\nARTICLE IX. INDEMNITY AND OTHER POST-CLOSING OBLIGATIONS………………….. 43
\n 9.1 General Indemnity………………………………………………. 43
\n 9.2 Escrow………………………………………………………… 45
\n 9.3 Defense of Claims………………………………………………. 47
\n 9.4 Participating Distributees………………………………………. 48<\/p>\nARTICLE X. MISCELLANEOUS PROVISIONS…………………………………….. 49
\n 10.1 Notice………………………………………………………… 49
\n 10.2 Entire Agreement……………………………………………….. 50
\n 10.3 Binding Effect; Assignment………………………………………. 50
\n 10.4 Counterparts…………………………………………………… 51
\n 10.5 Waiver; Consent………………………………………………… 51
\n 10.6 Other and Further Covenants of Seller…………………………….. 51
\n 10.7 Governing Law………………………………………………….. 51
\n 10.8 Expenses………………………………………………………. 52
\n 10.9 Public Announcements……………………………………………. 52
\n10.10 Severability…………………………………………………… 52
\n10.11 Incorporation by Reference………………………………………. 52<\/p>\n
ARTICLE XI. DISPUTE RESOLUTION…………………………………………. 52
\n 11.1 Dispute Resolutions…………………………………………….. 52
\n<\/c><\/s><\/c><\/caption>\n<\/table>\n
iii<\/p>\n
SCHEDULES<\/p>\n
Schedule 3.1 Organization, Good Standing and Qualification
\nSchedule 3.4 Title of Shares
\nSchedule 3.5 Subsidiaries
\nSchedule 3.7 Permitted Liens
\nSchedule 3.9 Account Receivables of Elmagco and the Subsidiaries
\nSchedule 3.10 Insurance Policies
\nSchedule 3.11(a) Pension Plans
\nSchedule 3.11(b) Welfare Plans
\nSchedule 3.11(c) Compensation Programs
\nSchedule 3.13 Financial Statements
\nSchedule 3.14 Tax Disputes
\nSchedule 3.15 Litigation
\nSchedule 3.16 Absence of Material Adverse Change; Conduct of Business
\nSchedule 3.20 Contracts
\nSchedule 3.21 Real Property and Leases
\nSchedule 3.22 Inventory
\nSchedule 3.23 Personal Property
\nSchedule 3.24 Bank Accounts, Guarantees and Powers
\nSchedule 3.25 Patents, Trademarks and Licenses
\nSchedule 3.26 Permits
\nSchedule 3.27 Transactions with Affiliates
\nSchedule 3.29 Consents and Approvals
\nSchedule 3.33 Suppliers
\nSchedule 3.34 Customers<\/p>\n
iv<\/p>\n
STOCK PURCHASE AGREEMENT<\/p>\n
THIS STOCK PURCHASE AGREEMENT (“Agreement”) is made as of the 22nd day of
\nJune 1998, by and among Elmagco, Inc., a Delaware corporation (“Elmagco”), with
\nits principal place of business at 500 Industrial Blvd., Sugar Land, Texas
\n77478; Begemann, Inc., a Delaware corporation (“Seller”), with its principal
\nplace of business at 500 Industrial Blvd., Sugar Land, Texas 77478 and Boots & Coots International Well Control, Inc., a Delaware corporation, with its
\nprincipal place of business at 5151 San Felipe, Suite 450, Houston, Texas 77056
\n(“Buyer”).<\/p>\n
R E C I T A L S<\/p>\n
WHEREAS, Seller is the owner of all of the outstanding capital stock of
\nElmagco; and<\/p>\n
WHEREAS, on the terms and conditions set forth in this Agreement, Seller
\ndesires to sell to Buyer, Elmagco desires to induce Buyer to purchase from
\nSeller and Buyer desires to purchase from Seller, all of the issued and
\noutstanding capital stock of Elmagco, which owns (except as set forth on
\nSchedule 3.5) all of the issued and outstanding capital stock of its
\nsubsidiaries, Baylor Electronics, Inc., a Texas corporation; Baylor Controls,
\nInc., a Texas corporation; Baylor Limited, a United Kingdom corporation; and
\nSchottel, Inc., a Delaware corporation (being collectively referred to herein as
\nthe “Subsidiaries” and individually as a “Subsidiary”);<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the mutual
\ncovenants, representations, warranties and conditions herein contained, the
\nparties hereby agree as follows:<\/p>\n
ARTICLE I. PURCHASE AND SALE OF SHARES<\/p>\n
1.1 Purchase and Sale. Upon the terms and subject to the conditions
\nprovided herein in reliance on the representations, warranties and covenants
\nhereinafter set forth, on the Closing Date (as defined in Section 2.1 hereof),
\nSeller agrees to transfer and convey to Buyer,<\/p>\n
and Buyer agrees to acquire from Seller all of the issued and outstanding shares
\nof capital stock of Elmagco (the “Shares”).<\/p>\n
1.2 Purchase Price. In consideration for the sale and transfer of the
\nShares, Buyer shall pay to Seller, at the times and in the manner herein
\nprovided, a purchase price of Thirty Million Dollars (US $30,000,000), less the
\namount of the Dividend (as defined below) and subject to further adjustment as
\nherein provided (the “Purchase Price”), which Purchase Price shall consist of
\n(i) cash in the amount equal to (a) the lesser of $25,000,000 or the Purchase
\nPrice (b) less the amount necessary to result in the issuance of shares of the
\ncommon stock, $.00001 par value per share (“Common Stock”), of Buyer to Seller
\nwith a value, for purposes hereof, of at least $3,000,000, and (ii) shares of
\nCommon Stock of Buyer with a value, for purposes hereof, equal to the greater of
\n(a) $3,000,000 or (b) the difference between the cash portion of the Purchase
\nPrice and the Purchase Price. The number of shares of Common Stock to be issued
\nto Seller in satisfaction of the preceding sentence, shall be determined by
\ncalculating the average of the last reported sales price per share (or the
\naverage of the closing bid and asked prices if no sales have been reported) of
\nBuyer’s Common Stock for each trading day within the thirty (30) calendar days
\nimmediately preceding the Closing Date and dividing such number into the dollar
\nvalue thereof to be delivered to Seller as determined above. For example, if the
\nDividend were $1,500,000, the Purchase Price would be $28,500,000, and the
\ndifference between the Purchase Price and the cash portion of the Purchase Price
\nwould be $3,500,000 (since the cash portion of the Purchase Price cannot exceed
\n$25,000,000). If the average of the last reported sales price per share for such
\nperiod were $5.00, the number of shares would be calculated as follows:<\/p>\n
2<\/p>\n
Difference between cash portion of the Purchase Price
\n and aggregate Purchase Price $ 3,500,000<\/p>\n
Divided by Average Sales Price $ 5
\n ———–
\n Aggregate Shares 700,000<\/p>\n
For the purposes hereof, the term “Dividend” shall mean the amount, not to
\nexceed $2,000,000, distributed by Elmagco to Seller prior to Closing (and after
\nthe Effective Date) as a dividend (exclusive of the amount treated as a dividend
\nunder Section 5.1(g)), which shall equal Seller’s good faith estimate of
\nElmagco’s after tax net income from operations for the period from January 1,
\n1998 through June 30, 1998 (the “Effective Date”) computed in accordance with
\nGenerally Accepted Accounting Principles, consistently applied.<\/p>\n
1.3 Preparation of Initial and Final Effective Date Financial Statements.
\nElmagco shall engage KPMG Peat Marwick LLP to prepare audited financial
\nstatements of Elmagco as of the Effective Date (the “Initial Effective Date
\nFinancial Statements”). The Initial Effective Date Financial Statements shall
\ninclude a closing balance sheet of Elmagco (the “Initial Effective Date Balance
\nSheet”) which shall reflect those assets and liabilities of Elmagco normally
\nreflected on a balance sheet prepared in accordance with generally accepted
\naccounting principles, consistently applied, and which assets and liabilities
\nare divided among the same categories of assets and liabilities contained on the
\nbalance sheet of Elmagco as of December 31, 1997 (the “Base Balance Sheet”).
\nThe costs of such audit shall be paid one-half by Buyer and one-half by Seller.<\/p>\n
As soon as reasonably practicable after the Closing Date and in any event
\nno later than sixty (60) days after the Closing Date, the Initial Effective Date
\nFinancial Statements shall be delivered to Buyer. Upon receipt of the Initial
\nEffective Date Financial Statements, Buyer and its independent accountants
\n(“Buyer’s Accountants”) shall be permitted during the succeeding thirty (30) day
\nperiod to examine such books, records and work papers as reasonably necessary <\/p>\n
3<\/p>\n
in connection with its review of the Initial Effective Date Financial
\nStatements. If Buyer agrees to the Initial Effective Date Financial Statements,
\nthey shall become the Final Effective Date Financial Statements. If Buyer cannot
\nagree to the Initial Effective Date Financial Statements it shall within such
\nthirty (30) day period prepare and deliver to Seller a list of disputed
\nadjustments (the “Disputed Adjustments”) Buyer believes should have been
\nrecorded on such financial statements. Buyer and Seller shall use their best
\nefforts to resolve the Disputed Adjustments. If Buyer and Seller are unable to
\nreach an agreement on the Disputed Adjustments within thirty (30) calendar days
\nafter receipt by Seller of the Disputed Adjustments, then the Disputed
\nAdjustments shall be submitted by Buyer and Seller to their independent public
\naccountants on or before the thirty-first (31st) calendar day after receipt by
\nSeller of the Disputed Adjustments, and the parties shall use reasonable efforts
\nto cause these accounting firms to promptly review and assist the parties in
\nresolving the Disputed Adjustments. Buyer and Seller shall each be responsible
\nfor the fees, costs and expenses of their respective public accountants. If the
\nindependent accountants for Buyer and Seller are unable to reach an agreement on
\nthe Disputed Adjustments within fifty (50) calendar days after receipt by Buyer
\nof such Disputed Adjustments, then the Disputed Adjustments shall be resolved by
\na nationally-recognized firm of certified public accountants mutually acceptable
\nto the independent accountants of Buyer and Seller (the “Accounting Referee”).
\nThe parties shall use reasonable efforts to cause the Accounting Referee to
\npromptly review the Disputed Adjustments and determine the final value of each
\nof the Disputed Adjustments. In making such determination, the Accounting
\nReferee shall consider only the items or amounts in dispute (and any other items
\nor amounts relating thereto). Such determination shall be made within thirty
\n(30) calendar days after the date on which the Accounting Referee receives
\nnotice of the Disputed Adjustments, or as soon thereafter as possible. Upon the
\nresolution of all Disputed Adjustments, the Initial Effective Date Financial
\nStatements<\/p>\n
4<\/p>\n
shall then be amended to reflect the determination of the final value of each of
\nthe Disputed Adjustments and shall become the Final Effective Date Financial
\nStatements and the balance sheet contained therein shall become the Final
\nEffective Date Balance Sheet. The fees, costs and expenses of the Accounting
\nReferee in conducting such review shall be shared one-half by Buyer and one-half
\nby Seller.<\/p>\n
The Final Effective Date Financial Statements shall be deemed to be and
\nshall be conclusive and binding on the parties to this Agreement for purposes of
\ndetermining any adjustment of the Purchase Price pursuant to Section 1.4.<\/p>\n
1.4 Purchase Price Adjustment. The Purchase Price shall be adjusted
\ndownward to the extent that the Stockholder’s Equity of Elmagco reflected on the
\nFinal Effective Date Balance Sheet (adjusted as hereafter provided) is less than
\n$13,278,481 (which is the amount of Stockholder’s Equity reflected on the Base
\nBalance Sheet); provided, however that such adjustment shall be made only if
\nsuch difference exceeds $300,000. The Stockholder’s Equity reflected on the
\nFinal Effective Date Balance Sheet shall be increased by the amount of any
\nSeller Liabilities (as defined in Section 9.1) reflected on the Final Effective
\nDate Balance Sheet, plus the amount of any reserves for Seller Liabilities (as
\ndefined in Section 9.1) in excess of $317,000 which are established in
\npreparation of the Final Effective Date Balance Sheet. In the event the Final
\nEffective Date Balance Sheet has not been prepared by the Closing Date, Seller
\nshall make a good faith estimate of the Stockholder’s Equity of Elmagco as of
\nsuch date and the parties shall adjust the Purchase Price accordingly;
\nthereafter, upon completion of the Final Effective Date Balance Sheet, Seller or
\nBuyer, as appropriate, shall pay the difference between the amount of the
\nadjustment for Stockholder’s Equity made on the Closing Date and the amount of
\nthe adjustment required based upon the Final Effective Date Balance Sheet. With
\nrespect to the foregoing adjustment, the net amount of the required payment
\nshall be made in cash within<\/p>\n
5<\/p>\n
five business days after such determination has been made. The amount, if any,
\nrequired to be paid pursuant to this Section 1.4 shall bear interest, at the
\nprime rate announced from time to time by The Wall Street Journal from the
\nClosing Date through the date of payment of such amount, and the total amount of
\nsuch interest shall be paid at the same time and along with such payment.<\/p>\n
1.5 Method of Payment. On the Closing Date, Buyer shall pay to Seller the
\ncash portion of the Purchase Price by wire transfer of immediately available
\nfunds to an account designated by Seller not fewer than three (3) business days
\nprior to the Closing Date and shall instruct its transfer agent to issue or
\ncause to be issued in the name of Seller the portion of the Purchase Price to be
\npaid in shares of Buyer’s Common Stock.<\/p>\n
1.6 338(h)(10) Election; Tax Liability; Allocation of Purchase Price. At
\nthe request of Buyer, Seller will cooperate with Buyer in making a timely and
\neffective election under Section 338(h)(10) of the Code, with respect to the
\npurchase and sale of the Shares hereunder. Upon presentation of Internal Revenue
\nService Form 8023 by Buyer to Seller, Seller will, within fifteen (15) days
\nafter the such presentation, execute and deliver said Form 8023 to Buyer. If any
\nchanges or supplements are required to the Form 8023, Seller agrees to make such
\nchanges or supplements. Except as specifically provided herein, any income or
\nTexas franchise tax liabilities of either Seller or Elmagco (including any
\ninterest and penalties) incurred as a result of the Section 338(h)(10) election
\nwill be the responsibility of Seller. Seller shall be responsible for the
\npayment of all taxes related to taxable income of the Company during the period
\nfrom January 1, 1998 until the Closing Date. Buyer and Seller agree that the
\nPurchase Price, as adjusted, shall be allocated among the Purchased Assets and
\nthe Noncompete Agreement (as hereinafter defined) in such manner as Seller and
\nBuyer shall mutually agree at or prior to the Closing, provided such allocation
\nwill be in accordance with the requirements of Section 1060 of the Internal
\nRevenue Code and the rules and regulations promulgated thereunder. Seller and
\nBuyer shall cooperate in<\/p>\n
6<\/p>\n
making a reasonable allocation of the Purchase Price and all tax returns and
\nreports filed by Seller, Elmagco and Buyer shall be consistent with the agreed
\nallocations.<\/p>\n
ARTICLE II. CLOSING<\/p>\n
2.1 The Closing. The transactions contemplated in this Agreement are to be
\nclosed, and all deliveries to be made at such time in connection therewith are
\nto be made, at the offices of Brown, Parker & Leahy, L.L.P., 1200 Smith Street,
\nSuite 3600, Houston, Texas 77002 on July 15, 1998 at 10:00 a.m. local time, or
\nat such other place, date and\/or time as may be mutually agreed upon in writing
\nby Seller and Buyer (said closing and the date thereof herein referred to as the
\n“Closing” and the “Closing Date,” respectively). The Closing shall be deemed to
\nhave occurred and be effective for all purposes as of 12:01 a.m., Houston time,
\non the Closing Date.<\/p>\n
2.2 Termination.<\/p>\n
Notwithstanding anything contained in this Agreement to the contrary, this
\nAgreement may be terminated at any time prior to the Closing:<\/p>\n
(a) By the mutual written consent of Buyer and Seller;<\/p>\n
(b) By either Buyer or Seller by notice delivered to the other if the<\/p>\n
Closing shall not have occurred on or before July 15, 1998; provided,
\n however, that any such termination of this Agreement pursuant to this
\n Section 2.2 shall not relieve Buyer of any liability to Seller for any
\n breach of the provisions of Section 2.3 hereof; or<\/p>\n
(c) By either Buyer or Seller by notice delivered to the other if
\n there shall have been entered a final, nonappealable order or injunction of
\n any governmental authority restraining or prohibiting the consummation of
\n the transactions contemplated herein or any material part thereof.<\/p>\n
7<\/p>\n
In the event of termination of this Agreement each party hereto will pay all of
\nits own fees and expenses and there will be no further liability hereunder on
\nthe part of any party hereto, except under Section 2.3.<\/p>\n
2.3 Breakup Fee. If Buyer fails to consummate the transactions
\ncontemplated herein on or before July 15, 1998 (unless extended in writing by
\nSeller and Buyer), except for the reasons enumerated below, Buyer shall pay
\nSeller cash in the amount of $1,000,000. Buyer shall not be required to pay such
\namount in the event such failure to close is the result of any of the following:<\/p>\n
(i) a material adverse change occurs, in comparison with the same as
\nof December 31, 1997, in or to: the financial condition, operations or business
\nprospects of Elmagco and the Subsidiaries, taken as a whole; the fair market
\nvalue of Elmagco’s and the Subsidiaries’ assets; or the amount of Elmagco’s and
\nthe Subsidiaries’ liabilities required to be accrued for under generally
\naccepted accounting principles;<\/p>\n
(ii) Buyer and Seller are unable, after using their best efforts, to
\nobtain any required regulatory approvals;<\/p>\n
(iii) Seller fails to proceed expeditiously to close on or before
\nJuly 15, 1998, other than as a result of a breach by Buyer of its obligations
\nhereunder; or<\/p>\n
(iv) Buyer is unable, after using its best efforts in good faith, to
\nnegotiate a reasonably satisfactory employment agreement with H.B. Payne Jr.<\/p>\n
Any required payment pursuant hereto shall be due and payable five business
\ndays following the earlier of termination hereof without cause or July 15, 1998
\n(unless extended). If, despite such termination, Buyer and Seller subsequently
\nclose the transaction contemplated herein, the amount paid shall be credited to
\nthe cash portion of the Purchase Price to be paid at any such closing.<\/p>\n
8<\/p>\n
ARTICLE III. REPRESENTATIONS AND
\n WARRANTIES OF SELLER AND ELMAGCO<\/p>\n
As an inducement to Buyer to enter into this Agreement and to consummate
\nthe transactions contemplated herein, Seller and Elmagco, jointly and severally,
\nrepresent and warrant to Buyer as follows:<\/p>\n
3.1 Organization, Good Standing and Qualification. Seller is a corporation
\nduly organized, validly existing and in good standing under the laws of the
\nState of Delaware and has all requisite corporate power and authority to own,
\nlease and operate its properties and conduct its business as currently being
\nconducted by it. Elmagco is a corporation duly organized, validly existing and
\nin good standing under the laws of the State of Delaware and has all requisite
\ncorporate power and authority to own, lease and operate its properties and
\nconduct its business as currently being conducted by it. Elmagco is duly
\nqualified to do business and is in good standing in such jurisdictions as the
\nnature of its business or ownership, leasing or operation of its assets so
\nrequires, except where the failure to so qualify would not have a material
\nadverse effect on Elmagco or its business. Each jurisdiction in which Elmagco is
\nqualified to do business is listed on Schedule 3.1 hereto.<\/p>\n
3.2 Authorization. Each of Seller and Elmagco has the corporate power and
\nauthority to execute, deliver and perform this Agreement and all other
\ninstruments and documents required or contemplated pursuant to this Agreement
\nand to carry out its respective obligations hereunder and thereunder. Such
\nexecution, delivery and performance by Seller or Elmagco have been duly
\nauthorized by all necessary corporate and other action by each of Seller and
\nElmagco as required under applicable law and this Agreement is, and such
\ninstruments and documents when executed and delivered pursuant hereto will be,
\nthe legal, valid and binding obligations of Seller and Elmagco, as the case may
\nbe, enforceable against Seller and Elmagco, as the case may be, in<\/p>\n
9<\/p>\n
accordance with their respective terms, except as enforceability may be limited
\nby bankruptcy laws, insolvency laws and laws generally relating to the rights of
\ncreditors.<\/p>\n
3.3 Capital of Elmagco. The authorized capital stock of Elmagco consists
\nof 2,000 shares of common stock, having a par value of $1.00 each, of which
\n1,000 shares are issued and outstanding and 1,000 shares of preferred stock,
\nhaving a par value of $1.00 each, none of which are issued and outstanding. All
\nof the Shares are validly issued, fully paid and non-assessable. There are no
\noutstanding subscriptions, options, rights, warrants, convertible securities, or
\nother agreements or commitments obligating Elmagco to issue or to transfer from
\ntreasury any additional shares of its capital stock of any class.<\/p>\n
3.4 Title. Seller is the owner, beneficially and of record, of all the
\nShares free and clear of all liens, encumbrances, security agreements, equities,
\noptions, claims, charges and restrictions, except those set forth on Schedule
\n3.4.<\/p>\n
3.5 Subsidiaries. Elmagco does not own, directly or indirectly, any
\ninterest or investment (whether equity or debt) in any corporation, partnership,
\nbusiness, trust, or other entity, except the Subsidiaries. Except as set forth
\non Schedule 3.5, Elmagco owns, beneficially and of record, all of the issued and
\noutstanding capital stock of each Subsidiary. Each Subsidiary is a corporation
\nduly organized, validly existing and in good standing under the laws of its
\njurisdiction of incorporation, has all necessary power to own its assets and to
\ncarry on its business as presently conducted, and is duly qualified to do
\nbusiness and is in good standing in each jurisdiction in which the nature of its
\nbusiness or of its properties makes such qualification necessary, except where
\nthe failure to so qualify would not have a material adverse effect on such
\nSubsidiary or its business. Each jurisdiction in which each Subsidiary is
\nqualified to do business is set forth on Schedule 3.5 hereto. All the issued and
\noutstanding shares of capital stock of each Subsidiary are validly issued, fully
\npaid and non-assessable, and are owned by Company, free and<\/p>\n
10<\/p>\n
clear of all liens, encumbrances, security agreements, equities, options,
\nclaims, charges and restrictions. There are no outstanding subscriptions,
\noptions, rights, warranties, convertible securities or other agreements or
\ncommitments obligating any Subsidiary to issue or to transfer from treasury any
\nadditional shares of its capital stock of any class.<\/p>\n
3.6 No Violation. Subject to Elmagco obtaining the Consents (as set forth
\nin Section 3.29), neither the execution, delivery or performance of this
\nAgreement or any instrument or document contemplated herein nor the consummation
\nof the transactions contemplated herein or therein will constitute a violation
\nof, or be in conflict with, or will result in a cancellation of, or constitute a
\ndefault under, or create (or cause the acceleration of the maturity of) any
\ndebt, obligation or liability affecting, or result in the creation or imposition
\nof any security interest, lien, or other encumbrance upon the Shares or any of
\nthe assets of Elmagco or any Subsidiary under:<\/p>\n
(a) any term or provision of the Certificate or Articles of
\nIncorporation or Bylaws of Seller, Elmagco or any Subsidiary;<\/p>\n
(b) any judgment, decree, order, regulation or rule of any court or
\ngovernmental authority;<\/p>\n
(c) any statute or law;<\/p>\n
(d) any contract, agreement, indenture, lease or other commitment to
\nwhich Seller, Elmagco or any Subsidiary is a party or by which Seller, Elmagco
\nor any Subsidiary, as the case may be, is bound; or<\/p>\n
(e) cause any material change in the rights or obligations of any
\nparty under any such contract, agreement, indenture, lease or commitment.<\/p>\n
Except as provided in Section 3.29 hereof, no consent of, or notice to, any
\nfederal, state or local authority, or any private person or entity, is required
\nto be obtained or given by Seller or Elmagco in <\/p>\n
11<\/p>\n
connection with the execution, delivery or performance of this Agreement or any
\nother instrument or document to be executed, delivered or performed hereunder by
\nSeller or Elmagco.<\/p>\n
3.7 Title to Assets. Elmagco and the Subsidiaries have good, marketable
\nand valid title in and to all of their respective assets, free and clear of any
\nlien, mortgage, security interest, pledge or other encumbrance, except for those
\nset forth on Schedule 3.7 (the “Permitted Liens”).<\/p>\n
3.8 Condition of Assets. All of the tangible assets of Elmagco and the
\nSubsidiaries are in good operating condition and repair and are useable for the
\npurposes for which they were intended, except for reasonable wear and tear and
\nexcept to the extent of applicable reserves for repair or replacement of such
\nassets and, to the knowledge of Seller, such assets conform to all applicable
\nstatutes, ordinances and regulations relating to their construction, use and
\noperation. All buildings and other similar structures used by Elmagco or the
\nSubsidiaries are free from material defects except to the extent of any
\napplicable reserves established for repair or replacement.<\/p>\n
3.9 Accounts Receivable. Attached hereto as Schedule 3.9 is an accurate
\naging schedule of all accounts receivable of Elmagco and the Subsidiaries
\nthrough May 31, 1998, except for accounts receivable from Seller and its
\naffiliates. Such accounts receivable are collectible at the recorded amounts
\nthereof, net of any allowance for doubtful accounts reflected on the Base
\nBalance Sheet or subsequently recorded on the books and records of Elmagco and
\nthe Subsidiaries. Such accounts receivable, and all accounts receivable created
\nafter that date, arose from valid sales in the ordinary course of business and
\nare collectible in the ordinary course of business, subject in the aggregate to
\nany applicable allowance for doubtful accounts which is consistent with
\nhistorical levels.<\/p>\n
3.10 Insurance Policies. Schedule 3.10 is a true and accurate list and
\nsummary of current insurance coverage or information concerning any self
\ninsurance program with respect to<\/p>\n
12<\/p>\n
Elmagco and the Subsidiaries. Insurance policies providing such coverage will be
\noutstanding and in full force and effect through the Closing Date. Neither
\nElmagco and the Subsidiaries nor Seller has received notice from any current
\ninsurance carrier of the intention of such carrier (i) to discontinue any
\nmaterial insurance coverage afforded to such companies; or (ii) to materially
\nincrease the premium costs of such insurance. The types of insurance policies
\nmaintained by Elmagco and the Subsidiaries or Seller with third parties for the
\nbenefit of Elmagco and the Subsidiaries, and the coverage afforded by such
\npolicies with respect to the operations of Elmagco and the Subsidiaries are, in
\nthe opinion of Seller and Elmagco, reasonable in light of the nature of the
\nbusiness conducted and the risks associated with such business. Except as listed
\non Schedule 3.10, during the past year, no application by Seller or Elmagco or
\nthe Subsidiaries for insurance or any bond has been denied for any reason.<\/p>\n
3.11 Employee Benefits. With respect to employee benefits provided by
\nSeller or Elmagco and the Subsidiaries to employees of Elmagco and the
\nSubsidiaries:<\/p>\n
(a) Seller and\/or Elmagco and the Subsidiaries currently maintain or
\ncontribute to only those employee pension benefit plans, as defined in Section
\n3(2) of the Employee Retirement Income Security Act of 1974, as amended
\n(“ERISA”), that are listed on Schedule 3.11 (the “Pension Plans”) with respect
\nto one or more employees of Elmagco or the Subsidiaries. Seller has furnished
\nto Buyer a copy of each Pension Plan, all amendments thereto, and any funding
\narrangement agreement, any investment manager agreement, current summary plan
\ndescription, and participant informational material relating thereto as well as
\nthe actuarial reports, if any, and annual reports with attachments for the
\nimmediate past two plan years.<\/p>\n
(b) Seller and\/or Elmagco and the Subsidiaries currently maintain or
\ncontribute to only those employee welfare benefit plans, as defined in Section
\n3(1) of ERISA (including, but not limited to, life insurance, medical,
\nhospitalization, holiday, vacation, dental and vision<\/p>\n
13<\/p>\n
plans) that are listed on Schedule 3.11 (the “Welfare Plans”) with respect to
\none or more employees of Elmagco of the Subsidiaries. Seller has furnished to
\nBuyer a copy of each Welfare Plan, all amendments thereto, current summary plan
\ndescription, participant informational material, and any funding arrangement
\nagreement relating thereto as well as the annual report with attachments for the
\nimmediate past two plan years.<\/p>\n
(c) Seller and\/or Elmagco and the Subsidiaries currently maintain or
\nhave entered into only those written compensation programs and employment
\narrangements (including, but not limited to, fringe benefits, incentive
\ncompensation, bonus, severance, deferred compensation, and supplemental
\nexecutive compensation plans, employment agreements, and consulting agreements,
\nbut excluding routine administrative procedures or required governmental
\nprograms such as Social Security, unemployment and workers’ compensation
\nprograms) that are listed on Schedule 3.11 (the “Compensation Programs”) with
\nrespect to one or more employees of Elmagco or the Subsidiaries. Seller has
\nfurnished to Buyer a copy of each Compensation Program as well as a copy of any
\nfunding arrangement agreement relating thereto.<\/p>\n
(d) Each Pension Plan and any trust maintained in conjunction
\ntherewith comply and have been administered in form and operation in all
\nmaterial respects with the provisions of all applicable laws, including but not
\nlimited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”).
\nSeller and\/or Elmagco and the Subsidiaries have not engaged in nor are
\ncontractually bound to enter into any non-exempt “prohibited transaction” as
\ndefined in Section 406 of ERISA or Section 4975 of the Code with respect to any
\nPension Plan.<\/p>\n
(e) To the knowledge of Seller, neither Seller and\/or Elmagco and the
\nSubsidiaries nor any “controlled company” has participated, or will participate
\nprior to or after the Closing, in any conduct that could result in the
\nimposition upon Buyer, Elmagco or the Subsidiaries of any excise tax under
\nSection 4971 through 4980B of the Code or civil liability <\/p>\n
14<\/p>\n
under Section 502(i) of ERISA. A “controlled company” is any enterprise which,
\nwith Seller and\/or Elmagco and the Subsidiaries, forms or formed at any time
\nsince September 2, 1974 a controlled group of corporations within the meaning of
\nSection 414(b) of the Code, a group of trades or businesses under common control
\nwithin the meaning of Section 414(c) of the Code, or any affiliated service
\ngroup within the meaning of Section 414(m) of the Code.<\/p>\n
(f) To the knowledge of Seller, every employee and former employee of
\nElmagco and the Subsidiaries, and every dependent of the foregoing entitled to
\ncontinuation of benefit coverage under any Welfare Plan, has been accorded all
\nof the rights to which such person is entitled as a matter of law or regulation,
\nincluding any entitlements arising in connection with the transactions
\ncontemplated in this Agreement.<\/p>\n
(g) Elmagco and the Subsidiaries do not sponsor or maintain, nor are
\ncontributing employers or otherwise a parties to, nor have any obligation or
\nliability under or with respect to, any defined benefit plan within the meaning
\nof Section 3(35) of ERISA.<\/p>\n
(h) Elmagco and the Subsidiaries do not maintain or participate in,
\nnor are obligated to contribute to, nor have ever maintained or participated in,
\nnor been obligated to contribute to, any “multiemployer plan” within the meaning
\nof Section 3(37) of ERISA.<\/p>\n
(i) No Welfare Plan provides any health, life or other welfare
\ncoverage to employees of Elmagco and the Subsidiaries beyond termination of
\ntheir employment with Elmagco and the Subsidiaries by reason of retirement or
\notherwise, other than coverage as may be required under Section 4980B of the
\nCode or Part 6 of ERISA, or under the continuation of coverage provisions of the
\nlaws of any state or locality.<\/p>\n
3.12 Labor Contracts. Elmagco and the Subsidiaries are not a party to and
\nhave no obligation under any collective bargaining agreement or other labor
\nunion contract, white paper or side agreement with any labor union or
\norganization, nor any obligation to recognize or deal <\/p>\n
15<\/p>\n
with any labor union or organization. There are no pending or, to the knowledge
\nof Seller and Elmagco, threatened representation campaigns, elections or
\nproceedings or questions concerning union representation involving any employees
\nof Seller or Elmagco or the Subsidiaries. To the knowledge of Seller and
\nElmagco, there are no activities or efforts of any labor union or organization
\n(or representatives thereof) to organize any employees, nor of any demands for
\nrecognition or collective bargaining, nor of any strikes, slowdowns, work
\nstoppages or lock-outs of any kind, or threats thereof, by or with respect to
\nany of its employees, or any actual or claimed representatives thereof, and no
\nsuch activities, efforts, demands, strikes, slowdowns, work stoppages or lock-
\nouts occurred during the three-year period preceding the date hereof.<\/p>\n
3.13 Financial Statements. Schedule 3.13 is the financial statements of
\nElmagco for the fiscal years ended December 31, 1997, 1996 and 1995 and
\nunaudited interim financial statements of Elmagco and the Subsidiaries for the
\nperiod ended March 31, 1998 (the “Financial Statements”), along with the
\nunqualified opinion(s) of KPMG Peat Marwick LLP delivered with respect to the
\naudited Financial Statements. Except as otherwise provided therein, the
\nFinancial Statements fairly present the assets, liabilities and financial
\ncondition of Elmagco and the Subsidiaries in all material respects as of the
\nrespective dates and for the respective periods above stated and have been
\nprepared in accordance with generally accepted accounting principles
\nconsistently applied as of the respective dates and for the respective periods
\nstated above. Neither Elmagco nor the Subsidiaries has any liabilities or
\nobligations, whether direct, indirect, contingent, absolute, matured or
\nunmatured, or of any nature whatsoever, whether arising out of contract, tort,
\nstatute or otherwise, which are not reflected, reserved against or given effect
\nto in the Financial Statements. There is no basis for assertion against Elmagco
\nor the Subsidiaries of any liabilities or obligations not adequately reflected,
\nreserved against or given effect to in the Financial Statements.<\/p>\n
16<\/p>\n
3.14 Taxes. Elmagco and the Subsidiaries have filed all income, franchise,
\nsales and use tax returns required to be filed by them and have paid the taxes
\nshown to be due and payable thereon, or appropriate extension for payment has
\nbeen requested and received and neither Elmagco nor the Subsidiaries is
\ndelinquent thereon. All monies required to be withheld by Elmagco and the
\nSubsidiaries from employees for income taxes, social security and unemployment
\ninsurance taxes or charges have been collected or withheld, and either paid to
\nthe respective governmental agencies or set aside for such purposes, or accrued,
\nor reserved against and entered upon the books of Elmagco and the Subsidiaries.
\nThe provisions for taxes reflected in the Financial Statements are adequate, in
\nall material respects, for federal, state, county and local taxes for the
\nperiods ended thereon. Except as set forth on Schedule 3.14, there are no
\npresent disputes as to taxes of any nature payable by Elmagco or the
\nSubsidiaries and no tax liabilities of Elmagco or the Subsidiaries.<\/p>\n
3.15 Litigation. Except as set forth on Schedule 3.15, neither Seller nor
\nElmagco or the Subsidiaries: (i) is engaged in or a party to, or has been
\nthreatened with, any legal action, suit, investigation, arbitration or other
\nproceeding either at law or in equity before any court, administrative agency or
\narbitrator that if asserted and decided adversely to Seller or Elmagco or the
\nSubsidiaries could materially and adversely affect the operations of Seller or
\nElmagco or the Subsidiaries (present or prospective) or the business or assets
\n(present or prospective) thereof; (ii) has been charged with, or their knowledge
\nare under investigation with respect to, any violation of any provision of
\nfederal, state or other applicable law or administrative regulation; or (iii) is
\nsubject to any litigation, proceeding or governmental investigation pending or
\nthreatened relating to any of the transactions contemplated in this Agreement or
\nwhich questions the validity of this Agreement or which seeks to delay, prohibit
\nor restrict in any manner any action taken or contemplated to be taken under
\nthis Agreement. Neither Seller nor Elmagco or the Subsidiaries <\/p>\n
17<\/p>\n
is subject to any judgment, restrain, order or decree entered in any lawsuit or
\nproceeding which would adversely affect Seller’s ability to convey the Shares
\nfree of any lien, claim or other encumbrance to Buyer.<\/p>\n
3.16 Absence of Material Adverse Change; Conduct of Business. Except as set
\nforth on Schedule 3.16, since the date of the Base Balance Sheet there has not
\nbeen any:<\/p>\n
(a) sale, assignment, pledge, hypothecation or other transfer of any
\nof the assets of Elmagco or the Subsidiaries except in the ordinary course of
\nbusiness (other than the distribution of the Dividend as contemplated in Section
\n1.2);<\/p>\n
(b) any condition or contingency that might reasonably be expected to
\nresult in any material adverse change in the financial condition or prospects of
\nElmagco or the Subsidiaries;<\/p>\n
(c) destruction, damage to or loss of, any material asset of Elmagco
\nor the Subsidiaries (whether or not covered by insurance) that materially and
\nadversely affects the financial condition or prospects of Elmagco or the
\nSubsidiaries taken as a whole;<\/p>\n
(d) termination of or material amendment to any Contract (as hereafter
\ndefined) or Lease (as hereafter defined) other than in the ordinary course of
\nbusiness;<\/p>\n
(e) waiver or release of any material right or claim of Elmagco or the
\nSubsidiaries;<\/p>\n
(f) increase in compensation payable to, or any employment, bonus or
\ncompensation agreement entered into with, any officer, director, employee, agent
\nor independent contractor of Elmagco or the Subsidiaries other than in the
\nordinary course of business;<\/p>\n
(g) labor dispute that materially affects the financial condition of
\nElmagco or the Subsidiaries;<\/p>\n
18<\/p>\n
(h) actual or suspected loss of any customer or product line or
\ncancellation of any material sales order;<\/p>\n
(i) agreement by Elmagco or the Subsidiaries to do any of the things
\ndescribed in the preceding clauses (a) through (h) except as contemplated in
\nthis Agreement.<\/p>\n
3.17 Authorization for this Agreement. Except as contemplated by Section
\n6.2, no authorization, approval or consent of any governmental department,
\nbureau or agency or other public board or authority is required in connection
\nwith the execution and delivery of this Agreement by Seller or Elmagco, for the
\nperformance of Seller’s or Elmagco’s respective obligations hereunder and the
\nconsummation by Seller or Elmagco of the transactions contemplated in this
\nAgreement.<\/p>\n
3.18 Compliance with Laws. To the knowledge of Seller, each of Seller and
\nElmagco and the Subsidiaries is in compliance with all federal, state, local and
\nforeign statutes, laws, ordinances, regulations, rules, permits, judgments,
\norders or decrees applicable to it, its assets and its business. Neither Seller
\nnor Elmagco or the Subsidiaries has received any written notice of and, to their
\nknowledge, there does not exist any basis for, any claim of default under or
\nviolation of any such statute, law, ordinance, regulation, rule, judgment, order
\nor decree except such defaults or violations, if any, that in the aggregate do
\nnot and will not materially and adversely affect the property, operation,
\nfinancial condition or prospects of Elmagco and the Subsidiaries taken as a
\nwhole. Neither Seller nor Elmagco or the Subsidiaries has received any written
\nopinion or memorandum from any legal counsel to the effect that it, its business
\nor its assets are exposed to any liability that can reasonably be expected to be
\nmaterial thereto.<\/p>\n
3.19 Compliance with Environmental Laws.<\/p>\n
(a) To the knowledge of Seller, any property or facility owned, leased
\nor operated by Elmagco or the Subsidiaries is and has been owned, leased, or
\noperated by Elmagco <\/p>\n
19<\/p>\n
or the Subsidiaries in material compliance with all applicable Environmental
\nLaws, as defined hereinafter.<\/p>\n
(b) Each of Elmagco and the Subsidiaries has acquired, obtained,
\napplied for or made any permits, licenses, notifications, applications or other
\nreports to or from all governmental or administrative agencies having
\njurisdiction over it or any property owned, leased or operated by such company,
\nas required under any applicable Environmental Laws.<\/p>\n
(c) There is no claim, action, suit, proceeding, arbitration,
\ninvestigation or inquiry pending or threatened against any of Elmagco or the
\nSubsidiaries before any federal, state, municipal, foreign or other court, or
\nany other governmental or administrative body or agency, or any private
\narbitrational tribunal, nor has there been any complaint, order, directive,
\nclaim, citation, notice or lien by or in favor of any governmental authority or
\nprivate person with respect to (i) the use, storage, generation, treatment,
\ntransportation or disposal by Elmagco or the Subsidiaries of Hazardous
\nSubstances (as hereafter defined); (ii) spills, releases, discharges or
\ndisposals of Hazardous Substances on or into any real property, buildings,
\nappurtenances, fixtures and facilities owned, leased, or operated by any of
\nElmagco or the Subsidiaries, or any other property as a result of operations or
\nactivities on real property owned, leased or operated by any of Elmagco or the
\nSubsidiaries, or on or into any surface water, groundwater or sewer system;
\n(iii) air emissions by Elmagco or the Subsidiaries; or (iv) the violation of or
\nnoncompliance by Elmagco or the Subsidiaries with any Environmental Laws, as
\ndefined hereinafter.<\/p>\n
(d) As used herein, the term “Environmental Laws” means and includes,
\nwithout limitation, any federal, state or local law, statute, regulation or
\nordinance, now or hereinafter enacted, promulgated or issued, regulating or
\nrelating to any Hazardous Substances or pertaining to health, safety, industrial
\nhygiene or the environmental conditions on, under or about the business of
\nElmagco or the Subsidiaries or their respective properties, including without<\/p>\n
20<\/p>\n
limitation each of the following: the Comprehensive Environmental Response,
\nCompensation and Liability Act of 1980, as amended (“CERCLA”), 42 U.S.C. (S)
\n9601 et seq.; the Resource Conservation and Recovery Act of 1976, as amended
\n(“RCRA”), 42 U.S.C. (S) 6901 et seq.; the Toxic Substances Control Act, as
\namended, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, as amended, 42 U.S.C.
\n(S) 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
\n(S) 1251 et seq.; the Federal Hazardous Materials Transportation Act, 49 U.S.C.
\n(S) 1801 et seq.; the National Environmental Policy Act of 1975, as amended, 42
\nU.S.C. (S) 4321 et seq.; the Texas Solid Waste Disposal Act, as amended, Texas
\nHealth and Safety Code (S) 361.001 et seq.; the Texas Water Code, as amended,
\n(S) 26.001 et seq.; and the rules, regulations and ordinances of the U.S.
\nEnvironmental Protection Agency, the Texas Natural Resource Conservation
\nCommission, and of all other agencies, boards, commissions and other
\ngovernmental offices, bodies and political subdivisions thereof having
\njurisdiction over the Business and its property or the use or operation thereof.<\/p>\n
(e) As used herein, the term “Hazardous Substances” means and includes
\npetroleum and any substance, material, pollutant or contaminant listed or
\ndefined as hazardous or toxic under any Environmental Law.<\/p>\n
3.20 Contracts. Schedule 3.20 is a complete and accurate list of all
\ncontracts, agreements and personal property leases, whether written or oral, to
\nwhich Elmagco or any Subsidiary is a party as of the date of this Agreement
\n(except for certain immaterial contracts, leases or other agreements involving
\npayments of less than $5,000 individually over the life of such agreements and
\n$20,000 in the aggregate for all such agreements over the life of such
\nagreements and which do not impose any significant non-monetary obligations), or
\nof which Elmagco or any Subsidiary is an assignee (the “Contracts”). True and
\ncorrect copies of all written Contracts have been furnished to Buyer by Seller.<\/p>\n
21<\/p>\n
Each Contract is in full force and effect and constitutes a legal, valid and
\nbinding obligation of the parties thereto in accordance with the terms of such
\nContract. There have been no material amendments, modifications or supplements
\nto any Contract, except as set forth on Schedule 3.20. There is no default or
\nclaim of default under any Contract and, no event has occurred that, with the
\npassage of time or the given of notice (or both), would constitute a default by
\nElmagco or any Subsidiary or, to the knowledge of Seller, any other party
\nthereto, under any Contract, or would permit modification, acceleration, or
\ntermination of any Contract, or result in the creation of any security interest,
\nlien, mortgage or any encumbrance on any of the assets of Elmagco or any
\nSubsidiary.<\/p>\n
3.21 Real Property and Leases. Schedule 3.21 is a description of all real
\nproperty owned or other real estate leased by Elmagco or the Subsidiaries (the
\n“Leases”) according to the character of the property and the location thereof.
\nSchedule 3.21 sets forth a brief description (including in each case the annual
\nrental payable, the expiration date, a brief description of the property covered
\nand the name of the lessor) of every lease or agreement, whether written or
\noral, under which Elmagco or the Subsidiaries is lessee of or holds or operates,
\nany real property. Each of such Leases and agreements is in full force and
\neffect and constitutes a legal, valid and binding obligation of the respective
\nparties thereto. There is no default under any Lease or agreement and no event
\nhas occurred that with the passage of time or giving of notice (or both) would
\nconstitute a default by Elmagco or the Subsidiaries, as applicable, or, to the
\nknowledge of Seller, any other party thereto. Neither Seller nor Elmagco or the
\nSubsidiaries has received any notice of a proposed increase in the assessed
\nvaluation of the real property. Elmagco or the Subsidiaries, as applicable, now
\nhas and will have at the Closing Date good, marketable and indefeasible title in
\nfee simple to the owned real property, free and clear of all liens, mortgages
\nand other security interests except for those set forth on Schedule 3.21. All
\nutilities required for the operation of the real property are installed and
\noperating, all installation and connection<\/p>\n
22<\/p>\n
charges have been paid in full, and the right to return of any deposit or
\ncontribution in connection therewith shall inure to Elmagco or the Subsidiaries.
\nAll utilities are available to the real property in sufficient quantities as
\nrequired for the operation of the business conducted thereof as presently
\nconducted.<\/p>\n
3.22 Inventory. The inventory reflected in the Financial Statements (the
\n“Inventory”) consists of items that are usable and saleable in the ordinary
\ncourse of business by Elmagco and the Subsidiaries, except for applicable
\ninventory reserves. Subject to such applicable inventory reserve, all items
\nincluded in the Inventory are the property of Elmagco and the Subsidiaries, and
\nare not missing (except for sales made in the ordinary course of business since
\nDecember 31, 1997) or obsolete, and are in good condition. Except as set forth
\non Schedule 3.22, no items included in the Inventory are held by Elmagco or the
\nSubsidiaries on consignment from others. The Inventory reflected in the
\nFinancial Statements is based on quantities determined by physical count or
\nmeasurement, taken as of December 31, 1997, and is valued at the lower of cost
\n(determined on a last in, first out basis) or market value and on a basis
\nconsistent with that of prior years. Since December 31, 1997, the Inventory has
\nbeen replaced as and when used in a manner consistent with past practice.<\/p>\n
3.23 Personal Property. Schedule 3.23 is a complete and accurate list
\ndescribing, in all material respects, all trucks, automobiles, trailers, other
\ntitled vehicles, machinery, equipment, furniture, supplies, tools, dies, jigs,
\nmolds, patterns, drawings, and other tangible personal property owned by, in the
\npossession of, or used by Elmagco or the Subsidiaries, except Inventory. The
\nproperty listed on Schedule 3.23 constitutes all tangible personal property
\nnecessary for the conduct by Elmagco and the Subsidiaries of their respective
\nbusinesses as now conducted and such property is not missing or obsolete.<\/p>\n
23<\/p>\n
3.24 Bank Accounts, Guarantees and Powers. Schedule 3.24 is a complete and
\naccurate list (i) a list of all accounts, borrowing resolutions and deposit
\nboxes maintained by Elmagco and the Subsidiaries at any bank or other financial
\ninstitution and the names of the persons authorized to effect transactions in
\nsuch accounts and pursuant to such resolutions and with access to such boxes;
\n(ii) all agreements or commitments of Elmagco and the Subsidiaries guaranteeing
\nthe payment of money or performance of any other Contracts by Elmagco or the
\nSubsidiaries or by any third persons, and (iii) the names of all persons, firms,
\nassociations, corporations or business organizations holding general or special
\npowers of attorney from Elmagco or the Subsidiaries, together with a summary of
\nthe terms thereof.<\/p>\n
3.25 Patents, Trademarks and Licenses. Schedule 3.25 is a complete and
\naccurate list of all of Elmagco’s and the Subsidiaries patents, trademarks,
\nservice marks, copy rights (whether or not registered) and registrations and
\napplications therefor, trade names owned or used in any way or relating to the
\nbusiness of such company; and the list of all licenses, franchise agreements and
\nother similar agreements relating to any of the foregoing or otherwise owned,
\nused in or any way relating to such business (the “Proprietary Information”). To
\nthe knowledge of Seller, Elmagco or the Subsidiaries, as appropriate, has the
\nright and authority to use such Proprietary Information as is necessary to
\nenable it to conduct and to continue to conduct all phases of its business in
\nthe manner as now conducted by it, and such use does not, and will not, conflict
\nwith, infringe upon or violate any patent or other rights of any person,
\ncorporation or entity. To the knowledge of Seller and Elmagco, no person,
\ncorporation or entity is infringing upon or violating any rights of Elmagco or
\nthe Subsidiaries with respect to such Proprietary Information.<\/p>\n
Elmagco or the Subsidiaries, as appropriate, is the sole owner of each
\nof its trade secrets and has taken all reasonable security measures to protect
\nthe secrecy, confidentiality, and value of such trade secrets. To the knowledge
\nof Seller, all of the trade secrets of Elmagco are <\/p>\n
24<\/p>\n
presently valid and protectible, and are not part of the public knowledge or
\nliterature, nor have they been used, divulged or appropriated for the benefit of
\nany past or present employees or other persons, or to the detriment of Elmagco
\nor the Subsidiaries.<\/p>\n
3.26 Permits. Schedule 3.26 is a complete and accurate list of all permits
\nnecessary for the conduct of the business of Elmagco and the Subsidiaries, other
\nthan permits, the lack of which would not have a material adverse effect on
\nElmagco and the Subsidiaries or their business (the “Permits”), together with
\nthe expiration date thereof. Except as set forth on Schedule 3.26, such Permits
\nhave been validly and properly issued, established and maintained and are in
\nfull force and effect.<\/p>\n
3.27 Transactions with Affiliates. Except as set forth on Schedule 3.27,
\nthere are no contracts or arrangements (formal, informal, written or oral),
\ndirectly or indirectly, between Seller and Elmagco or the Subsidiaries or any
\nother person controlling, under common control with or controlled by Seller.<\/p>\n
3.28 Disclosure. No representation or warranty of Seller or Elmagco set
\nforth hereunder or in the schedules attached hereto or in any certificate,
\nstatement or other document delivered by or on behalf of Seller or Elmagco
\nhereunder contains any untrue statement of the material fact or omits to state a
\nmaterial fact necessary in order to make the statements contained herein or
\ntherein not misleading.<\/p>\n
3.29 Consents and Approvals. Schedule 3.29 is a complete and accurate list
\nof all persons, corporations, or entities whose approval, consent, waiver or
\nauthorization (the “Consents”) to the execution, delivery of performance of this
\nAgreement by Seller or Elmagco, or any of the instruments or documents to be
\nexecuted by Seller or Elmagco as contemplated herein, is legally or
\ncontractually required or is necessary to duly and validly transfer the Shares<\/p>\n
25<\/p>\n
being transferred to Buyer or necessary to preclude any cancellation, suspension
\nor termination or reaffirmation of any Contracts, Permits or Leases of Elmagco
\nor the Subsidiaries.<\/p>\n
3.30 Brokerage or Finder’s Fees. No broker or finder has acted for or on
\nbehalf of Seller or Elmagco in connection with this Agreement or the
\ntransactions contemplated in this Agreement. No broker or finder is entitled to
\nany brokerage or finder’s fee, or to any commission, based in any way on
\nagreements, arrangements or understandings made by or on behalf of Seller or
\nElmagco, in each case for which Buyer or any affiliate of Buyer has any
\nliabilities or obligations, contingent or otherwise.<\/p>\n
3.31 Year 2000 Compliance. The software and computer programs used by
\nElmagco and the Subsidiaries will, except to the extent that a reserve has been
\nestablished for the cost of addressing or remedying such issues: (i) accurately
\nprocess date information before, during and after January 1, 2000, including,
\nbut not limited to, accepting the date input, providing date output and
\nperforming calculations on dates or portions of dates; (ii) function accurately
\nand without interruption before, during and after January 1, 2000, without any
\nchange in operations associated with the advent of the new century; (iii)
\nrespond to two (2) digit year date input in a way that resolves the ambiguity as
\nto century in a disclosed, defined and predetermined manner; and (iv) store and
\nprovide output of date information in ways that are unambiguous as to century.<\/p>\n
3.32 Purchase for Own Account. The shares of Common Stock of Buyer, if any,
\nto be acquired by Seller as part of the Purchase Price pursuant to this
\nAgreement are being or will be acquired for its own account and with no
\nintention of distributing or reselling such securities or any part thereof in
\nany transaction that would be in violation of the securities laws of the United
\nStates of America, or any state, without prejudice, however, to the rights of
\nSeller at all times to sell or otherwise dispose of all or any part of such
\nsecurities under an effective registration statement under the Securities Act,
\nor under an exemption from such registration available under<\/p>\n
26<\/p>\n
the Securities Act of 1933, as amended (the “Securities Act”), and subject,
\nnevertheless, to the disposition of Seller’s property being at all times within
\nits control. If Seller should in the future decide to dispose of any of such
\nshares of Common Stock, Seller understands and agrees that it may do so only in
\ncompliance with the Securities Act and applicable state securities laws, as then
\nin effect. Seller agrees to the imprinting, so long as required by law of a
\nlegend on certificates representing such shares to the following effect:<\/p>\n
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
\n UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE
\n SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT
\n PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
\n APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
\n FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS SUPPORTED BY A
\n WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
\n REGISTRATION IS NOT REQUIRED.<\/p>\n
Seller understands that any shares of Common Stock of Buyer issued to it will
\nnot be registered at the time of their issuance under the Securities Act for the
\nreason that the sale provided for in this Agreement is exempt pursuant to
\nSection 4(2) of the Securities Act and that the reliance of Buyer on such
\nexemption is predicated in part on the representations of Seller set forth
\nherein. Seller represents that it is experienced in evaluating companies such
\nas Buyer, has such knowledge and experience in financial and business matters as
\nto be capable of evaluating the merits and risks of its investment and has the
\nability to suffer the total loss of its investment. Seller further represents
\nthat it has had the opportunity to ask questions of and receive answers from
\nexecutive officers of Buyer concerning the terms and conditions of the offering
\nand to obtain additional information to the satisfaction of Seller. Seller is
\nan “accredited investor as that term is defined by Rule 501 of Regulation D
\npromulgated under the Securities Act.<\/p>\n
Buyer acknowledges and agrees that, subject to receipt by Buyer of an
\nopinion of counsel of Winstead Sechrest & Minick P.C. that the applicable
\ntransfer may be made without registration <\/p>\n
27<\/p>\n
under the securities laws of the United States of America or any state and will
\nnot cause the initial issuance of the Common Stock to Seller to have been made
\nin violation of the securities laws of the United States of America or any
\nstate, any one or more of the following transfers of such shares of Common Stock
\nmay be made:<\/p>\n
(a) Seller may transfer shares to one or more shareholders of Seller
\n (“Shareholder”) pursuant to a complete redemption of such
\n Shareholder’s stock in Seller and\/or a payment on Seller’s
\n indebtedness owed to such Shareholder;
\n (b) Seller or a Shareholder may transfer shares to a direct or indirect
\n 80%-or-more-owned subsidiary of Seller or such Shareholder (and
\n thereafter such subsidiary may retransfer such shares to Seller or
\n such Shareholder);
\n (c) a Shareholder may transfer shares to one or more of its shareholders.<\/p>\n
3.33 Suppliers. Schedule 3.33 lists all of the material suppliers and
\ndistributors of Elmagco and the Subsidiaries. Except as set forth in Schedule
\n3.33, no single supplier or distributor accounted for more than 5% of the
\nservices or merchandise purchased by Elmagco or the Subsidiaries during the year
\nended as of the date of the Base Balance Sheet, or during the three months ended
\nMarch 31, 1998, and no single supplier or distributor is expected to account for
\nmore than 5% of such services or merchandise during the twelve-month period
\nending December 31, 1998. Except as set forth in Schedule 3.33, since the date
\nof the Base Balance Sheet there has not been (i) any material adverse change in
\nthe business relationship of Elmagco or the Subsidiaries with any supplier or
\ndistributor of services or merchandise identified in Schedule 3.33; or (ii) any
\nchange in any material term (including credit terms) of the supply agreements or
\nrelated arrangements with any such supplier.<\/p>\n
3.34 Customers. Schedule 3.34 sets forth all of the material customers of
\nElmagco and the Subsidiaries. Except as set forth in Schedule 3.34, no single
\ncustomer accounted for more <\/p>\n
28<\/p>\n
than 5% of the combined sales of Elmagco or the Subsidiaries during the year
\nended as of the date of the Base Balance Sheet, or during the three Months ended
\nMarch 31, 1998, and no single customer is expected to account for more than 5%
\nof such sales during the twelve months ended December 31 , 1998. Except as set
\nforth in Schedule 3.34 since the date of the Base Balance Sheet there has not
\nbeen (i) any adverse change in the business relationship of Elmagco or the
\nSubsidiaries with any customer identified in Schedule 3.34; or (ii) any change
\nin any term (including credit terms) of the sales agreements or related
\nagreements with any such customer. During the past two years, neither Elmagco
\nnor any Subsidiary has received any customer complaints concerning its products
\nand services, nor has Elmagco or any Subsidiary had any of its products returned
\nby a purchaser thereof, other than complaints and returns in the ordinary course
\nof business.<\/p>\n
3.35 Performance Bonds; Letters of Credit. There are no performance or
\nsimilar bonds or letters of credit currently posted by Elmagco or any
\nSubsidiary.<\/p>\n
ARTICLE IV. REPRESENTATIONS OF BUYER<\/p>\n
As an inducement to Buyer to enter into this Agreement and to consummate
\nthe transactions contemplated herein; Buyer represents and warrants to Seller
\nand Elmagco as follows:<\/p>\n
4.1 Organization and Good Standing. Buyer is a corporation duly organized,
\nvalidly existing and in good standing under the laws of the State of Delaware
\nand has all requisite corporate power and authority to own, lease and operate
\nits properties and conduct its business as currently being conducted by it.<\/p>\n
4.2 Authorization. Buyer has the corporate power and authority to
\nexecute, deliver and perform this Agreement and all other instruments and
\ndocuments required or contemplated pursuant to this Agreement and to carry out
\nits obligations hereunder and thereunder. Such execution, delivery and
\nperformance by Buyer has been duly authorized by all necessary <\/p>\n
29<\/p>\n
corporate and other action by Buyer as required under applicable law and this
\nAgreement is, and such instruments and documents when executed and delivered
\npursuant hereto will be, the legal, valid and binding obligations of Buyer,
\nenforceable against Buyer in accordance with their respective terms, except as
\nenforceability may be limited by bankruptcy laws, insolvency laws and laws
\ngenerally relating to the rights of creditors.<\/p>\n
4.3 No Violation. Neither the execution, delivery or performance of this
\nAgreement or any instrument or document contemplated herein nor the consummation
\nof the transactions contemplated herein or therein will constitute a violation
\nof, or be in conflict with, or will result in a cancellation of, or constitute a
\ndefault under, or create (or cause the acceleration of the maturity of) any
\ndebt, obligation or liability affecting, or result in the creation or imposition
\nof any security interest, lien, or other encumbrance upon any of the assets of
\nBuyer or its subsidiaries under:<\/p>\n
(a) any term or provision of the Certificate or Articles of
\nIncorporation or Bylaws of Buyer or any of its subsidiaries;<\/p>\n
(b) any judgment, decree, order, regulation or rule of any court or
\ngovernmental authority;<\/p>\n
(c) any statute or law;<\/p>\n
(d) any contract, agreement, indenture, lease or other commitment to
\nwhich Buyer or any of its subsidiary is a party or by which Buyer or any of its
\nsubsidiaries is bound; or<\/p>\n
(e) cause any material change in the rights or obligations of any
\nparty under any such contract, agreement, indenture, lease or commitment.<\/p>\n
No consent of, or notice to, any federal, state or local authority, or any
\nprivate person or entity, is required to be obtained or given by Buyer in
\nconnection with the execution, delivery or <\/p>\n
30<\/p>\n
performance of this Agreement or any other instrument or document to be
\nexecuted, delivered or performed hereunder by Buyer.<\/p>\n
4.4 Governmental Consents. Except as contemplated by Section 6.2, neither
\nthe execution and delivery of this Agreement by Buyer nor the consummation by
\nBuyer of the transactions contemplated herein requires any filing with, or the
\nauthorization, approval or consent of any third party or governmental agency or
\nauthority including, without limitation, any filing of a premerger notification.<\/p>\n
4.5 Capitalization of Buyer. The authorized capital stock of Buyer is
\n50,000,000 shares of common stock, $.00001 par value, of which 30,728,298 shares
\nare issued and outstanding as of the date hereof and 5,000,000 shares of “blank
\ncheck” preferred stock (“Preferred Stock”), of which 196,000 shares of the 10%
\nJunior Redeemable Convertible Preferred Stock are issued and outstanding as of
\nthe date hereof. All outstanding shares of Common Stock and Preferred Stock of
\nBuyer are validly issued, fully paid and nonassessable. At the time of issuance
\nthereof, the Common Stock to be delivered to Seller pursuant to this Agreement
\nwill constitute valid and legally issued shares of Common Stock of Buyer, fully
\npaid and nonassessable and will not have been issued in violation of any
\npreemptive rights of the stockholders of Buyer.<\/p>\n
4.6 Brokerage or Finder’s Fee. No broker or finder has acted for or on
\nbehalf of Buyer in connection with this Agreement or the transactions
\ncontemplated in this Agreement. No broker or finder is entitled to any brokerage
\nor finder’s fee, or to any commission, based in any way on agreements,
\narrangements or understandings made by or on behalf of Buyer for which Seller or
\nany affiliate of Seller has any liabilities or obligations, contingent or
\notherwise.<\/p>\n
31<\/p>\n
ARTICLE V. COVENANTS OF SELLER AND ELMAGCO<\/p>\n
5.1 Conduct of the Business Pending Closing. From the date hereof until
\nthe Closing, except with the prior written consent of Buyer:<\/p>\n
(a) Elmagco shall maintain itself at all times as a corporation
\nvalidly existing and in good standing under the laws of Delaware and shall cause
\neach Subsidiary to maintain itself at all times as a corporation validly
\nexisting and in good standing under the laws of its jurisdiction of
\nincorporation;<\/p>\n
(b) Elmagco and each Subsidiary shall carry on its business only in
\nthe ordinary course, in a good and diligent manner on an arm’s-length basis and
\nsubstantially in the manner carried on historically prior to the date hereof and
\nwill not engage in any acquisition, whether by merger, consolidation or
\notherwise, of all or substantially all of any business or organization or
\ndivision thereof, or engage in any other activity or transaction or make any
\ncommitment to purchase or spend other than in the ordinary course of its
\nbusiness as heretofore conducted;<\/p>\n
(c) Elmagco and each Subsidiary shall not (i) pay or obligate itself
\nto pay any compensation, commission or bonus to any director, officer, employee,
\nagent or independent contractor, as such, except for the regular compensation
\nand commission and bonuses payable to such director, officer, employee, agent or
\nindependent contractor at the rate in effect on December 31, 1997, or (ii) grant
\nany severance or termination pay to any director, officer, employee, agent or
\nindependent contractors;<\/p>\n
(d) Elmagco and each Subsidiary shall continue to carry all of its
\nexisting insurance policies insuring its properties and operations, business and
\nassets;<\/p>\n
(e) Elmagco and each Subsidiary shall use its best efforts to preserve
\nits business organization intact, to keep available to Buyer the services of its
\nemployees, agents and <\/p>\n
32<\/p>\n
independent contractors and to preserve for Buyer its relationships with
\nsuppliers, licensees, distributors and customers and others having business
\nrelationships with it; and<\/p>\n
(f) Elmagco and each Subsidiary shall not amend, extend, permit to
\nexpire (in each case, except in the ordinary course of business) or terminate
\nany material Contract, Lease, concession, franchise, license, indenture,
\ninstrument, mortgage, note, loan or credit agreement or other obligation to
\nwhich it is a party without the prior written consent of Buyer.<\/p>\n
(g) After June 30, 1998 and prior to Closing, (i) Seller shall
\ncontribute to the capital of Elmagco all amounts owing on that certain
\npromissory note in the amount of $2,050,530 (as reflected on the Base Balance
\nSheet), (ii) Elmagco shall distribute as a dividend that certain promissory note
\nfrom Seller to Elmagco in the original principal amount of $5,000,000, and (iii)
\nall deferred tax assets and liabilities and all other amounts (except for tax
\nsharing payments) due to or from Affiliates of Elmagco or owing between Seller
\nand Elmagco or the Subsidiaries shall be similarly contributed to capital or
\nforgiven. The net amount accruing to the benefit of Seller after the
\ncontribution and forgiveness items provided for in this Section 5.1(g) shall
\nconstitute a dividend from Elmagco to Seller, effective immediately prior to
\nClosing.<\/p>\n
5.2 Access to Information. Between the date hereof and the Closing Date,
\nSeller and Elmagco shall give to Buyer and to Buyer’s lawyers, accountants and
\nother representatives full and complete access, to any and all of the properties
\nand books and records and other documents of Elmagco and each Subsidiary and
\nshall furnish Buyer with any information concerning the business of each that
\nBuyer may reasonably request.<\/p>\n
5.3 Consents of Third Parties. Between the date hereof and the Closing
\nDate, Seller and Elmagco will use their best and proper efforts to obtain, where
\nrequired, the consents, authorizations and approvals of all third parties
\n(including, without limitation, all governmental authorities and agencies) to
\nthe transactions contemplated herein, including, but not limited to, <\/p>\n
33<\/p>\n
those set forth on Schedule 3.29. The form of consent used to obtain such
\nconsents, authorizations and approvals shall be subject to Buyer’s reasonable
\napproval.<\/p>\n
5.4 Hart-Scott-Rodino. Seller and Elmagco shall use all reasonable efforts
\n(i) to cause to be filed as promptly as practicable with the Department of
\nJustice and the Federal Trade Commission any premerger notifications required by
\nthe Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
\nAct”), (ii) to respond promptly to inquiries from the Department of Justice or
\nthe Federal Trade Commission in connection with the transactions contemplated
\nherein, and (iii) to obtain the earliest possible termination or waiver of the
\nHSR Act waiting period, if applicable.<\/p>\n
5.5 Covenant of Cooperation. After the Closing Date, Seller will give, or
\ncause to be given, to Buyer and its representatives, during normal business
\nhours at Seller’s premises and at Buyer’s expense, such reasonable access to the
\npersonnel, properties, titles, contracts, books, records, files, documents and
\naffairs of Seller and copies thereof (at the expense of Buyer) as is necessary,
\nin Buyer’s reasonable judgment, to allow Buyer to obtain information in
\nconnection with the preparation for and any audit of the tax returns of Buyer
\nand any tax related claims, demands, other audits, suits, actions or proceedings
\nby or against Buyer as the owner of Elmagco and the Subsidiaries.<\/p>\n
ARTICLE VI. COVENANTS OF BUYER<\/p>\n
6.1 Consents of Third Parties. From the date hereof to the Closing Date,
\nBuyer will furnish all reasonable cooperation to Seller in connection with
\nSeller’s efforts to obtain, where required, the Consents of all third parties to
\nthe transfer of the Shares or relating to the use, operation or ownership of the
\nassets or the business of Elmagco and the Subsidiaries. Notwithstanding the
\nforegoing, Buyer shall not be required to make any payment or assume any
\nobligation not existing prior to Seller’s attempts to obtain such Consents.<\/p>\n
34<\/p>\n
6.2 HSR Act. Buyer shall use all reasonable efforts (i) to cause to be
\nfiled as promptly as practicable with the Department of Justice and the Federal
\nTrade Commission any premerger notifications required by the HSR Act, (ii) to
\nrespond promptly to inquiries from the Department of Justice or the Federal
\nTrade Commission in connection with the transactions contemplated herein, and
\n(iii) to obtain the earliest possible termination or waiver of the HSR Act
\nwaiting period, if applicable.<\/p>\n
6.3 Confidentiality. Buyer acknowledges that Buyer may possess or obtain
\nconfidential information of Seller, Elmagco and the Subsidiaries and agrees that
\nBuyer will disclose such information only to its officers, directors, employees,
\naccountants, counsel and other of its representatives who need to know such
\ninformation for the purposes of the transactions contemplated herein and will
\ndisclose such information to others only with the prior written consent of
\nSeller or, where disclosure is required by law or by a government or government
\nagency, prior notice and an opportunity to respond shall be given to Seller.
\nInformation shall not be considered to be confidential if such information:<\/p>\n
(a) is in or passes into the public domain other than by breach of this
\n Section 6.4; or<\/p>\n
(b) is known to Buyer prior to disclosure by Seller, Elmagco or the
\n Subsidiaries; or<\/p>\n
(c) is disclosed to Buyer without restriction by a third party not subject
\n to an obligation to maintain the confidentiality thereof.<\/p>\n
Upon any termination of this Agreement, Buyer shall within five business
\ndays after written demand return all documents and copies of confidential
\ninformation to Seller.<\/p>\n
6.4 Nonsolicitation. Until the earlier of (i) the Closing of the
\ntransactions contemplated herein or (ii) one year from the date hereof, without
\nthe express written consent of Seller, Buyer shall not solicit the customers of
\nElmagco or the Subsidiaries for the purpose of competing with <\/p>\n
35<\/p>\n
the business of Elmagco or the Subsidiaries nor shall Buyer solicit the
\nemployees of Elmagco or the Subsidiaries for the purpose of employing such
\nemployees.<\/p>\n
6.5 Covenant of Cooperation. Buyer agrees that after the Closing Date,
\nSeller, its counsel, accountants, other agents or representatives, and its
\nsuccessors in interest shall have the right of reasonable access, at all times
\nconsistent with the minimization of disruption to Buyer’s business, to all
\nbooks, records, and other data (including, as necessary, interviews with
\nemployees) which relate to Elmagco and the Subsidiaries on or before the Closing
\nDate in order to prepare tax returns, to prepare for or respond to any
\ngovernmental audits, assessments or reassessments, in connection with any third-
\nparty litigation, arbitrations, or investigations, in order to prepare financial
\nstatements, and for other similar purposes including, without limitation, for
\npurposes of presenting evidence or presenting such records in evidence before
\nany court or other governmental agency or authority and for purposes of
\npreparing for any testimony or other proceedings or presentations, and Seller
\nshall reimburse Buyer for any duplicating or similar costs incurred by Buyer in
\ncomplying with its obligations under this Section 6.5. In the event that Buyer
\nproposes at any time within three years after the Closing Date to destroy any of
\nsuch books and records, Buyer shall give at least 30 days’ prior notice to
\nSeller and shall, if the Seller so requests by notice to Buyer within fifteen
\n(15) days of the effective date of Buyer’s notice, deliver to Seller at Seller’s
\nexpense the books and records otherwise to be destroyed.<\/p>\n
ARTICLE VII. CONDITIONS TO CLOSING<\/p>\n
7.1 Conditions to Seller’s Obligations. The obligation of Seller to
\nconsummate the transactions contemplated in this Agreement is, at its option,
\nsubject to the following conditions:<\/p>\n
(a) Representations and Warranties. Buyer’s representations and
\nwarranties shall be true and correct as of the date hereof and as of the Closing
\nDate as though made at the Closing;<\/p>\n
36<\/p>\n
(b) Performance. Buyer shall have performed and complied with all
\nagreements and conditions on its part herein required to be performed or
\ncomplied with at or before the Closing;<\/p>\n
(c) Review of Proceedings. All actions, proceedings, instruments and
\ndocuments required to carry out the transactions contemplated in this Agreement
\nor any other agreement to be executed and delivered by any of the parties
\nhereunder, or in connection herewith, shall be subject to the reasonable
\napproval of Seller’s counsel, and Buyer shall have furnished to such counsel
\nsuch documents as such counsel may have reasonably requested for the purpose of
\nenabling such counsel to pass upon legal matters incidental thereto; and<\/p>\n
(d) Governmental Consents. Any and all necessary consents (including,
\nwithout limitation, any necessary permits) of and filings with any governmental
\nauthority or agency (including, without limitation, any environmental regulatory
\nauthority or agency) relating to the consummation of the transactions
\ncontemplated in this Agreement shall have been obtained or accomplished, and no
\naction, proceeding, inquiry or investigation by any private or governmental
\nagency shall have been brought that questions the validity or legality of the
\ntransactions contemplated in this Agreement;<\/p>\n
(e) HSR Act Waiting Period. All waiting periods pursuant to the HSR
\nAct shall have expired or terminated and the Department of Justice and the
\nFederal Trade Commission shall have not made a request for additional
\ninformation, which information has not been supplied, or have taken any action
\nto prevent the transactions contemplated in this Agreement.<\/p>\n
(f) Other Consents. The consents required from the parties to the
\nConsents listed on Schedule 3.29 shall have been obtained (unless waived by
\nBuyer);<\/p>\n
37<\/p>\n
(g) Litigation. No person shall have instituted a lawsuit seeking to
\nvoid this Agreement or enjoin consummation of the transactions contemplated
\nherein which in the opinion of counsel for Seller, after consultation with
\ncounsel for Buyer, has a substantial likelihood of success on the merits; and<\/p>\n
(h) Delivery of Closing Documents. Buyer shall have delivered at the
\nClosing the cash portion of the Purchase Price, shall have instructed its
\ntransfer agent to issue the Shares and shall have delivered all of the documents
\ndescribed in Section 8.2 below.<\/p>\n
7.2 Conditions to Buyer’s Obligations. The obligation of Buyer to
\nconsummate the transactions contemplated in this Agreement is, at its option,
\nsubject to the following conditions:<\/p>\n
(a) Representations and Warranties. Seller’s and Elmagco’s
\nrepresentations and warranties shall be true and correct as of the date hereof
\nand as of the Closing Date as though made at the Closing;<\/p>\n
(b) Performance. Seller and Elmagco shall have performed and complied
\nwith all agreements and commitments on their part herein required to be
\nperformed or complied with at or before the Closing;<\/p>\n
(c) Absence of Casualty. Between the date hereof and the Closing,
\nthere shall have been no material damage or destruction to the assets of Elmagco
\nand the Subsidiaries, taken as a whole, by fire, flood or other Act of God;<\/p>\n
(d) Governmental Consents. Any and all necessary consents (including,
\nwithout limitation, any necessary permits) of and filings with any governmental
\nauthority or agency (including, without limitation, any environmental regulatory
\nauthority or agency) relating to the consummation of the transactions
\ncontemplated in this Agreement shall have been obtained or accomplished, and no
\naction, proceeding, inquiry or investigation by any private or <\/p>\n
38<\/p>\n
governmental agency shall have been brought that questions the validity or
\nlegality of the transactions contemplated in this Agreement;<\/p>\n
(e) HSR Act Waiting Period. All waiting periods pursuant to the HSR
\nAct shall have expired or terminated and the Department of Justice and the
\nFederal Trade Commission shall have not made a request for additional
\ninformation, which information has not been supplied, or have taken any action
\nto prevent the transactions contemplated in this Agreement.<\/p>\n
(f) Other Consents. The Consents required from the parties to the
\nConsents listed on Schedule 3.29 shall have been obtained;<\/p>\n
(g) Review of Proceedings. All actions, proceedings, instruments and
\ndocuments required to carry out the transactions contemplated in this Agreement
\nor any other agreement to be executed and delivered by any of the parties
\nhereunder, or in connection herewith, shall be subject to the reasonable
\napproval of Buyer’s counsel, and Seller and Elmagco shall have furnished to such
\ncounsel such documents as such counsel may have reasonably requested for the
\npurpose of enabling such counsel to pass upon legal matters incidental thereto;<\/p>\n
(h) Delivery of Closing Documents. Seller and Elmagco shall have
\ndelivered at the Closing all of the documents described in Section 8.1 below;<\/p>\n
(i) No Material Adverse Change; Due Diligence. Since December 31,
\n1997, there shall have been no material adverse change in or to the financial
\ncondition, the operations or the business prospects of Elmagco or the
\nSubsidiaries, taken as a whole, or the fair market value of their assets. Buyer
\nshall have completed its legal, financial, accounting, operational and other due
\ndiligence, including, but not limited to, environmental audits deemed
\nappropriate by Buyer and shall have discovered no facts or circumstances which
\nwere not previously disclosed <\/p>\n
39<\/p>\n
to Buyer which, individually or in the aggregate, are material and adverse to
\nElmagco or the Subsidiaries or their business assets financial condition or
\nprospects, taken as a whole;<\/p>\n
(j) Employment Agreements. Buyer shall have entered into an
\nemployment agreement with H.B. Payne, Jr. on terms and conditions satisfactory
\nto Buyer;<\/p>\n
(k) Litigation. No person shall have instituted a lawsuit seeking to
\nvoid this Agreement or enjoin consummation of the transactions contemplated
\nherein which in the opinion of counsel for Buyer, after consultation with
\ncounsel for Seller, has a substantial likelihood of success on the merits;<\/p>\n
(l) Mortgages. The mortgagees and lien holders under the Permitted
\nLiens shall have consented to the transaction contemplated herein, if required,
\nand waived any acceleration of the indebtedness secured thereby or Seller shall
\nhave discharged such Permitted Liens and provided financing to Buyer in a like
\namount under substantially identical terms and conditions as existed under the
\nContract governing the Permitted Liens and the indebtedness secured thereby; and<\/p>\n
(m) Intercompany Debts and Liabilities. Seller shall execute such
\nreleases as may be necessary or appropriate to (i) forgive or contribute all
\nobligations owing to Seller or its affiliates from Elmagco and the Subsidiaries
\nto the capital of Elmagco or the Subsidiaries, as appropriate, and to release
\nany and all liens, claims or encumbrances relating thereto, and (ii) any and all
\nclaims and rights Seller or its affiliates may have against Elmagco or the
\nSubsidiaries.<\/p>\n
ARTICLE VIII. DELIVERIES AT CLOSING<\/p>\n
8.1 Deliveries of Seller and Elmagco. At the Closing, Seller shall deliver
\nor cause to be delivered to Buyer, duly executed:<\/p>\n
(a) Stock Certificates. A certificate or certificates representing
\nthe Shares registered in the name of Seller, duly endorsed by Seller for
\ntransfer or accompanied by an <\/p>\n
40<\/p>\n
assignment of the Shares duly executed by Seller, free and clear of all liens,
\nencumbrances, security agreements, equities, options, claims, charges and
\nrestrictions which shall include a release of all items set forth in Schedule
\n3.4;<\/p>\n
(b) Books and Records. The books and records of Elmagco and the
\nSubsidiaries;<\/p>\n
(c) Opinion of Counsel. The opinion of Winstead Sechrest & Minick
\nP.C., counsel for Seller and Elmagco, dated the Closing Date in form reasonably
\nsatisfactory to Buyer’s counsel;<\/p>\n
(d) Officers’ Certificates. Certificates signed by the President,
\nChairman or an Executive Vice President of Seller and Elmagco dated the Closing
\nDate, as to the truth and accuracy of the respective representations and
\nwarranties of each at the Closing Date and certifying that all of the covenants,
\nobligations and conditions to be performed as of the Closing on their part under
\nthis Agreement have been duly performed;<\/p>\n
(e) Secretary’s Certificate. A Secretary’s Certificate shall be
\ndelivered attesting to the incumbency and the signature specimens with respect
\nto the officers of Seller and Elmagco executing the Agreement and any other
\ndocument delivered pursuant to the Agreement by or on behalf of Seller or
\nElmagco and attesting to the copies of the corporate actions and proceedings of
\nSeller and Elmagco required to carry out the transactions contemplated in this
\nAgreement or incidental thereto and attesting to such other instruments and
\ndocuments as counsel for Buyer shall reasonably request;<\/p>\n
(f) Assumption of Employment Agreement. Seller shall deliver
\nevidence, satisfactory to Buyer, that the obligations of Elmagco arising out of
\nor related to any employment or other compensation agreements with H.B. Payne,
\nJr. shall have finally and completely been assumed by Seller.<\/p>\n
41<\/p>\n
(g) Other Requested Documents. Further instruments and documents, in
\nform and content reasonably satisfactory to counsel for Buyer, as may be
\nnecessary or appropriate more fully to consummate the transaction contemplated
\nherein.<\/p>\n
8.2 Deliveries of Buyer. At the Closing, Buyer shall deliver or cause to
\nbe delivered to Seller:<\/p>\n
(a) Purchase Price. The cash portion of the Purchase Price in the
\nmanner described in Section 1.2 above;<\/p>\n
(b) Opinion of Counsel. The opinion of Brown, Parker & Leahy, L.L.P.,
\ncounsel to Buyer dated the Closing Date in form reasonably satisfactory to
\nSeller’s counsel; and<\/p>\n
(c) Officers’ Certificates. Certificates signed by the President,
\nChairman or an Executive Vice President of Buyer dated the Closing Date, as to
\nthe truth and accuracy of the representations and warranties of Buyer at the
\nClosing Date and certifying that all of the covenants, obligations and
\nconditions to be performed as of the Closing on its part under this Agreement
\nhave been duly performed; and<\/p>\n
(d) Secretary’s Certificate. A Secretary’s Certificate shall be
\ndelivered attesting to the incumbency and the signature specimens with respect
\nto the officers of Buyer executing the Agreement and any other document
\ndelivered pursuant to the Agreement by or on behalf of Buyer and attesting to
\nthe copies of the corporate actions and proceedings of Buyer required to carry
\nout the transactions contemplated in this Agreement or incidental thereto and
\nattesting to such other instruments and documents as counsel for Seller shall
\nreasonably request.<\/p>\n
ARTICLE IX. INDEMNITY AND
\n OTHER POST-CLOSING OBLIGATIONS<\/p>\n
9.1 General Indemnity.<\/p>\n
(a) Seller agrees to reimburse, hold harmless, indemnify and defend
\nBuyer and its officers, directors, controlling persons (if any), employees,
\nattorneys, agents, partners<\/p>\n
42<\/p>\n
representatives, successors and assigns (the “Buyer Indemnitees”) from and
\nagainst any loss, suit, claim, action, cause of action, proceeding (formal or
\ninformal), investigation, judgment, deficiency, actual or punitive damage,
\nsettlement, liability, expense or cost of any kind or amount whatever, including
\ncourt costs and reasonable attorneys’ fees (collectively, “Claims”) which
\nresults from or arises out of or is based upon:<\/p>\n
(i) the inaccuracy of any representation or warranty made by
\n Seller or Elmagco (other than Section 3.14 which is covered in Section
\n 9.1(a)(iii) below), or the failure to perform or breach by Seller or
\n Elmagco of any covenant, obligation or agreement contained in this
\n Agreement, the Exhibits or Schedules hereto, the bring-down
\n certificate required by Section 8.1(d) and any amendments that may be
\n entered into;<\/p>\n
(ii) any pending or threatened litigation, claim or assessment
\n against Elmagco (including but not limited to any claim based on tort
\n liability, product liability, warranty, negligence or strict
\n liability) designated by Buyer, in its sole discretion, and set forth
\n on Schedule 9.1 which is to be delivered by Buyer to Seller at Closing
\n (“Seller’s Liabilities”); provided, however, that Seller shall have no
\n liability under this Section 9.1(a)(ii) until and only to the extent
\n that the aggregate Claims under this Section 9.1(a)(ii) exceed
\n $317,000; and<\/p>\n
(iii) any inaccuracy of the representation set forth in Section
\n 3.14 or the failure of Seller to pay any taxes, including, without
\n limitation, any Texas franchise tax liability accruing to either
\n Elmagco or Seller, and any liability for gain or loss on the sale of
\n Shares pursuant to this Agreement arising out of or related to the
\n transactions contemplated in this Agreement.<\/p>\n
43<\/p>\n
; provided further, however, that notwithstanding the other provisions of
\nthis Article IX, (1) Seller shall have no obligation to indemnify any Buyer
\nIndemnitees with respect to any Claim unless Buyer notifies Seller of the claim
\nor potential claim for indemnification not later than the first anniversary of
\nthe Closing Date for matters covered by Section 9.1(a)(i) and the third
\nanniversary of the filing of Seller’s 1998 United States federal income tax
\nreturn (with attached Section 338(h)(10) election) for matters covered by
\nSection 9.1(a)(iii); (2) Seller shall have no obligation to indemnify Buyer for
\nany Claim under Section 9.1(a)(i) until the amount of such Claim equals or
\nexceeds $50,000 or the sum of all Claims equals or exceeds $100,000, at which
\ntime Buyer shall have the right to indemnification for the full amount of each
\nsuch Claim; and (3) Buyer’s sole recourse for indemnification of Claims under
\nSections 9.1(a)(i) and 9.1(a)(iii) shall be against the Escrow Fund established
\npursuant to Section 9.2. Provided further, that of the amount held in the Escrow
\nFund, no more than $1,500,000 thereof may be paid out to satisfy claims made
\npursuant to Section 9.1(a)(i). The entire amount of the Escrow Fund shall be
\nsubject to being paid out to satisfy claims made pursuant to Section
\n9.1(a)(iii).<\/p>\n
The Indemnity Agreement contained in this Section 9.1(a) shall remain
\noperative and in full force and effect regardless of any investigation made by
\nor on behalf of Buyer. Any indemnification payments made to Buyer shall be
\ndeemed an adjustment to the Purchase Price.<\/p>\n
(b) Buyer agrees to hold harmless, indemnify and defend Seller and its
\nofficers, directors, controlling persons, employees, attorneys, agents,
\nrepresentatives, successors and assigns (the “Seller Indemnitees”) from and
\nagainst any loss, claim, cause of action, damage, liability, expense or cost of
\nany kind or amount whatever including court costs and reasonable attorneys’ fees
\nwhich result from or arise out of the inaccuracy of any representation or
\nwarranty made by Buyer, or the failure to perform or breach by Buyer of any
\ncovenant, obligation or agreement <\/p>\n
44<\/p>\n
contained in this Agreement, the Exhibits or Schedules hereto, the bring-down
\ncertificate required by Section 8.2(c) and any amendments that may be entered
\ninto.<\/p>\n
The Indemnity Agreement contained in this Section 9.1(b) shall remain
\noperative and in full force and effect, regardless of any investigation made by
\nor on behalf of Seller or Elmagco. Any indemnification payments made by Buyer
\nto Seller shall be deemed an adjustment to the Purchase Price.<\/p>\n
9.2 Escrow. (a) The indemnification obligations of Seller under Sections
\n9.1(a)(i) and (iii) shall be secured by an escrow fund of the number of shares
\nof the Common Stock of Buyer, which is a portion of the Purchase Price, having a
\nvalue, as determined in Section 1.2, of $3,000,000 (the “Escrow Fund”), which
\nshall be held by a federally insured savings or banking institution mutually
\nacceptable to Buyer and Seller (the “Escrow Agent”) pursuant to the terms of an
\nescrow agreement in form and substance satisfactory to Buyer and Seller (the
\n“Escrow Agreement”). The Escrow Agreement shall provide that Seller shall have
\nthe right to receive any cash dividends paid, if any, on the shares of Common
\nStock in the Escrow Fund.<\/p>\n
(b) In the event that any Buyer Indemnitee has a claim for
\nindemnification under this Article IX, Buyer shall give written notice of same
\nto Seller. If Seller has not corrected or remedied such claim within thirty (30)
\ndays following receipt of such notice and does not dispute such claim, then
\nBuyer shall be entitled to receive immediately from the Escrow Fund an amount of
\nshares from the Escrow Fund having a value equal to the amount of such claim. If
\nSeller disputes such claim, Buyer shall not be entitled to receive any amount
\nfrom the Escrow Fund with respect to such claim prior to resolution of such
\ndispute pursuant to Article XI or otherwise, but any such delay shall be without
\nprejudice to any extension of the Escrow Fund pursuant to Section 9.2(c) hereof.
\nFor purposes of valuing the shares of Common Stock for payment of any Claim,
\nsuch value shall be determined by calculating the average of the last <\/p>\n
45<\/p>\n
reported sales price per share (or the average of the closing bid and asked
\nprices if no sales have been reported) of Buyer’s Common Stock for each trading
\nday within the thirty (30) calendar days immediately preceding the date of
\nBuyer’s notice of such Claim, or, if no such reports are rendered, the fair
\nmarket value of such shares over such period determined in good faith by the
\nBoard of Directors of Buyer.<\/p>\n
(c) Provided no dispute then exists as to any claim by Buyer of all or
\na portion of the Escrow Fund and provided all obligations of Seller to Buyer
\nwhich are payable from the Escrow Fund are satisfied, the remaining Escrow Fund
\nwill be released to Seller on the three (3) year anniversary of the filing of
\nSeller’s 1998 United States federal income tax return. To the extent a dispute
\ndoes exist as to a claim or claims on such anniversary date, an amount equal to
\nthe amount of such claim or claims will be withheld from such remaining Escrow
\nFund and will continue to be held by the Escrow Agent pursuant to the terms of
\nthe Escrow Agreement until such claim or claims have been fully resolved.<\/p>\n
9.3 Defense of Claims. If any Buyer Indemnitee or Seller Indemnitee (the
\n“Indemnified Party”) desires to make a claim against the party obliged to
\nprovide indemnification to such Indemnified Party (the “Indemnitor”), the
\nIndemnified Party shall give prompt notice in writing (a “Claim Notice”) to the
\nIndemnitor describing in reasonable detail the facts giving rise to any claim
\nfor indemnification hereunder promptly after the receipt of knowledge of the
\nfacts upon which such claim is based (but in no event later than 10 days prior
\nto the time any response to the asserted claim is required). Upon receipt by the
\nIndemnitor of a Claim Notice from an Indemnified Party with respect to any claim
\nof a third party, such Indemnitor may control negotiations towards the
\nresolution of any such claim without the necessity for litigation, and, if
\nlitigation ensues, assume the defense thereof at such Indemnitor’s cost and with
\ncounsel reasonably satisfactory to the Indemnified Party and the Indemnified
\nParty shall extend reasonable <\/p>\n
46<\/p>\n
cooperation in the defense or prosecution thereof and shall furnish such
\nrecords, information and testimony and attend all such conferences, discovery
\nproceedings, hearings, trials and appeals as may be reasonably requested in
\nconnection therewith. The Indemnified Party shall have the right to employ its
\nown counsel in any such case, but the fees and expenses of such counsel shall be
\nat the expense of the Indemnified Party unless (i) the Indemnitor shall not have
\npromptly employed counsel reasonably satisfactory to such Indemnified Party to
\ntake charge of the defense of such action or (ii) such Indemnified Party shall
\nhave reasonably concluded, based upon the opinion of its outside legal counsel,
\nthat there may be one or more legal defenses available to it, or to any other
\nIndemnified Party who has submitted a Claim Notice to the Indemnitor, which are
\ndifferent from or additional to those available to the Indemnitor, in either of
\nwhich events such fees and expenses shall be borne by the Indemnitor (but in no
\nevent shall the Indemnitor be required to pay the fees and expenses of more than
\none counsel employed by more than one Indemnified Party with respect to any
\nclaim) and the Indemnitor shall not have the right to direct the defense of any
\nsuch action on behalf of the Indemnified Party. The Indemnitor shall have the
\nright, in its sole discretion, to settle any claim for monetary damages for
\nwhich indemnification has been sought and is available hereunder; provided,
\nhowever, that neither Indemnitor nor the Indemnified Party shall settle,
\ncompromise or make any disposition of any claim under this Article IX which
\nwould or may result in liability to the Indemnified Party or Indemnitor,
\nrespectively, without the written consent of Indemnitee or Indemnitor,
\nrespectively. No claim for indemnification under Section 9.1(a)(i) or Section
\n9.1(b) may be made more than one year after the Closing Date. No claim to
\nindemnification under Section 9.1(a)(iii) may be made more than three years
\nafter the date of filing of Seller’s 1998 United States federal income tax
\nreturn.<\/p>\n
47<\/p>\n
9.4 Participating Distributees. This Section 9.4 shall apply if Seller
\ndissolves while Seller Liabilities remain outstanding.<\/p>\n
(a) For purposes of this Section 9.4, the following terms shall have
\nthe meanings set forth below:<\/p>\n
(i) “Participating Distributees” shall mean shareholders and
\n Participating Creditors of Seller who are distributed Purchase
\n Consideration by Seller.<\/p>\n
(ii) “Purchase Consideration” shall mean the cash and Common
\n Stock constituting the Purchase Price.<\/p>\n
(iii) “Section 9.1(a)(ii) Obligations” means Seller’s
\n obligations arising under Section 9.1(a), only insofar as they arise under
\n Section 9.1(a)(ii).<\/p>\n
(b) If shareholders of Seller are distributed less than seventy-five
\npercent of the Purchase Consideration, Seller shall designate as “Participating
\nCreditors” one or more of its creditors who receive Purchase Consideration, such
\nthat no less than seventy-five percent of the Purchase Consideration is received
\nby Seller’s shareholders and Participating Creditors.<\/p>\n
(c) Prior to the distribution of any Purchase Consideration by Seller,
\nSeller shall cause each Participating Distributee to execute and deliver to
\nBuyer agreements, in form and substance reasonably satisfactory to Buyer,
\nproviding for the assumption of Seller’s Section 9.1(a)(ii) Obligations upon the
\nfollowing terms and conditions:<\/p>\n
(i) Each Participating Distributee shall be liable for Seller’s
\n Section 9.1(a)(ii) Obligations to the extent, and only to the extent, of
\n the Purchase Consideration distributed to it by Seller.<\/p>\n
(ii) A Participating Distributee shall constitute an
\n “Indemnitor” under Section 9.3 and shall have all other rights of Seller
\n under this Agreement insofar as they <\/p>\n
48<\/p>\n
relate to the Section 9.1(a)(ii) Obligations for which such Participating
\n Distributee is liable.<\/p>\n
(iii) Such other terms and conditions as Seller, Buyer or the
\n Participating Distributee may reasonably require in order to carry out the
\n intent of this Section 9.4.<\/p>\n
Nothing in this Section 9.4 is intended to, nor shall it be construed to, limit
\nin any respect Seller’s indemnification obligations under this Agreement.<\/p>\n
ARTICLE X. MISCELLANEOUS PROVISIONS<\/p>\n
10.1 Notice. All notices, requests, demands and other communications
\nrequired or permitted under this Agreement shall be made in writing and shall be
\ndeemed to have been duly given and made when delivered personally or sent by
\nfacsimile transmission with a copy following by mail or, if mailed, when
\ndeposited in the United States mail, as follows:<\/p>\n
If to the Seller:<\/p>\n
Begemann, Inc.
\n c\/o H. B. Payne, Jr.
\n 500 Industrial Boulevard
\n Sugar Land, Texas 77478<\/p>\n
with a copy to:<\/p>\n
Winstead Sechrest & Minick P.C.
\n 910 Travis, Suite 1700
\n Houston, Texas 77002
\n Attention: Ross D. Margraves, Jr.<\/p>\n
If to Buyer:<\/p>\n
Boots & Coots International Well Control, Inc.
\n 5151 San Felipe, Suite 450
\n Houston, Texas 77056
\n Attention: Larry Ramming, Chief Executive Officer<\/p>\n
49<\/p>\n
with a copy to:<\/p>\n
Brown, Parker & Leahy, L.L.P.
\n 1200 Smith Street, Suite 3600
\n Houston, Texas 77002
\n Attention: Barry Davis<\/p>\n
provided, however, that if any party shall have designated a different address
\nor facsimile number by notice to the other, then such notice shall be sent to
\nthe last address and facsimile number so designated.<\/p>\n
10.2 Entire Agreement. This Agreement, including the schedules and exhibits
\nhereto, and the agreements and other documents expressly referred to herein
\nembody the entire agreement and the understanding of the parties hereto with
\nrespect to the subject matter hereof.<\/p>\n
10.3 Binding Effect; Assignment. This Agreement and the various rights and
\nobligations arising hereunder shall inure to the benefit of and be binding upon
\nBuyer, Seller and Elmagco, and their respective legal representatives,
\nsuccessors and assigns; the parties may assign this Agreement or any rights
\nhereunder with the written consent of the other parties hereto which consent may
\nnot be unreasonably withheld.<\/p>\n
10.4 Counterparts. This Agreement may be executed in multiple counterparts,
\neach of which shall be deemed an original but all of which taken together shall
\nconstitute one and the same instrument.<\/p>\n
10.5 Waiver; Consent. Whenever the consent, approval, agreement, waiver,
\ndesignation, notice, demand or other written action by Buyer or Seller is
\nprovided for in this Agreement, the same may be given on behalf of such party in
\na writing signed by its President, an Executive Vice President or a Vice
\nPresident. Except to the extent that a party hereto may have otherwise agreed in
\nwriting, no waiver by that party of any condition of this Agreement or breach by
\nthe other party of any of its obligations or representations hereunder shall be
\ndeemed to be a wavier <\/p>\n
50<\/p>\n
of any other condition or subsequent breach of the same or any other obligation
\nor representation by the other party, nor shall any forbearance by the first
\nparty to seek a remedy for any noncompliance or breach by the other party be
\ndeemed to be a waiver by the first party of its rights and remedies with respect
\nto such noncompliance or breach.<\/p>\n
10.6 Other and Further Covenants of Seller. At any time after the Closing,
\nand without further consideration, Seller will execute and deliver such other
\nand further instruments of conveyance, transfer and confirmation as Buyer may
\nreasonably request in order more effectively to convey, confirm and transfer the
\nproperties transferred hereunder; provided, however, that Buyer shall reimburse
\nSeller for all out-of-pocket expenses incurred in connection therewith.<\/p>\n
10.7 Governing Law. This Agreement shall be deemed to have been executed
\nand delivered in Houston, Harris County, Texas. Except as otherwise provided
\nherein, this Agreement and all rights and obligations hereunder, including
\nmatters of construction, validity and performance shall be governed by the laws
\nof the State of Texas, including the Uniform Commercial Code as enacted in that
\njurisdiction, without giving effect to the principles of conflicts of laws
\nthereof.<\/p>\n
10.8 Expenses. Each of the parties to this Agreement shall bear all
\nexpenses incurred by it in connection with the negotiation of this Agreement
\nand, except as otherwise provided herein, in the consummation of the
\ntransactions provided for herein and the preparation therefor.<\/p>\n
10.9 Public Announcements. Prior to Closing, except as may be required by
\nlaw, no party hereto shall make any public announcement or filing with respect
\nto the transactions provided for herein without the prior consent of the other
\nparties hereto. After the Closing, all public announcements or filings with
\nrespect to the transactions provided for herein shall be subject to the prior
\napproval of Buyer.<\/p>\n
51<\/p>\n
10.10 Severability. If any term or other provision of this Agreement is
\ndetermined to be invalid, illegal or incapable of being enforced by any rule of
\nlaw or public policy, all other terms and provisions of this Agreement will
\nnevertheless remain in full force and effect so long as the economic or legal
\nsubstance of the transactions contemplated herein is not affected in any manner
\nadverse to any party hereto. Upon any such determination that any term or other
\nprovision is invalid, illegal or incapable of being enforced, the parties hereto
\nwill negotiate in good faith to modify this Agreement so as to effect the
\noriginal intent of the parties as closely as possible in an acceptable manner,
\nto the end that the transaction contemplated by this Agreement is consummated to
\nthe extent possible.<\/p>\n
10.11 Incorporation by Reference. The Exhibits and Schedules attached
\nhereto are an integral part of this Agreement and are incorporated herein by
\nthis reference.<\/p>\n
ARTICLE XI. DISPUTE RESOLUTION<\/p>\n
11.1 Dispute Resolutions. Except with respect to injunctive relief,
\nneither party shall institute a proceeding in any court or administrative agency
\nto resolve a dispute between the parties before that party has sought to resolve
\nthe dispute through direct negotiation with the other party. If the dispute is
\nnot resolved within two weeks after a demand for direct negotiation, the parties
\nshall attempt to resolve the dispute through mediation. If the parties do not
\npromptly agree on a mediator, the parties shall request the Association of
\nAttorney Mediators in Harris County, Texas to appoint a mediator certified by
\nthe Supreme Court of Texas. If the mediator is unable to facilitate a settlement
\nof the dispute within a reasonable period of time, as determined by the
\nmediator, the mediator shall issue a written statement to the parties to that
\neffect and any unresolved dispute or controversy arising under or in connection
\nwith this Agreement shall be settled exclusively by arbitration, conducted
\nbefore a panel of three arbitrators in Houston, Texas, in accordance with the
\nrules of the American Arbitration Association then in effect, subject to the<\/p>\n
52<\/p>\n
provisions of this Article. Each party shall appoint one arbitrator from the
\npanels of arbitrators of the American Arbitration Association within thirty days
\nafter the statement issued by the mediator and these two arbitrators shall
\nappoint a third arbitrator within ten days after their selection. The
\narbitration shall commence within thirty days after all of the arbitrators have
\nbeen selected and shall conclude within thirty days thereafter. The arbitrators
\nshall render their decision within thirty days after the conclusion of the
\narbitration. A decision by a majority of the arbitration panel shall be final
\nand binding. Judgment may be entered on the arbitrators’ award in any court
\nhaving jurisdiction. The costs and expenses, including reasonable attorneys’
\nfees, of the prevailing party in any dispute arising under this Agreement will
\nbe promptly paid by the other party.<\/p>\n
53<\/p>\n
IN WITNESS WHEREOF, Seller, Elmagco and Buyer have caused this
\nAgreement to be duly executed in their respective corporate names by their
\nrespective duly authorized officers, all as of the day and year first above
\nwritten.<\/p>\n
BUYER: SELLER:
\nBOOTS & COOTS INTERNATIONAL BEGEMANN, INC., a Delaware
\nWELL CONTROL, INC., a Delaware corporation
\ncorporation <\/p>\n
By: By:
\n —————————- ————————–
\nName: Name:
\n ————————– ————————
\nTitle: Title:
\n ————————- ———————–<\/p>\n
ELMAGCO:<\/p>\n
ELMAGCO, INC.<\/p>\n
By:
\n ————————–
\n Name:
\n ————————
\n Title:
\n ———————– <\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6924],"corporate_contracts_industries":[9413],"corporate_contracts_types":[9622,9627],"class_list":["post-43668","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-boots---coots-international-well-control-inc","corporate_contracts_industries-energy__services","corporate_contracts_types-planning","corporate_contracts_types-planning__purchase"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43668"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43668"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43668"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}