
assignments, endorsements, checks and other good and sufficient instruments of
sale, transfer and conveyance, in such form and substance as Buyer shall
reasonably request and consistent with all applicable law, as shall be effective
to vest in Buyer all right and title to, and interest in, the Assets free and
clear of all Encumbrances, except for the assumption of obligations expressly
provided for in Section 2.2 hereof; and (ii) all contracts and commitments,
instruments, books and records and other data being conveyed hereunder and
relating to the Assets and the Business, and, simultaneous with such delivery,
Seller will take such steps as may be reasonably required to put Buyer in actual
possession and operating control of such Assets and Business. At any time and
from time to time after the Closing Date, on Buyer's reasonable request, Seller
will execute, acknowledge and deliver such further deeds, assignments and
transfers and take such actions as may be required in conformity with this
Agreement for the adequate assignment, transfer, and grant to Buyer of the
Assets.
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1.4 Reserves.
Seller shall pay any assumed accounts payable and taxes on earned revenues
of its subsidiaries on or before Closing. In addition, Seller agrees that the
promissory note to be delivered by Buyer pursuant to Section 2.1(a)(ii) will be
credited by an amount sufficient to cover two months operating expenses of
Seller as provided in Section 2.1(a)(ii). Buyer and Seller agree that the
amount of the reserve for operating expenses shall be $300,000; provided,
however, that from such amount shall be deducted the salary and benefits that
would be paid to Mr. Thompson and/or Mr. Tuppen, as applicable, during such
period in the event either or both of them have not executed Employment
Agreements with Buyer at Closing (the "Operating Expenses Reserve").
PURCHASE PRICE
2.1 Purchase Price and Payments.
The purchase price for the sale of the Assets under this Agreement shall be
$7,300,000 as adjusted pursuant to Section 2.3 hereof (collectively, the
"Purchase Price") and consisting of cash, stock and the assumption of certain
promissory notes as set forth below. The Purchase Price shall be payable as
follows:
(a) on the Closing Date:
(i) a payment of $1,050,000 by the wire transfer of immediately
available funds to the account designated by Seller in a written notice
delivered by Seller to Buyer;
(ii) delivery of a promissory note from Buyer to Seller, in the
amount of $2,000,000 (increased or decreased by any Purchase Price adjustments
pursuant to Section 2.3, decreased by the amount of the Operating Expenses
Reserve set forth in Section 1.4, and increased by the amount of the Debt [as
hereinafter defined], if paid in full by Seller at Closing) at 8% interest per
annum with a maturity of 30 days after the Closing Date (or the next day which
is not a Saturday, Sunday or a holiday on which national banking associations in
the State of Texas are closed), and on the terms and conditions as set forth in
Schedule 2.1(a)(ii) hereto; provided Seller shall pay such Debt only if the Debt
is not assumed by Buyer at Closing;
(iii) a payment of $75,000 by the wire transfer of immediately
available funds to the account designated by James Tuppin in a written notice
delivered by James Tuppin to Buyer in consideration for entering into an
employment agreement with Buyer in the form of Schedule 9.9(B) hereto and a
Lockup Agreement as required pursuant to Section 9.14 hereof;
4
(iv) a payment of $75,000 by the wire transfer of immediately
available funds to the account designated by David Thompson in a written notice
delivered by David Thompson to Buyer in consideration for entering into an
employment agreement with Buyer in the form of Schedule 9.9(B) hereto and a
Lockup Agreement as required pursuant to Section 9.14 hereof; and
(v) the assumption of the promissory notes described in Schedule
2.1(a)(v) hereto, in the aggregate principal amount of $500,000, plus all
accrued but unpaid interest thereon as described in Schedule 2.1(a)(v) (in the
aggregate, the "Debt");
(vi) the delivery of a promissory note from Buyer to Seller, in the
amount equal to eighty-five percent of the difference between (x) the Purchase
Price less $1,000,000 and (y) the sum of items 2.1(a)(i)-(iv) if the Debt has
been paid in full by Seller at Closing, or the sum of items 2.1(a)(i)-(v) if the
Debt has been assumed by Buyer at Closing, which note shall be non-interest
bearing with a maturity of 30 days after the Closing Date (or the next day which
is not a Saturday, Sunday or a holiday on which national banking associations in
the State of Texas are closed), and on the terms and conditions as set forth in
Schedule 2.1(a)(vi) hereto;
(b) stock of the Buyer as follows:
(i) if the contemplated acquisition of Buyer by a publicly-held
corporation (i.e., a corporation that files periodic reports with the Securities
and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the "Public Company") has been consummated prior to
Closing, shares of the common stock of the Public Company equal to $1,000,000
(delivered promptly after the determination of the value per share of such stock
as set forth below). The value of a share of Public Company stock shall be
determined by the weighted average closing bid price during the sixty day period
commencing thirty (30) days after the acquisition of Buyer by the Public
Company; or
(ii) if the contemplated acquisition of Buyer by a publicly-held
corporation has not occurred on or before the Closing, shares of Series A
Convertible Preferred Stock of Buyer ("Series A Stock") and shares of Series B
Convertible Preferred Stock of Buyer ("Series B Stock") with a value equal to
$1,000,000. The Series A Stock and Series B Stock shall have the terms and
provisions set forth in Schedule 2.1(B) hereof. The relative amount of Series A
Stock and Series B Stock issued hereunder shall be determined by Seller and
communicated to Buyer prior to the date of issuance.
5
The Purchase Price shall be allocated in accordance with Schedule 2.1(C) hereto.
Buyer and Seller shall, in any state, federal and/or local income tax or
information return filed by it, which includes an evaluation of the Assets
(i.e., allocation of the Purchase Price), report such value at the amounts set
forth on Schedule 2.l(C) for the various assets. If Buyer or Seller breaches
this provision, the breaching party shall indemnify and hold the nonbreaching
party harmless from any and all loss, cost and expense (including, without
limitation, attorneys' and accountants' fees, costs for any audit, any
additional income taxes and any interest found to be payable by the non-
breaching party) relating to and/or arising out of any such breach.
2.2 Assumption of Liabilities.
On the Closing Date, pursuant to the terms of the Assumption Agreement
attached hereto as Schedule 2.2(A), Buyer shall assume and agree to perform and
discharge the following as they become due for all periods from and after the
Closing Date, to the extent not theretofore performed or discharged:
(a) all obligations of Seller except those outside the normal course
of business arising from and after the Effective Time (as hereinafter defined)
and attributable and relating to the period after the Effective Time under all
leases and other agreements expressly set forth on Schedule 4.6(A) and Schedule
4.7(A) hereto or which are not required to be set forth under the provisions of
Section 4.7 because such contracts, leases or other agreements involve payments
of less than $1000 individually over the life of such agreements and $2000 in
the aggregate for all such agreements over the life of such agreements and do
not impose any significant non-monetary obligations;
(b) all obligations arising out of customer prepayments and all
other accrued and unpaid expenses that result in a Buyer's Adjustment to the
Purchase Price as provided in Sections 2.3(a), (b) and (c) hereof; and
(c) the obligations of Seller to those employees who are hired by
Buyer for accrued but unused vacation time, as adjusted through the Effective
Date pursuant to Section 2.3(a) hereof (the "Seller's Accrued Vacation Pay").
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT OR APPLICABLE LAW TO
THE CONTRARY, BUT SUBJECT TO SECTION 2.2 HEREOF, BUYER DOES NOT ASSUME AND SHALL
NOT BE LIABLE FOR ANY DEBTS, OBLIGATIONS OR LIABILITIES OF SELLER OF ANY NATURE
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ANY LIABILITY OF SELLER FOR
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ENVIRONMENTAL CONTAMINATION OR REMEDIATION, FOR TAXES OF ANY KIND OR
DESCRIPTION, ANY ACCRUED OR OTHER LIABILITY FOR CONTRIBUTION OR PAYMENTS TO BE
MADE IN RESPECT OF SERVICES BY EMPLOYEES TO SELLER DURING PERIODS THROUGH THE
CLOSING DATE INCLUDING, WITHOUT LIMITATION, ANY SEVERANCE PAY, SICK LEAVE PAY,
OBLIGATIONS UNDER SECTION 4980B OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
("CODE"), ERISA (AS HEREINAFTER DEFINED), BONUSES, OR OTHERWISE WITH RESPECT TO
SELLER'S EMPLOYEES.
2.3 Adjustments and Prorations.
The operation of the Business until 11:59 p.m. of the close of business on
the day immediately preceding the Closing Date (the "Effective Time") shall be
for the account of Seller and thereafter for the account of Buyer. The
operation of the Business and the income and expenses attributable thereto shall
be prorated as of the Effective Time. The aggregate amount paid for the Assets
on the Closing Date shall be adjusted and revenues and expenses, costs and
liabilities relating to the Business shall be prorated as follows with all
adjustments and prorations as of the Effective Time:
(a) The aggregate amount paid for the Assets shall be reduced by the
sum of the following amounts: (i) the amount of liabilities with respect to
customer prepayments, the responsibility for which is assumed by Buyer under
this Agreement, with the amount of prepayments relating to services provided
prior to the Effective Time for the account of Seller and prepayments relating
to services which Buyer will be obligated to provide after the Effective Time
for the account of Buyer, and (ii) Seller's Accrued Vacation Pay.
(b) The aggregate amount paid for the Assets shall be decreased by
the value as reflected on the 1996 Financial Statements of Seller of that
certain real property of Seller located in Midland, Texas, decreased by the
value on the 1996 Financial Statements for any of the Assets which have, at
Closing, been destroyed or rendered unfit for their intended purpose in the
operation of the Business, and shall be increased by the amount paid prior to
Closing by Seller for those items of equipment purchased by Seller at Buyer's
request as set forth on Schedule 2.3(b) hereof.
(c) All revenues and expenses, costs and liabilities relating to the
Assets being purchased by Buyer (including, without limitation, rental or
similar charges or payments payable in respect of any contracts, leases or
agreements of Seller being assumed by Buyer, insurance
7
premiums (but only to the extent such insurance, if any, is assumed by Buyer),
sales and use taxes payable in respect of services and equipment furnished in
connection with the operation of the Business, power and utility charges, real
and personal property taxes and rentals, sales and service charges, taxes and
similar prepaid and deferred items), shall be prorated, with Seller being
entitled to all revenues and liable for all such expenses, costs and liabilities
relating to the period at or prior to the Effective Time and Buyer entitled to
all revenues and liable for all such expenses relating to the period after the
Effective Time, determined in accordance with generally accepted accounting
principles consistently applied, subject to Section 2.3(e) below. An increase
or decrease in the cash price paid at Closing shall be made, as appropriate,
based upon such proration. Buyer shall use reasonable efforts to collect the
accounts receivable existing on the Closing Date but shall not be required to
bring suit with respect to any such amount and shall not be liable to Seller or
any other party for any amounts not collected thereon. The portion of any such
accounts receivable for services prior to the Effective Time are for the account
of Seller and for the period after the Effective Time are for the account of
Buyer. To the extent that either party collects accounts receivable that are
for the account of the other, such party shall promptly remit such amounts to
the other.
(d) Seller shall deliver to Buyer, not less than one (1) business
day prior to the Closing Date, a certificate (the "Closing Adjustment
Certificate") of Seller which shall set forth Seller's good faith estimate of
the amount of the adjustments and prorations set forth in Sections 2.3(a),(b)
and (c) above, as of the Effective Time. The Closing Adjustment Certificate
shall be in form and substance satisfactory to Buyer, and Seller shall deliver
to Buyer with the Closing Adjustment Certificate a copy of such supporting
evidence as shall be appropriate hereunder as Buyer may reasonably request. At
the Closing there will be a settlement between Buyer and Seller with respect to
the adjustments and prorations set forth in Sections 2.3(a), (b) and (c) above,
and the amounts determined by Buyer and Seller pursuant to the provisions of
this Section 2.3 shall be paid to Buyer or Seller, as appropriate, by an
increase or decrease in the Purchase Price, as appropriate on the Closing Date,
with a final settlement within sixty (60) days after the Closing Date.
(e) Within thirty (30) days after the Closing Date, Buyer shall
deliver to Seller a certificate (the "Final Closing Certificate") setting forth
any changes to the adjustments made at the Closing pursuant to Sections 2.3(a),
(b) and (c), together with a copy of such supporting evidence as shall be
appropriate hereunder as Seller may reasonably request. If Seller shall
8
conclude that the Final Closing Certificate does not accurately reflect the
changes to be made to the closing adjustments pursuant to this Section 2.3,
Seller shall, within thirty (30) days after its receipt of the Final Closing
Certificate, provide to Buyer its written statement (together with any
supporting documentation as Buyer may reasonably request) of any discrepancy or
discrepancies believed to exist. Seller's representatives shall be permitted
access to all books, records, billing service reports and other documents
necessary or appropriate for the determination of the adjustments and
prorations.
Buyer and Seller shall attempt jointly to resolve any discrepancies within
thirty (30) days after receipt of Seller's discrepancy statement, which
resolution, if achieved, shall be binding upon all parties to this Agreement and
not subject to dispute or review. If Buyer and Seller cannot resolve the
discrepancies to their mutual satisfaction within such thirty (30) day period,
Buyer and Seller shall, within the following ten (10) days, jointly designate a
nationally known independent public accounting firm to be retained to review the
Final Closing Certificate together with Seller's discrepancy statement and any
other relevant documents. The cost of retaining such independent public
accounting firm shall be borne equally by Seller and Buyer. Such firm shall
report its conclusions in writing to Buyer and Seller and such conclusions as to
adjustments pursuant to this Section 2.3 shall be conclusive on all parties to
this Agreement and not subject to dispute or review.
If, as a result of such adjustments, Buyer is determined to owe an amount
to Seller, Buyer shall pay such amount thereof to Seller in immediately
available funds within three business days of such determination, and if Seller
is determined to owe an amount to Buyer, Seller shall pay such amount thereof to
Buyer in immediately available funds within three business days of such
determination, and such amounts to be paid by Seller shall not be subject to the
limitations of Section 13.1.
(e) Section 2.3 hereof is intended to establish the Effective Time
as the cutoff date from which Buyer shall be entitled to the revenues and
responsible for expenses of operating the Business and shall not be construed as
an assumption by Buyer of any liability, contract, agreement or obligation which
is not specifically set forth in Section 2.2 hereof.
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CLOSING
3.1 Closing Date.
Subject to satisfaction of all conditions set forth in this Agreement, the
closing of the transactions contemplated herein (the "Closing") shall take place
on or before July 31, 1997 at least one business day after Seller has provided
Buyer with written notice that all material consents have been obtained as of
the date of such notice. The Closing shall be held at the offices of Brown,
Parker & Leahy, L.L.P., 1200 Smith Street, Suite 3600, Houston, Texas 77002 or
at such place as the parties may agree in writing. The date on which Closing
takes place is referred to as the "Closing Date."
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, Seller hereby makes (as of the date hereof
and, as of the Closing Date except for those stated to be as of the date hereof)
the following representations and warranties:
4.1 Existence and Qualification.
Seller is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Colorado and has the power and
authority to own, lease, use and operate its properties and to transact the
business in which it is engaged and to enter into this Agreement and the other
documents and instruments contemplated herein and to carry out the transactions
contemplated herein. Each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the power and authority to own, lease, use and operate its
properties and to transact the business in which it is engaged. Seller and each
of the Subsidiaries is qualified to do business, and has all appropriate or
necessary licenses in each jurisdiction or place in which the nature of its
business or the character of its properties requires such registration, except
where the failure to so register or qualify would not have a material adverse
effect.
4.2 Authorization.
This Agreement and the other documents or instruments executed and
delivered or to be executed and delivered pursuant hereto have been duly
authorized, executed and delivered by Seller. This Agreement constitutes and
the other documents or instruments executed and delivered or to be executed and
delivered when executed will constitute, the legal, valid and binding
obligations of Seller, enforceable in accordance with their terms subject to
applicable
10
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and by general principals of equity.
4.3 Approvals and Consents.
Subject to obtaining the approvals and consents set forth in Schedule 4.3
hereto required under any of Seller's material leases and agreements in order
for the transfer of such agreements to Buyer to occur pursuant to this
Agreement, neither the execution, delivery and performance by Seller of this
Agreement nor the consummation of the transactions contemplated herein will to
Seller's knowledge after due inquiry (i) conflict with, or result in a breach of
the terms of, or constitute a default under, or violation of, any lease or
agreement to which Seller or the Subsidiaries is a party or by which Seller or
the Subsidiaries, or any of their respective properties are bound, or (ii)
result in a material violation of any material law, rule, regulation, order,
writ, judgment, decree, determination or award presently in effect or having
applicability to Seller or the Subsidiaries. Subject to obtaining such
approvals and consents, such execution, delivery, performance or consummation
will not give to others any rights of termination, acceleration or cancellation
in or with respect to any leases or agreements of (or relating to the business
of) Seller or the Subsidiaries. Schedule 4.3 hereto sets forth all approvals or
consents contractually or legally required to (i) enable Buyer to continue to
lawfully operate the Business as it is presently operated by Seller and the
Subsidiaries; (ii) render this Agreement and the transactions contemplated
herein valid and effective with respect to the parties hereto (including any
approvals or consents required under Seller's organizational documents or
applicable loan agreements); and (iii) permit Seller to assign to Buyer all
material leases or agreements or other instruments to be assigned to and assumed
by Buyer hereunder. All references in this Agreement to the "knowledge" of
Seller will be deemed to include the knowledge of the executive officers of the
general partners of Seller who have executed this Agreement.
4.4 Undisclosed Liabilities.
Each of Seller and each of the Subsidiaries have no material liabilities or
obligations, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, in connection with the Business and the Assets and Seller does
not know of any basis for any claim against it or the Subsidiaries for any such
material liabilities or obligations, including specifically (but without
limiting the foregoing) (i) claims alleging the presence or the existence of any
substance or condition constituting violation of the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"), as amended, or any other
federal or state
11
environmental law or regulation except to the extent set forth in this Agreement
or in the Schedules hereto, or (ii) liabilities, debts or obligations incurred
in the ordinary course of the operation of the Business since December 31, 1996,
none of which individually or in the aggregate will have a material adverse
effect upon the business or condition, financial or otherwise, of Seller.
Neither Seller nor any of the Subsidiaries has any liabilities, material or
otherwise, that will impose transferee liability upon Buyer.
4.5 Tax Returns and Audits.
Seller and each of the Subsidiaries have filed with the appropriate
agencies all tax returns and tax reports required by law to be filed by them
with respect to the operation of the Business. Seller and each of the
Subsidiaries have paid all of its assessments, fees and taxes to the extent that
the same have become due and payable. Except as set forth on Schedule 4.5
hereto, there exists no unpaid federal, state or local income or other tax with
respect to the existence or operations of the Business or the Assets, except for
accrued taxes not yet due and payable. Seller and each of the Subsidiaries have
no liability, fixed or contingent, known or unknown, for any foreign, federal,
state or local taxes (including without limitation, income, franchise, sales,
use, occupation, property, excise, alternative or add-on minimum, social
security, employees' withholding, unemployment, disability, transfer and other
taxes) of any nature whatsoever that might impose transferee liability on Buyer.
Except as set forth in Schedule 4.5 hereto, neither Seller nor any of the
Subsidiaries holds nor has held a permit, registration, certificate or like
instrument as a "dealer" or other collecting agent from a state taxing authority
under which Seller or any of the Subsidiaries collects sales tax from the
Business and remits such tax to such taxing authority. Seller and each of the
Subsidiaries are in compliance with all applicable sales and use tax laws and
regulations.
4.6 Necessary Contracts. etc.
Seller and each of the Subsidiaries have entered into and validly holds all
necessary agreements for the operation of their respective Businesses (the
"Necessary Contracts"). All Necessary Contracts are in full force and effect,
without any pending (or to the best of Seller's knowledge, threatened)
modification, amendment or termination of such Necessary Contracts. Set forth
on Schedule 4.6(A) hereto is a true and accurate description of each Necessary
Contract to which Seller or any of the Subsidiaries is a party other than those
Necessary Contracts that are excluded assets pursuant to Section 1.2 hereof.
Except as set forth on Schedule 4.6(B) hereto, Seller and/or the Subsidiaries
party thereto have performed all of their obligations under
12
the Necessary Contracts and Seller and/or the Subsidiaries party thereto are not
in default under any Necessary Contract, nor is there any condition, event or
occurrence existing, nor is any proceeding pending (or, to the best of Seller's
knowledge, threatened) or being conducted by any governmental authority or any
other party, which would cause the termination, suspension or cancellation of
any Necessary Contract. Seller has no knowledge of any material breach or
anticipated material breach by the other parties to the Necessary Contracts.
The operation of the Business and the Assets have been and are being conducted
in accordance with all applicable provisions of such Necessary Contracts.
4.7 Material Contracts and Obligations.
(a) Attached hereto as Schedule 4.7(A) is a list of all agreements
(other than those required to be listed by Section 4.6 and other than agreements
which are excluded assets pursuant to Section 1.2 hereof and non-assignable
insurance policies) of any nature to which Seller or any of the Subsidiaries is
a party or by which Seller or any of the Subsidiaries or any of their properties
are bound which obligate Seller or any of the Subsidiaries to pay individually
under any agreement more than $1000, and in the aggregate for all such
agreements more than $2000, or which impose any significant non-monetary
obligations (collectively, the "Material Agreements"). Except as set forth on
the Schedules hereto and except as may be required under Section 601 et seq. of
ERISA, neither Seller nor any Subsidiary is a party to any written or oral
contract with respect to the Business that is not cancelable without penalty
upon thirty (30) days notice or less, including, without limitation, any:
(i) pension, profit sharing, retirement, hospitalization, insurance,
stock option, employee stock purchase, or any other employee
benefit or "fringe benefit" plan, including, without limitation,
medical or other insurance plans or any union collective
bargaining or any other contract with any labor union;
(ii) contract for the employment of any officer, director, individual
employee, or other person or entity on a full-time, part-time,
consulting or other basis;
(iii) agreement or indenture relating to the borrowing of money or
to mortgaging, pledging or otherwise placing a lien on any asset
or group of assets of Seller or any of the Subsidiaries;
(iv) guarantee of any obligation;
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(v) lease or agreement under which it is lessee or lessor, or holds
or operates any property, real or personal, owned by any other
party, except for any lease under which the aggregate annual
rental payments do not exceed $1000;
(vi) agreement or group of related agreements with the same party or
any group of affiliated parties which requires or may in the
future require aggregate consideration by or to Seller or any of
the Subsidiaries in excess of $1000 per annum; or
(vii) continuing contract for the future purchase of materials,
supplies, equipment or services.
(b) Except as disclosed on Schedule 4.7 (B) hereto, with respect to
the Business, each of Seller and each of the Subsidiaries has performed all
material obligations required to be performed by it and is not in material
default under, or in material breach of, or in receipt of any claim of default
under, any Material Agreement to which it is a party or by which it or any of
its properties are bound; Seller has no knowledge of any material breach or
anticipated material breach by the other parties to any contract or commitment
to which it and any of the Subsidiaries is a party or by which Seller or any of
the Subsidiaries or any of their respective properties are bound.
4.8 Employees.
The names of all employees of Seller and of the Subsidiaries together with
their December 31, 1996 gross salaries and wages as reported for income tax
purposes and current gross salaries are listed on Schedule 4.8 hereto. Neither
Seller nor any Subsidiary is, nor during the past six months has it been,
involved in any discussion with any unit or group seeking to become the
bargaining unit for any of its employees nor, to the best of Seller's knowledge,
has there been any threat of such discussions.
4.9 Absence of Certain Developments.
Except as set forth on Schedule 4.9 attached hereto, and except for the
transactions contemplated in this Agreement, Seller and each of the Subsidiaries
have not insofar as the Business, or the Assets are concerned, since
December 31, 1996:
(i) sold, assigned or transferred any tangible assets, except in the
ordinary course of business;
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(ii) suffered any material losses or waived any material rights,
whether or not in the ordinary course of business;
(iii) suffered any termination or cancellation of any Necessary
Contract without the consent of Buyer, including without
limitation, the contracts to be assumed by Buyer hereunder;
(iv) made any material changes in employee compensation (other than
severance pay and deferred compensation) except in the
ordinary course of business;
(v) entered into any other material transaction other than in the
ordinary course of business;
(vi) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(vii) suffered any strikes, work stoppages or other material labor
disputes adversely affecting the Business or the Assets; or
(viii) entered into any agreement or understanding to do any of the
foregoing.
4.10 Real Property.
Schedule 1.1 (A) attached hereto contains a legal description of each
parcel of Real Estate owned by Seller and the Subsidiaries in connection with
the Business with a description of the type of use of each such parcel. Seller
and the Subsidiaries have provided Buyer with a title insurance commitment with
respect to each such parcel of Real Estate and will obtain at Seller's expense
and will deliver to Buyer as soon as possible after closing a title insurance
policy with respect to each such parcel in the amounts that are allocated to the
Real Estate as set forth in Schedule 2.1(B). Except for current taxes or
assessments due but not yet payable and easements, liens, or other encumbrances
set forth on Schedule 4.10 hereto or in the title insurance commitments which
have been provided to Buyer which do not materially adversely affect their use
with respect to the Business or materially detract from their value, Seller or
the applicable Subsidiary of Seller is the sole owner (both legal and equitable)
of and has good and marketable title to each property described thereon. All of
the Real Estate and all of the real property leased by Seller or any of the
Subsidiaries has unfettered access to public roads or streets and all utilities
and services necessary for the proper conduct and operation of the Business.
15
4.11 Title to Assets: Personal Property.
Except as set forth on Schedule 4.11 hereto, Seller is the sole owner (both
legal and equitable) of and has good and marketable title to the Assets,
tangible and intangible, and has or will have at the Closing Date, the absolute
right to sell, assign, transfer, convey and deliver the Business, and such
Assets to Buyer, free and clear of all mortgages, liens, security interests,
charges, claims, restrictions and other encumbrances of every kind. All of the
Assets are in good working order and condition and are suitable for the purposes
for which they are employed in the operation of the Business, ordinary wear and
tear excluded. Except as set forth on Schedule 4.11 hereto, each Subsidiary is
the sole owner (both legal and equitable) of and has good and marketable title
to the assets, tangible and intangible, used in the conduct of its respective
portion of the Business, free and clear of all mortgages, liens, security
interests, charges, claims, restrictions and other encumbrances of every kind.
All of such assets are in good working order and condition and are suitable for
the purposes for which they are employed in the operation of the Business.
4.12 Necessary Property.
The Assets and the assets owned by the Subsidiaries constitute all of the
property used in the operation of the Business lawfully and in the manner and to
the extent presently conducted by Seller and the Subsidiaries.
4.13 Compliance with Laws.
The operation of the Business has been conducted and is being conducted in
compliance in all material respects with all applicable laws, rules, regulations
and other requirements of all federal, state, county or local governmental
authorities or agencies.
4.14 Transactions.
Except as set forth in Schedule 4.14, since December 31, 1996, neither
Seller nor any of the Subsidiaries has entered into any transaction not in the
ordinary course of its business, and there has not been any material adverse
change in the manner in which Seller or any Subsidiary conducts its Business or
any change in the assets, liabilities, property, business, operations,
prospects, customers or financial condition of Seller or any Subsidiary, the
effect of which was or will be, in any single case or in the aggregate,
materially adverse to Seller or any Subsidiary, the Assets, or the Business.
4.15 Litigation and Legal Proceedings.
Set forth on Schedule 4.15 hereto is a complete and accurate list of all
suits, claims, actions and administrative, arbitration or other similar
proceedings relating to the operation of
16
the Business or the Assets (including proceedings concerning labor disputes or
grievances, civil rights discrimination cases and affirmative action
proceedings) and all governmental investigations pending or, to the knowledge of
Seller, threatened, to which Seller or a Subsidiary is a party, or against their
respective properties or business, and each judgment, order, injunction, decree
or award relating to Seller or any Subsidiary, or the Assets (whether rendered
by a court, administrative agency or by arbitration pursuant to a grievance or
other procedure) to which Seller or any Subsidiary is a party which is
unsatisfied or requires continuing compliance therewith (such suits, actions,
claims, judgments, orders, injunctions, decrees and awards are herein referred
to as "legal proceedings"). Seller is not aware of any facts or circumstances
which would give rise to any unasserted possible material claims against the
Business or the Assets.
4.16 Financial Statements.
Schedule 4.16 hereto contains the unaudited consolidated balance sheet of
Seller for the year ended December 31, 1996, and the unaudited consolidated
statements of income and cashflow for the fiscal year then ended together with
all notes thereto (the "1996 Financial Statements"), and the unaudited
consolidated balance sheet of Seller as of April 30, 1997 and the unaudited
consolidated statements of income and cashflow for the period then ended (the
"Interim Financial Statements"; the 1996 Financial Statements and Interim
Financial Statements being referred to herein collectively as the "Financial
Statements"). The Financial Statements (i) fairly present the financial
condition of Seller and its results of operations as of the relevant dates
thereof and for the periods covered thereby, and (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of Seller's financial
condition as of the relevant dates thereof and the results of Seller's
operations for the periods covered thereby.
4.17 Brokers' Fees.
Neither Seller nor any Subsidiary, nor anyone on their behalf has retained
any broker, finder or agent or other intermediary or agreed to pay any brokerage
fee, finder's fee or commission with respect to the transactions contemplated in
this Agreement.
4.18 Pensions and Other Deferred Compensation.
(a) With the exception of pension, or retirement plans or policies
that are excluded assets pursuant to Section 1.2 hereof, neither Seller nor any
Subsidiary maintains or contributes to any pension, retirement or other Employee
Benefit Plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") (collectively, "Employee
17
Benefit Plans"). Neither Seller nor any Subsidiary has maintained or been
obligated to contribute to any multi-employer plan, as defined in Section 3(37)
of ERISA. Neither Seller nor any Subsidiary is subject to any liability
resulting from the withdrawal by Seller, any Subsidiary, or any of their
affiliates from a multi-employer plan or resulting from the termination of a
plan previously utilized in a trade or business affiliated with Seller or any
Subsidiary under Code Section 414. Each Employee Benefit Plan sponsored or
maintained by Seller or any Subsidiary or any trade or business affiliated with
Seller or any Subsidiary under Code Section 414 has been administered, without
material exception, in compliance with the terms of the plan, ERISA, the Code
and other applicable laws.
(b) Neither Seller nor any Subsidiary, nor any trade or business
affiliated with Seller or any Subsidiary under Code Section 414 is aware of the
existence of any pending or threatened governmental audit or examination of any
Employee Benefit Plan sponsored, maintained or contributed to by Seller or any
Subsidiary, or of any pending or threatened action, suit or claim (other than
routine claims for benefits which are fully covered by insurance maintained with
reputable, financially responsible insurers) against any such Employee Benefit
Plan, compensation arrangement or trustees or administrators thereof, or of any
facts that could give rise to such action, suit or claim.
4.19 Benefit Plans.
Except as set forth in Schedule 4.19, Seller has no unfunded liability or
accumulated benefit obligation with respect to any Employee Benefit Plans and no
person has asserted any claim under which Seller, any Subsidiary, or Buyer would
have any liability under any health insurance, life insurance, disability,
medical, surgical, hospital, death benefit, or any other employee benefit plan,
contract or arrangement maintained by Seller or any Subsidiary, or to which
Seller or any Subsidiary is a party or may be bound, or under any worker's
compensation or similar law, which is not self funded with adequate stop loss
insurance coverage (which is described on Schedule 4.19 along with any claims
thereunder) or fully covered by insurance maintained with reputable, responsible
financial insurers.
4.20 Insurance, Surety Bonds, Damages.
Set forth on Schedule 4.20 hereto is a list of all insurance certificates
and surety bonds of Seller and each Subsidiary now in effect, including the
coverages thereof. The premiums on such insurance policies and bonds have been
currently paid, and such policies and bonds are valid, outstanding and
enforceable, in full force and effect and insure against risks and liabilities
18
and provide for coverage to the extent and in a manner required of or
historically deemed appropriate and sufficient by Seller and each Subsidiary.
Seller and each Subsidiary will maintain coverage of similar kinds and amounts
and pay the premium for such coverage through the Closing Date.
4.21 Relationships with Affiliates.
Except as set forth in Schedule 4.21 hereto, none of the partners of Seller
nor any affiliate of Seller, individually or collectively, owns or has owned of
record or as a beneficial owner an equity interest or any other financial or
profit interest in any firm corporation or any other entity or person which (a)
has had business dealings or a material financial interest in any transaction
with Seller or any Subsidiary or (b) is in competition with Seller or any
Subsidiary with respect to any services of Seller or any Subsidiary in any
market presently served by Seller or any Subsidiary except for less than one
percent (1%) of the outstanding capital stock of any such competing business
which is publicly traded on any recognized exchange or in the over-the-counter
market.
4.22 Relationships with Suppliers and Customers.
Schedule 4.22 hereto sets forth the names and business addresses of all
customers to whom more than five percent (5%) of Seller's consolidated revenues
for fiscal year 1996 were attributable or are expected to be attributable for
fiscal year 1997. No such supplier or customer has indicated any intention to
terminate its existing business relationship with Seller or any Subsidiary or
has indicated any intention not to continue its business relationship with Buyer
following the consummation of the transactions contemplated herein.
4.23 Subsidiaries.
Other than as set forth on Schedules 1.1(G), 4.21 and 4.23 hereto, Seller
does not hold any interests in any partnerships, corporations or other entities.
Seller owns all of the interests of each entity identified on Schedule 1.1(G)
free and clear of any and all Encumbrances and there are no rights, options or
agreements requiring the issuance of any capital stock or interests in any of
such entities.
4.24 Representations of General Partners.
Each General Partner of Seller that has executed this Agreement ("General
Partner") represents the following: (i) if such General Partner is an entity, it
is duly organized, validly existing and in good standing under the laws of its
State of formation; (ii) this Agreement and the other documents or instruments
executed and delivered or to be executed and delivered
19
pursuant hereto by such General Partner have been duly authorized, executed and
delivered by such General Partner; (iii) this Agreement constitutes and such
other documents or instruments executed and delivered or to be executed and
delivered pursuant hereto by such General Partner when executed will constitute,
the legal, valid and binding obligations of such General Partner, enforceable in
accordance with their terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally; and (iv) will not conflict with, or result in a breach of the terms
of, or constitute a default under, or violation of, any agreement to which such
General Partner is a party or its properties are bound, or of any law, rule,
regulation, order, writ, judgment, decree, determination or award applicable to
such General Partner.
4.25 Representations and Warranties.
No representation or warranty made herein by Seller and no statement
contained in any certificate or other instrument furnished or to be furnished by
Seller to Buyer in connection with the transactions contemplated in this
Agreement contains or will contain any untrue statement of a material fact or,
to the best of Seller's knowledge, omits or will omit to state any facts or
statements necessary in order to make the other facts or statements set forth
herein or therein not misleading under the circumstances in which made.
REPRESENTATIONS AND WARRANTIES OF BUYER
Except if expressly stated otherwise in this section 5, all references to
Buyer include references to the Public Company which is anticipated to acquire
Buyer prior to the Closing. Buyer hereby makes (as of the date hereof and as of
the Closing Date except for those stated to be as of the date hereof) the
following representations and warranties:
5.1 Organization.
Buyer is, and Public Company will be, a corporation duly organized, validly
existing and in good standing under the laws of the states of Texas and
Delaware, respectively, and has or will have the power and authority to own,
lease, use and operate its properties and to transact the business in which it
is engaged and to enter into this Agreement and the other documents and
instruments contemplated herein and to carry out the transactions contemplated
herein. Each of Buyer's subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the power and authority to own, lease, use and operate its
properties and to transact the business in which it is engaged. Buyer and each
20
of its subsidiaries is qualified to do business, and has all appropriate or
necessary licenses in each jurisdiction or place in which the nature of its
business or the character of its properties requires such registration, except
where the failure to so register or qualify would not have a material adverse
effect.
5.2 Authorization of Agreement.
The execution and delivery of this Agreement and all other instruments or
documents executed or delivered by Buyer in connection herewith as well as all
action required to be taken hereunder or thereunder by Buyer has been duly
authorized by Buyer and upon execution and delivery, each such document will
constitute the legal, valid and binding obligation of Buyer enforceable upon and
in accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and by general principles of equity. All persons who have executed
this Agreement on behalf of Buyer are authorized to do so under its
organizational documents and the laws of its state of creation.
5.3 No Default.
The execution and delivery of this Agreement and all other instruments or
documents executed or delivered by Buyer in connection herewith and the
consummation of the transactions contemplated herein will not violate any
provision of or constitute a default under any provision in Buyer's Articles of
Incorporation, Bylaws or any agreement or instrument to which Buyer is a party
or which is otherwise applicable to Buyer or result in the acceleration of any
obligation or to the best of its knowledge, cause or give any reason for an
adverse action to be taken by any person or governmental authority under any
mortgage, lien, lease, agreement, instrument, order, judgment, or decree to
which Buyer is a party or by which it is bound and will not violate or conflict
with any other restriction to which Buyer is subject, including, to the best of
Buyer's knowledge, federal, state, and local laws and regulations.
5.4 Litigation.
As of the date hereof, there is no pending or, to the knowledge of Buyer,
threatened suit, claim, action or proceeding to which Buyer is a party which
individually or in the aggregate will have a material adverse effect upon the
business or condition, financial or otherwise, of Buyer. As of the date hereof,
no judgment, order or decree has been entered nor any such liability incurred
which has or will have such effect. There is no claim, action or proceeding
pending as of the date hereof or threatened as of the date hereof against Buyer
which will prevent or delay the consummation of the transactions contemplated in
this Agreement.
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5.5 Articles and Bylaws.
Buyer has provided to Seller complete and correct copies of its Articles of
Incorporation and Bylaws, each as amended to the date hereof. Buyer will
provide complete and current copies of any amendments to such documents. Public
Company will adopt Articles of Incorporation and Bylaws with substantially the
same provisions as those stated therein as of the date hereof.
5.6 Capitalization of Buyer. As of the date hereof, Buyer's authorized
capital stock consists of 50,000,000 shares of common stock, $0.01 par value of
which 6,178,947 shares are issued and outstanding as of the date hereof and
5,000,000 shares of preferred stock, $0.01 par value. At Closing, Buyer will,
if necessary designate and authorize shares designated as "Series A Convertible
Preferred Stock" and shares designated as "Series B Convertible Preferred Stock"
sufficient in number to consummate the purchase as required hereunder. No
shares of Series A Stock or Series B Stock are issued as of the date hereof and,
except as contemplated in this Agreement and as set forth on Schedule 5.6
hereto, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon Buyer for
the purchase or acquisition of any shares of the capital stock of Buyer. When
issued in accordance with the terms hereof, the shares of Series A Stock and
Series B Stock shall be duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with the applicable requirements of the
Securities Act and applicable state securities laws, or in transactions exempt
from registration under the Securities Act and such applicable state securities
laws.
5.7 Capitalization of the Public Company. At the Closing Date, if a
transaction has occurred between Buyer and the Public Company, Buyer shall cause
the Public Company's authorized capital stock to consist of 50,000,000 shares of
common stock, $0.01 par value and 5,000,000 shares of preferred stock, $0.01 par
value. On or before the Closing Date, Buyer and the Public Company shall
provide Seller Schedule 5.7, which shall set forth the issued and outstanding
capital stock of the Public Company and all outstanding preemptive, conversion
or other rights, options, warrants or agreements granted or issued by or binding
upon the Public Company for the purchase or acquisition of any shares of the
capital stock of the Public Company. Shares of Common Stock of the Public
Company issued in accordance with the terms hereof shall, when issued, be duly
authorized and validly issued, fully paid and nonassessable, and issued in
compliance with the applicable requirements of the Securities Act and applicable
22
state securities laws, or in transactions exempt from registration under the
Securities Act and such such applicable state securities laws.
5.8 No Conflicts; Required Approvals and Consents. There are no approvals
and consents required by Buyer in order for the payment of the Purchase Price,
including the issuance of the stock to Seller (provided that the approval of the
Public Company will be required for the issuance of the Common Stock and will be
obtained by Buyer prior to Closing) to occur pursuant to this Agreement, neither
the execution, delivery and performance by Buyer of this Agreement nor the
consummation of the transactions contemplated herein will to Buyer's knowledge
after due inquiry (i) conflict with, or result in a breach of the terms of, or
constitute a default under, or violation of, any lease or agreement to which
Buyer or its subsidiaries is a party or by which Buyer or its subsidiaries, or
any of their respective properties are bound, or (ii) result in a material
violation of any material law, rule, regulation, order, writ, judgment, decree,
determination or award presently in effect or having applicability to Buyer or
its subsidiaries, or (iii) result in the creation or imposition of any lien
against or upon the Series A Stock or the Series B Stock. Such execution,
delivery, performance or consummation will not give to others any rights of
termination, acceleration or cancellation in or with respect to any leases or
agreements of (or relating to the business of) Buyer or its subsidiaries.
Schedule 5.8 hereto sets forth all approvals or consents contractually or
legally required to (i) enable Buyer to continue to lawfully operate its
business as it is presently operated by Buyer and its subsidiaries; (ii) render
this Agreement and the transactions contemplated herein valid and effective with
respect to the parties hereto (including any approvals or consents required
under Buyer's organizational documents or applicable loan agreements).
5.9 Undisclosed Liabilities.
Buyer and each of its subsidiaries each have no material liabilities or
obligations, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, in connection with its business and Buyer does not know of any
basis for any claim against it or its subsidiaries for any such material
liabilities or obligations, including specifically (but without limiting the
foregoing) claims relating to federal or state environmental or tax liabilities
or ERISA or other employee benefits except to the extent set forth in this
Agreement or in the Schedules hereto.
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5.10 Necessary Contracts. etc.
Buyer and each of its subsidiaries have entered into and validly holds all
necessary agreements for the operation of their respective businesses (the
"Buyer Necessary Contracts"). All Buyer Necessary Contracts are in full force
and effect, without any pending (or to the best of Buyer's knowledge,
threatened) modification, amendment or termination of such Buyer Necessary
Contracts. Buyer and/or its subsidiaries party thereto have performed all of
their obligations under the Buyer Necessary Contracts and Buyer and/or its
subsidiaries party thereto are not in default under any Buyer Necessary
Contract, nor is there any condition, event or occurrence existing, nor is any
proceeding pending (or, to the best of Buyer's knowledge, threatened) or being
conducted by any governmental authority or any other party, which would cause
the termination, suspension or cancellation of any Buyer Necessary Contract.
Buyer has no knowledge of any material breach or anticipated material breach by
the other parties to the Buyer Necessary Contracts. The operation of Buyer's
and its subsidiaries' businesses have been and are being conducted in accordance
with all applicable provisions of such Buyer Necessary Contracts.
5.11 Absence of Certain Developments.
Except as set forth on Schedule 5.11 attached hereto, and except for the
transactions contemplated in this Agreement, Buyer and each of its subsidiaries
have not insofar as their respective businesses or assets are concerned, since
the date of the audited balance contained within Buyer's Financial Statements:
(i) sold, assigned or transferred any tangible assets, except in
the ordinary course of business;
(ii) suffered any material losses or waived any material rights,
whether or not in the ordinary course of business;
(iii) suffered any termination or cancellation of any Buyer
Necessary Contract without the consent of Seller;
(iv) made any material changes in employee compensation (other than
severance pay and deferred compensation) except in the ordinary
course of business;
(v) entered into any other material transaction other than in the
ordinary course of business;
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(vi) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(vii) suffered any strikes, work stoppages or other material labor
disputes adversely affecting its business or assets; or
(viii) entered into any agreement or understanding to do any of the
foregoing.
5.12 Title to Assets: Personal Property.
Buyer and its subsidiaries are the sole owner (both legal and equitable) of
and have good and marketable title to the assets, tangible and intangible,
reflected in the Buyer's Financial Statements or acquired since the date of the
balance sheet included therein, free and clear of all mortgages, liens, security
interests, charges, claims, restrictions and other encumbrances of every kind,
except (i) as set forth in the Buyer's Financial Statements or the Schedules
herein, (ii) for liens for current taxes not yet due and payable, (iii) for
statutory liens not yet delinquent, and (iv) for matters that are not, in the
aggregate, material to Buyer and its subsidiaries, taken as a whole. All such
assets are in good working order and condition and are suitable for the purposes
for which they are employed in the operation of the business, ordinary wear and
tear excluded.
5.13 Compliance with Laws.
The operation of Buyer's business has been conducted and is being conducted
in compliance in all material respects with all applicable laws, rules,
regulations and other requirements of all federal, state, county or local
governmental authorities or agencies.
5.14 Transactions.
Since the date of Buyer's Financial Statements, neither Buyer nor any of
its subsidiaries has entered into any transaction not in the ordinary course of
its business, and there has not been any material adverse change in the manner
in which Buyer or any of its subsidiaries conducts its business or any change in
the assets, liabilities, property, business, operations, prospects, customers or
financial condition of Buyer or any of its subsidiaries, the effect of which was
or will be, in any single case or in the aggregate, materially adverse to Buyer
or any of its subsidiaries, assets, or business.
5.15 Financial Statements.
Schedule 5.15 hereto contains the audited consolidated balance sheet of
Buyer for the ten-month period ended April 30, 1997, and the audited
consolidated statements of income and cashflow for the ten-month period then
ended together with all notes thereto (the "Buyer's Financial Statements"). The
Buyer's Financial Statements (i) fairly present the financial condition
25
of Buyer and its results of operations as of the relevant dates thereof and for
the periods covered thereby, and (ii) contain and reflect all necessary
adjustments and accruals for a fair presentation of Buyer's financial condition
as of the relevant dates thereof and the results of Buyer's operations for the
periods covered thereby.
5.16 Brokers' Fees.
Neither Buyer nor anyone on its behalf has retained any finder, broker,
agent or other intermediary or agreed to pay any brokerage fee, finder's fee or
commission with respect to the transactions contained in this Agreement.
5.17 Subsidiaries.
Other than as set forth on Schedule 5.17, Buyer does not hold any interests
in any partnerships, corporations or other entities. Buyer owns all of the
interests of each entity identified on Schedule 5.17 free and clear of any and
all encumbrances and there are no rights, options or agreements requiring the
issuance of any capital stock or interests in any of such entities.
5.18 Representations and Warranties.
No representation or warranty made herein by Buyer and no statement
contained in any certificate or other instrument furnished or to be furnished by
Buyer to Seller in connection with the transactions contemplated in this
Agreement contains or will contain any untrue statement of a material fact or,
to the best of Buyer's knowledge, omits or will omit to state any facts or
statements necessary in order to make the other facts or statements set forth
herein or therein not misleading under the circumstances in which made.
CONDUCT OF BUSINESS PRIOR TO CLOSING
6.1 Seller's Restrictions on Operations Prior to Closing Date.
(a) Negative Covenants. From the date of execution of this Agreement
until the Closing, Seller will not, and will cause the Subsidiaries not to,
without the prior written consent of Buyer, do or agree to do any of the
following:
(i) sell, assign, lease or otherwise transfer or dispose of any
of the Assets or any of the Assets of any Subsidiary,
except in the case of inventory in the ordinary course of
business consistent with past practices;
(ii) merge or consolidate with or into any other entity or enter
into any agreements relating hereto;
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(iii) enter into or renew, amend or modify any contracts or
leases, commitments or understandings, or other agreements
or incur any obligation or liability relating to the
Business; provided, however, that Seller and the
Subsidiaries may enter into such other contracts, leases,
commitments, understandings, or other agreements in the
ordinary course of business consistent with Seller's and
the Subsidiaries' past business practices but in no event
which would obligate Seller or any Subsidiary to pay more
than $1000 for any individual contract and $2000 in the
aggregate for all such Contracts or which would impose
significant non-monetary obligations; and provided further,
that Seller may incur obligations or liabilities for which
Seller will remain responsible after the Closing Date and
which Buyer will not assume;
(iv) with respect to the employees of the Business, enter into
or become subject to any employment, labor or union
contract not terminable at will, any professional service
contract not terminable at will, or any pension, insurance,
profit sharing, deferred compensation, retirement,
hospitalization, employee benefit, or other similar plan
not currently in effect or any renewal on different terms
(other than renewals with normal premium increases, in the
ordinary course of business); or increase the compensation
payable to any employee other than in the ordinary course
of business consistent with past practices, or increase the
benefits payable under any Employee Benefit Plan, or pay or
arrange to pay any bonus payment to any employee for which
Buyer will be obligated after the Closing.
(b) Affirmative Covenants of Seller. From the Effective Date until
the Closing Date, Seller has, and will continue to, and will cause each of the
Subsidiaries to continue to:
(i) preserve its existence and business organization intact,
use its best efforts to preserve, for Buyer, its
relationships with suppliers, customers, employees and
others having business relations with it, and keep all
Assets in their present condition, ordinary wear and tear
excepted;
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(ii) operate the Business in the normal and usual manner
consistent with its ordinary and usual course of business
and in compliance in all material respects with all
applicable laws, rules and regulations;
(iii) maintain in full force and effect all of the insurance
policies listed on Schedule 4.20, or substantially similar
policies, through the Closing Date in amounts not less than
those in effect on the date hereof;
(iv) notify Buyer of the necessity for renewal of any Necessary
Contract prior to its expiration and if requested by Buyer
renew such contract; and
(v) give Buyer prompt written notice of any material change in
any of the information in the representations and
warranties made in Section 4 hereof or the Schedules hereto
which occurs prior to the Closing.
6.2 Buyer's Restrictions on Operations Prior to Closing Date.
(a) Negative Covenants. Except as set forth on Schedule 6.2 hereto,
from the date of execution of this Agreement until the Closing, Buyer will not,
and will cause its subsidiaries not to, outside the ordinary course of business,
without the prior written consent of Seller, do or agree to do any of the
following:
(i) sell, assign, lease or otherwise transfer or dispose of any
material asset;
(ii) merge or consolidate with or into any other entity or enter
into any agreements relating hereto, except for the
contemplated transaction with the Public Company that is
currently anticipated;
(iii) issue any additional shares of stock, including issuing any
options, warrants, rights or other derivative securities;
(iv) amend its Articles of Incorporation or Bylaws except as may
be necessary to effect the contemplated transaction with
the Public Company, but only if the amended Articles and
Bylaws contain substantially the same provisions are those
currently set forth in such documents as of the date
hereof.
(b) Affirmative Covenants of Buyer. From the Effective Date until
the Closing Date, Buyer has, and will continue to, and will cause each of its
subsidiaries to:
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(i) operate its business in the normal and usual manner
consistent with its ordinary and usual course of business
and in compliance in all material respects with all
applicable laws, rules and regulations;
(ii) give Seller prompt written notice of any material change in
any of the information in the representations and
warranties made in Section 5 hereof or the Schedules hereto
which occurs prior to the Closing.
INVESTIGATION BY BUYER
7.1 Access to Records.
Following execution hereof and prior to the Closing Date, Seller shall give
Buyer and its representatives (including, without limitation, advisers,
accountants and attorneys designated by Buyer) full access during ordinary
business hours upon reasonable notice to its and its Subsidiaries' premises,
assets, properties, books of account, agreements and commitments pertaining to
the Business, provided that Buyer's investigation and use of the same shall not
unreasonably interfere with Seller's and its Subsidiaries' normal operations.
Seller shall furnish Buyer all information with respect to the Business as Buyer
may from time to time reasonably request. Seller shall cause its employees and
its Subsidiaries' employees to render to Buyer and its representatives
reasonable cooperation in connection with their investigation of Seller's and
its Subsidiaries' premises, assets, properties, records, books of account,
agreements, commitments and other information relating to the Business. If
Buyer discovers any condition which would make any condition, representation or
warranty of Seller untrue, Buyer shall notify Seller of such condition and allow
Seller a reasonable time to cure (provided that the Closing Date shall not be
extended thereby). Notwithstanding the previous sentence, any investigation
made at any time by or on behalf of any party hereto shall not diminish in any
respect Buyer's right to rely on the foregoing representations and warranties
and any others made by or on behalf of Seller pursuant to this Agreement.
7.2 Confidentiality of Information.
Buyer and Seller each agree to keep confidential and to cause their
respective employees, counsel, accountants and other representatives to keep
confidential, the documents and other information and data, whether written or
oral, that is identified as confidential, relating to Seller, Buyer or the
Business furnished such party and its representatives, subject in all respects
to any exercise by the party keeping such information confidential of any of its
rights or remedies
29
hereunder. If the transaction contemplated herein is not consummated for any
reason whatsoever, then Buyer and Seller shall return to the other all such
confidential documents and other information and data obtained from Seller or
Buyer, as the case may be, and/or any of their respective employees, counsel,
accountants or representatives and each of Buyer and Seller shall destroy all
summaries, notations, analyses and other reports prepared by or for Buyer or
Seller which incorporate or are based upon any of such documents, information or
data. Nothing herein contained shall prevent Buyer or Seller from disclosing
such information or delivering any documents, information or data relating to
Seller, Buyer or the Business (i) in connection with any legal proceeding to
which it is a party (or otherwise pursuant to a subpoena) or pursuant to the
request or requirement of a government agency or to the extent required by law,
or (ii) to Buyer's or Seller's consultants, advisors, counsel, accountants,
lenders and potential lenders and its investors. The provisions of this Section
shall survive any termination of this Agreement for a period of three years.
FURTHER COVENANTS
8.1 Delivery of Documents to Buyer.
Seller covenants that it either has delivered or has made available to
Buyer for inspection, the following:
(i) copies of any and all insurance policies in force with regard to
the Business and Seller; and
(ii) copies of all contracts, agreements and other documents listed in
the Schedules attached hereto with the exception of the excluded
assets set forth in Section 1.2.
8.2 Transfer of Agreements.
Seller shall use its best efforts and all due diligence prior to the
Closing Date to obtain assignments to Buyer of all assignable Necessary
Contracts and all other contracts to be assumed by Buyer hereunder, including
the leases and all other agreements referred to in Schedule 4.6A (or the
issuance of substantially equivalent new agreements directly with Buyer). Buyer
agrees to reasonably cooperate and assist Seller in obtaining such assignments
or new agreements, subject to all the terms and conditions of this Agreement.
With regard to agreements other than non-assignable agreements, Buyer shall have
the right but not the obligation to communicate directly with the contracting
parties to each of said agreements and leases with respect to said
30
assignments or new agreements and leases, but the foregoing right of Buyer and
the exercise thereof shall not diminish Seller's obligation under this
Section 8.2.
8.3 Further Assurances.
Each of the parties hereto shall, subject to all of the terms and
conditions of this Agreement and to the fulfillment at or before the Closing
Date of each of the conditions to its performance set forth herein or the waiver
thereof, perform such further acts and execute such documents as reasonably may
be required to effectuate the transactions contemplated herein. Each of the
parties hereto shall use all reasonable efforts to expeditiously fulfill or
obtain the fulfillment of the conditions precedent to Buyer's and Seller's
obligations hereunder, which conditions are set forth below, provided that
nothing herein shall be deemed to expand any parties' obligations hereunder.
8.4 Employee Benefit Matters.
(a) To the extent required under Section 601 et seq. of ERISA, Seller
shall assume full responsibility and liability for offering and providing
"continuation coverage" to any "qualified beneficiary" who is covered by a
"group health plan" sponsored, maintained or contributed to by Seller or any
Subsidiary and who has experienced a "qualified event" or is receiving such
"continuation coverage" on or prior to the Closing Date. The continuation
coverage shall be provided under a group health plan of Seller or an affiliate
of Seller. Continuation coverage, qualified beneficiary, qualifying event and
group health plan shall have the meanings given to such terms under Section
4980B of the Code and Section 601 et seq. of ERISA. Seller shall hold Buyer and
any party required to be combined with Buyer under Section 414 of the Code
("Affected Parties") harmless from and fully indemnify such Affected Parties
against any costs, expenses, losses, damages and liabilities incurred or
suffered by such Affected Parties directly or indirectly, including, but not
limited to, reasonable attorneys fees and expenses, which arise under a group
health plan sponsored, maintained or contributed to by Seller or any Subsidiary
as a result of any action or omission of Seller or any Subsidiary prior to the
Closing Date or because Buyer is deemed to be a successor employer to Seller;
provided, however, that such indemnity shall not apply to any liability that
arises by reason of any event, act, or omission occurring on or after the
Closing Date.
(b) Seller shall be responsible for satisfying in full all amounts
owed to any employee of Seller or any Subsidiary, including without limitation,
wages, salaries, accrued vacation pay, any employment, incentive, compensation
or bonus agreements or other benefits,
31
or payments on account of termination through the Effective Time, and Seller
hereby agrees to indemnify and hold harmless Buyer from any liabilities through
such time.
(c) Prior to Closing, Seller and Buyer shall agree to the disposition
of the account balances of the employees of Seller or its Subsidiaries in any
profit sharing, pension or salary reduction plan of Seller or its Subsidiaries
maintained or contributed to by Seller or its Subsidiaries.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions contemplated herein
are subject to the fulfillment (or waiver in whole or in part by Buyer in
writing) on or before the Closing Date (or such sooner date as may be
specified), of each of the following conditions:
9.l Compliance with Agreement.
Seller shall have performed and complied in all material respects with all
of its covenants, agreements and obligations under this Agreement to be
performed or complied with by it at or prior to Closing and there shall be no
material uncured default of Seller under any term of this Agreement.
9.2 Correctness of Representations and Warranties.
The representations and warranties of Seller contained in this Agreement,
and in the certificates and papers delivered to Buyer, shall be true and correct
in all material respects on the date hereof and on the Closing Date as though
such representations and warranties were made on and as of the Closing Date,
except for those stated to be as of a certain date.
9.3 Delivery of Documents.
Seller shall have delivered to Buyer or made available to Buyer as
specified in Section 8.l hereof the documents referred to in Section 8.1.
9.4 No Adverse Change in Business or Properties.
Since December 31, 1996, neither the Business nor its properties, prospects
or conditions, financial or otherwise shall have been affected in the aggregate
adversely to a material extent or interfered with in any material way.
9.5 Certificate of Officer.
Seller shall deliver to Buyer a certificate dated the Closing Date,
certifying, in such form as Buyer may reasonably request, as to the fulfillment
of the conditions set forth in Sections 9.1, 9.2, 9.3 and 9.4 above.
32
9.6 Opinion of Counsel.
Buyer shall have received from counsel to Seller an opinion of such counsel
addressed to Buyer dated as of the Closing Date in form and substance
satisfactory to Buyer.
9.7 Absence of Litigation.
No suit, action or other proceeding shall be pending, or to the knowledge
of Seller, threatened before any court or governmental agency to restrain or
prohibit, or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated herein.
9.8 Consents.
All consents or approvals of third parties which are required in connection
with the transfer of the assets to Buyer designated on Schedule 4.3 (the
"Required Consents") shall have been obtained in writing, in form and substance
reasonably acceptable to Buyer and such Required Consents shall (i) have become
final and effective; and (ii) not contain the imposition of any adverse changes
to the underlying documents for which consent was sought or impose any adverse
conditions thereon; Seller shall have delivered to Buyer copies of all such
consents and approvals so obtained.
9.9 Employment Agreements.
James Tuppen shall have entered into an employment agreement in the form of
Schedule 9.9(A) hereto.
9.10 Proceedings and Documents.
All partnership and other proceedings taken in connection with the
transactions contemplated herein and all documents incident thereto shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
9.11 Receivables Report.
At least five days prior to the Closing, Seller shall provide Buyer with an
accounts receivable aging report.
9.12 Deliveries.
At Closing, Buyer shall have received the following:
(a) an executed Bill of Sale in the form customarily used in the
State of Texas;
(b) an executed general warranty deed to each parcel of Real Estate
in form customarily used in the State of Texas;
33
(c) all other applicable assignments and other good and sufficient
instruments of conveyance transfer and assignment, in form and substance
satisfactory to Buyer;
(d) certified copies of appropriate resolutions of Seller
authorizing the consummation of the transactions contemplated in this Agreement
and a certificate of existence for Seller;
(e) and such other documents as are to be delivered by Seller
hereunder (which shall be in form and substance reasonably satisfactory to Buyer
consistent with the provisions hereof) or which may be reasonably requested by
Buyer to consummate the transactions contemplated herein.
9.13 Private Placement Representations.
Buyer shall have received executed Subscription Agreements in the form of
Schedule 9.13 hereto from each of the recipient of the Series A Stock and
Series B Stock or the Common Stock of the Public Company and has determined
therefrom that an exemption from registration is available under federal and
applicable state securities laws.
9.14 Lockup Agreements.
Buyer shall have received executed Lockup Agreements in form and substance
satisfactory to the parties thereto from each holder of Series B Stock,
providing for restrictions on the disposition or transfer of shares of Common
Stock of Buyer issuable upon the conversion thereof or on the disposition or
transfer of shares of Common Stock of the Public Company.
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions contemplated
herein are subject to fulfillment (or waiver in whole or in part by Seller in
writing) on or before the Closing Date (or such sooner date as may be specified)
of each of the following conditions:
10.1 Correctness of Representations and Warranties.
The representations and warranties of Buyer contained in this Agreement and
the certificates or papers delivered to Seller pursuant hereto shall be true and
correct in all material respects on the date hereof and on the Closing Date as
though such representations and warranties were made at and as of the Closing
Date except for those stated to be as of the date hereof.
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10.2 Compliance with Agreement.
Buyer shall have performed and complied in all material respects with all
of its covenants, agreements and obligations under this Agreement to be
performed or complied with by it at or prior to Closing and there shall be no
material uncured default of Buyer under any term of this Agreement.
10.3 No Adverse Change in Business or Properties.
Since April 30, 1997, neither Buyer nor its properties, prospects or
conditions, financial or otherwise, shall have been affected in the aggregate
adversely to a material extent or interfered with in any material way.
10.4 Certificate of Officer.
Buyer shall have delivered to Seller a certificate dated the Closing Date,
certifying, in such form as Seller may reasonably request, as to the fulfillment
of the conditions set forth in Sections 10.1, 10.2 and 10.3 above.
10.5 Opinions of Counsel.
Seller shall have received from Brown, Parker & Leahy, L.L.P., counsel to
Buyer, and from counsel to the Public Company, if applicable, opinions, dated as
of the Closing Date in form and substance satisfactory to Seller.
10.6 Absence of Litigation.
No suit, action or other proceeding shall be pending, or to the knowledge
of Buyer threatened, before any court or governmental agency to restrain or
prohibit, or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated herein.
10.7 Proceedings and Documents.
All corporate and other proceedings taken in connection with the
transactions contemplated herein and all documents incident thereto shall be
satisfactory in form and substance to Seller and its counsel.
10.8 Deliveries.
At Closing, Seller shall have received the following:
(a) evidence of the payment of the amounts set forth in Section
2.1(a)(i), (iii) and (iv);
(b) an executed promissory note in the form set forth in Schedule
2.1(a)(ii);
(c) an executed promissory note in the form set forth in Schedule
2.1(a)(vi);
(d) an executed security agreement granting a first security
interest in the Assets;
35
(e) evidence of either payment or assumption of the Debt;
(f) a Share certificate, if applicable, representing the appropriate
value (as determined pursuant to Section 2.1 hereof) of shares of Series A
Stock;
(g) a Share certificate, if applicable, representing the appropriate
value (as determined pursuant to Section 2.1 hereof) of shares of Series B
Stock;
(h) an executed Assumption Agreement in the form of Schedule 2.2(A);
(i) certified copies of appropriate resolutions of Buyer authorizing
the consummation of the transactions contemplated in this Agreement and a
certificate of good standing from the Secretary of State of Texas for Buyer;
(j) certified copies of appropriate resolutions of Public Company
authorizing the issuance of the stock and the transactions contemplated in this
Agreement and a certificate of good standing from the Secretary of State of
Delaware for Public Company; and
(k) such other documents as are to be delivered by Buyer and Public
Company hereunder (which shall be in form and substance reasonably satisfactory
to Seller consistent with the provisions hereof) or which may be reasonably
requested by Seller to consummate the transactions contemplated herein.
10.9 Buyer's Financial Statements. Buyer shall have delivered its
Financial Statements to Seller on or before one week prior to the Closing and
Seller shall have approved in writing the contents of such Financial Statements;
provided, that should Seller fail to so approve such Financial Statements,
neither party shall be required to close the transactions contemplated herein.
SUBSEQUENT DELIVERY OF SCHEDULES
11. Subsequent Schedules.
The parties hereto agree that the parties' respective disclosure schedules
pursuant to Sections 4 and 5 hereof which have not been delivered as of the date
of the execution hereof shall be delivered not later than one week prior to the
Closing Date. In the event all of such schedules are not delivered by such
date, the party entitled to receive such schedules shall have the right and
option to terminate this Agreement, which shall become null and void and of no
further force or effect (other than as to the confidentiality provisions
hereof). In the event one party delivers after the date hereof disclosure
schedules that disclose adverse claims, expenses or liabilities relating to the
assets and business of such party that are materially different in the aggregate
from the anticipated amount of such adverse claims, expenses or liabilities, the
other
36
party shall have the right and option to terminate this Agreement which shall
become null and void and of no further force or effect (other than as to the
confidentiality provisions hereof).
EXPENSES OF NEGOTIATION AND TRANSFER
12. Expenses.
Except as provided herein, each party shall pay its own expenses, taxes and
other costs incident to or resulting from this Agreement whether or not the
transactions contemplated herein are consummated. Costs of Seller include, but
are not limited to, sales and use taxes resulting from the consummation of the
transactions contemplated herein. If any such sales or use taxes are due,
Seller shall provide Buyer with evidence at Closing of payment of such taxes.
Buyer and Seller shall each pay one half of all documentary taxes and real
property transfer taxes and fees for the filing or recording of instruments of
transfer. Buyer shall pay any stock transfer or issuance taxes on the issuance
of the shares of Series A Stock, Series B Stock or Common Stock delivered
hereunder.
RIGHTS TO TERMINATE BREACH
13. Termination.
(a) This Agreement may be terminated prior to the Closing:
(i) at any time by mutual written agreement of Seller and
Buyer;
(ii) by Seller if all the conditions set forth in Section 10
hereof have not been satisfied or waived by the Closing
Date; and
(iii) by Buyer if all the conditions set forth in Section 9
hereof have not been satisfied or waived by the Closing
Date.
(b) In the event of termination of this Agreement by either party
pursuant to Section 13(a), prompt written notice thereof shall be given to the
other party and this Agreement shall terminate without further action by any of
the parties hereto. If this Agreement is terminated as provided herein:
(i) none of the parties hereto nor any of their partners
(including any general partner), shall have any liability
or further obligation to the other party or any of its
partners pursuant to this Agreement, except as stated in
Sections 7.2 and 13(c);and
37
(ii) all filings, applications and other submissions relating to
the transfer of the Assets shall, to the extent
practicable, be withdrawn from the agency or other person
to which made.
(c) Notwithstanding anything to the contrary contained in this
Agreement, if Seller or Buyer is in breach under this Agreement prior to
Closing, then and in that event, as appropriate, in addition to the right to
terminate, the following provisions shall apply: if Seller or Buyer is in
material breach of its obligations under this Agreement (including a breach of
its representations and warranties in any material respect), and such breach is
fraudulent or intentional, the non-breaching party may terminate this Agreement
and shall also have the right to seek all legal and equitable remedies available
to it as provided hereunder, at law or equity.
INDEMNIFICATION
14.1 Indemnification by Seller and its General Partners.
From and after the Closing, Seller and its General Partners, jointly and
severally, shall indemnify Buyer against and hold it harmless from any and all
damages, losses or liabilities in respect of suits, proceedings, demands,
judgments, damages, expenses and costs (including, without limitation,
reasonable counsel fees and costs and expenses incurred in the investigation,
defense or settlement of any claims covered by this indemnity) (collectively,
the "Indemnifiable Damages") which Buyer may suffer or incur by reason of (i)
the inaccuracy of any of the representations and warranties of Seller contained
in this Agreement, or any document, certificate or agreement delivered pursuant
hereto; (ii) any liability for claims made by third parties against Buyer, the
Assets or the Business, arising out of the ownership and operation of the
Business on or prior to the Closing Date, including, specifically, without
limitation, those items of litigation set forth on Schedule 4.15 hereto; (iii)
any liabilities for claims made by third parties against Buyer, the Assets, or
the Business not assumed by Buyer pursuant to this Agreement; or (iv) the
nonperformance by Seller of any of its covenants or agreements contained in this
Agreement or any document, certificate or agreement delivered pursuant hereto.
Without limiting the generality of the foregoing, with respect to the
measurement of Indemnifiable Damages, Buyer shall have the right to be put in
the same financial position as it would have been in had each of the
representations and warranties of Seller been true and correct or had Seller not
breached any such covenants, representations, warranties or agreements.
Notwithstanding anything contained in this Section 14.1 to the contrary, (1) if
there is a claim for damages, Buyer will use commercially
38
reasonable efforts to mitigate the amount and nature of damages, and (2) Buyer
shall not knowingly take affirmative actions to initiate any claims made by
third parties for which indemnification is sought. Each of the representations
and warranties made by Seller in this Agreement or in any document, certificate
or agreement delivered pursuant hereto and all of Seller's other covenants and
agreements contained herein or in any document, certificate or instrument
delivered pursuant hereto shall survive for a period of two (2) years after the
Closing Date, and thereafter all such representations and warranties shall be
extinguished, and no action for the enforcement of the representations and
warranties may be commenced with respect to any claim made more than two (2)
years following the Closing Date.
14.2 Indemnification by Buyer.
From and after the Closing, Buyer shall indemnify Seller against and hold
it harmless from any and all damages, losses or liabilities in respect of suits,
proceedings, demands, judgments, damages, expenses and costs (including, without
limitation, reasonable counsel fees and costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity)
(collectively, the "Indemnifiable Damages") which Seller may suffer or incur by
reason of (i) the inaccuracy of any of the representations and warranties of
Buyer contained in this Agreement, or any document, certificate or agreement
delivered pursuant hereto, (ii) any liability for claims made by third parties
against Seller arising out of the operation of the Business by Buyer after the
Closing Date, (iii) by reason of Buyer's failure to satisfy the liabilities
specifically assumed by it pursuant to this Agreement, or (iv) the
nonperformance by Buyer of any of its covenants or agreements contained in this
Agreement or any document, certificate or agreement delivered pursuant hereto.
Without limiting the generality of the foregoing, with respect to the
measurement of Indemnifiable Damages, Seller shall have the right to be put in
the same financial position as it would have been in had each of the
representations and warranties of Buyer been true and correct or had Buyer not
breached any such covenants, representations, warranties or agreements. Each of
the representations and warranties made by Buyer in this Agreement or pursuant
hereto shall survive for a period of two (2) years after the Closing Date, and
thereafter all such representations and warranties shall be extinguished, and no
action for the enforcement of the foregoing obligation may be commenced with
respect to any claim made more than two (2) years following the Closing Date.
39
14.3 Notice and Right to Defend Third Party Claims.
Promptly, upon receipt of notice of any claim, demand or assessment or the
commencement of any suit, action or proceedings by any party not a party to this
Agreement in respect of which indemnity may be sought on account of an indemnity
agreement contained in this Section, the party seeking indemnification (the
"Indemnitee") will notify, within sufficient time to respond to such claim or
answer or otherwise plead in such action, the party from whom indemnification is
sought (the "Indemnitor"), in writing, thereof. The omission of such Indemnitee
to notify promptly the Indemnitor of any such claim or action shall not relieve
such Indemnitor from any liability which it may have to such Indemnitee in
connection therewith on account of the indemnity agreements contained in this
Section unless the Indemnitor is prejudiced thereby, and then only to the extent
of the prejudice caused by such delay. In case any claim, demand or assessment
shall be asserted or suit, action or proceeding commenced against an Indemnitee,
and it shall notify the Indemnitor of the commencement thereof, the Indemnitor
will be entitled to participate therein, and, to the extent that it may wish, to
assume the defense, conduct or settlement thereof, with counsel reasonably
satisfactory to the Indemnitee; provided that no settlement may be made by an
Indemnitor on behalf of an Indemnitee without the Indemnitee's express written
consent if such settlement would impose continuing obligations or any liability
upon the Indemnitee. After notice from the Indemnitor to the Indemnitee of its
election so to assume the defense, conduct or settlement thereof, the Indemnitor
will not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense, conduct
or settlement thereof. The Indemnitee will cooperate with the Indemnitor in
connection with any such claim, make personnel, books and records relevant to
the claim available to the Indemnitor, and grant such authorizations or powers
of attorney to the agents, representatives and counsel of the Indemnitor as such
Indemnitor may reasonably consider desirable in connection with the defense of
any such claim. In the event that the Indemnitor does not wish to assume the
defense, conduct or settlement of any claim, demand, or assessment, the
Indemnitee will not settle such claim, demand, or assessment without the consent
of the Indemnitor, which shall not be unreasonably withheld. It is understood
and agreed that to the extent a claim for indemnification is made by Buyer or
Seller within the survival periods stated herein, the responsibility for
indemnification with respect to such claim shall then survive until such claim
is resolved. Each of Buyer and Seller expressly understands and agrees that
notwithstanding any disclosure herein or in the Schedules hereto or in any
document,
40
certificate, or instrument delivered pursuant hereto of actual or potential
defaults, claims, litigation and the like that may be asserted against the
Business, Assets, Seller or Buyer, that Buyer and Seller shall be entitled to
indemnification against such matters under Section 14.1 or 14.2, as applicable.
REGISTRATION RIGHTS
15.1 Certain Definitions. As used in this Section 15, the following terms
shall have the following meanings:
(a) "Buyer" shall mean Buyer or the Public Company, as applicable.
(b) "Common Stock" shall mean the common stock of Buyer issued upon
conversion of the Series A Stock or Series B Stock issued hereunder (if any) or
the common stock of the Public Company issued hereunder (if any).
(c) "Holders" shall mean (i) persons or entities and their affiliates
receiving Common Stock issued pursuant to the terms hereof, (ii) persons or
entities and their affiliates receiving Common Stock upon a liquidating
distribution of the Common Stock by Seller to its partners, and (iii) persons or
entities and their affiliates that purchase substantially all the assets of the
persons or entities receiving Common Stock pursuant to either (i) or (ii) above.
(d) "Registration Statement" shall mean a registration statement filed
by Buyer to effect a public offering for the sale of Common Stock on behalf of
Buyer (other than a registration statement on Form S-8, or its successor, or any
registration statement covering Common Stock proposed to be issued in exchange
for securities or assets of another corporation in a transaction subject to Rule
145 under the Securities Act).
(e) "Registration Expenses" shall mean the expenses described in
Subsection 15.5.
(f) "Registrable Shares" shall mean (i) all shares of Common Stock and
(ii) all other shares of Common Stock or other securities issued in respect of
such shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations or similar events); provided, however, that each share of
Common Stock or other securities shall cease to be Registrable Shares when (x)
it has effectively been registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it, (y) it has been
distributed to the public pursuant to Rule 144 under the Securities Act, or any
similar provision then in effect, or (z) it
41
has otherwise been transferred to a party other than a Holder, as defined in
Section 15.1(c) hereof.
15.2 Demand Registration. On one occasion upon request in writing by the
Holders of an aggregate of not less than fifty-one percent (51%) of the
aggregate number of shares of Common Stock issued hereunder, Buyer agrees, at
any time (i) after July 31, 1999 and (ii) prior to the earlier of (x) the time a
Holder becomes eligible to sell all such stock without any restrictions under
Rule 144 or (y) the fifth anniversary of the Effective Time, to (a) give prompt
notice of the proposed registration to all other Holders, and (b) use its
reasonably best efforts to effect all such registrations, qualifications, and
compliances (including, without limitation, the filing of post-effective
amendments, appropriate qualifications under the applicable Blue Sky or other
state securities laws and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holders' Registrable Shares as
are specified in such request, together with all or such portion of the
Registrable Shares of any Holder or Holders joining in such request as are
specified in a written request given within 20 days after receipt of such
written notice from Buyer. Buyer shall use its reasonable best efforts to cause
a Registration Statement on Form S-3 or such other form as Buyer shall
determine, in its discretion, to be available for such registration ("Demand
Registration"), to be filed as soon as practicable, but in any event within 45
days after receipt of the initial request of the Holders demanding registration.
If the Holders requesting registration under this Section 15.2 intend to
distribute the Registrable Shares covered in their request by means of an
underwriting, such Holders shall so advise Buyer as part of their request made
pursuant to this Section 15.2 and Buyer shall include such information in the
written notice to the other Holders. The selection of the underwriter shall be
within the reasonable discretion of Buyer; provided, however, that the
underwriter shall be approved by the Holders participating in the offering,
whose approval will not be unreasonably withheld. In the event of an
underwritten offering, Buyer and the Holders participating therein will enter
into an underwriting agreement with respect to such offering, such agreement to
be reasonably satisfactory in substance and form to the Holders of the
Registrable Shares to be included in such Demand Registration, Buyer, and the
managing underwriter or underwriters, and contain such representations and
warranties by Buyer and the Holders participating therein and such other terms
and provisions as are customarily contained in underwriting agreements with
respect to
42
secondary distributions, including, without limitation, indemnities to the
effect and to the extent provided in Section 15.6 hereof.
Notwithstanding the foregoing, Buyer may defer for a period of up to 60 days its
obligation to prepare and file any registration statement pursuant to this
Agreement at any time when Buyer, in its good faith judgment with the advice of
counsel, reasonably believes that the filing thereof at the time requested, or
the offering of shares pursuant thereto, would materially adversely affect a
pending or scheduled public offering of the Company's securities or an
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction or negotiations thereto.
15.3 "Piggyback" Registration.
(a) Whenever, at any time (i) after the Effective Time and (ii)
prior to the earlier of (x) the time a Holder becomes eligible to sell all such
stock without any restrictions under Rule 144 or (y) the seventh anniversary of
the Effective Time, Buyer files a Registration Statement it will, at least 20
days prior to such filing, give written notice to each Holder of its intention
to do so, describing such securities and specifying the form and manner and the
other relevant facts involved in such proposed registration and, upon the
written request of a Holder given within 15 days after receipt of such notice
(which request shall state the intended method of disposition of the Common
Stock), Buyer shall (subject to this Section) use its reasonable best efforts to
cause all Registrable Shares which Buyer has been requested by a Holder to
register to be registered under the Securities Act to the extent necessary to
permit the sale or other disposition thereof in accordance with the intended
methods of distribution specified in the request of the Holder ("Piggyback
Registration"); provided, however, that Buyer shall have the right to postpone
or withdraw any registration effected pursuant to this Section without
obligation to any Holder.
(b) If the proposed registration of Registrable Shares which Buyer
has been requested by the Holder to include in a Piggyback Registration is to be
distributed by or through an underwriter or underwriters, who shall be chosen in
the sole discretion of Buyer, the Holder must agree (i) to sell such Registrable
Shares on the same basis as provided in the underwriting arrangement approved by
Buyer and (ii) to complete and execute, in a timely manner, all reasonable and
customary questionnaires, powers of attorney, indemnities, hold-back or lockup
agreements, underwriting agreements and other documents required by Buyer, under
the terms of such arrangement or by the SEC.
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(c) If, in the opinion of the managing underwriter for any such
underwritten offering, the registration of all, or part of, the Registrable
Shares which any Holder has requested be included in such public offering would
have an adverse effect on the success of the offering by Buyer, then Buyer shall
be required to include in the underwriting only that number of Registrable
Shares, if any, which the managing underwriter reasonably believes may be sold
without causing such adverse effect. If the number of shares to be included in
the underwriting in accordance with the foregoing is less than the number of
shares which the Holder and all other persons entitled to participate in the
registration have requested be included (whether pursuant to the exercise of
registration rights or otherwise) Buyer and any stockholder exercising demand
registration rights shall be entitled to include all shares which it had
intended to register, after which the Holder shall participate in the
underwriting pro rata with the holders of all other shares entitled to
participate in the underwriting pursuant to registration rights or otherwise,
based upon their respective total ownership of shares of Common Stock, and if
any holder or the Holder would thus be entitled to include more shares than such
holder or the Holder requested to be registered, the excess shall be allocated
among other requesting holders and the Holder pro rata based upon their
respective total ownership of shares of Common Stock. If requested by any
underwriter or underwriters, the Holder shall agree to sell its Registrable
Shares which are subject to the Piggyback Registration to or through such
underwriter or underwriters at the same price to be paid to Buyer and any other
selling stockholders;
15.4 Registration Procedures. Whenever any Registrable Shares are to be
registered pursuant to this Agreement, Buyer will use its reasonable best
efforts to effect the registration as quickly as practicable and will involve
Holder's counsel in the preparation of the Registration Statement (provided that
the fees of Holder's counsel shall be borne by the Holder), and in connection
with such registration Buyer will as expeditiously as practicable:
(a) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, in the case of a Demand Registration,
as may be necessary to keep the Registration Statement effective for a period
equal to the lesser of (x) 90 days, (y) the number of days remaining until the
participating Holders shall be eligible to sell all such Registrable Shares
without any restrictions under Rule 144, or (z) when all Registrable Shares
covered by such Registration Statement have been sold or withdrawn at the
request of participating Holders; cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act;
44
and comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition set forth in such Registration Statement or supplement to the
prospectus;
(b) furnish to participating Holder such number of copies of the
Registration Statement and amendments thereto and such number of copies of the
prospectus (including each preliminary prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein, as
participating Holder or the underwriters, if any, may request in order to
facilitate the disposition of the Registrable Shares being sold by participating
Holder;
(c) notify a participating Holder and such Holder's counsel at any
time when Buyer becomes aware of the occurrence of any event as a result of
which the prospectus included in such Registration Statement (as then in effect)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
(in the case of the prospectus or any preliminary prospectus, in light of the
circumstances of which they were made) not misleading and, as promptly as
practicable thereafter, if required by applicable law, prepare and file with the
SEC and furnish a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
prospectus will not contain any 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, in light of the circumstances under which they were made,
not misleading;
(d) on or prior to the date on which the Registration Statement is
declared effective, use its reasonable best efforts to register or qualify, in
connection with the registration or qualification of the Registrable Shares
covered by the Registration Statement, for offer and sale under the securities
or Blue Sky laws of each state and other jurisdiction of the United States as
the participating Holder or the underwriter, if any, may reasonably request in
writing, and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Shares
covered by the applicable Registration Statement; provided, that Buyer will not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(e) each participating Holder agrees that, upon receipt of any
notice from Buyer of the occurrence of any event of the kind described in
Section 15.4(c) hereof, it will
45
forthwith discontinue disposition of Registrable Shares until it has received
copies of the supplemented or amended prospectus contemplated herein;
(f) it shall be a condition precedent to the obligation of the Buyer
to file a Registration Statement, which includes or will include Registrable
Shares, that the participating Holder shall furnish promptly to Buyer
instruments in writing duly executed containing all such information as Buyer
shall reasonably request for use in connection with the preparation of the
Registration Statement or the prospectus or preliminary prospectus included
therein, as well as all undertakings which the SEC may request or Buyer or any
underwriter may reasonably request under the Exchange Act.
15.5 Allocation of Expenses. With regard to the registration of
Registrable Shares pursuant to the terms of this Agreement, except as otherwise
provided for below, Buyer shall bear all usual and customary costs and expenses
incidental to the preparation of the Registration Statement, including all
registration, filing and qualification fees and expenses of counsel to Buyer,
all fees and expenses of Buyer's independent auditors, all fees and expenses of
underwriters and all printing costs and all fees and expenses incidental to
complying with the state securities or Blue Sky laws with regard to the
Registrable Shares, provided, however, that the Holder shall bear all fees and
expenses of any underwriters that are customarily paid by selling stockholders,
such as underwriter discounts and commissions attributable to the Registrable
Shares offered by the Holder, and all fees and expenses of any counsel or
experts retained by the Holder plus all out-of-pocket expenses of Holder or any
agent who manages Holder's account, in connection with the requested
registration.
15.6 Indemnification.
(a) Indemnification by Buyer. For the purposes of this Section 15,
Buyer will indemnify and hold harmless the Holder (the "Indemnified Person")
against any and all losses, claims, damages, costs, penalties, expenses
(including reasonable attorney's fees and expenses and costs of investigation or
litigation) or liabilities, joint or several, to which the Indemnified Person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, are based upon or are caused by:
(i) any untrue statement or alleged untrue statement of any
material fact contained in a Registration Statement, any
preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to
such Registration Statement,
46
or arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made;
provided, however, that Buyer will not be liable in any such case to: (a) the
Indemnified Person to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished in writing to Buyer by or on behalf of the Indemnified Person for
inclusion in the Registration Statement, prospectus, amendment or supplement or
(b) the Indemnified Person from whom the person asserting any such loss, claim,
damage or liability purchased the Registrable Shares if the Indemnified Person
failed, if required by the Securities Act, to send or give a copy of the final
prospectus to the person asserting such loss, claim, damage or liability; or
(ii) any violation or alleged violation by Buyer of the
Securities Act.
Such indemnification shall remain in full force and effect regardless of
any investigation made by any party and shall survive the transfer of the Common
Stock by the Indemnified Person.
(b) Indemnification by the Holder. For the purposes of this
Section 15, the Holder will, to the extent permitted by law, indemnify and hold
harmless Buyer, each of its directors and officers, each underwriter, each
officer and director of each underwriter, and each person, if any, who controls
Buyer (within the meaning of Section 15 of the Securities Act) against any and
all losses, claims, damages or liabilities, joint or several, to which Buyer,
such directors and officers, underwriter, officers or directors of underwriter,
or controlling person may become subject under the Securities Act, Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of, are based upon or are caused by any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement, any preliminary prospectus or final prospectus contained
in the Registration Statement, or any amendment or supplement to the
Registration Statement, or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were under, if the
statement or omission was made in reliance upon and in conformity with
information furnished in writing to Buyer by or on behalf of, the Holder for use
in connection with the preparation of such Registration Statement, prospectus,
amendment or supplement.
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NONCOMPETITION
16.1 Noncompetition Agreement. Seller and all of the General Partners of
Seller agree that neither it nor they nor any affiliate will at any time within
the three (3) year period following the date of this Agreement directly or
indirectly engage in, or have any interest in, any firm, corporation or business
(whether as an agent, partner, security holder, creditor, consulting firm or
otherwise) that engages in, any Prohibited Activity (as defined below). The
geographical scope of this noncompetition agreement shall be worldwide, in
recognition of the worldwide market heretofore served by the Seller (the
"Restricted Territories"). For purposes of this Section 16.1, "Prohibited
Activity" shall mean (a) any activity that is the same as, similar to, or
competitive with any activity engaged in by Seller in the one year (1) period
immediately preceding the date of this Agreement so long as Buyer (or Buyer's
successor or assignee) shall engage in such activity within the Restricted
Territories, and (b) consulting with, being employed by or acting as an agent
for any prior or existing client of Seller with respect to those activities
specified in (a) above.
The parties intend that the covenant contained in the preceding paragraph
shall be construed as a series of separate covenants, one for each state and
country covered thereby. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraph. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in this Section 16.1, then
the unenforceable covenant shall be reformed and enforced to the maximum extent
permissible or, should such court refuse to so reform such covenant, it shall be
deemed eliminated from these provisions for the purpose of those proceedings to
the extent necessary to permit the remaining separate covenants to be enforced.
MISCELLANEOUS
17.1 Survival.
The representations, warranties, covenants and agreements of the parties
set forth herein and in the documents or instruments delivered pursuant hereto
shall survive the Closing as set forth in Section 14 hereof.
17.2 Change of Seller's Name. Seller shall cooperate with Buyer in
changing its name in the jurisdiction of its formation and in each jurisdiction
in which it is registered to do business.
17.3 Assignment.
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Except as provided for in Section 15.1 et seq., neither this Agreement, nor
any right hereunder, may be assigned by any of the parties hereto, provided that
Buyer shall have the right to assign its rights and obligations under this
Agreement to affiliates of Buyer provided that Buyer shall remain liable under
this Agreement. The term "affiliate" as used in this Agreement shall have the
meaning prescribed by Rule 12(b)-2 of the regulations promulgated pursuant to
the Securities Exchange Act of 1934, as amended.
17.4 Successors.
This Agreement shall be binding upon and inure to the benefit of Buyer and
its heirs, successors or assigns, and Seller and its heirs, successors or
assigns.
17.5 Entire Agreement.
This Agreement, including the exhibits and schedules attached hereto which
are incorporated herein by reference and other agreements referred to herein or
delivered pursuant hereto constitute the entire agreement of the parties.
17.6 Power of Attorney.
Seller agrees that, effective as at the Closing Date, it hereby constitutes
and appoints Buyer, its successors and assigns, the true and lawful attorney of
Seller in the name of Buyer or in the name of Seller, to endorse, collect and
deposit any checks, drafts or other instruments payable to Seller which relate
to payments for goods and/or services provided by Seller or Buyer in connection
with the Business sold to Buyer hereunder.
17.7 Amendments in Writing.
The terms of this Agreement may not be amended, modified or waived except
by written agreement between the parties. No waiver shall be deemed a waiver of
any other provision or any subsequent breach or default of the same or similar
nature.
17.8 Interpretation.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Texas.
17.9 Arbitration.
Any dispute hereunder shall be submitted to binding arbitration to be
conducted in Houston, Texas, before a single arbitrator appointed by the
American Arbitration Association in accordance with the commercial rules of the
American Arbitration Association then in effect. The award of such arbitrator
shall be final and may be entered by any party hereto in any court of competent
jurisdiction. All costs and expenses of such arbitration shall be paid solely
by the
49
party against whom the arbitrator's award is directed or as directed by the
arbitrator if an award not entirely in favor of either party is made.
17.10 Notices.
All notices hereunder shall be in writing and shall be deemed given when
delivered personally or by facsimile transmission, or when received when mailed
by reputable overnight courier or by certified mail, return receipt requested,
to such party at its address set forth below or such other address as either
party may designate to the other in writing:
If to Seller: Boots & Coots, L.P.
c/o Roemer International, Inc.
1200 17th Street, Suite 2610
Denver, Colorado 80202
Attention: Steven Swanson
Facsimile: (303) 446-2643
with a copy to: Stuart Rifkin
Baker & Hostetler LLP
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203
Facsimile: (303) 861-2307
If to Buyer: IWC Services, Inc.
5151 San Felipe, Suite 450
Houston, Texas 77056
Attention: Charles Phillips, Esq.
Facsimile: (713) 621-7988
with a copy to: Dallas Parker
Brown, Parker & Leahy, L.L.P.
1200 Smith Street, Suite 3600
Houston, Texas 77002
Facsimile: (713) 654-1871
17.11 Severability.
Any provision hereof which is prohibited or unenforceable shall be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
17.12 Headings.
The headings appearing in this Agreement have been inserted solely for the
convenience of the parties and shall be of no force and effect in the
construction of provisions of this Agreement.
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17.13 Counterparts.
This Agreement may be executed in one or more counterparts and each
executed copy shall constitute an original, but all of which together shall
constitute one instrument.
17.14 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes.
17.15 Bulk Sales Law.
Seller agrees to take or cause to be taken all steps necessary to comply
with the provisions of any applicable bulk sales, fraudulent conveyance or other
laws for protection of creditors and Seller further agrees to indemnify and hold
Buyer harmless from and reimburse Buyer for any and all liabilities, claims or
obligations which Buyer may suffer or incur by virtue of non-compliance with any
such applicable laws.
17.16 Effectiveness.
This Agreement shall be binding and enforceable upon the execution and
delivery hereof by Buyer and Seller; provided that either party shall be
permitted to terminate this Agreement pursuant to Section 13 should a majority
of the executive committee of Seller fail to approve this Agreement on or before
5:00 p.m., Houston Time, July 22, 1997.
51
IN WITNESS WHEREOF, the parties hereunto have duly executed this Agreement
on the date first above written.
BUYER:
IWC SERVICES, INC.
/s/ LARRY RAMMING
By: ________________________________
Larry Ramming
Print:______________________________
CEO
Title: _____________________________
SELLER:
BOOTS & COOTS, L.P.
By: Roemer International, Inc.,
Managing General Partner
/s/ STEVEN SWANSON
By:____________________________
Steven Swanson,
Vice President
GENERAL PARTNERS OF SELLER:
ROEMER INTERNATIONAL, INC.
/s/ STEVEN SWANSON
____________________________________
Steven Swanson, Vice President
BLOWOUT SPECIALISTS, INC.
____________________________________
Annie Kelly, President
OIL WELL FIREFIGHTERS, INC.
By:_________________________________
James Tuppen, President
52
Asset Purchase Agreement - Boots & Coots LP and IWC Services Inc.
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