EXHIBIT 2.1
8
AGREEMENT AND PLAN OF MERGER
AMONG
TUBOSCOPE VETCO INTERNATIONAL CORPORATION,
GROW ACQUISITION LIMITED
AND
D.O.S. LTD.
DATED AS OF JANUARY 3, 1996
9
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER.................................................... 1
1.1 The Merger; Effective Time of the Merger.......................... 1
1.2 Closing........................................................... 2
1.3 Effects of the Merger............................................. 2
1.4 Liquidation of Surviving Corporation.............................. 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES................. 2
2.1 Effect on Capital Stock........................................... 2
(a) Capital Stock of Sub.......................................... 2
(b) Cancellation of Parent-Owned Stock............................ 3
(c) Exchange Ratio for Company Common Stock....................... 3
(d) Assumption of Stock Options................................... 3
2.2 Exchange of Certificates.......................................... 3
(a) Exchange Agent................................................ 3
(b) Exchange Procedures........................................... 4
(c) Distributions with Respect to Unexchanged Shares.............. 4
(d) No Further Ownership Rights in Company Common Stock........... 5
(e) No Fractional Shares.......................................... 5
(f) Termination of Exchange Fund.................................. 5
(g) No Liability.................................................. 5
2.3 Dissenting Shares................................................. 6
2.4 Escrowed Shares................................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................. 6
3.1 Representations and Warranties of the Company..................... 6
(a) Organization, Standing and Power.............................. 6
(b) Capital Structure............................................. 7
(c) Non-Subsidiaries Equity Investment............................ 8
(d) Authority; No Violations; Consents and Approvals.............. 8
(e) Financial Statements.......................................... 9
(f) Pro Forma Financial Information............................... 10
(g) Information Supplied.......................................... 10
(h) Absence of Certain Changes or Events.......................... 11
(i) No Undisclosed Material Liabilities........................... 12
(j) Material Contracts; No Defaults............................... 12
(k) Compliance with Applicable Laws............................... 13
(l) Litigation.................................................... 14
(m) Taxes......................................................... 14
(n) Pension and Benefit Plans; ERISA.............................. 16
(o) Labor Matters................................................. 18
-10-
(p) Intangible Property........................................... 18
(q) Environmental Matters......................................... 19
(r) Opinion of Financial Advisor.................................. 21
(s) Vote Required................................................. 21
(t) Insurance..................................................... 21
(u) Brokers....................................................... 21
(v) Tax Matters................................................... 21
(w) Title......................................................... 21
(x) Books and Records............................................. 22
(y) Certain Payments.............................................. 22
(z) Transactions with Related Parties............................. 22
3.2 Representations and Warranties of Parent and Sub.................. 22
(a) Organization, Standing and Power.............................. 22
(b) Capital Structure............................................. 23
(c) Non-Subsidiary Equity Investment.............................. 24
(d) Authority; No Violations; Consents and Approvals.............. 24
(e) SEC Documents................................................. 25
(f) Information Supplied.......................................... 26
(g) Absence of Certain Changes or Events.......................... 26
(h) No Undisclosed Material Liabilities........................... 27
(i) Material Contracts; No Defaults............................... 27
(j) Compliance with Applicable Laws............................... 28
(k) Litigation.................................................... 28
(l) Taxes......................................................... 28
(m) Pension and Benefit Plans; ERISA.............................. 29
(n) Labor Matters................................................. 31
(o) Intangible Property........................................... 32
(p) Environmental Matters......................................... 32
(q) Opinion of Financial Advisor.................................. 33
(r) Vote Required................................................. 34
(s) Insurance..................................................... 34
(t) Brokers....................................................... 34
(u) Tax Matters................................................... 34
(v) Interim Operations of Sub..................................... 34
(w) Title......................................................... 34
(x) Books and Records............................................. 34
(y) Certain Payments.............................................. 35
(z) Transactions with Related Parties............................. 35
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.................... 35
4.1 Conduct of Business by the Company Pending the Merger............. 35
(a) Ordinary Course............................................... 35
(b) Dividends; Changes in Stock................................... 35
(c) Issuance of Securities........................................ 36
(d) Governing Documents........................................... 36
(e) No Acquisitions............................................... 36
-11-
(f) No Dispositions............................................... 36
(g) No Dissolution, Etc........................................... 36
(h) Certain Employee Matters...................................... 37
(i) Indebtedness; Leases; Capital Expenditures.................... 37
(j) No Solicitation............................................... 37
4.2 Conduct of Business by Parent Pending the Merger.................. 38
(a) Ordinary Course............................................... 38
(b) Dividends; Changes in Stock................................... 38
(c) Issuance of Securities........................................ 38
(d) Governing Documents........................................... 39
(e) No Acquisitions............................................... 39
(f) No Dispositions............................................... 39
(g) No Dissolution, Etc........................................... 39
(h) Certain Employee Matters...................................... 39
(i) Indebtedness; Leases; Capital Expenditures.................... 40
(j) No Solicitation............................................... 40
ARTICLE V ADDITIONAL AGREEMENTS......................................... 41
5.1 Preparation of S-4 and the Proxy Statement........................ 41
5.2 Letter of the Company's Accountants............................... 41
5.3 Letter of Parent's Accountants.................................... 41
5.4 Access to Information............................................. 41
5.5 Stockholders Meetings............................................. 42
5.6 Legal Conditions to Merger........................................ 42
5.7 Agreements of Others.............................................. 42
5.8 Listing........................................................... 43
5.9 Board of Directors and Officers at the Effective Time............. 43
5.10 Stock Options..................................................... 43
5.11 Indemnification; Directors' and Officers' Insurance............... 44
5.12 Registration Rights............................................... 45
5.13 Public Announcements.............................................. 45
5.14 Other Actions..................................................... 45
5.15 Advice of Changes; SEC Filings.................................... 46
5.16 Reorganization.................................................... 46
5.17 Change of Control................................................. 46
5.18 Certain Tax Agreements............................................ 46
5.19 Formation of Sub.................................................. 46
ARTICLE VI CONDITIONS PRECEDENT......................................... 46
6.1 Conditions to Each Party's Obligation to Effect the Merger........ 46
(a) Stockholder Approval.......................................... 47
(b) Listing....................................................... 47
(c) Other Approvals............................................... 47
(d) S-4........................................................... 47
(e) No Injunctions or Restraints.................................. 47
(f) Subscription Agreement........................................ 47
-12-
(g) Escrow Agreement.............................................. 47
6.2 Conditions of Obligations of Parent and Sub....................... 47
(a) Representations and Warranties................................ 47
(b) Performance of Obligations of the Company..................... 48
(c) Letters from the Company Affiliates........................... 48
(d) Tax Opinion................................................... 48
(e) Fairness Opinion.............................................. 48
6.3 Conditions of Obligations of the Company.......................... 48
(a) Representations and Warranties................................ 48
(b) Performance of Obligations of Parent and Sub.................. 49
(c) Tax Opinion................................................... 49
ARTICLE VII TERMINATION AND AMENDMENT................................... 49
7.1 Termination....................................................... 49
7.2 Effect of Termination............................................. 50
7.3 Amendment......................................................... 51
7.4 Extension; Waiver................................................. 52
ARTICLE VIII GENERAL PROVISIONS......................................... 52
8.1 Payment of Expenses............................................... 52
8.2 Nonsurvival of Representations, Warranties and Agreements......... 52
8.3 Notices........................................................... 52
8.4 Interpretation.................................................... 53
8.5 Counterparts...................................................... 54
8.6 Entire Agreement; No Third Party Beneficiaries.................... 54
8.7 Governing Law..................................................... 54
8.8 Severability...................................................... 54
8.9 Assignment........................................................ 54
-13-
D.O.S. LTD.
SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER
Schedule No. Description
------------ -----------
3.1(a) - Significant Subsidiaries; Jurisdiction of Incorporation
3.1(b) - Capital Structure
3.1(c) - Authority; No Violations; Consents and Approvals
3.1(d) - SEC Documents
3.1(h) - No Default
3.1(i) - Compliance with Applicable Laws
3.1(j)(i)(iii)(iv) - Litigation
3.1(k) - Taxes
3.1(l) - Employee and Employee Compensation Matters
3.1(m) - Labor Matters
3.1(n)(ii)(iii) - Intangible Property
3.1(o)(i)(ii) - Environmental Matters
3.1(p)
3.1(q)
3.1(u) - Brokers
3.1(v) - Tax Certificate
3.1(w)
3.1(z)
4.1(a) - Conduct of Business
4.1(b) - Dividends; Changes in Stock
4.1(c) - Issuance of Securities
4.1(e) - No Acquisitions
4.1(f) - No Dispositions
4.1(h) - Certain Employee Matters
4.1(i) - Indebtedness; Leases; Capital Expenditures
5.7
8.4
-14-
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER
Schedule No. Description
------------ -----------
3.2(a) - Significant Subsidiaries; Jurisdiction
3.2(b) - Capital Structure
3.2(c)
3.2(d)
3.2(g) - No Undisclosed Material Liabilities
3.2(i) - Compliance with Applicable Laws
3.2(j) - Litigation
3.2(k)
3.2(l)
3.2(m)(ii)(iii) - Labor Matters
3.2(n)(i)(ii) - Intangible Property
3.2(o) - Environmental Matters
3.2(p)
3.2(t)
3.2(u) - Certificate of Parent
3.2(w)
3.2(z)
4.2(a)
4.2(b)
4.2(c)
4.2(e) - List of Acquisitions
4.2(f) - Dispositions, Proposed Dispositions
4.2(h)
4.2(i)
-15-
EXHIBITS TO THE AGREEMENT AND PLAN OF MERGER
Exhibit Description
------- -----------
Exhibit A - List of Initial Directors and Officers of Surviving
Corporation
Exhibit B - Escrow Agreement
Exhibit C-1 - List of Initial Directors of Parent
Exhibit C-2 - List of Initial Officers of Parent
Exhibit D - Registration Rights Agreement
-16-
GLOSSARY OF DEFINED TERMS
Defined Term Defined in Section
------------ ------------------
Affiliates........................... 5.7
Bermuda Act.......................... 1.1
CERCLA............................... 3.1(o)(A)
Certificate of Merger................ 1.1
Certificates......................... 2.2(b)
Charter Amendment.................... 3.2(c)(i)
Closing.............................. 1.1
Closing Date......................... 1.2
Code................................. Recitals
Company.............................. Preamble
Company Acquisition Proposal......... 4.1(j)
Company Benefit Programs............. 3.1(l)(i)
Company Common Stock................. 2.1(b)
Company Commonly Controlled Entity... 3.1(l)(ii)
Company Financial Statements......... 3.1(d)
Company Intangible Property.......... 3.1(n)
Company Letter....................... 3.1(a)
Company Litigation................... 3.1(j)
Company Material Adverse Change...... 3.1(a)
Company Material Adverse Effect...... 3.1(a)
Company Order........................ 3.1(j)
Company Permits...................... 3.1(i)
Company Plans........................ 3.1(l)(i)
Company Representatives.............. 4.1(j)
Company's Credit Facility............ 5.6
Company Stock Option................. 5.10
Company Stock Option Plan............ 3.1(b)
Company Voting Debt.................. 3.1(b)
Company Voting Rights................ 3.1(b)
Confidentiality Agreement............ 5.4
Constituent Corporations............. 1.3(a)
Dissenting Shares.................... 2.3
Effective Time....................... 1.1
Environmental Law.................... 3.1(o)(A)
ERISA................................ 3.1(l)(i)
Escrow Agent......................... 2.4
Escrow Agreement..................... 2.4
Escrowed Shares...................... 2.1(c)
Exchange Act......................... 3.1(b)
Exchange Agent....................... 2.2(a)
Exchange Fund........................ 2.2(a)
GAAP................................. 3.1(d)
Governmental Entity.................. 3.1(c)(iii)
-17-
Defined Term Defined in Section
------------ ------------------
Hazardous Material................... 3.1(o)(B)
HSR Act.............................. 3.1(c)(iii)
Indemnified Liabilities.............. 5.11
Indemnified Parties.................. 5.11
Injunction........................... 6.1(e)
IRS.................................. 3.1(k)(ii)
Liquidation.......................... 1.4
Made Available....................... 8.4
Merger............................... Recitals
Non-Escrowed Shares.................. 2.1(c)
NYSE................................. 5.8
OSHA................................. 3.1(o)(A)
Parent............................... Preamble
Parent Acquisition Proposal.......... 4.2(j)
Parent Benefit Programs.............. 3.2(l)(i)
Parent Common Stock.................. 2.1(c)
Parent ERISA Affiliate............... 3.2(l)(i)
Parent Intangible Property........... 3.2(n)
Parent Letter........................ 3.2(a)
Parent Litigation.................... 3.2(j)
Parent Material Adverse Change....... 3.2(a)
Parent Material Adverse Effect....... 3.2(a)
Parent Order......................... 3.2(j)
Parent Permits....................... 3.2(i)
Parent Plans......................... 3.2(l)(i)
Parent Representatives............... 4.2(j)
Parent SEC Documents................. 3.2(d)
Parent Share Issuance................ 3.2(c)(i)
Parent Voting Debt................... 3.2(b)
Parent's Credit Facility............. 5.6
PBGC................................. 3.1(l)(ii)
Pro Forma Financial Statements....... 3.1(f)
Proxy Statement...................... 3.2(c)(iii)
Release.............................. 3.1(o)(C)
Remedial Action...................... 3.1(o)(D)
Returns.............................. 3.1(k)(i)
S-4.................................. 3.1(e)
SEC.................................. 3.1(a)
Shares............................... 2.1(c)
Significant Subsidiary............... 3.1(a)
Stockholder Meetings................. 5.5
Stockholders Representative.......... 2.4
Stock Option Exchange Ratio.......... 5.10
Sub.................................. Preamble
Subscription Agreement............... Recitals
-18-
Defined Term Defined in Section
------------ ------------------
Subsidiary........................... 2.1(b)
Surviving Corporation................ 1.3(a)
Sweco Entities....................... 3.1(d)(iii)
Sweco Options........................ 3.1(b)
Taxes................................ 3.1(k)
Warrant.............................. Recitals
-19-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 3, 1996 (this
"Agreement"), among Tuboscope Vetco International Corporation, a Delaware
corporation ("Parent"), and Grow Acquisition Limited, a Bermuda corporation to
be formed by Parent as a direct wholly owned subsidiary of Parent ("Sub"), and
D.O.S. Ltd., a Bermuda corporation (the "Company").
WHEREAS, the Boards of Directors of Parent and the Company each have
determined that it is in furtherance of and consistent with their respective
long-term business strategies and is fair to and in the best interests of their
respective stockholders for Sub to merge with and into the Company (the
"Merger") upon the terms and subject to the conditions of this Agreement;
WHEREAS, in accordance with the understanding of Parent and the Company,
concurrently herewith: (i) the Company is entering into a Voting Agreement with
each of Xxxxx Xxxxxx Incorporated and Brentwood Associates IV, LP and (ii)
Parent is entering into a Voting Agreement with each of DOS Partners L.P.,
Panmell (Holdings), Ltd. and Xxxx Industries Limited;
WHEREAS, in accordance with the understanding of Parent and the Company,
concurrently herewith SCF-III, L.P., an affiliate of a stockholder of the
Company, is entering into a Subscription Agreement with Parent (the
"Subscription Agreement") whereby SCF-III, L.P. is agreeing to purchase for an
aggregate purchase price of $31,000,000 in connection with the Closing (as
defined herein) 4,200,000 shares of Parent Common Stock (as defined herein) and
warrants (the "Warrants") to purchase, subject to adjustment under certain
circumstances, an aggregate of 2,533,000 shares of Parent Common Stock at an
exercise price of $10 per share;
WHEREAS, for federal income tax purposes, it is intended that the Merger
and the Liquidation (as defined herein) shall collectively qualify as a
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and
conditions of this Agreement and in accordance with the Companies Xxx 0000 of
Bermuda, as amended
-00-
(xxx "Xxxxxxx Xxx"), Sub shall be merged with and into the Company at the
Effective Time (as hereinafter defined). The Merger shall become effective as of
the date indicated in a certificate of amalgamation (the "Certificate of
Merger"), prepared and executed in accordance with the relevant provisions of
the Bermuda Act, that is filed with the Registrar of Companies pursuant to the
Bermuda Act (the "Effective Time"). The filing of the Certificate of Merger
shall be made upon, or as soon as practicable after, the closing of the Merger
(the "Closing").
1.2 Closing. The Closing shall take place at 10:00 a.m. on the first
business day after satisfaction (or waiver in accordance with this Agreement) of
the latest to occur of the conditions (other than deliveries of instruments to
be made at Closing) set forth in Article VI (the "Closing Date"), at the offices
of Xxxxx & Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 unless another
date or place is agreed to in writing by the parties.
1.3 Effects of the Merger. (a) At the Effective Time: (i) Sub shall be
merged with and into the Company, the separate existence of Sub shall cease and
the Company shall continue as the surviving corporation (Sub and the Company are
sometimes referred to herein as the "Constituent Corporations" and the Company
is sometimes referred to herein as the "Surviving Corporation"); (ii) the
Memorandum of Association of the Company as in effect immediately prior to the
Effective Time shall be the Memorandum of Association of the Surviving
Corporation; and (iii) the Bye-laws of the Company as in effect immediately
prior to the Effective Time shall be the Bye-laws of the Surviving Corporation.
(b) The individuals listed on Exhibit A hereto (which Exhibit indicates the
address of each such individual) shall, from and after the Effective Time, be
the initial directors and officers of the Surviving Corporation and shall serve
until their successors have been duly elected or appointed and qualified or
until the Liquidation or their earlier death, resignation or removal in
accordance with the Surviving Corporation's Memorandum of Association and Bye-
laws.
(c) The Merger shall have such other effects as specified in the Bermuda
Act.
1.4 Liquidation of Surviving Corporation. As soon as practicable after
the Effective Time, Parent shall cause the Surviving Corporation to be
liquidated into Parent (the "Liquidation") so that the Merger and the
Liquidation will be collectively treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock . At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, the Constituent
Corporations or their respective stockholders:
-21-
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable ordinary share, par value $0.10 per share, of the Surviving
Corporation.
(b) Cancellation of Parent-Owned Stock. Each ordinary share, par value
$0.10 per share, of the Company ("Company Common Stock") owned by Parent, Sub or
any other wholly owned Subsidiary (as hereinafter defined) of Parent or the
Company shall be canceled and retired and shall cease to exist and no stock of
Parent or other consideration shall be delivered or deliverable in exchange
therefor. As used in this Agreement, "Subsidiary" means, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which: (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership interests
of which are held by such party or any Subsidiary of such party that do not have
a majority of the voting interest in such partnership); or (ii) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and any one or more of its Subsidiaries.
(c) Exchange Ratio for Company Common Stock. Subject to the provisions of
Section 2.2(e) hereof, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled in
accordance with Section 2.1(b) and Dissenting Shares (as hereinafter defined))
shall be converted into (i) .4372 shares of common stock, par value $0.01 per
share, of Parent ("Parent Common Stock") (such shares issuable upon such
conversion are referred to herein as the "Non-Escrowed Shares") and (ii) .0273
shares of Parent Common Stock which shall be subject to the provisions of
Section 2.4 and the Escrow Agreement (as hereinafter defined) (such shares
issuable upon such conversion are referred to herein as the "Escrowed Shares"
and together with the Non-Escrowed Shares, the "Shares"). All such shares of
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of Parent
Common Stock and cash in lieu of fractional shares of Parent Common Stock as
contemplated by Section 2.2(e), to be issued or paid in consideration therefor
upon the surrender of such certificate in accordance with Section 2.2, without
interest.
(d) Assumption of Stock Options. Each outstanding Company Stock Option
(as defined in Section 5.10) shall be assumed by Parent as provided in Section
5.10.
2.2 Exchange of Certificates
(a) Exchange Agent. As of the Effective Time, Parent shall deposit with
Chemical Shareholder Services Group, Inc. or such other bank or trust company
designated by Parent and reasonably acceptable to the Company (the "Exchange
Agent"), for the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Article II, through the Exchange Agent,
certificates representing the Non-Escrowed Shares (such shares of Parent Common
Stock, together with any dividends or distributions with respect
-22-
thereto, being hereinafter referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Non-Escrowed
Shares contemplated to be issued pursuant to Section 2.1 out of the Exchange
Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which, immediately prior to the Effective Time,
represented outstanding shares of Company Common Stock (the "Certificates"),
which holder's shares of Company Common Stock were converted into the right to
receive shares of Parent Common Stock pursuant to Section 2.1: (i) a letter of
transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Exchange Agent, and shall be in such form and have such
other provisions as Parent may reasonably specify); and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor certificates representing that number
of whole shares of Non-Escrowed Shares which such holder has the right to
receive pursuant to the provisions of this Article II, certificates representing
that number of whole shares of Escrowed Shares which such holder has the right
to receive pursuant to the provisions of this Article II to the extent and as of
such time as provided in the Escrow Agreement and cash in lieu of fractional
Shares as contemplated by Section 2.2(e) and the Escrow Agreement, and the
Certificates so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
share transfer records of Company, certificates representing the appropriate
number of shares of Parent Common Stock may be issued to a transferee if the
Certificates representing such Company Common Stock are presented to the
Exchange Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
(other than Certificates representing shares to be canceled in accordance with
Section 2.1(b) or Dissenting Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificates representing shares of Parent Common Stock and cash in lieu of any
fractional shares of Parent Common Stock as contemplated by this Section 2.2.
The Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the Parent Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect thereto for the account of
persons entitled thereto.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock declared or made before
or after the Effective Time with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the right to
receive shares of Parent Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.2(e) until the holder of such Certificate shall surrender such Certificate
and, with respect to Escrowed Shares, until such other time as provided in the
-23-
Escrow Agreement. Subject to the effect of applicable laws and the provisions
of the Escrow Agreement with respect to Escrowed Shares, following surrender of
any such Certificate (other than Certificates representing shares to be canceled
in accordance with Section 2.1(b) or Dissenting Shares), there shall be paid to
the holder thereof, without interest: (i) at the time of such surrender, the
amount of any cash payable in lieu of any fractional share of Parent Common
Stock to which such holder is entitled pursuant to Section 2.2(e) and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock; and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time that may have been declared or made by the Company on such shares
of Company Common Stock in accordance with the terms of this Agreement or prior
to the date hereof and which remain unpaid at the Effective Time, and after the
Effective Time there shall be no further registration of transfers on the share
transfer books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article II, and, except as provided in
this Section 2.2(e), no dividend or other distribution, stock split or interest
shall relate to any such fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder of Parent. In lieu of any fractional share of Parent Common Stock, each
holder of shares of Company Common Stock who would otherwise have been entitled
to a fraction of a share of Parent Common Stock upon surrender of Certificates
for exchange pursuant to this Article II will be paid an amount in cash (without
interest) equal to the value of such fraction of a share based upon the closing
price of Parent Common Stock on the Nasdaq Stock Market on the date on which the
Effective Time shall occur (or if the Parent Common Stock shall not trade on the
Nasdaq Stock Market on such date, the first day of that Parent Common Stock
shall trade on the Nasdaq Stock Market thereafter). All shares of Company
Common Stock held by a record holder shall be aggregated for purposes of
computing the number of shares of Parent Common Stock to be issued pursuant to
this Section 2.2(e).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and
any cash in lieu of fractional shares of Parent Common Stock made available to
the Exchange Agent that remain undistributed to the former stockholders of the
Company on or after the one-hundred eightieth day following the Effective Time
shall be delivered to Parent, upon
-24-
demand, and any stockholders of the Company who have not theretofore complied
with this Article II shall thereafter look only to Parent for payment of their
claim for Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent Common
Stock.
(g) No Liability. Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock or Parent Common Stock, as the case may
be, for such shares (or dividends or distributions with respect thereto) or cash
in lieu of fractional shares of Parent Common Stock delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Any amounts remaining unclaimed by holders of any such shares on the day
immediately preceding the day on which such amounts would otherwise escheat to
or become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of Parent free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
2.3 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have properly exercised appraisal rights with respect thereto under the Bermuda
Act (the "Dissenting Shares") shall not be converted into or represent the right
to receive shares of Parent Common Stock as provided in Section 2.1(c), but the
holders of Dissenting Shares shall be entitled to receive such payment of the
appraised value of such shares held by them from the Surviving Corporation as
shall be determined pursuant to the Bermuda Act; provided, however, that if any
such holder shall have failed to perfect or shall withdraw or lose the right to
appraisal and payment under the Bermuda Act, each such holder's shares shall
thereupon be deemed to have been converted as of the Effective Time into the
right to receive shares of Parent Common Stock, without any interest thereon, as
provided in Section 2.1(c), and upon surrender, in the manner provided in
Section 2.2 of the Certificate(s) representing such shares, such shares shall no
longer be Dissenting Shares.
2.4 Escrowed Shares. On the Closing Date, Parent, the Company, a wholly
owned Subsidiary of Parent designated by Parent or such other entity designated
by Parent and reasonably acceptable to the Company (the "Escrow Agent") and the
Stockholders Representative (as hereinafter defined) shall execute and deliver
an escrow agreement in the form attached as Exhibit B hereto (the "Escrow
Agreement"). The provisions of the Escrow Agreement are hereby incorporated by
reference into this Agreement. Promptly after the Effective Time, Parent shall
deposit with the Escrow Agent the Escrowed Shares in accordance with this
Article II and the Escrow Agreement. Prior to the Closing Date, holders of a
majority of the outstanding shares of Company Common Stock may, by written
notice to Parent, designate an individual or entity as the Stockholders
Representative for purposes of the Escrow Agreement (the "Stockholders
Representative"), which individual or entity need not be a holder of Company
Common Stock. If no such Stockholders Representative is so designated prior to
the Closing, Parent shall designate an individual or entity to act in such
capacity.
-25-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. Each of the Company and its
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, other than in such jurisdictions
where the failure so to qualify would not have a Company Material Adverse Effect
(as defined below). The Company has heretofore delivered to Parent complete and
correct copies of its Memorandum of Association and Bye-laws and the
organizational documents of each of its Significant Subsidiaries. All
Subsidiaries of the Company, the percentage of the Company's ownership of such
Subsidiaries, the identity and percentage ownership of all other persons with
equity interests in such Subsidiaries and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.1(a) of the letter
dated and delivered to Parent on the date hereof (the "Company Letter"), which
relates to this Agreement and is designated therein as being the Company Letter.
As used in this Agreement: (i) a "Significant Subsidiary" means any Subsidiary
of the Company or Parent, as the case may be, that would constitute a
Significant Subsidiary of such party within the meaning of Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the "SEC"); and (ii) a
"Company Material Adverse Effect" or "Company Material Adverse Change" shall
mean, any effect or change that is, individually or in the aggregate, materially
adverse to the business, operations, assets, condition (financial or otherwise)
or results of operation of the Company and its Subsidiaries taken as a whole
except for general economic changes and changes that may affect the industries
of the Company or any of its Subsidiaries generally.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 40,000,000 shares of Company Common Stock. At
the close of business on December 1, 1995: 35,892,240 shares of Company Common
Stock were issued and outstanding and 1,659,466 shares of Company Common Stock
were reserved for issuance pursuant to the Company's 1993 Stock Option Plan and
certain stock option agreements (the "Sweco Options") entered into with certain
former stockholders of the Sweco Entities (as defined herein) identified on
Schedule 3.1(b) of the Company Letter (the Company's 1993 Stock Option Plan and
the Sweco Options are collectively referred to as the "Company Stock Option
Plans") with an aggregate exercise price of $2,658,591; and (ii) no bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into securities having the right to vote) on any matters on which the Company
stockholders may vote ("Company Voting Debt") were issued or outstanding. All
outstanding shares of Company Common Stock have been duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive rights.
Except as set forth on Schedule 3.1(b) of the Company Letter, all outstanding
shares of capital stock of the Subsidiaries of
-26-
the Company are owned by the Company, or a direct or indirect wholly owned
Subsidiary of the Company, free and clear of all liens, charges, encumbrances,
claims and options of any nature. Except as set forth in this Section 3.1(b) and
except for changes since December 1, 1995 resulting from the exercise of
employee stock options granted pursuant to, or from issuances or purchases
under, the Company Stock Option Plans, or as contemplated by this Agreement,
there are outstanding: (i) no shares of capital stock, Company Voting Debt or
other voting securities of the Company; (ii) no securities of the Company or any
Subsidiary of the Company convertible into or exchangeable for shares of capital
stock, Company Voting Debt or other voting securities of the Company or any
Subsidiary of the Company; and (iii) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which the Company or
any Subsidiary of the Company is a party or by which it is bound in any case
obligating the Company or any Subsidiary of the Company to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Company Voting
Debt or other voting securities of the Company or of any Subsidiary of the
Company, or obligating the Company or any Subsidiary of the Company to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. Except as set forth on Schedule 3.1(b) of the Company Letter, there
are no stockholder agreements, voting trusts or other similar agreements or
understandings to which the Company is a party or by which it is bound. Except
as set forth on Schedule 3.1(b) of the Company Letter, there are no restrictions
on the Company's ability to vote the stock held by the Company of any of its
Subsidiaries. Except as identified on Schedule 3.1(b) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any agreement
granting registration rights to any holders of its securities. To the knowledge
of the Company, as of the date of this Agreement, no stockholder of the Company
or "group" within the meaning of Section 13(d)3 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") will be immediately after the Effective
Time the beneficial owner of more than 25% of the then outstanding Parent Common
Stock (excluding for such purpose any beneficial ownership attributable to the
Warrants).
(c) Non-Subsidiaries Equity Investment. Schedule 3.1(c) of the Company
Letter sets forth the book value of each investment by the Company or any of its
Subsidiaries in the voting securities, partnership interests or other equity
interests of any corporation, partnership or other entity (other than a
Subsidiary of the Company) and the nature and percentage of the Company's or its
Subsidiaries' ownership interests in such investment. Except as set forth in
Schedule 3.1(c) of the Company Letter, the voting securities, partnership
interests or other equity interests of the Company or its Subsidiaries in such
investments are owned free and clear of all liens, charges and encumbrances.
(d) Authority; No Violations; Consents and Approvals .
(i) The Board of Directors of the Company has approved the Merger and
this Agreement, by unanimous vote of the directors, and declared the Merger and
this Agreement to be in the best interests of the stockholders of the Company.
The Company has all requisite corporate power and authority to enter into this
Agreement and, subject, with respect to consummation of the Merger, to approval
of this Agreement and the Merger by the stockholders of the Company in
accordance with the Bermuda Act, to consummate the
-26-
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
subject, with respect to consummation of the Merger, to approval of this
Agreement and the Merger by the stockholders of the Company in accordance with
the Bermuda Act. This Agreement has been duly executed and delivered by the
Company and, subject, with respect to consummation of the Merger, to approval of
this Agreement and the Merger by the stockholders of the Company in accordance
with the Bermuda Act, and assuming this Agreement constitutes the valid and
binding obligation of Parent and Sub, constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(ii) Except as set forth on Schedule 3.1(d) of the Company Letter, the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Memorandum of Association or Bye-
laws of the Company or any provision of the comparable charter or organizational
documents of any of its Subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, or indenture applicable to the Company or any of its
Subsidiaries, (iii) any other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its Subsidiaries or
(iv) assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.1(d)(iii) are duly and timely obtained or
made and the approval of the Merger and this Agreement by the stockholders of
the Company has been obtained, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (iii), any such conflicts, violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Company Material Adverse Effect, materially impair
the ability of the Company to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, as to which the failure to
obtain or make would have a Company Material Adverse Effect, except for: (A) the
filing of a premerger notification report by the Company under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
expiration or termination of the applicable waiting period with respect thereto;
(B) the approval of the Minister of Finance of Bermuda and the filing of the
Certificate of Merger with the Registrar
-28-
of Companies of Bermuda and the appropriate filings and consents required for
the Liquidation under Bermuda law; (C) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws, or
environmental laws; and (D) such filings and approvals as may be required by any
foreign premerger notification, securities, corporate or other law, rule or
regulation.
(e) Financial Statements. The Company previously has delivered to Parent
a true and complete copy of:
(i) the consolidated balance sheets of the Company and its
consolidated Subsidiaries as of March 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the fiscal years then ended on such dates, together with the notes thereto, in
each case audited by and accompanied by the report of KPMG Peat Marwick LLP,
independent accountants;
(ii) the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as of October 31, 1995, and the related consolidated
statements of operations and cash flows for the seven months then ended;
(iii) the combined balance sheet of Environmental Procedures, Inc.,
Venezuela Well Analysis, Venwell International, and Onea Corporation
(collectively, the "Sweco Entities") as of May 31, 1995, and the related
combined statements of operations, changes in stockholders' equity, and cash
flows for the year then ended, together with the notes thereto, audited by and
accompanied by the report of Ernst & Young LLP, independent accountants; and
(iv) the unaudited combined balance sheet of the Sweco Entities as of
October 31, 1995, and the related combined statements of operations and cash
flows for the five months then ended
(all the foregoing financial statements, including the notes thereto; being
referred to herein collectively as the "Company Financial Statements").
The Company Financial Statements were prepared in accordance with generally
accepted accounting principles in effect in the United States ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
indicated in the notes thereto, (ii) in the case of the unaudited financial
statements, such differences in presentation or omissions as permitted by Rule
10-01 of Regulation S-X of the SEC and (iii) the unaudited financial statements
do not contain all notes required by GAAP) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited financial
statements, to normal year-end adjustments on a basis comparable with past
periods) the consolidated financial position of the Company and its consolidated
Subsidiaries or the combined financial position of the Sweco Entities, as the
case may be, as of their respective dates and the consolidated results of
operations and the consolidated cash flows of the Company and its consolidated
Subsidiaries or combined results of operations and the combined cash flows of
the Sweco Entities, as the case may be, for the periods presented therein.
-29-
(f) Pro Forma Financial Information. The Company previously has delivered
to Parent a true and complete copy of the pro forma balance sheet of the
Company, the SWECO Entities and their consolidated Subsidiaries as of October
31, 1995 and a pro forma income statement of the Company, the SWECO Entities and
their consolidated Subsidiaries for the twelve months ended September 30, 1995
(the "Pro Forma Financial Statements"). The underlying unadjusted financial
information included in the Pro Forma Financial Statements was prepared in
accordance with GAAP applied on a consistent basis with the Company Financial
Statements during the periods involved. The pro forma adjustments included in
the Pro Forma Financial Statements have been fairly applied to such unadjusted
financial information on the basis of the assumptions set forth therein. The
Pro Forma Financial Statements fairly present the information shown therein and
the assumptions and adjustments relating thereto are reasonable and have been
made in good faith.
(g) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time the S-4 becomes effective under the Securities Act of
1933, as amended (the "Securities Act") and the rules and regulations thereunder
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and none of the information supplied
or to be supplied by the Company and included or incorporated by reference in
the Proxy Statement (as hereinafter defined) will, at the time of mailing
thereof or at the time of the meeting of the stockholders of Parent to be held
in connection with the Merger or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company or any of its
Subsidiaries, or with respect to other information supplied by the Company for
inclusion in the Proxy Statement or S-4, shall occur which is required to be
described in an amendment of, or a supplement to, the Proxy Statement or the S-
4, such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of Parent. The S-4 and the Proxy Statement, insofar as they relate
to the Company or its Subsidiaries or other information supplied by the Company
for inclusion therein, will comply as to form in all material respects with the
provisions of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder.
(h) Absence of Certain Changes or Events. Except as disclosed in Schedule
3.1(h) of the Company Letter, or except as contemplated by this Agreement, since
(x) March 31, 1995 with respect to the Company and its Subsidiaries other than
the SWECO Entities and (y) May 31, 1995 with respect to the SWECO Entities, the
Company has in all material respects conducted its business only in the ordinary
course and there has not been: (i) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock or the capital stock of the SWECO
Entities; (ii) any amendment of any material term of any outstanding equity
security of the Company or any Subsidiary; (iii) any repurchase, redemption or
other
-30-
acquisition by the Company or any Subsidiary of any outstanding shares of
capital stock or other equity securities of, or other ownership interests in,
the Company or any Subsidiary, except as contemplated by the Company Benefit
Programs (as hereinafter defined); (iv) any material change in any method of
accounting or accounting practice, or in any tax method, principle, election or
practice by the Company or any Subsidiary; (v) if the covenants and agreements
with respect to the Company and its Subsidiaries set forth in Section 4.1 had
been applicable to the Company and its Subsidiaries during the period from (x)
March 31, 1995 with respect to the Company and its Subsidiaries other than the
SWECO Entities and (y) May 31, 1995 with respect to the SWECO Entities to the
date of this Agreement, any action, transaction, commitment or failure to act
that would cause the Company or any such Subsidiary to fail to comply with such
covenants and agreements; or (vi) any other action, transaction, commitment,
dispute or other event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business) that has had, or may
reasonably be expected to have, a Company Material Adverse Effect, except for
general economic changes and changes that may affect the industries of the
Company or any of its Subsidiaries generally.
(i) No Undisclosed Material Liabilities. Except as fully reflected or
reserved against in the Company Financial Statements, or disclosed in the
footnotes thereto, or referred to in the Company Letter, as of the date hereof
the Company and its Subsidiaries have no liabilities, absolute or contingent
other than liabilities which, individually or in the aggregate, are reasonably
expected not to have a Company Material Adverse Effect. Except as so reflected,
reserved or disclosed, the Company and its Subsidiaries have no commitments
which, individually or in the aggregate, are reasonably expected to have a
Company Material Adverse Effect.
(j) Material Contracts; No Defaults.
(i) Set forth in Schedule 3.1(j)(i) of the Company Letter is (A) a
list of all loan or credit agreements, notes, bonds, mortgages, indentures,
financing leases or other debt instruments or agreements pursuant to which, as
of a date within 30 days of the date hereof, any indebtedness (determined in
accordance with GAAP)of the Company or any of its Subsidiaries in an aggregate
principal amount in excess of $1,000,000 is outstanding or may be incurred and
(B) the respective principal amounts outstanding thereunder as of the date of
this Agreement.
(ii) Schedule 3.1(j)(ii) of the Company Letter contains a listing of
all other contracts, agreements, arrangements or understandings to which the
Company or one of its Subsidiaries is a party or by which any of them or any of
their properties or assets is bound (exclusive of any contracts, agreements,
arrangements or understandings that are immaterial as to amount and significance
to the operations to which they relate and are routinely entered into the
ordinary course of business) described in (A) through (I) below to which the
Company or any of its Subsidiaries is a party (the items referred to in clauses
(i) and (ii) of this Section 3.1(j) being collectively referred to herein as
"Contracts").
(A) Each Contract, whether in the ordinary course of business or
not, which involves performance of services or delivery of goods and/or
materials, by the
-31-
Company or any of its Subsidiaries of an amount or value in excess of $300,000
and which is not cancelable without penalty on 30 days' notice or less;
(B) Each Contract or guaranty of third party debt or obligations
not in the ordinary course of business involving expenditures, commitments or
receipts of the Company or any of its Subsidiaries in excess of $300,000;
(C) Each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except real or personal property leases and
installment and conditional sales agreements having a value per property or item
or aggregate payments of less than $300,000 and with terms of less than one
year);
(D) Each collective bargaining agreement or other Contract to or
with any labor union or other employee representative of a group of employees
relating to wages, hours and other conditions of employment;
(E) Each joint venture contract, partnership arrangement or other
Contract (however named) involving a sharing of profits, losses, costs or
liabilities by the Company or any of its Subsidiaries with any other person;
(F) Each contract containing covenants which in any way purport
to limit the freedom of the Company or any of its Subsidiaries to engage in any
line of business or engage in business in any geographic area or to compete with
any person;
(G) Each general power of attorney granting the recipient the
power to commit material resources of the Company or its Subsidiaries which is
currently effective and outstanding;
(H) Each contract for capital expenditures in excess of $250,000;
and
(I) Each amendment, supplement and modification (whether written
or oral) in respect of any of the foregoing.
(iii) Except as disclosed on Schedule 3.1(j)(iii) of the Company
Letter (and, in the case of contracts and agreements arising after the date
hereof and prior to the Effective Time, which are not prohibited by Section 4.1
of this Agreement and are disclosed in writing to Parent), there is no contract
or agreement that is material to the business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries is in violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving of
notice would cause such a violation of or default under) any Contract, other
than such violations or defaults as would not have a Company Material Adverse
Effect. To the knowledge of the Company, none of the other parties to the
Contracts are in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice
-32-
would cause such a violation of or default under) any Contract, other than such
violations or defaults as would not have a Company Material Adverse Effect.
(iv) Except as disclosed on Schedule 3.1j(iv) of the Company Letter,
there are no renegotiations of, or attempts to renegotiate, any material amounts
paid or payable to the Company or any of its Subsidiaries under current or
completed Contracts with any person or entity having the contractual or
statutory right to demand or require such negotiation. To the knowledge of the
Company, no such person or entity has made written demand for such
renegotiation.
(k) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except where the failure so to
hold would not have a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not have a Company Material Adverse Effect.
Except as disclosed or as set forth on Schedule 3.1(k), 3.1(l), 3.1(m), 3.1(n),
3.1(o) or 3.1(q) of the Company Letter, the businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, judgment or decree of any Governmental Entity, except for possible
violations which would not have a Company Material Adverse Effect. Except as
set forth on Schedule 3.1(k) of the Company Letter, as of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
the Company or any of its Subsidiaries is, to the best knowledge of the Company,
pending or threatened, other than those the outcome of which would not have a
Company Material Adverse Effect.
(l) Litigation. Schedule 3.1(l) of the Company Letter discloses all
suits, actions or proceedings pending, or, to the best knowledge of the Company,
threatened against the Company or any Subsidiary of the Company ("Company
Litigation") on the date of this Agreement and all judgments, decrees,
injunctions, rules or orders of any Governmental Entity or arbitrator
outstanding against the Company or any Subsidiary of the Company ("Company
Order")on the date of this Agreement, in each case in which the amount claimed
or that could be involved is in excess of $100,000. Except as disclosed on
Schedule 3.1(l) of the Company Letter, there is no Company Litigation that,
individually or in the aggregate with all other Company Litigation, is
reasonably likely to have a Company Material Adverse Effect, nor is there any
Company Order that, individually or in the aggregate with all other Company
Litigation, is reasonably likely to have a Company Material Adverse Effect or a
material adverse effect on the Company's ability to perform its obligations
hereunder or to consummate the transactions contemplated by this Agreement.
(m) Taxes. Except as set forth on Schedule 3.1(m) of the Company Letter
and except for exceptions to the following that would not, individually or in
the aggregate, have a Company Material Adverse Effect:
(i) Each of the Company, each of its Subsidiaries and any affiliated,
consolidated, combined, unitary or similar group of which any such corporation
is or was a member has (A) duly and timely (taking into account any extensions)
filed all federal, state,
-33-
local, foreign and other returns, declarations, reports, estimates, information
returns and statements ("Returns") required to be filed or sent by or with
respect to it in respect of any Taxes (as hereinafter defined), (B) duly paid or
deposited on a timely basis all Taxes (including estimated Taxes) that are due
and payable (except for audit adjustments not material in the aggregate or to
the extent that liability therefor is reserved for in the Company's or Sweco's
most recent audited financial statements) for which the Company or any of its
Subsidiaries may be liable, (C) established reserves that are adequate for the
payment of all Taxes not yet due and payable with respect to the results of
operations of the Company and its Subsidiaries through the date hereof, and (D)
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has in all
material respects timely withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over.
(ii) Schedule 3.1(m) of the Company Letter sets forth (i) the last
taxable period through which the United States federal income Tax Returns of the
Company and any of its Subsidiaries have been examined by the Internal Revenue
Service ("IRS") or otherwise closed and (ii) any affiliated, consolidated,
combined, unitary or similar group Return in which the Company or any of its
Subsidiaries is or has been a member or is or has joined in the filing. Except
to the extent being contested in good faith, all material deficiencies asserted
as a result of such examinations and any examination by any applicable federal,
state, local, foreign or other taxing authority have been paid, fully settled or
adequately provided for in the Company's or the Sweco Entities' most recent
audited financial statements. Except as adequately provided for in the Company
Financial Statements, no material tax audits or other administrative proceedings
or court proceedings are presently pending with regard to any Taxes for which
the Company or any of its Subsidiaries would be liable, and no material
deficiency for any such Taxes has been proposed, asserted or assessed pursuant
to such examination against the Company or any of its Subsidiaries by any
federal, state, local, foreign or other taxing authority with respect to any
period.
(iii) Neither the Company nor any of its Subsidiaries has executed or
entered into with the IRS or any taxing authority (i) any agreement or other
document extending or having the effect of extending the period for assessments
or collection of any Taxes for which the Company or any of its Subsidiaries
would be liable or (ii) a closing agreement pursuant to Section 7121 of the
Code, or any predecessor provision thereof or any similar provision of federal,
state, local, foreign or other tax law that relates to the assets or operations
of the Company or any of its Subsidiaries.
(iv) Neither the Company nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would constitute a
"parachute payment" within the meaning of Section 280G of the Code.
(v) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
Subsidiaries.
-34-
(vi) Neither the Company nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing or allocation agreement or
similar agreement or arrangement.
(vii) None of the assets of the Company or any of its Subsidiaries
organized outside the United States constitutes a "United States real property
interest" within the meaning of Section 897(c) of the Code.
(viii) Neither the Company nor any of its Subsidiaries is or has been
at any time during the past five years a "controlled foreign corporation" within
the meaning of Section 957(a) of the Code.
(ix) The Company is not and has not been engaged in the conduct of a
trade or business within the United States for United States federal income tax
purposes.
For purposes of this Agreement, "Taxes" means all federal, state, local,
foreign and other taxes, charges, fees, levies, imposts, duties, licenses or
other governmental assessments, together with any interest, penalties, additions
to tax or additional amounts imposed by any taxing authority with respect
thereto.
(n) Pension and Benefit Plans; ERISA.
(i) The Company has made available to Parent true, correct, and
complete copies of each of the following which is sponsored, maintained or
contributed to by the Company or any of its Subsidiaries for the benefit of the
employees of the Company or such Subsidiary:
(1) each "employee benefit plan," as such term is defined in
Section 3(3) of the United States Employee Retirement Income Security Act of
1974, as amended ("ERISA") (including, but not limited to, employee benefit
plans, such as foreign plans, which are not subject to the provisions of ERISA)
("Company Plans"); and
(2) each personnel policy, stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or supplemental
income arrangement, consulting agreement, employment agreement and each other
employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Section 3.1(n)(i)(1) ("Company Benefit
Programs").
(ii) Except as disclosed in Schedule 3.1(n)(ii) of the Company Letter:
(1) The Company and its Subsidiaries do not contribute to or have
an obligation to contribute to, and have not at any time within six years prior
to the Effective Time contributed to or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA;
-35-
(2) The Company and its Subsidiaries have substantially performed
all material obligations, whether arising by operation of law or by contract,
required to be performed by them in connection with the Company Plans and the
Company Benefit Programs, and to the knowledge of the Company there have been no
material defaults or violations by any other party to the Company Plans or
Company Benefit Programs;
(3) All reports and disclosures relating to the Company Plans
required to be filed with or furnished to governmental agencies, Company Plan
participants or beneficiaries have been filed or furnished substantially in
accordance with applicable law in a timely manner;
(4) Each Company Plan intended to be qualified under Section 401
of the Code satisfies the requirements of such Section and has received a
favorable determination letter from the Internal Revenue Service regarding such
qualified status and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of the Company, operated
in a way which would adversely affect such qualified status. As to any Company
Plan intended to be qualified under Section 401 of the Code, there has been no
termination or partial termination of the Company Plan within the meaning of
Section 411(d)(3) of the Code;
(5) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, threatened
against, or with respect to, any of the Company Plans or Company Benefit
Programs or their assets. To the knowledge of the Company, there is no matter
pending (other than routine qualification determination filings) with respect to
any of the Company Plans before the IRS, the United States Department of Labor
or the Pension Benefit Guaranty Corporation ("PBGC");
(6) As to any Company Plan subject to Title IV of ERISA, there
has been no event or condition which presents the material risk of a Company
Plan termination, no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of ERISA (for
which the disclosure requirements of Regulation (S)2615.3 promulgated by the
PBGC have not been waived) has occurred, no notice of intent to terminate the
Company Plan has been given under Section 4041(c) of ERISA, no proceeding has
been instituted under Section 4042 of ERISA to terminate the Company Plan, no
liability to the PBGC has been incurred;
(7) No act, omission or transaction has occurred which would
result in imposition on the Company or any of its Subsidiaries of (A) liability
for a breach of fiduciary duty under Section 409 of ERISA, (B) a civil penalty
assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (C)
a tax imposed pursuant to Chapter 43 of Subtitle D of the Code;
(8) With respect to any employee benefit plan, within the meaning
of Section 3(3) of ERISA, which is not a Company Plan but which is sponsored,
maintained or contributed to, or has been sponsored, maintained or contributed
to within six years prior to the Effective Time, by any corporation, trade,
business or entity under common control
-36-
with the Company, within the meaning of Section 414(b), (c) or (m) of the Code
or Section 4001 of ERISA ("Company Commonly Controlled Entity"), (A) no
withdrawal liability, within the meaning of Section 4201 of ERISA, has been
incurred, which withdrawal liability has not been satisfied, (B) no liability to
the PBGC has been incurred by any Company Commonly Controlled Entity, which
liability has not been satisfied, (C) no accumulated funding deficiency, whether
or not waived, within the meaning of Section 302 of ERISA or Section 412 of the
Code has been incurred, and (D) all contributions (including installments) to
such plan required by Section 302 of ERISA and Section 412 of the Code have been
timely made; and
(9) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (A) require the
Company or any of its Subsidiaries to make a larger contribution to, or pay
greater benefits under, any Company Plan or Company Benefit Program than it
otherwise would or (B) create or give rise to any additional vested rights or
service credits under any Company Plan or Company Benefit Program.
(iii) Except as disclosed on Schedule 3.1(n)(iii) of the Company
Letter, there are no severance agreements or employment agreements between the
Company or any of its Subsidiaries and any employee of the Company or such
Subsidiary. True and correct copies of all such severance and employment
agreements have been provided to Parent. Except as disclosed on Schedule
3.1(n)(iii) of the Company Letter, (A) neither the Company nor any of its
Subsidiaries has any consulting agreement or arrangement with any person
involving annual compensation in excess of $100,000, except as are terminable
without penalty upon one month's notice or less, and (B) no stock or other
security issued by the Company or any of its Subsidiaries forms or has formed a
material part of the assets of any Company Plan or Company Benefit Program.
(o) Labor Matters.
(i) Except as set forth in Schedule 3.1(o)(i) of the Company Letter,
as of the date of this Agreement, (1) no employees of the Company or any of its
Subsidiaries are represented by any labor organization; (2) no labor
organization or group of employees of the Company or any of its Subsidiaries has
made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority; and (3) to the knowledge of the Company, there
are no organizing activities involving the Company or any of its Subsidiaries
pending with any labor organization or group of employees of the Company or any
of its Subsidiaries.
(ii) Except as set forth on Schedule 3.1(o)(ii) of the Company Letter,
the Company and each of its Subsidiaries is in compliance with all laws and
orders relating to the employment of labor, including all such laws and orders
relating to wages, hours, collective bargaining, discrimination, civil rights,
safety and health workers' compensation and the collection and payment of
withholding and or Social Security Taxes and similar
-37-
Taxes, except where the failure to comply would not have a Company Material
Adverse Effect.
(p) Intangible Property. The Company and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents, service
marks, brand marks, brand names, computer programs, database, industrial designs
and copyrights necessary for the operation of the businesses of each of the
Company and its Subsidiaries (collectively, the "Company Intangible Property"),
except where the failure to possess or have adequate rights to use such
properties would not reasonably be expected to have a Company Material Adverse
Effect. Schedule 3.1(p) lists all patents and trademarks or licensing
agreements with respect to any patent or trademark, which in each case is
applicable to a material portion of the business of the Company or its
Subsidiaries. Except as set forth on Schedule 3.1(p) of the Company Letter, all
of the Company Intangible Property is owned by the Company or its Subsidiaries
free and clear of any and all liens, claims or encumbrances, except those that
are not reasonably likely to have a Company Material Adverse Effect, and neither
the Company nor any such Subsidiary has forfeited or otherwise relinquished any
Company Intangible Property which forfeiture would result in a Company Material
Adverse Effect. The use of the Company Intangible Property by the Company or
its Subsidiaries does not, in any material respect, conflict with, infringe
upon, violate or interfere with or constitute an appropriation of any right,
title, interest or goodwill, including, without limitation, any intellectual
property right, trademark, trade name, patent, service xxxx, brand xxxx, brand
name, computer program, database, industrial design, copyright or any pending
application therefor of any other person and there have been no claims made, and
neither the Company nor any of its Subsidiaries has received any notice of any
claim or otherwise knows, that any of the Company Intangible Property is invalid
or conflicts with the asserted rights of any other person or has not been used
or enforced or has been failed to be used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of any of the
Company Intangible Property, except for any such conflict, infringement,
violation, interference, claim, invalidity, abandonment, cancellation or
unenforceability that would not reasonably be expected to have a Company
Material Adverse Effect.
(q) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Law" means any applicable law regulating or
prohibiting Releases into any part of the natural environment, or pertaining to
the protection of natural resources, the environment and public and employee
health and safety including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(33 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 7401 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section
-38-
651 et seq.) ("OSHA") and the regulations promulgated pursuant thereto, and any
such applicable state or local statutes, and the regulations promulgated
pursuant thereto, as such laws have been and may be amended or supplemented
through the Closing Date.
(B) "Hazardous Material" means any substance, material or waste which
is regulated, or which could be the subject of Remedial Action, pursuant to any
Environmental Law by any public or governmental authority in the jurisdictions
in which the applicable party or its Subsidiaries conducts business, or the
United States, including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste," "pollutant,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law;
(C) "Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, or into or out of any property
owned, operated or leased by the applicable party or its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity or
required under any Environmental Law, or voluntarily undertaken to (I) clean up,
remove, treat, or in any other way ameliorate the Release of any Hazardous
Materials in the indoor or outdoor environment; (II) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material so
it does not endanger or threaten to endanger the public health or welfare of the
indoor or outdoor environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or relating to a
Release; or (IV) bring the applicable party into compliance with any
Environmental Law.
(i) Except as disclosed on Schedule 3.1(q) of the Company Letter,
the operations of the Company and its Subsidiaries have been and are currently
in compliance with all Environmental Laws, except where the failure to so comply
would not reasonably be expected to have a Company Material Adverse Effect;
(ii) Except as disclosed on Schedule 3.1(q) of the Company
Letter, the Company and its Subsidiaries have obtained and maintained all
permits required under applicable Environmental Laws for the continued
operations of their respective businesses, except such permits the lack of which
would not reasonably be expected to lead to a Company Material Adverse Effect;
(iii) Except as disclosed on Schedule 3.1(q) of the Company
Letter, as of the date hereof the Company and its Subsidiaries are not subject
to any material (individually or in the aggregate) outstanding written orders or
material contracts with any Governmental Entity or other person respecting (A)
Environmental Laws, (B) Remedial Action or (C) any Release or threatened Release
of a Hazardous Material;
-39-
(iv) Except as disclosed on Schedule 3.1(q) of the Company
Letter, the Company and its Subsidiaries have not received any written
communication alleging, with respect to any such party, and has no knowledge of,
or reasonable reason to suspect the existence of, the violation of or liability
under any Environmental Law, which violation or liability would reasonably be
expected to have a Company Material Adverse Effect;
(v) Except as disclosed on Schedule 3.1(q) of the Company Letter,
neither the Company nor any of its Subsidiaries has any contingent liability in
connection with any Release, of any Hazardous Material including, without
limitation, in connection with the exposure of any person or property to
Hazardous Material that would reasonably be expected to lead to a Company
Material Adverse Effect;
(vi) Except as disclosed on Schedule 3.1(q) of the Company
Letter, the operations of the Company or its Subsidiaries involving the
generation, transportation, treatment, storage or disposal of hazardous waste,
as defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of the date
of this Agreement) or any state equivalent, or any other Hazardous Material are
in compliance with applicable Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Company Material Adverse
Effect; and
(vii) Except as disclosed on Schedule 3.1(q) of the Company
Letter, to the knowledge of the Company as of the date hereof, there is not now
on or in any property of the Company or its Subsidiaries any of the following:
(A) any underground storage tanks or surface impoundments, (B) any asbestos-
containing materials, or (C) any polychlorinated biphenyls, any of which ((A),
(B), or (C) preceding) could reasonably be expected to have a Company Material
Adverse Effect. None of the properties owned or operated by the Company are
restricted as to use or as to transfer of title, or the subject of any special
recorded notice as a result of the existence of Hazardous Substances thereon.
With respect to Sections 3.1(q)(ii), (iii) and (iv), the Company will disclose
in writing to Parent all changes to such information occurring subsequent to the
date hereof and prior to the Closing Date.
(viii) The Company has made available to Parent for review all
written reports of environmental audits and assessments prepared for the Company
or any of its Subsidiaries within the last three years by third party
consultants or internal environmental, safety or health personnel which are in
the possession or control of the Company and which relate to the assets or
operations of the Company or any of its Subsidiaries.
(r) Opinion of Financial Advisor. The Company has received the opinion of
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated (a copy of which has been
delivered to Parent) to the effect that, as of the date hereof, the
consideration to be received by the holders of Company Common Stock pursuant to
this Agreement is fair from a financial point of view to such holders.
-40-
(s) Vote Required. The affirmative vote of the holders of ninety percent
of the shares of Company Common Stock voting at the Company Stockholder Meeting
(as defined herein) is the only vote of the holders of any class or series of
the Company capital stock necessary to approve this Agreement and the
transactions contemplated hereby and to cause the same to be binding upon all
shareholders of the Company in accordance with the Bermuda Act subject to any
dissenters' rights under the Bermuda Act.
(t) Insurance. The Company has delivered to Parent an insurance schedule
of the Company's and each of its Subsidiaries' directors' and officers'
liability insurance, primary and excess casualty insurance policies, providing
coverage for bodily injury and property damage to third parties, including
products liability and completed operations coverage, and worker's compensation,
in effect as of the date hereof. The Company maintains insurance coverage
reasonably adequate for the operation of the business of the Company and each of
its Subsidiaries (taking into account the cost and availability of such
insurance), and the transactions contemplated hereby will not materially
adversely affect such coverage.
(u) Brokers. Except as disclosed on Schedule 3.1(u) of the Company
Letter, no broker, investment banker, or other person is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
(v) Tax Matters. As of the date hereof, the representations set forth in
the numbered paragraphs of the form of Certificate of the Company included as
Schedule 3.1(v) of the Company Letter are true and correct, assuming for
purposes of this representation and warranty that the Merger and the Liquidation
referred to in such form had been consummated on the date hereof.
(w) Title. Except as disclosed in the Company Financial Statements or on
Schedule 3.1(w) of the Company Letter, the Company and each of its Subsidiaries
have good and indefeasible title to all real property and good title to all
personal property owned by them, in each case free and clear of all liens,
pledges or encumbrances securing money borrowed, the deferred purchase price of
property in excess of $300,000 or capital leases and free and clear of all other
liens, pledges, encumbrances or defects that could affect the value or use
thereof except for any such other liens, pledges, encumbrances or defects that
would not have a Company Material Adverse Effect.
(x) Books and Records. The Company and its Subsidiaries (i) make and keep
accurate books and records and (ii) maintain internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(y) Certain Payments. Neither the Company nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its Subsidiaries, has used any
corporate funds for any unlawful
-41-
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic governmental official or employee from corporate funds; violated or
is in violation of an provision of the United States Foreign Corrupt Practices
Act of 1977; or made any illegal bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(z) Transactions with Related Parties. Except as set forth in Schedule
3.1(z) of the Company Letter, there are no agreements, contracts or other
arrangements between (i) the Company or any of its Subsidiaries, on the one
hand, and (ii) any Related Person (as defined below) of the Company, on the
other hand. Except as set forth in Schedule 3.1(z) of the Company Letter, and
except for the ownership of the Parent Common Stock issued hereunder after the
Closing Date no Related Person of the Company and no present officer or director
of any Related Person of the Company has any interest in any property (real or
personal, tangible or intangible) or contract used in or pertaining to the
business of the Company and its Subsidiaries (or the Surviving Corporation and
its Subsidiaries) and no Related Person of the Company has any direct or
indirect ownership interest (excluding immaterial passive investments) in any
person (other than through the Company or any of its Subsidiaries) with which
the Company or any of its Subsidiaries competes in any material respect or has a
material business relationship. Schedule 3.1(z) of the Company letter sets
forth as of the date of this Agreement a description of all such services
provided by any Related Person of the Company or the Company and any of its
Subsidiaries. A "Related Person" of any person shall mean any holder of in
excess of 5% of the equity securities of such person and any affiliates or
associates (as defined in Rule 12b-2 under the Exchange Act) of such holder
(other than such original person or its Subsidiaries).
3.2 Representations and Warranties of Parent and Sub. Parent, on behalf
of itself and Sub, represents and warrants to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Parent's
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, other than in such jurisdictions
where the failure so to qualify would not have a Parent Material Adverse Effect
(as defined below). Parent has heretofore delivered to the Company complete and
correct copies of Parent's Certificate of Incorporation and Bylaws, Sub's
Memorandum of Association and Bye-laws and the organizational documents of each
of Parent's Significant Subsidiaries. All Subsidiaries of Parent, the
percentage of Parent's ownership of such Subsidiaries, the identity and
percentage ownership of all other persons with equity interests in such
Subsidiaries and their respective jurisdictions of incorporation or organization
are identified on Schedule 3.2(a) of the letter dated and delivered to the
Company on the date hereof (the "Parent Letter"), which relates to this
Agreement and is designated therein as being the Parent Letter. As used in this
Agreement "Parent Material Adverse Effect" or "Parent Material Adverse Change"
shall mean any effect or change that is, individually or in the aggregate,
materially adverse to the business, operations, assets, condition (financial or
otherwise) or results of operation of
-42-
Parent and its Subsidiaries taken as a whole except for general economic changes
and changes that may affect the industries of Parent or any of its Subsidiaries
generally.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Parent consists of 35,000,000 shares of Parent Common Stock, par value
$.01 per share, and 5,000,000 shares of preferred stock, $.01 par value per
share. At the close of business on December 14, 1995: (i) 18,546,075 shares of
Parent Common Stock are issued and outstanding, and an aggregate of 1,960,957
shares of Parent Common Stock are reserved for issuance pursuant to Parent's
Amended and Restated Stock Option Plan for Key Employees and Parent's Stock
Option Plan for Nonemployee Directors (collectively, the "Parent Stock Option
Plans") and 1,000,000 shares of Parent Common Stock are reserved for issuance
pursuant to the Redeemable Series A Convertible Preferred Stock of Parent (ii)
100,000 shares of Redeemable Series A Convertible Preferred Stock of Parent were
issued and outstanding; (ii) no shares of Parent Common Stock were held by
Parent in its treasury; and (iii) no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into securities having the
right to vote) on any matters on which Parent stockholders may vote ("Parent
Voting Debt") were issued or outstanding. All outstanding shares of Parent
Common Stock have been duly authorized, are validly issued, fully paid and
nonassessable and are not subject to preemptive rights, and, subject to the
approval of the Parent Share Issuance and the Charter Amendment, all shares of
Parent Common Stock issuable in the Merger will be duly authorized and will be,
when issued, validly issued, fully paid and non-assessable and free of
preemptive rights. Except as set forth on Schedule 3.2(b) of the Parent Letter,
all outstanding shares of capital stock of the Subsidiaries of Parent are owned
by Parent, or a direct or indirect wholly owned Subsidiary of Parent, free and
clear of all liens, charges, encumbrances, claims and options of any nature.
Except as set forth in this Section 3.2(b) and except for changes since December
14, 1995 resulting from the exercise of employee stock options granted pursuant
to, or from issuances or purchases under, the Parent Stock Option Plans, or as
contemplated by this Agreement, including issuances contemplated by the
Subscription Agreement, there are outstanding: (i) no shares of capital stock,
Parent Voting Debt or other voting securities of Parent; (ii) no securities of
Parent or any Subsidiary of Parent convertible into or exchangeable for shares
of capital stock, Parent Voting Debt or other voting securities of Parent or any
Subsidiary of Parent; and (iii) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which Parent or any Subsidiary
of Parent is a party or by which it is bound in any case obligating Parent or
any Subsidiary of Parent to issue, deliver, sell, purchase, redeem or acquire,
or cause to be issued, delivered, sold, purchased, redeemed or acquired,
additional shares of capital stock or any Parent Voting Debt or other voting
securities of Parent or of any Subsidiary of Parent, or obligating Parent or any
Subsidiary of Parent to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth on Schedule 3.2(b) of
the Parent Letter, there are no stockholder agreements, registration rights,
voting trusts or other similar agreements or understandings to which Parent is a
party or by which it is bound. Except as set forth on Schedule 3.2(b) of the
Parent Letter, there are no restrictions on Parent's ability to vote the stock
held by Parent or any of its Subsidiaries. As of the Closing, the authorized
capital stock of Sub will consist of 1,000 ordinary shares, par value $0.01 per
share, 100 shares of which will be validly issued, fully paid and nonassessable
and owned by Parent and the balance of which will not be issued or outstanding.
-43-
(c) Non-Subsidiary Equity Investment. Schedule 3.2(c) of the Parent
Letter sets forth the book value of each investment by the Parent or any of its
Subsidiaries in the voting securities, partnership interests or other equity
interests of any corporation, partnership or other entity (other than a
Subsidiary of Parent) and the nature and percentage of Parent's or its
Subsidiaries' ownership interest in such investment. Except as set forth in
Schedule 3.2(c) of the Parent Letter, the voting securities, partnership
interests or other equity interests of Parent or its Subsidiaries in such
investments are owned free and clear of all liens, charges and encumbrances.
(d) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of Parent has unanimously declared as
advisable and fair to and in the best interests of the stockholders of Parent
the Merger, an amendment to the Certificate of Incorporation of Parent to
increase the number of authorized shares of Parent Common Stock to 60,000,000
(the "Charter Amendment") and the issuance (the "Parent Share Issuance") of
shares of Parent Common Stock in accordance with the Merger and the Subscription
Agreement and has unanimously approved this Agreement. Parent has all requisite
power and authority to enter into this Agreement and, subject to approval of the
Charter Amendment and the Parent Share Issuance, to consummate the transactions
contemplated hereby. Upon Sub's formation, Sub will have requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the Merger will, prior to the Closing,
be approved by Parent as the sole stockholder of Sub. The execution and
delivery of this Agreement by Parent, on behalf of itself and Sub, and the
consummation by Parent and Sub of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent and Sub,
subject to approval of the Charter Amendment and the Parent Share Issuance by a
majority of outstanding Parent Common Stock entitled to vote thereon at the
Parent Stockholder Meeting and subject to certain actions with respect to Sub
which Parent will take prior to Closing. This Agreement has been duly executed
and delivered by Parent, on behalf of itself and Sub, and subject, with respect
to the consummation of the Merger, to stockholder approval of the Charter
Amendment and the Parent Share Issuance, and assuming this Agreement constitutes
the valid and binding obligation of the Company, constitutes a valid and binding
obligation of Parent and will constitute a valid and binding obligation of Sub,
in each case enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(ii) Except as set forth on Schedule 3.2(d) of the Parent Letter, the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, any provision of (i) the Certificate of Incorporation or
Bylaws of Parent or any provision of the comparable charter or organizational
documents of any of its Subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, or indenture applicable to Parent or
-44-
any of its Subsidiaries, (iii) any other agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its Subsidiaries
or (iv) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.2(d)(iii) are duly and timely obtained
or made and the approval of the Merger and the Charter Amendment and the Parent
Share Issuance by the stockholders of Parent has been obtained, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clause (iii), any such conflicts, violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Parent Material Adverse
Effect, materially impair the ability of Parent to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental Entity
is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent and Sub
or the consummation by Parent and Sub of the transactions contemplated hereby,
as to which the failure to obtain or make would have a Parent Material Adverse
Effect, except for: (A) the filing of a premerger notification report by Parent
under the HSR Act, and the expiration or termination of the applicable waiting
period with respect thereto; (B) the filing with the SEC of a proxy statement in
preliminary and definitive form relating to the meeting of Parent's stockholders
to be held in connection with the Parent Share Issuance and the Charter
Amendment Proxy Statement, the S-4, such reports under Section 13(a) of the
Exchange Act and such other compliance with the Securities Act and the Exchange
Act and the rules and regulations thereunder as may be required in connection
with this Agreement and the transactions contemplated hereby, and the obtaining
from the SEC of such orders as may be so required; (C) the filing of a
certificate of amendment with respect to the Charter Amendment with the
Secretary of State of the State of Delaware; (D) filings with, and approval of,
the Nasdaq Stock Market or the NYSE; (E) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws, or
environmental laws; (F) such filings and approvals as may be required by any
foreign premerger notification, securities, corporate or other law, rule or
regulation and (G) the filing of the Certificate of Merger with the Registrar of
Companies of Bermuda and the appropriate filings and consents required for the
Liquidation under Bermuda law.
(e) SEC Documents. Parent has made available to the Company a true and
complete copy of each quarterly, annual or current report on Form 10-Q, 10-K or
8-K, registration statement and definitive proxy statement filed by Parent with
the SEC since January 1, 1993 and prior to the date of this Agreement (the
"Parent SEC Documents"), which are all the documents (other than preliminary
material) that Parent was required to file with the SEC since such date. As of
their respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Parent SEC Documents, and none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective filing dates, the financial statements of
-45-
Parent included in the Parent SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except (i) as may be indicated in the notes
thereto, (ii) in the case of the unaudited statements, such differences in
presentation or omissions as permitted by Rule 10-01 of Regulation S-X of the
SEC and (iii) the unaudited financial statements do not contain all notes
required by GAAP) and fairly presented in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal year-end adjustments on a basis comparable with past periods) the
consolidated financial position of Parent and its consolidated Subsidiaries as
of their respective dates and the consolidated results of operations and the
consolidated cash flows of Parent and its consolidated Subsidiaries for the
periods presented therein.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the S-4
will, at the time the S-4 becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information supplied or to be
supplied by Parent or Sub and included or incorporated by reference in the Proxy
Statement will, at the time of mailing thereof or at the time of the meeting of
the stockholders of Parent or the Company to be held in connection with the
Merger or at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event with respect to Parent or any of its Subsidiaries, or with respect to
other information supplied by Parent for inclusion in the Proxy Statement or
S-4, shall occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement or the S-4, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of Parent. The S-4 and the
Proxy Statement, insofar as they relate to Parent or its Subsidiaries or other
information supplied by Parent for inclusion therein, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
(g) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in the Parent SEC Documents or on
Schedule 3.2(g) of the Parent Letter, or except as contemplated by this
Agreement, since September 30, 1995, Parent has, in all material respects,
conducted its business only in the ordinary course and there has not been: (i)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Parent's capital
stock; (ii) any amendment of any material term of any outstanding equity
security of Parent or any Subsidiary; (iii) any repurchase, redemption or other
acquisition by Parent or any Subsidiary of any outstanding shares of capital
stock or other equity securities of, or other ownership interests in, Parent or
any Subsidiary, except as contemplated by Parent Benefit Programs (as
hereinafter defined); (iv) any material change in any method of accounting or
accounting practice, or in any tax method, principle, election or practice, by
Parent or any Subsidiary; (v) if the covenants and agreements with respect to
the Parent and its Subsidiaries set forth in Section 4.2 had been applicable to
Parent and its Subsidiaries during the period from
-46-
September 30, 1995 to the date of this Agreement, any action, transaction,
commitment or failure to act that would cause Parent or any such Subsidiary to
fail to comply with such covenants and agreements; or (vi) any other action,
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that has had, or may reasonably be expected to have, a Parent Material Adverse
Effect, except for general economic changes and changes that may affect the
industries of Parent or any of its Subsidiaries generally.
(h) No Undisclosed Material Liabilities. Except as fully reflected or
reserved against in the financial statements included in the Parent SEC
Documents, or disclosed in the footnotes thereto, or referred to in the Parent
Letter, as of the date hereof Parent and its Subsidiaries have no liabilities,
absolute or contingent other than liabilities which, individually or in the
aggregate, are reasonably expected not to have a Company Material Adverse
Effect. Except as so reflected, reserved or disclosed, Parent and its
Subsidiaries have no commitments which, individually or in the aggregate, are
reasonably expected to have a Parent Material Adverse Effect.
(i) Material Contracts; No Defaults. All of the material contracts of
Parent and its Subsidiaries that are required to be described in the Parent SEC
Documents or to be filed as exhibits thereto, or that would be required to be
described or filed if a Form 10-K with respect to the Parent were required to be
filed on the date hereof, have been described or filed in the Parent SEC
Documents except as disclosed on Schedule 3.2(i) of the Parent Letter. Neither
Parent, nor any of its Subsidiaries is in default or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) in the case of
Parent and its Significant Subsidiaries, their respective charter and by-laws or
comparable organizational documents, (ii) except as disclosed in Schedule 3.2(i)
of the Parent Letter, any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which Parent or any of its Subsidiaries is now
a party or by which Parent or any of its Subsidiaries or any of their respective
properties or assets may be bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its Subsidiaries,
except in the case of (ii) and (iii) for defaults or violations which in the
aggregate would not have a Parent Material Adverse Effect. Schedule 3.2(i) of
the Parent Letter lists each contract containing covenants which in any way
purport to limit the freedom of Parent or any of its Subsidiaries to engage in
any line of business or engage in business in any geographic area or to compete
with any person. Except as disclosed on Schedule 3.2(i), to the knowledge of
Parent, none of the other parties to material contracts of Parent or its
Subsidiaries are in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any contract, other than such violations
or defaults as would not have a Parent Material Adverse Effect.
(j) Compliance with Applicable Laws. Parent and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders, franchises and approvals of
all Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), except where the failure so to hold would not
have a Parent Material Adverse Effect. Parent and its Subsidiaries are in
compliance with the terms of the Parent Permits, except where the failure so to
comply would not have a Parent Material Adverse
-47-
Effect. Except as disclosed or as set forth on Schedule 3.2(j), 3.2(k), 3.2(l),
3.2(m), 3.2(n) or 3.2(p) of the Parent Letter, the businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, judgment or decree of any Governmental Entity, except for possible
violations which would not have a Parent Material Adverse Effect. Except as set
forth on Schedule 3.2(j) of the Parent Letter, as of the date of this Agreement,
no investigation or review by any Governmental Entity with respect to Parent or
any of its Subsidiaries is, to the best knowledge of Parent, pending or
threatened, other than those the outcome of which would not have a Parent
Material Adverse Effect.
(k) Litigation. Except as disclosed on Schedule 3.2(k) of the Parent
Letter or in the Parent SEC Documents, there is no suit, action or proceeding
pending, or, to the best knowledge of Parent, threatened against Parent or any
Subsidiary of Parent ("Parent Litigation"), that, individually or in the
aggregate with all other Parent Litigation, is reasonably likely to have a
Parent Material Adverse Effect, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Parent or any Subsidiary of Parent ("Parent Order") that, individually or in the
aggregate with all other Parent Litigation, is reasonably likely to have a
Parent Material Adverse Effect or a material adverse effect on Parent's ability
to perform its obligations hereunder or consummate the transactions contemplated
by this Agreement.
(l) Taxes. Except as set forth on Schedule 3.2(l) of the Parent Letter
and except for exceptions to the following that would not, individually or in
the aggregate, have a Parent Material Adverse Effect:
(i) Each of Parent, each of its Subsidiaries and any affiliated,
consolidated, combined, unitary or similar group of which any such corporation
is or was a member has (A) duly and timely (taking into account any extensions)
filed all federal, state, local, foreign and other Returns required to be filed
or sent by or with respect to it in respect of any Taxes, (B) duly paid or
deposited on a timely basis all Taxes (including estimated Taxes) that are due
and payable (except for (x) audit adjustments not material in the aggregate or
to the extent that liability therefor is reserved for in Parent's most recent
audited financial statements and (y) such Taxes not exceeding an aggregate of
$500,000 which are being contested in good faith in the ordinary course of
business) for which Parent or any of its Subsidiaries may be liable, (C)
established reserves that are adequate for the payment of all Taxes not yet due
and payable with respect to the results of operations of Parent and its
Subsidiaries through the date hereof, and (D) complied in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has in all material respects timely withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.
(ii) Schedule 3.2(l) of the Parent Letter sets forth (i) the last
taxable period through which the United States federal income Tax Returns of
Parent and any of its Subsidiaries have been examined by the IRS or otherwise
closed and (ii) any affiliated, consolidated, combined, unitary or similar group
Return in which the Parent or any of its Subsidiaries is or has been a member or
is or has joined in the filing. Except to the extent being contested in good
faith, all material deficiencies asserted as a result of such examinations and
any examination by any applicable federal, state, local, foreign or other
-48-
taxing authority have been paid, fully settled or adequately provided for in
Parent's most recent audited financial statements. Except as adequately
provided for in the financial statements included in the Parent SEC Documents,
no material tax audits or other administrative proceedings or court proceedings
are presently pending with regard to any Taxes for which Parent or any of its
Subsidiaries would be liable, and no material deficiency for any such Taxes has
been proposed, asserted or assessed pursuant to such examination against Parent
or any of its Subsidiaries by any federal, state, local, foreign or other taxing
authority with respect to any period.
(iii) Neither Parent nor any of its Subsidiaries has executed or
entered into with the IRS or any taxing authority (i) any agreement or other
document extending or having the effect of extending the period for assessments
or collection of any Taxes for which Parent or any of its Subsidiaries would be
liable or (ii) a closing agreement pursuant to Section 7121 of the Code, or any
predecessor provision thereof or any similar provision of federal, state, local,
foreign or other tax law that relates to the assets or operations of Parent or
any of its Subsidiaries.
(iv) Neither Parent nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would constitute a
"parachute payment" within the meaning of Section 280G of the Code.
(v) Neither Parent nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Parent or any of its Subsidiaries.
(vi) Neither Parent nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing or allocation agreement or
similar agreement or arrangement.
(m) Pension and Benefit Plans; ERISA .
(i) Parent has made available to the Company true, correct, and
complete copies of each of the following which is sponsored, maintained or
contributed to by Parent or any of its Subsidiaries for the benefit of the
employees of Parent or such Subsidiary:
(1) each "employee benefit plan," as such term is defined in
Section 3(3) of ERISA, including, but not limited to, employee benefit plans,
such as foreign plans, which are not subject to the provisions of ERISA ("Parent
Plans"); and
(2) each personnel policy, stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or supplemental
income arrangement, consulting agreement, employment agreement and each other
employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Section 3.2(m)(i)(1) ("Parent Benefit
Programs").
-49-
(ii) Except as disclosed in Schedule 3.2(m)(ii) of the
Parent Letter:
(1) Parent and its Subsidiaries do not contribute to or have an
obligation to contribute to, and have not at any time within six years prior to
the Effective Time contributed to or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA;
(2) Parent and its Subsidiaries have substantially performed all
material obligations, whether arising by operation of law or by contract,
required to be performed by them in connection with the Parent Plans and the
Parent Benefit Programs, and to the knowledge of Parent there have been no
material defaults or violations by any other party to the Parent Plans or Parent
Benefit Programs;
(3) All reports and disclosures relating to the Parent Plans
required to be filed with or furnished to governmental agencies, Parent Plan
participants or beneficiaries have been filed or furnished substantially in
accordance with applicable law in a timely manner;
(4) Each Parent Plan intended to be qualified under Section 401
of the Code satisfies the requirements of such Section and has received a
favorable determination letter from the Internal Revenue Service regarding such
qualified status and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of Parent, operated in a
way which would adversely affect such qualified status. As to any Parent Plan
intended to be qualified under Section 401 of the Code, there has been no
termination or partial termination of the Parent Plan within the meaning of
Section 411(d)(3) of the Code;
(5) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of Parent, threatened against,
or with respect to, any of the Parent Plans or Parent Benefit Programs or their
assets. To the knowledge of Parent, there is no matter pending (other than
routine qualification determination filings) with respect to any of the Parent
Plans before the IRS, the United States Department of Labor or the PBGC;
(6) As to any Parent Plan subject to Title IV of ERISA, there has
been no event or condition which presents the material risk of a Parent Plan
termination, no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of ERISA (for
which the disclosure requirements of Regulation (S)2615.3 promulgated by the
PBGC have not been waived) has occurred, no notice of intent to terminate the
Parent Plan has been given under Section 4041(c) of ERISA, no proceeding has
been instituted under Section 4042 of ERISA to terminate the Parent Plan, no
liability to the PBGC has been incurred;
(7) No act, omission or transaction has occurred which would
result in imposition on Parent or any of its Subsidiaries of (A) liability for a
breach of fiduciary duty under Section 409 of ERISA, (B) a civil penalty
assessed pursuant to subsections (c), (i)
-50-
or (l) of Section 502 of ERISA or (C) a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code;
(8) With respect to any employee benefit plan, within the meaning
of Section 3(3) of ERISA, which is not a Parent Plan but which is sponsored,
maintained or contributed to, or has been sponsored, maintained or contributed
to within six years prior to the Effective Time, by any corporation, trade,
business or entity under common control with Parent, within the meaning of
Section 414(b), (c) or (m) of the Code or Section 4001 of ERISA ("Parent
Commonly Controlled Entity"), (A) no withdrawal liability, within the meaning of
Section 4201 of ERISA, has been incurred, which withdrawal liability has not
been satisfied, (B) no liability to the PBGC has been incurred by any Parent
Commonly Controlled Entity, which liability has not been satisfied, (C) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred, and (D) all
contributions (including installments) to such plan required by Section 302 of
ERISA and Section 412 of the Code have been timely made; and
(9) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (A) require Parent
or any of its Subsidiaries to make a larger contribution to, or pay greater
benefits under, any Parent Plan or Parent Benefit Program than it otherwise
would or (B) create or give rise to any additional vested rights or service
credits under any Parent Plan or Parent Benefit Program.
(iii) Except as disclosed on Schedule 3.2(m)(iii) of the Parent
Letter, there are no severance agreements or employment agreements between
Parent or any of its Subsidiaries and any employee of Parent or such Subsidiary.
True and correct copies of all such severance and employment agreements have
been provided to the Company. Except as disclosed on Schedule 3.2(m)(iii) of
the Parent Letter, (A) neither Parent nor any of its Subsidiaries has any
consulting agreement or arrangement with any person involving annual
compensation in excess of $100,000 except as are terminable without penalty upon
one month's notice or less, and (B) no stock or other security issued by Parent
or any of its Subsidiaries forms or has formed a material part of the assets of
any Parent Plan or Parent Benefit Program.
(n) Labor Matters.
(i) Except as set forth in Schedule 3.2(n)(i) of the Parent Letter, as
of the date of this Agreement, (1) no employees of Parent or any of its
Subsidiaries are represented by any labor organization; (2) no labor
organization or group of employees of Parent or any of its Subsidiaries has made
a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority; and (3) to the knowledge of Parent, there are
no organizing activities involving Parent or any of its Subsidiaries pending
with any labor organization or group of employees of Parent or any of its
Subsidiaries.
-51-
(ii) Except as set forth on Schedule 3.2(n)(ii) of the Parent Letter,
Parent and each of its Subsidiaries is in compliance with all laws and orders
relating to the employment of labor, including all such laws and orders relating
to wages, hours, collective bargaining, discrimination, civil rights, safety and
health workers' compensation and the collection and payment of withholding
and/or Social Security Taxes and similar Taxes, except where the failure to
comply would not have a Parent Material Adverse Effect.
(o) Intangible Property. Parent and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents, service
marks, brand marks, brand names, computer programs, database, industrial designs
and copyrights necessary for the operation of the businesses of each of Parent
and its Subsidiaries (collectively, the "Parent Intangible Property"), except
where the failure to possess or have adequate rights to use such properties
would not reasonably be expected to have a Parent Material Adverse Effect.
Except as set forth on Schedule 3.2(o) of the Parent Letter, all of the Parent
Intangible Property is owned by Parent or its Subsidiaries free and clear of any
and all liens, claims or encumbrances, except those that are not reasonably
likely to have a Parent Material Adverse Effect, and neither Parent nor any such
Subsidiary has forfeited or otherwise relinquished any Parent Intangible
Property which forfeiture would result in a Parent Material Adverse Effect. The
use of Parent Intangible Property by Parent or its Subsidiaries does not, in any
material respect, conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, patent, service xxxx, brand xxxx, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any other
person and there have been no claims made and neither Parent nor any of its
Subsidiaries has received any notice of any claim or otherwise knows that any of
Parent Intangible Property is invalid or conflicts with the asserted rights of
any other person or has not been used or enforced or has been failed to be used
or enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of Parent Intangible Property, except for any such
conflict, infringement, violation, interference, claim, invalidity, abandonment,
cancellation or unenforceability that would not reasonably be expected to have a
Parent Material Adverse Effect.
(p) Environmental Matters.
(i) Except as disclosed on Schedule 3.2(p) of the Parent Letter, the
operations of Parent and its Subsidiaries have been and are currently in
compliance with all Environmental Laws, except where the failure to so comply
would not reasonably be expected to have a Parent Material Adverse Effect;
(ii) Except as disclosed on Schedule 3.2(p) of the Parent Letter,
Parent and its Subsidiaries have obtained and maintained all permits required
under applicable Environmental Laws for the continued operations of their
respective businesses, except such permits the lack of which would not
reasonably be expected to lead to a Parent Material Adverse Effect;
(iii) Except as disclosed on Schedule 3.2(p) of the Parent Letter, as
of the date hereof Parent and its Subsidiaries are not subject to any material
(individually or in the
-52-
aggregate) outstanding written orders or material contracts with any
Governmental Entity or other person respecting (A) Environmental Laws, (B)
Remedial Action or (C) any Release or threatened Release of a Hazardous
Material;
(iv) Except as disclosed on Schedule 3.2(p) of the Parent Letter,
Parent and its Subsidiaries have not received any written communication
alleging, with respect to any such party, and has no knowledge of, or reasonable
reason to suspect the existence of, the violation of or liability under any
Environmental Law, which violation or liability would reasonably be expected to
have a Parent Material Adverse Effect;
(v) Except as disclosed on Schedule 3.2(p) of the Parent Letter,
neither Parent nor any of its Subsidiaries has any contingent liability in
connection with any Release of any Hazardous Material including, without
limitation, in connection with the exposure of any person or property to
Hazardous Material that would reasonably be expected to lead to a Parent
Material Adverse Effect;
(vi) Except as disclosed on Schedule 3.2(p) of the Parent Letter, the
operations of Parent or its Subsidiaries involving the generation,
transportation, treatment, storage or disposal of hazardous waste, as defined
and regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of this
Agreement) or any state equivalent, or any other Hazardous Material are in
compliance with applicable Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Parent Material Adverse
Effect; and
(vii) Except as disclosed on Schedule 3.2(p) of the Parent Letter, to
the knowledge of Parent as of the date hereof, there is not now on or in any
property of Parent or its Subsidiaries any of the following: (A) any underground
storage tanks or surface impoundments, (B) any asbestos-containing materials, or
(C) any polychlorinated biphenyls, any of which ((A), (B), or (C) preceding)
could reasonably be expected to have a Parent Material Adverse Effect. None of
the properties owned or operated by Parent are restricted as to use or as to
transfer of title, or the subject of any special recorded notice, as a result of
the existence of Hazardous Substances thereon.
With respect to Sections 3.2(p)(ii), (iii) and (iv), Parent will disclose in
writing to the Company all changes to such information occurring subsequent to
the date hereof and prior to the Closing Date.
(viii) Parent has made available to the Company for review all
written reports of environmental audits and assessments prepared for Parent or
any of its Subsidiaries within the last three years by third party consultants
or internal environmental, safety or health personnel which are in the
possession or control of Parent and which relate to the assets or operations of
Parent or any of its Subsidiaries.
(q) Opinion of Financial Advisor. Parent has received the opinion of CS
First Boston Corporation (a copy of which has been delivered to the Company) to
the effect that, as of the date hereof, the consideration to be paid by the
Parent in the Merger is fair to Parent from a financial point of view.
-53-
(r) Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Parent Common Stock is the only vote of the holders of
any class or series of Parent capital stock necessary to approve the Charter
Amendment, the Parent Share Issuance, this Agreement and the transactions
contemplated hereby.
(s) Insurance. Parent has delivered to the Company an insurance schedule
of Parent's and each of its Subsidiaries' directors' and officers' liability
insurance, primary and excess casualty insurance policies, providing coverage
for bodily injury and property damage to third parties, including products
liability and completed operations coverage, and worker's compensation, in
effect as of the date hereof. Parent maintains insurance coverage reasonably
adequate for the operation of the business of Parent and each of its
Subsidiaries (taking into account the cost and availability of such insurance),
and the transactions contemplated hereby will not materially adversely affect
such coverage.
(t) Brokers. Except as disclosed on Schedule 3.2(t) of the Parent Letter,
no broker, investment banker, or other person is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
(u) Tax Matters. As of the date hereof, the representations set forth in
the numbered paragraphs of the form of Certificate of Parent included as
Schedule 3.2(u) of the Parent Letter are true and correct, assuming for purposes
of this representation and warranty that the Merger and the Liquidation referred
to in such form had been consummated on the date hereof.
(v) Interim Operations of Sub. Sub will be formed by Parent solely for
the purpose of engaging in the transactions contemplated hereby, will engage in
no other business or activities, will incur no other obligations or liabilities,
will have no other assets and will conduct its operations only as contemplated
hereby.
(w) Title. Except as disclosed in the Parent Financial Statements or on
Schedule 3.2(w) of the Parent Letter, the Parent and each of its Subsidiaries
have good and indefeasible title to all real property and good title to all
personal property owned by them, in each case free and clear of all liens,
pledges or encumbrances securing money borrowed, the deferred purchase price of
property in excess of $300,000 or capital leases and free and clear of all other
liens, pledges, encumbrances or defects that could affect the value or use
thereof except for any such other liens, pledges, encumbrances or defects that
would not have a Parent Material Adverse Effect.
(x) Books and Records. The Parent and its Subsidiaries (i) make and keep
accurate books and records and (ii) maintain internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of their financial statements and to maintain accountability
for their assets, (C) access to their assets is permitted only in accordance
with management's authorization and (D) the reported accountability for their
assets is compared with existing assets at reasonable intervals.
-54-
(y) Certain Payments. Neither the Parent not any of its Subsidiaries, nor
any director, officer, agent, employee or other person associated with or acting
on behalf of the Parent or any of its Subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic governmental official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; nor made any illegal bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(z) Transactions with Related Parties. Except as set forth in Schedule
3.2(z) of the Parent Letter or in the Parent SEC Documents, there are no
agreements, contracts or other arrangements between (i) Parent or any of its
Subsidiaries, on the one hand, and (ii) any Related Person of Parent, on the
other hand. Except as set forth in Schedule 3.2(z) of the Parent Letter, after
the Closing Date no Related Person of Parent and no present officer or director
of any Related Person of Parent has any interest in any property (real or
personal, tangible or intangible) or contract used in or pertaining to the
business of the Parent and its Subsidiaries (or the Surviving Corporation and
its Subsidiaries) and no Related Person of Parent has any direct or indirect
ownership interest (excluding immaterial passive investments) in any person
(other than through Parent or any of its Subsidiaries) with which Parent or any
of its Subsidiaries competes in any material respect or has a material business
relationship. Other than those services described in the Parent SEC Documents,
Schedule 3.2(z) of the Parent Letter sets forth as of the date of this Agreement
a description of all services provided by any Related Person of Parent to Parent
and any of its Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Conduct of Business by the Company Pending the Merger. During the
period from the date of this Agreement and continuing until the Effective Time,
the Company agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Parent shall
otherwise consent in writing):
(a) Ordinary Course. Except as provided on Schedule 4.1(a) of the Company
Letter, each of the Company and its Subsidiaries shall carry on its businesses
only in the usual, regular and ordinary course in substantially the same manner
as heretofore conducted and shall use all reasonable efforts to preserve intact
its present business organizations, keep available the services of its current
officers and employees, and endeavor to preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes in Stock. Except as provided on Schedule 4.1(b) of
the Company Letter, the Company shall not and it shall not permit any of its
Subsidiaries to: (i) declare or pay any dividends on or make other distributions
in respect of any of its capital stock or partnership interests, except for the
declaration and payment of dividends from a Subsidiary of the Company to the
Company or another Subsidiary of the Company and
-55-
except for cash dividends or distributions paid on or with respect to the
capital stock or partnership interests of a Subsidiary of the Company; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company capital stock; or (iii) repurchase,
redeem or otherwise acquire, or permit any of its Subsidiaries to purchase,
redeem or otherwise acquire, any shares of its capital stock, except as required
by the terms of its securities outstanding on the date hereof, as contemplated
by any existing employee benefit plan or pursuant to the terms of any existing
agreements with employees of the Company and its Subsidiaries upon the
termination of employment of any such employee.
(c) Issuance of Securities. Except as provided on Schedule 4.1(c) of the
Company Letter, the Company shall not and it shall not permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose to issue,
deliver or sell, any shares of its capital stock of any class, any Voting Debt
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, Voting Debt or convertible securities, other than: (i)
the issuance of Company Common Stock upon the exercise of stock options granted
under the Company Stock Option Plans that are outstanding on the date hereof, or
in satisfaction of stock grants or stock based awards made prior to the date
hereof pursuant to the Company Stock Option Plans; and (ii) issuances by a
wholly owned Subsidiary of its capital stock to its parent.
(d) Governing Documents. Except as contemplated hereby or in connection
herewith, the Company shall not amend or propose to amend its Memorandum of
Association or Bye-laws.
(e) No Acquisitions. Other than acquisitions listed on Schedule 4.1(e) of
the Company Letter or acquisitions as to which the aggregate purchase price is
not in excess of $3,000,000, the Company shall not and it shall not permit any
of its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof.
(f) No Dispositions. Other than: (i) dispositions or proposed
dispositions listed on Schedule 4.1(f) of the Company Letter; (ii) as may be
necessary or required by law to consummate the transactions contemplated hereby;
or (iii) dispositions of inventory in the ordinary course of business consistent
with past practice and dispositions of other assets that are not material,
individually or in the aggregate, to the Company and its Subsidiaries taken as a
whole, the Company shall not and it shall not permit any of its Subsidiaries to
sell, lease, encumber or otherwise dispose of, or agree to sell, lease (whether
such lease is an operating or capital lease), encumber or otherwise dispose of,
any of its assets. Notwithstanding the foregoing, none of the Company nor its
Subsidiaries shall sell, lease, encumber or otherwise dispose of, or agree to
dispose of, any of its assets to any Related Person other than in the ordinary
course of business on an arms length basis.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated by
this Agreement, the Company shall not authorize, recommend, propose or announce
an intention to adopt a plan of complete or partial liquidation or dissolution
of the Company or any of its Significant Subsidiaries.
-56-
(h) Certain Employee Matters. Except as set forth on Schedule 4.1(h) of
the Company Letter, the Company shall not and it shall not permit any of its
Subsidiaries to: (i) grant any increases in the compensation of any of its
directors, officers or employees, except increases in the ordinary course of
business and in accordance with past practice; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
contemplated by any of the existing Company Benefit Programs or Company Plans as
in effect on the date hereof to any such director, officer or employee, whether
past or present; (iii) enter into any new, or amend any existing, employment or
severance or termination agreement with any such director, officer or key
employee; or (iv) become obligated under any new Company Benefit Program or
Company Plan, which was not in existence or approved by the Board of Directors
of the Company prior to or on the date hereof, or amend any such plan or
arrangement in existence on the date hereof if such amendment would have the
effect of materially enhancing any benefits thereunder.
(i) Indebtedness; Leases; Capital Expenditures. Except as set forth on
Schedule 4.1(i) of the Company Letter, the Company shall not, nor shall the
Company permit any of its Subsidiaries to, (i) incur any indebtedness for
borrowed money (except for working capital under the Company's existing credit
facilities, and refinancings of existing debt that permit prepayment of such
debt without penalty (other than LIBOR breakage costs)) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of such party or any of its Subsidiaries or
guarantee any debt securities of others, (ii) except in the ordinary course of
business, enter into any lease (whether such lease is an operating or capital
lease) or create any mortgages, liens, security interests or other encumbrances
on the property of the Company or any of its Subsidiaries in connection with any
indebtedness thereof, except for those securing purchase money indebtedness or
(iii) commit to aggregate capital expenditures in excess of $1,000,000 outside
the capital budget, as amended and approved by the Company prior to the date
hereof and set forth on Schedule 4.1(i) of the Company Letter.
(j) No Solicitation. From and after the date hereof, the Company will
not, and will not authorize or permit any of its officers, directors, employees,
agents and other representatives or those of any of its Subsidiaries
(collectively, "Company Representatives") to, directly or indirectly, solicit or
initiate any prospective buyer or the making of any proposal that constitutes,
or may reasonably be expected to lead to, a Company Acquisition Proposal (as
defined herein) from any person; provided, however, that, notwithstanding any
other provision of this Agreement, (i) the Company may engage in discussions or
negotiations with a third party who (without any solicitation or initiation,
directly or indirectly, by or with the Company or any Company Representatives
after the date of this Agreement) seeks to initiate such discussions or
negotiations and may furnish such third party information concerning the Company
and its business, properties and assets, (ii) the Company's Board of Directors
may take and disclose to the Company's stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act and (iii) following receipt of
a Company Acquisition Proposal that is financially superior to the Merger and
reasonably capable of being financed (as determined in each case in good faith
by the Company's Board of Directors after consultation with the Company's
financial advisors), the Board of Directors of the Company may withdraw, modify
or not make its recommendation referred to in Section 5.5, but in each case
referred to in the foregoing
-57-
clauses (i) through (iii) only to the extent that the Board of Directors of the
Company shall conclude in good faith that such action is necessary in order for
the Board of Directors of the Company to act in a manner that is consistent with
its fiduciary obligations under applicable law. The Company shall immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by the Company or any Company Representatives with respect to any
Company Acquisition Proposal existing on the date hereof. The Company will
promptly notify Parent of any such requests for such information or the receipt
of any Company Acquisition Proposal, including the identity of the person or
group engaging in such discussions or negotiations, requesting such information
or making such Company Acquisition Proposal, and (unless the Board of Directors
of the Company concludes such disclosure is inconsistent with its fiduciary
obligations under applicable law) the material terms and conditions of any
Company Acquisition Proposal. As used in this Agreement, "Company Acquisition
Proposal" shall mean any proposal or offer, other than a proposal or offer by
Parent or any of its affiliates, for a tender or exchange offer, a merger,
consolidation or other business combination involving the Company or any
Significant Subsidiary of the Company or any proposal to acquire in any manner a
substantial equity interest in, or substantially all of the assets of, the
Company or any of its Significant Subsidiaries.
4.2 Conduct of Business by Parent Pending the Merger. During the period
from the date of this Agreement and continuing until the Effective Time, Parent
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Agreement, or to the extent that the Company shall
otherwise consent in writing):
(a) Ordinary Course. Except as provided on Schedule 4.2(a) of the Parent
Letter, each of Parent and its Subsidiaries shall carry on its businesses only
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and shall use all reasonable efforts to preserve intact its
present business organizations, keep available the services of its current
officers and employees, and endeavor to preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes in Stock. Except as provided on Schedule 4.2(b) of
the Parent Letter, Parent shall not and it shall not permit any of its
Subsidiaries to: (i) declare or pay any dividends on or make other distributions
in respect of any of its capital stock or partnership interests, except for the
declaration and payment of dividends from a Subsidiary of Parent to Parent or
another Subsidiary of Parent and except for cash dividends or distributions paid
on or with respect to the capital stock or partnership interests of a Subsidiary
of Parent; (ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Parent capital stock; or (iii)
repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries to
purchase, redeem or otherwise acquire, any shares of its capital stock, except
as required by the terms of its securities outstanding on the date hereof or as
contemplated by any existing employee benefit plan or pursuant to the terms of
any existing agreements with employees of Parent and its Subsidiaries upon the
termination of employment of any such employee.
-58-
(c) Issuance of Securities. Except as provided on Schedule 4.2(c) of the
Parent Letter, Parent shall not and it shall not permit any of its Subsidiaries
to, issue, deliver or sell, or authorize or propose to issue, deliver or sell,
any shares of its capital stock of any class, any Voting Debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Voting Debt or convertible securities, other than: (i) the issuance of
Parent Common Stock upon the exercise of stock options granted under Parent
Stock Option Plans that are outstanding on the date hereof, or in satisfaction
of stock grants or stock based awards made prior to the date hereof pursuant to
Parent Stock Option Plans; and (ii) issuances by a wholly owned Subsidiary of
its capital stock to its parent.
(d) Governing Documents. Except as contemplated hereby or in connection
herewith, Parent shall not amend or propose to amend its Certificate of
Incorporation or Bylaws.
(e) No Acquisitions. Other than acquisitions listed on Schedule 4.2(e) of
the Parent Letter or acquisitions as to which the aggregate purchase price is
not in excess of $3,000,000, Parent shall not and it shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof.
(f) No Dispositions. Other than: (i) dispositions or proposed
dispositions listed on Schedule 4.2(f) of the Parent Letter; (ii) as may be
necessary or required by law to consummate the transactions contemplated hereby;
or (iii) dispositions of inventory in the ordinary course of business consistent
with past practice and disposition of other assets that are not material,
individually or in the aggregate, to Parent and its Subsidiaries taken as a
whole, Parent shall not and it shall not permit any of its Subsidiaries to sell,
lease, encumber or otherwise dispose of, or agree to sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise dispose of, any
of its assets. Notwithstanding the foregoing, none of Parent nor its
Subsidiaries shall sell, lease, encumber or otherwise dispose of, any of its
assets to any Related Person other than in the ordinary course of business on an
arms length basis.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated by
this Agreement, Parent shall not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or dissolution of
Parent or any of its Significant Subsidiaries.
(h) Certain Employee Matters. Except as set forth on Schedule 4.2(h) of
the Parent Letter, Parent shall not and it shall not permit any of its
Subsidiaries to: (i) grant any increases in the compensation of any of its
directors, officers or employees, except increases in the ordinary course of
business and in accordance with past practice; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
contemplated by any of the existing Parent Benefit Programs or Parent Plans as
in effect on the date hereof to any such director, officer or employee, whether
past or present; (iii) enter into any new, or amend any existing, employment or
severance or termination agreement with any such director, officer or key
employee; or (iv) become obligated under any new
-59-
Parent Benefit Program or Parent Plan, which was not in existence or approved by
the Board of Directors of Parent prior to or on the date hereof, or amend any
such plan or arrangement in existence on the date hereof if such amendment would
have the effect of materially enhancing any benefits thereunder.
(i) Indebtedness; Leases; Capital Expenditures. Except as set forth on
Schedule 4.2(i) of the Parent Letter, Parent shall not, nor shall Parent permit
any of its Subsidiaries to, (i) incur any indebtedness for borrowed money
(except for working capital under Parent's existing credit facilities, and
refinancings of existing debt that permit prepayment of such debt without
penalty (other than LIBOR breakage costs)) or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities of such party or any of its Subsidiaries or guarantee any debt
securities of others, (ii) except in the ordinary course of business, enter into
any lease (whether such lease is an operating or capital lease) or create any
mortgages, liens, security interests or other encumbrances on the property of
Parent or any of its Subsidiaries in connection with any indebtedness thereof,
except for those securing purchase money indebtedness or (iii) commit to
aggregate capital expenditures in excess of $1,000,000 outside the capital
budget, as amended and approved by Parent prior to the date hereof and set forth
on Schedule 4.2(i) of the Parent Letter.
(j) No Solicitation. From and after the date hereof, Parent will not, and
will not authorize or permit any of its officers, directors, employees, agents
and other representatives or those of any of its Subsidiaries (collectively,
"Parent Representatives") to, directly or indirectly, solicit or initiate any
prospective buyer or the making of any proposal that constitutes, or may
reasonably be expected to lead to, a Parent Acquisition Proposal (as defined
herein) from any person; provided, however, that, notwithstanding any other
provision of this Agreement, (i) Parent may engage in discussions or
negotiations with a third party who (without any solicitation or initiation,
directly or indirectly, by or with Parent or any Parent Representatives after
the date of this Agreement) seeks to initiate such discussions or negotiations
and may furnish such third party information concerning Parent and its business,
properties and assets, (ii) Parent's Board of Directors may take and disclose to
Parent's stockholders a position contemplated by Rule 14e-2(a) promulgated under
the Exchange Act and (iii) following receipt of a Parent Acquisition Proposal
that is financially superior to the Merger and reasonably capable of being
financed (as determined in each case in good faith by Parent's Board of
Directors after consultation with Parent's financial advisors), the Board of
Directors of Parent may withdraw, modify or not make its recommendation referred
to in Section 5.5 or terminate this Agreement in accordance with Section 7.1(b),
but in each case referred to in the foregoing clauses (i) through (iii) only to
the extent that the Board of Directors of Parent shall conclude in good faith
that such action is necessary in order for the Board of Directors of Parent to
act in a manner that is consistent with its fiduciary obligations under
applicable law. Parent shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by Parent or any Parent
Representatives with respect to any Parent Acquisition Proposal existing on the
date hereof. Parent will promptly notify the Company of any such requests for
such information or the receipt of any Parent Acquisition Proposal, including
the identity of the person or group engaging in such discussions or
negotiations, requesting such information or making such Parent Acquisition
Proposal, and (unless the Board of Directors of Parent concludes such disclosure
is
-60-
inconsistent with its fiduciary obligations under applicable law) the material
terms and conditions of any Parent Acquisition Proposal. As used in this
Agreement, "Parent Acquisition Proposal" shall mean any proposal or offer, other
than a proposal or offer by the Company or any of its affiliates, for a tender
or exchange offer, a merger, consolidation or other business combination
involving Parent or any Significant Subsidiary of Parent or any proposal to
acquire in any manner a substantial equity interest in, or substantially all of
the assets of, Parent or any of its Significant Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Proxy Statement. Parent shall promptly
prepare and file with the SEC the Proxy Statement and the S-4, in which the
Proxy Statement will be included as a prospectus. Parent shall use its
reasonable best efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing. Parent shall use its
reasonable best efforts to cause the Proxy Statement to be mailed to
stockholders of Parent at the earliest practicable date. Parent shall use its
reasonable best efforts to obtain all necessary state securities laws or "blue
sky" permits, approvals and registrations in connection with the issuance of
Parent Common Stock in the Merger and upon the exercise of the Company Stock
Options (as defined herein) and the Company shall furnish all information
concerning the Company and the holders of the Company Common Stock, including
financial statements required by Form S-4 and the proxy rules under the Exchange
Act as may be reasonably requested in connection with obtaining such permits,
approvals and registrations.
5.2 Letter of the Company's Accountants. The Company shall use its
reasonable best efforts to cause to be delivered to Parent a letter of KPMG Peat
Marwick LLP, the Company's independent public accountants, and Ernst & Young
LLP, Sweco's independent public accountants, each dated a date within two
business days before the date on which the S-4 shall become effective and
addressed to Parent and the individuals listed on Exhibit C-1, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.3 Letter of Parent's Accountants. Parent shall use its reasonable best
efforts to cause a letter of Ernst & Young LLP, Parent's independent public
accountants, dated a date within two business days before the date on which the
S-4 shall become effective, in form and substance reasonably satisfactory to
Parent and the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4 to be delivered and addressed to such persons and
entities as is customary for similar letters.
5.4 Access to Information. Upon reasonable notice, the Company and
Parent shall each (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books,
-61-
contracts, commitments and records and, during such period, each of the Company
and Parent shall (and shall cause each of their respective Subsidiaries to)
furnish promptly to the other (a) a copy of each quarterly, annual or current
report on Form 10-Q, 10-K or 8-K, schedule, registration statement and other
document filed or received by it during such period pursuant to SEC requirements
and (b) all other information concerning its business, properties and personnel
as such other party may reasonably request, excluding, however, information
covered by confidentiality agreements with third parties. Each of the Company
and Parent agrees that it will not, and will cause its respective
representatives not to, use any information obtained pursuant to this Section
5.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. The Confidentiality Agreement dated as of
October 24, 1995 between Parent and Drexel Oilfield Services Inc. (the
"Confidentiality Agreement") shall apply with respect to information furnished
thereunder or hereunder and any other activities contemplated thereby.
5.5 Stockholders Meetings. The Company and Parent shall each call a
meeting of its stockholders (respectively, the "Company Stockholder Meeting" and
the "Parent Stockholder Meeting" and, collectively, the "Stockholder Meetings")
to be held as promptly as practicable after the date hereof for the purpose of
voting upon this Agreement and the Merger (in the case of the Company) and the
Parent Share Issuance and the Charter Amendment (in the case of Parent).
Subject only to the proviso of the first sentence of Section 4.1(j), the Company
will, through its Board of Directors, recommend to its stockholders approval of
such matters and not rescind such recommendation and shall use its reasonable
best efforts to obtain approval and adoption of this Agreement and the Merger by
its stockholders. Subject only to the proviso of the first sentence of Section
4.2(j), Parent will, through its Board of Directors, recommend to its
stockholders approval of such matters and not rescind such recommendation and
shall use its reasonable best efforts to obtain approval and adoption of the
Parent Share Issuance and the Charter Amendment by its stockholders. The
Company and Parent shall coordinate and cooperate with respect to the timing of
such meetings and shall use their reasonable best efforts to hold such meetings
on the same day.
5.6 Legal Conditions to Merger. Each of the Company, Parent and Sub will
take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on such party with respect to the Merger
(including, without limitation, furnishing all information required under the
HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger. Each of the Company,
Parent and Sub will, and will cause its Subsidiaries to, take all actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity, court or other person or entity,
including without limitation, any necessary parties to that certain Secured
Credit Agreement dated June 30, 1994 among Parent, certain Subsidiaries of
Parent and ABN AMRO Bank, N.V., as agent ("Parent's Credit Facility") and to
that certain $37,000,000 Amended and Restated Revolving and Term Credit
Agreement by and among Drexel Holdings, Inc. and Texas Commerce Bank NA (the
"Company's Credit Facility") required to be obtained or made by the Company,
Parent or any of their Subsidiaries in
-62-
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement, including complying with any requests or orders made by the
Justice Department or the Federal Trade Commission in connection with the
Merger.
5.7 Agreements of Others. Prior to the Effective Time, the Company shall
cause to be prepared and delivered to Parent a list identifying all persons who,
at the time of the Company Stockholder Meeting, may be deemed to be "affiliates"
of the Company as that term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act (the "Affiliates"). The Company shall use its reasonable
best efforts to cause each person who is identified as an Affiliate in such list
to deliver to Parent, at or prior to the Effective Time, a written agreement, in
a form mutually agreeable to the Company and Parent whereby each such person
acknowledges that such person is subject to the provisions of Rule 145(d)
promulgated under the Securities Act.
5.8 Listing. Parent shall use its reasonable best efforts to cause the
shares of Parent Common Stock to be issued in the Merger, the shares of Parent
Common Stock issuable upon exercise of the Warrants and the shares of Parent
Common Stock issuable upon exercise of the Company Stock Options and issuable
under the Company Stock Option Plans to be approved for trading on the Nasdaq
Stock Market or the New York Stock Exchange, Inc. (the "NYSE"), subject to
official notice of issuance, prior to the Closing Date.
5.9 Board of Directors and Officers at the Effective Time. Parent shall
take all necessary action so that as of the Effective Time the directors of
Parent shall only be those individuals identified as directors on Exhibit C-1
hereto and the officers of Parent shall only be those individuals identified as
officers on Exhibit C-2 hereto, except to the extent any such individual is
unwilling or unable to serve in such capacity. Parent represents and warrants
to the Company that it has received irrevocable letters of resignation effective
as of the Effective Time from all of the current directors of Parent other than
individuals identified as directors on Exhibit C-1 hereto. If prior to the
Effective Time an individual identified on Exhibits C-1 or C-2 hereto as a
director or officer is unwilling or unable to serve in such capacity, then the
directors of Parent specified on Exhibit C-1 that are willing and able to serve
shall fill any vacancies promptly after the Effective Time.
5.10 Stock Options; Reservation and Registration of Shares. (a) At the
Effective Time, each outstanding option to purchase the Company Common Stock and
any stock appreciation rights related thereto that have been granted pursuant to
the Company Stock Option Plans (a " Company Stock Option"), whether vested or
unvested, shall be assumed by Parent. Each such option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, a number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock purchasable
pursuant to such Company Stock Option multiplied by the Stock Option Exchange
Ratio (as hereinafter defined), at a price per share equal to the per-share
exercise price for the shares of Company Common Stock purchasable pursuant to
such Company Stock Option divided by the Stock Option Exchange Ratio; provided,
however, that in the case of any option to which Section 421 of the Code applies
by reason of its qualification under any of Sections 422-424 of the Code, the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option
-63-
shall be determined in order to comply with Section 424(a) of the Code; and
provided further, that the number of shares of Parent Common Stock that may be
purchased upon exercise of such Company Stock Option shall not include any
fractional share and, upon exercise of such Company Stock Option, a cash payment
shall be made for any fractional share based upon the closing price of a share
of Parent Common Stock on the Nasdaq Stock Market or, if then traded on an
exchange, such exchange, on the last trading day of the calendar month
immediately preceding the date of exercise. "Stock Option Exchange Ratio" shall
mean initially .4372, which amount shall be increased as of the date that
Escrowed Shares are distributed pursuant to the Escrow Agreement by (i) the
product of .0273 multiplied by (ii) the quotient of the number of Escrowed
Shares distributed to former holders of Company Common Stock divided by the
aggregate number of Escrowed Shares. Notwithstanding the foregoing, (i) if a
Company Stock Option is exercised prior to the date that Escrowed Shares are
distributed pursuant to the Escrow Agreement, upon such date appropriate
adjustments shall be made so that such optionee will be in the same position
with respect to Parent Common Stock as if the Stock Option Exchange Ratio on the
date of such exercise had been the adjusted Stock Option Exchange Ratio as of
such date and (ii) the Company may elect prior to the Effective Time to cancel
for cash consideration the Sweco Options in accordance with their terms.
(b) Subject to the approval of the Charter Amendment, Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery upon exercise of the Company Stock Options.
As soon as practicable after the Effective Time, Parent shall file with the SEC
a registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Parent Common Stock subject to
the Company Stock Options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as the Company Stock Options remain outstanding.
5.11 Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, Parent and the Surviving Corporation shall indemnify,
defend and hold harmless each person who is now, or has been at any time prior
to the date hereof or who becomes prior to the Effective Time, an officer or
director of the Parent or the Company or any of their Subsidiaries or an
employee of the Parent or the Company or any of their Subsidiaries who acts as a
fiduciary under any of the Parent Benefit Programs, the Parent Plans, the
Company Benefit Programs or the Company Plans (the "Indemnified Parties")
against all losses, claims, damages, costs, expenses (including attorneys'
fees), liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer, or such
employee of the Parent or the Company or any of their Subsidiaries whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the
fullest extent permitted under applicable law (and Parent and the Surviving
Corporation, as
-64-
the case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the fullest extent
permitted by law). Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any Indemnified
Parties (whether arising before or after the Effective Time), (i) the
Indemnified Parties may retain counsel satisfactory to them, Parent and the
Surviving Corporation and Parent and the Surviving Corporation shall pay all
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; and (ii) the Parent and the Surviving
Corporation will use all reasonable efforts to assist in the vigorous defense of
any such matter, provided that neither the Parent nor the Surviving Corporation
shall be liable for any settlement effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any Indemnified Party
wishing to claim indemnification under this Section 5.11, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the Parent
and the Surviving Corporation, but the failure so to notify shall not relieve a
party from any liability that it may have under this Section 5.11, except to the
extent such failure materially prejudices such party. The Indemnified Parties as
a group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties. The Company, Parent and Sub agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
(including in the Memorandum of Association or Bye-laws or in the
indemnification agreements previously provided by Parent to the Company) with
respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of six years
from the Effective Time; provided, however, that all rights to indemnification
in respect of any Indemnified Liabilities asserted or made within such period
shall continue until the disposition of such Indemnified Liabilities.
(b) For a period of six years after the Effective Time, if Parent maintains
directors' and officers' liability insurance with respect to matters arising
after the Effective Time, then Parent shall cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained by
the Company and its Subsidiaries or other policies of comparable coverage and
amounts with respect to matters arising before the Effective Time covering the
Indemnified Parties, provided that Parent shall not be required to pay an annual
premium for such insurance to the extent Parent's Board of Directors considers
such premium unreasonable provided that, in such case, Parent shall purchase as
much coverage, if any, as Parent's Board of Directors determines may be
reasonably purchased.
5.12 Registration Rights. At the Closing, the Company agrees to execute
and deliver the Registration Rights Agreement in the form of Exhibit D hereto.
5.13 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or by obligations
-65-
pursuant to any listing agreement with any national securities exchange or
transaction reporting system.
5.14 Other Actions. Except as contemplated by this Agreement, neither
Parent nor the Company shall, and shall not permit any of its Subsidiaries to,
take or agree or commit to take any action that is reasonably likely to result
in any of its respective representations or warranties hereunder being untrue in
any material respect or in any of the conditions to the Merger set forth in
Article VI not being satisfied. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties hereto agrees to use its
reasonable best efforts to take or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable, to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
5.15 Advice of Changes; SEC Filings. Parent and the Company shall confer
on a regular basis with each other, report on operational matters and promptly
advise each other orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, could have, a Parent Material Adverse
Effect or Company Material Adverse Effect. The Company and Parent shall
promptly provide each other (or their respective counsel) copies of all filings
made by such party with the SEC or any other state or federal Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
5.16 Reorganization. It is the intention of Parent and the Company that
the Merger and the Liquidation collectively will qualify as a reorganization
described in Section 368(a) of the Code (and any comparable provisions of
applicable state or local law). Neither Parent nor the Company (nor any of
their respective Subsidiaries) will take or omit to take any action (whether
before, on or after the Closing Date) that would cause the Merger and the
Liquidation collectively not to be so treated. The parties will characterize
the Merger and the Liquidation collectively as such a reorganization for
purposes of all Returns and other filings.
5.17 Change of Control. Parent and the Company agree that the
transactions contemplated by this Agreement shall constitute a "Change of
Control" as defined in the executive employment agreements of Parent listed on
Schedule 5.17 of the Parent Letter. Parent represents and warrants to the
Company that true and complete copies of such executive employment agreements
have been delivered to the Company prior to the date hereof under cover letter
specifically identifying such agreements as those listed on Schedule 5.17.
5.18 Certain Tax Agreements. At or before the Closing, the Company will
(i) provide to Parent copies of one or more duly executed statements described
in Treasury Regulation Section 1.897-2(h)(1), which are issued by each of the
Company's directly owned Subsidiaries that is organized in the United States or
is organized outside the United States for which an election under Section
897(i) of the Code is in effect and which are dated not more than 30 days before
the Closing Date, certifying that the stock of each such Subsidiary
-66-
is not a United States real property interest and (ii) cause any such Subsidiary
to provide to the IRS a duly executed notice described in Treasury Regulation
Section 1.897-2(h)(2).
5.19 Formation of Sub. Parent agrees to promptly cause Sub to be formed
and to ratify and approve this Agreement. Parent agrees to be responsible for,
and to cause Sub to comply with, Sub's obligations hereunder.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of the Company Common Stock entitled to vote thereon at the
Company Stockholder Meeting, and the Parent Share Issuance and the Charter
Amendment shall have been approved by the holders of a majority of the
outstanding shares of Parent Common Stock entitled to vote thereon at the Parent
Stockholder Meeting.
(b) Listing. The shares of Parent Common Stock issuable to the Company
stockholders pursuant to this Agreement, the shares of Parent Common Stock
issuable upon the exercise of the Warrants issuable in the Merger and such other
shares of Parent Common Stock required to be reserved for issuance in connection
with the Merger shall have been authorized for trading on the Nasdaq Stock
Market or, listing on the NYSE, upon official notice of issuance.
(c) Other Approvals. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and all
filings required to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from any Governmental Entity and from any necessary parties to
Parent's Credit Facility and the Company's Credit Facility in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company, Parent and Sub shall have been
made or obtained (as the case may be), except where the failure to obtain such
consents, approvals, permits, and authorizations would not be reasonably likely
to result in a Parent Material Adverse Effect (assuming the Merger and the
Liquidation have taken place) or to materially adversely affect the consummation
of the Merger or the Liquidation.
(d) S-4. The S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other
-67-
legal restraint or prohibition (an "Injunction") preventing the consummation of
the Merger shall be in effect.
(f) Subscription Agreement. SCF-III, L.P. shall have complied with its
obligations under the Subscription Agreement.
(g) Escrow Agreement. The Escrow Agreement shall have been executed and
delivered in accordance with Section 2.4
6.2 Conditions of Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Parent and Sub.
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date except for such failures to be so true and
correct (without giving effect to the individual materiality thresholds
otherwise contained in Section 3.1 hereof) which would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect
or which were provided by, or in accordance with, this Agreement.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Letters from the Company Affiliates. Parent shall have received from
each person named in the letter referred to in Section 5.7 an executed copy of
an agreement as provided in Section 5.7.
(d) Tax Opinion. Parent shall have received an opinion, reasonably
satisfactory to Parent, dated on or about the date that is two days prior to the
date the Proxy Statement is first mailed to stockholders of the Parent and a
copy of which will be furnished to the Company, of Xxxxx & Xxxxx, L.L.P.,
counsel to Parent, to the effect that, if the Merger and the Liquidation are
consummated in accordance with the terms of this Agreement, the Merger and the
Liquidation will be collectively treated as a reorganization within the meaning
of Section 368(a) of the Code, Parent and the Company will each be a party to
that reorganization within the meaning of Section 368(b) of the Code and no gain
or loss will be recognized for United States federal income tax purposes by
Parent, Sub or the Company as a result of the Merger and the Liquidation, which
opinion shall have been confirmed at the Closing. In rendering such opinion,
such counsel may receive and rely upon representations of fact and covenants of
the Company and Parent identical to those contained in the Certificates included
as Schedule 3.1(v) of the Company Letter and Schedule 3.2(u) of the Parent
Letter, respectively.
(e) Fairness Opinion. The opinion described in Section 3.2(q) shall not
have been withdrawn.
-68-
6.3 Conditions of Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Sub set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date except for such failures to be
so true and correct which (without giving effect to the individual materiality
thresholds otherwise contained in Section 3.2 hereof) would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect or which were provided by or in accordance with this Agreement.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. The Company shall have received an opinion, reasonably
satisfactory to the Company, dated on or about the date that is two days prior
to the date the Proxy Statement is first mailed to stockholders of the Company
and a copy of which will be furnished to Parent, of Xxxxxx & Xxxxxx L.L.P.
counsel to the Company, to the effect that, if the Merger and the Liquidation
are consummated in accordance with the terms of this Agreement, the Merger and
the Liquidation will be collectively treated as a reorganization within the
meaning of Section 368(a) of the Code, each of Parent and the Company will be a
party to that reorganization within the meaning of Section 368(b) of the Code
and no gain or loss will be recognized for United States federal income tax
purposes by a stockholder of the Company as a result of the Merger and the
Liquidation upon the conversion of shares of the Company Common Stock into
shares of Parent Common Stock except with respect to (i) cash, if any, received
in lieu of fractional shares of Parent Common Stock, (ii) a stockholder in
special circumstances, such as a stockholder who acquired shares of Company
Common Stock through exercise of employee stock options or otherwise as
compensation for employment, or (iii) a stockholder who failed to comply with
certain filing requirements, which opinion shall have been confirmed at the
Closing. In rendering such opinion, such counsel may receive and rely upon
representations of fact and covenants of the Company and Parent identical to
those contained in the Certificates included as Schedule 3.1(v) of the Company
Letter and Schedule 3.2(u) of the Parent Letter, respectively.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent:
-69-
(a) by mutual written consent of the Company and Parent, or by mutual
action of their respective Boards of Directors;
(b) by either the Company or Parent if (i) the Merger shall not have been
consummated by June 30, 1996 (provided that the right to terminate this
Agreement under this clause (i) shall not be available to any party whose breach
of any representation or warranty or failure to fulfill any covenant or
agreement under this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date); (ii) any court of competent
jurisdiction, or some other governmental body or regulatory authority shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (iii)
the stockholders of the Parent shall not approve the Parent Share Issuance or
the Charter Amendment at the Parent Stockholder Meeting or at any adjournment
thereof; or (iv) in the exercise of its good faith judgment as to its fiduciary
duties to its stockholders imposed by law, as advised by outside counsel, the
Board of Directors of Parent determines that such termination is required by
reason of a Parent Acquisition Proposal having been made, provided that Parent
may not terminate this Agreement pursuant to this clause (iv) unless five
business days shall have elapsed after delivery to the Company of a written
notification of Parent's intention to terminate this Agreement and during such
five business-day period Parent shall have fully cooperated with the Company;
including, without limitation, informing the Company of the terms and conditions
of such Parent Acquisition Proposal and the identity of the person or group
making such Parent Acquisition Proposal, with the intent of enabling the
Company to agree to a modification of the terms and conditions of this Agreement
so that the transactions contemplated hereby may be effected;
(c) by Parent if (i) the Company shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by the Company at or prior to such
date of termination (provided such breach has not been cured within 30 days
following receipt by the Company of written notice from Parent of such breach
and is existing at the time of termination of this Agreement); (ii) any
representation or warranty of the Company contained in this Agreement shall not
be true in all material respects when made (provided such breach has not been
cured within 30 days following receipt by the Company of written notice from
Parent of such breach and is existing at the time of termination of this
Agreement) or on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent it relates to a particular date), except
for such failures to be so true and correct (without giving effect to the
individual materiality thresholds otherwise contained in Section 3.1 hereof)
which would not individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect or which were provided by, or in accordance
with, this Agreement; or
(d) by the Company if (i) Parent or Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it at or prior to such date of
termination (provided such breach has not been cured within 30 days following
receipt by Parent of written notice from the Company of such breach and is
existing at the time of termination of this Agreement); (ii) any representation
or warranty of Parent or Sub contained in this Agreement shall not be
-70-
true in all material respects when made (provided such breach has not been cured
within 30 days following receipt by Parent of written notice from the Company of
such breach and is existing at the time of termination of this Agreement) or on
and as of the Effective Time as if made on and as of the Effective Time (except
to the extent it relates to a particular date), except for such failures to be
so true and correct (without giving effect to the individual materiality
thresholds otherwise contained in Section 3.2 hereof) which would not
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect or which were provided by, or in accordance with, this
Agreement or (iii) the Board of Directors of Parent withdraws, modifies or
changes its recommendation of this Agreement, the Merger, the Parent Share
Issuance or the Charter Amendment in a manner adverse to the Company or shall
have resolved to do any of the foregoing.
7.2 Effect of Termination. (a) In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company except (i) with respect to
this Section 7.2, the second and third sentences of Section 5.4 and Section 8.1,
and (ii) and such termination shall not relieve any party hereto for any
intentional breach prior to such termination by a party hereto of any of its
representations or warranties or of any of its covenants or agreements set forth
in this Agreement.
(b) If Parent or the Company terminates this Agreement pursuant to Section
7.1(b)(iv), Parent shall on the business day next succeeding such termination
pay the Company a fee of $4,000,000 in cash by wire transfer of immediately
available funds to an account designated by the Company.
(c) If the Company terminates this Agreement pursuant to Section
7.1(d)(iii) and if the Company is not in material breach of this Agreement at
the time of such termination and the condition specified in Section 6.2(a) would
have been satisfied if the Closing would have occurred at the time of such
termination, then if a Parent Acquisition Proposal was outstanding at the time
the Parent's Board of Directors withdrew, changed or modified its recommendation
Parent shall on the business day next succeeding such termination pay the
Company a fee of $4,000,000 in cash by wire transfer of immediately available
funds to an account designated by the Company.
(d) If Parent or the Company terminates this Agreement pursuant to Section
7.1(b)(iii) and if the Company is not in material breach of this Agreement at
the time of such termination and the condition specified in Section 6.2(a) would
have been satisfied if the Closing would have occurred at the time of such
termination, then (i) if after the date of this Agreement and on or prior to the
Company Stockholder Meeting, any person or group (within the meaning of Section
13(d)(3) of the Exchange Act) became the beneficial owner of 33% or more of the
outstanding Parent Common Stock, Parent shall on the business day next
succeeding such termination pay the Company a fee of $4,000,000 in cash by wire
transfer of immediately available funds to an account designated by the Company
and (ii) if no fee is paid pursuant to clause (i) of this Section 7.3(d) and if
a Parent Acquisition Proposal had been publicly disclosed at or prior to the
time of the Parent Stockholder Meeting and if after the Parent Stockholder
Meeting, Parent consummates a Parent Acquisition Proposal within
-71-
one year following such termination, then Parent shall on the business day next
succeeding the consummation of such Parent Acquisition Proposal pay the Company
a fee of $4,000,000 in cash by wire transfer of immediately available funds to
an account designated by the Company.
(e) If this Agreement is terminated by Company or Parent pursuant to
Section 7.1(b)(iii) or 7.1(b)(iv) or by the Company pursuant to Section
7.1(d)(iii), if no fee is payable to the Company pursuant to Sections 7.2(b),
(c) or (d), and if the Company is not in material breach of this Agreement at
the time of such termination, then Parent shall on the business day next
succeeding such termination pay the Company $1,000,000 in cash by wire transfer
of immediately available funds to an account designated by the Company as a
partial reimbursement of out-of-pocket expenses incurred by the Company in
connection with the transactions contemplated by this Agreement.
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company or Parent, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Except as provided in Section 7.2 and the
Escrow Agreement, each party hereto shall pay its own expenses incident to
preparing for entering into and carrying out this Agreement and the consummation
of the transactions contemplated hereby, whether or not the Merger shall be
consummated.
8.2 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
and any liability for breach or violation thereof shall terminate absolutely and
be of no further force and effect at and as of the Effective Time, except as
provided in the Escrow Agreement and except for the agreements contained in
Article II, Sections 5.10 through 5.12 and Article VIII, the agreements
delivered pursuant to Section 5.7 and the representations, covenants and
-72-
agreements contained in Sections 5.16 and 5.17. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement, and the provisions
of the Confidentiality Agreement shall apply to all information and material
delivered hereunder.
8.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
(a) if to Parent or Sub, to:
Tuboscope Vetco International Corporation
0000 Xxxxxx Xxxx
Xxxxxxx, XX 00000
Telecopy: 000-000-0000
Attn: General Counsel
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, XX 00000-0000
Telecopy: 000-000-0000
Attn: Xxxxxxx Xxxxxx
and (b) if to the Company, to:
D.O.S. Ltd.
0000 X. Xxxxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000
Telecopy: 000-000-0000
Attn: Xxxx X. Xxxxxxxx
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
2300 First City Tower
0000 Xxxxxx
Xxxxxxx, XX 00000
Telecopy: 000-000-0000
Attn: Xxx Xxxx
-73-
8.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the word "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. Unless the context otherwise requires, "or" is disjunctive
but not necessarily exclusive, and words in the singular include the plural and
in the plural include the singular. Any representations and warranties of the
Company that are qualified by the phrase "to the knowledge of the Company" or
phrases with similar wording shall be interpreted to refer to the actual
knowledge of the individuals set forth on Schedule 8.4 of the Company Letter.
Any representations and warranties of Parent that are qualified by the phrase
"to the knowledge of Parent" or phrases with similar wording shall be
interpreted to refer to the actual knowledge of the individuals set forth on
Schedule 8.4 of the Parent Letter.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereto and (b) except as provided
in Sections 5.7, 5.11, 5.16 and 5.17, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
8.7 Governing Law. Except to the extent that the laws of Bermuda or the
State of Delaware are mandatorily applicable to the Merger or the internal
affairs of any of the parties, this Agreement shall be governed and construed in
accordance with the laws of the State of Texas, without giving effect to the
principles of conflicts of law thereof.
8.8 Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes the
Agreement impossible to perform in which case this Agreement shall terminate as
if the parties mutually agreed under Section 7.1(a).
-74-
8.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
-75-
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
PARENT: TUBOSCOPE VETCO INTERNATIONAL CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
SUB: GROW ACQUISITION LIMITED
(a Bermuda corporation to be formed by
Tuboscope Vetco International Corporation)
By: Tuboscope Vetco International
Corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
THE COMPANY: D.O.S. LTD.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-76-
EXHIBIT A
Xxxxx X. Xxxxxxx
0000 X. Xxxxxxx
Xxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxx, Xx.
00000 Xxxxxxxx
Xxxxxxx, Xxxxx
Xxxxxxxxx X. Xxxxx
0000 X. Xxxxxxx
Xxxxxx, Xxxxx 00000
Y. L. Loh
9, Lorong Tukang Dua
Singapore 2261
X. X. Xxxxxxx-Xxxxx
Xx. Xxxxxx'x Xxxxxxxx, 00xx Xxxxx
Xxx Xxxxx Xxxxxx
Xxxx Xxxx
L. E. Simmons
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
-77-
EXHIBIT B
ESCROW AGREEMENT
This Escrow Agreement, dated as of __________________, 1996, between
Tuboscope Vetco International Corporation, a Delaware corporation ("Parent"),
D.O.S. Ltd., a Bermuda corporation (the "Company"), ______________________
("Stockholders Representative") and _________________, ____________________
("Escrow Agent");
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Parent, Grow Acquisition Limited ("Sub") and the Company have
entered into an Agreement and Plan of Merger dated as of January ____, 1996,
(the "Merger Agreement"), which provides, among other things, for the merger
(the "Merger") of Sub with the Company, with the result that the surviving
corporation (the "Surviving Corporation") will become a wholly owned subsidiary
of Parent; and
WHEREAS, the parties hereto desire, pursuant to Article II of the Merger
Agreement, to set aside a portion of the consideration to be paid to the holders
of ordinary shares, $.10 par value, of the Company (the "Company Common Stock")
in connection with the Merger, for the purpose of providing Parent with a
limited remedy in the event of a breach by the Company of certain
representations and warranties made in the Merger Agreement;
WHEREAS, Escrow Agent has agreed to hold the Escrowed Shares (as
hereinafter defined) in accordance with the terms and provisions contained
herein;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the parties hereto hereby agree as follows:
1. Definitions. Except as hereinafter defined, capitalized terms used in
-----------
this Escrow Agreement will have the meanings assigned to such terms in the
Merger Agreement.
(a) "Breach" shall mean a breach by the Company of a representation or
warranty of the Company set forth in the Merger Agreement as of the date of
the Merger Agreement (except to the extent such representation or warranty
speaks of an earlier date); provided, however that such a Breach shall be
deemed not to be a Breach to the extent that (i) the Company has notified
Parent in writing prior to the Closing of such Breach or (ii) an executive
officer of Parent prior to the Closing is shown by clear and convincing
evidence to have had actual knowledge of such Breach prior to the Closing.
-78-
(b) "Claim" shall mean a claim for Damages incurred by Parent as a
result of one or more Breaches.
(c) "Claim Expiration Time" shall mean 5:00 p.m. C.S.T. on the
fifteenth business day following the delivery to the Board of Directors of
Parent of audited financial statements of the Company and its Subsidiaries
as of and for the period ending on March 31, 1996 (or as of any later
date).
(d) "Damages" shall mean any loss, liability, claim, damage, expense,
whether or not involving a third-party claim, net of any insurance proceeds
or payments from any other responsible person or entity and net of any tax
savings as a result of the incurrence of such Damages.
(e) "Threshold Amount" shall mean the dollar amount of Damages, the
loss of which would result in a Company Material Adverse Effect.
(f) "Stockholders" means the holders of shares of Company Common Stock
immediately before the Effective Time, excluding any holders of Dissenting
Shares.
2. Appointment of Escrow Agent. Parent and the Company hereby designate
---------------------------
and appoint _____________________ as Escrow Agent for the purposes set forth
herein and the Escrow Agent hereby accepts such appointment on the terms herein
provided.
3. Deposit of Escrowed Shares. Promptly after the Effective Time, Parent
--------------------------
shall deliver to the Escrow Agent one or more certificates in the name of the
Escrow Agent representing the Escrowed Shares and cash in lieu of any fractional
shares.
4. Maintenance of Escrow.
---------------------
(a) The Escrow Agent shall hold the Escrowed Shares in escrow, and
shall maintain and disburse the Escrowed Shares, pursuant to this Escrow
Agreement.
(b) All dividends and other distributions of money, securities or
other property made by Parent with respect to the Escrowed Shares while
such shares are held by the Escrow Agent, shall be paid or delivered to the
Stockholders pro rata in accordance with their respective ownership of
Company Common Stock immediately prior to the Effective Time, at the same
time such dividends or other distributions are paid or delivered to other
holders of Parent Common Stock; provided, however, that there shall be paid
or delivered to the Escrow Agent at such time all shares of Parent Common
Stock issuable as a result of any stock dividend or stock split with
respect to the Escrowed Shares. The Escrowed Shares and such additional
shares of Parent
-79-
Common Stock are collectively referred to in this Escrow Agreement as the
"Escrow Funds."
5. Parent's Right to Assert Claim to Escrow Funds. Parent shall have the
----------------------------------------------
right to make one Claim on or prior to the Claim Expiration Time by delivering a
written notice of such Claim to the Stockholders Representative and the Escrow
Agent prior to such time. Subject to the other provisions herein, Parent shall
have the right to receive a portion or all of the Escrow Funds only if the
Damages for such Claim (determined without giving effect to the individual
materiality thresholds contained in Section 3.1 of the Merger Agreement when
evaluating the Damages resulting from a Breach, but without duplication for the
same Damages resulting from more than one Breach) exceed the Threshold Amount
and then only in the amount by which such Damages exceed $1,000,000. If Parent
asserts a Claim, such Claim shall state with particularity all Breaches
asserted, including sufficient facts relating thereto so that the Stockholders
Representative may reasonably evaluate such Claim, the aggregate Damages
incurred by Parent, Parent's estimate of the Threshold Amount and the amount
(the "Parent Net Claim") that equals (i) the aggregate amount of such Damages,
less (ii) $1,000,000, rounded to the nearest amount evenly divisible by $7.00.
Notwithstanding anything to the contrary herein, Parent shall in no event be
entitled to receive pursuant to this Agreement, more than the then available
Escrow Funds. The parties agree that the $1,000,000 deductible set forth above
was a negotiated risk sharing provision and does not and was not intended to,
reflect either party's understanding or agreement as to the level of Damages
necessary to exceed the Threshold Amount or constitute a Company Material
Adverse Effect.
6. Determination of Valid Parent Net Claim; Final Instruction. For
----------------------------------------------------------
purposes of this Escrow Agreement, a "Final Instruction" shall mean a written
notice given to the Escrow Agent directing the disbursement of the amount of the
Parent Net Claim, and shall be signed both by Parent and by the Stockholders
Representative except as otherwise provided below in clause (b) or (d). A Final
Instruction shall be delivered to the Escrow Agent under the following
circumstances, and accompanied by the indicated documentation:
(a) If the Stockholders Representative disputes either the validity,
amount or calculation of the Threshold Amount or the Parent Net Claim, the
Stockholders Representative shall give written notice of such dispute to
Parent, with a copy to the Escrow Agent, within 20 business days after the
delivery of notice of the Claim by Parent. In such circumstances, no Final
Instruction may be given to the Escrow Agent except as provided in (c) or
(d) below.
(b) If the Stockholders Representative fails to respond to the Claim
within 20 business days after the delivery to the Stockholders
Representative and the Escrow Agent of the Notice of the Claim, or if the
Stockholders Representative notifies the Escrow Agent that there is no
dispute with respect to the Parent Net Claim, Parent
-80-
shall have the right to deliver to the Escrow Agent a Final Instruction,
signed only by Parent, with respect to the Parent Net Claim.
(c) If the Stockholders Representative and Parent reach an agreement
with respect to the proper determination of the Threshold Amount or the
Parent Net Claim, the Stockholders Representative and Parent shall give to
the Escrow Agent a Final Instruction, signed by both the Stockholders
Representative and Parent, with respect to the Parent Net Claim.
(d) If an arbitration order pursuant to Section 22 hereof, is entered
with respect to the Parent Net Claim, either the Stockholders
Representative or Parent shall have the right to deliver to the Escrow
Agent a Final Instruction with respect to the Parent Net Claim based on and
in compliance with such order, signed only by the Stockholders
Representative or by Parent, as the case may be, and accompanied by a copy
of such order.
Upon receipt of a Final Instruction in accordance with this Section, the
Escrow Agent shall disburse to Parent from the Escrow Funds such number of
shares of Parent Common Stock as shall equal the Parent Net Claim based on the
valuation procedures set forth in Section 8 herein and shall distribute the
remaining Escrow Funds in accordance with Section 7 below.
7. Distribution of Escrow Funds. If Parent fails to make a Claim on or
----------------------------
prior to the Claim Expiration Time in accordance with Section 5, then as
promptly as practicable thereafter the Escrow Agent shall deliver the Escrowed
Shares and all other Escrow Funds to the Stockholders pro rata in accordance
with their respective ownership of Company Common Stock immediately prior to the
Effective Time. If Parent timely makes a Claim, then upon the Escrow Agent's
receipt of a Final Instruction, the Escrow Agent shall deliver such portion of
the Escrow Funds to Parent as set forth in such Final Instruction and then shall
deliver any remaining Escrowed Shares and any other remaining Escrow Funds, on a
pro rata basis, to the Stockholders.
8. Valuation of Escrowed Shares; Fractional Shares. For purposes of
-----------------------------------------------
determining the number of Escrowed Shares to be disbursed from the Escrow Fund
under this Escrow Agreement with respect to the Parent Net Claim, each share of
Parent Common Stock shall be valued at $7.00 per share (subject to appropriate
adjustment for any stock split, stock dividend, reverse stock split or similar
event with respect to Parent Common Stock effected after the Effective Time),
regardless of the then market value of such shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued pursuant
to this Agreement. In lieu of any fractional share of Parent Common Stock, each
Stockholder who would otherwise have been entitled to a fraction of a share of
Parent Common Stock hereunder shall be paid an amount in cash (without interest)
equal to the value of such fraction of a share based upon an assumed value of
$7.00 per share (subject to
-81-
appropriate adjustment for any stock split, stock dividend, reverse stock split
or similar event with respect to Parent Common Stock effected after the
Effective Time). Parent agrees to pay to Escrow Agent such amounts as are
necessary to pay such cash in lieu of fractional shares and the Escrow Agent
shall transfer and deliver such shares to Parent with respect to which cash is
so paid as a result of the distribution to the Stockholders.
9. Reliance by Escrow Agent; Liability of Escrow Agent. The Escrow Agent
---------------------------------------------------
shall be protected in acting upon any written notice, request, waiver, consent,
certificate, receipt, authorization or other paper or document that the Escrow
Agent believes to be genuine and what it purports to be. The Escrow Agent may
confer with its own corporate or outside legal counsel in the event of any
dispute or question as to the construction of any of the provisions hereof, or
its duties hereunder, and shall incur no liability and shall be fully protected
in acting in accordance with the written opinions of such counsel. The duties
of the Escrow Agent hereunder will be limited to the observance of the express
provisions of this Escrow Agreement. The Escrow Agent will not be subject to,
or be obliged to recognize, any other agreement between the parties hereto or
directions or instructions not specifically set forth as provided for herein.
The Escrow Agent will not make any payment or disbursement from or out of the
Escrow Fund that is not expressly authorized pursuant to this Escrow Agreement.
The Escrow Agent may rely upon and act upon any instrument received by it
pursuant to the provisions of this Escrow Agreement that it reasonably believes
to be genuine and in conformity with the requirements of this Escrow Agreement.
The Escrow Agent undertakes to use the same degree of care and skill in
performing its services hereunder as an ordinary prudent person would do or use
under the circumstances in the conduct of his or her own affairs. The Escrow
Agent will not be liable for any action taken or not taken by it under the terms
hereof in the absence of breach of its obligations hereunder or gross negligence
or willful misconduct on its part.
10. Indemnification of Escrow Agent. Parent will indemnify and hold the
-------------------------------
Escrow Agent harmless from and against any and all losses, costs, damages or
expenses (including, but not limited to, reasonable attorneys' fees) it may
sustain by reason of its service as Escrow Agent hereunder, and except such
losses, costs, damages or expenses (including, but not limited to, reasonable
attorneys' fees) incurred by reason of such acts or omissions for which the
Escrow Agent is liable or responsible under the last sentence of Section 9
hereof.
11. Release of Stockholders Representative; Successor Stockholders
--------------------------------------------------------------
Representative. In consideration of _____________________ (and any successor)
--------------
acting as the Stockholders Representative hereunder on behalf of all
Stockholders, each such Stockholder, by accepting shares of Parent Common Stock
in respect of such Stockholder's shares of Company Common Stock and by becoming
a beneficiary of this Escrow Agreement, releases the Stockholder Representative
from liability for any action taken or not taken by the Stockholders
Representative under the terms hereof in the absence of the Stockholders
Representative's gross negligence or willful misconduct. If
___________________ ceases to act as the Stockholders Representative for any
reason or
-82-
______________ or his representative shall notify Parent and the
Escrow Agent of the Stockholders Representative intent to resign as Stockholders
Representative, then Stockholders entitled to receive a majority of the Escrowed
Shares hereunder (assuming no Claim is made) may by written notice to the Parent
and Escrow Agent appoint a successor Stockholders Representative. If no such
successor is appointed within 30 days, then Parent shall appoint an independent
third party as successor.
12. Fees and Expenses of the Escrow Agent. All fees of the Escrow Agent
-------------------------------------
for its services hereunder, together with any expenses reasonably incurred by
the Escrow Agent in connection with this Escrow Agreement, shall be paid by
Parent.
13. Resignation of Escrow Agent. The Escrow Agent may resign from its
---------------------------
duties hereunder by giving each of the parties hereto not less than 60 days
prior written notice of the effective date of such resignation (which effective
date shall be at least 60 days after the date such notice is given). The
parties hereto intend that a substitute Escrow Agent will be appointed by Parent
to fulfill the duties of the Escrow Agent hereunder for the remaining term of
this Escrow Agreement in the event of the Escrow Agent's resignation. If on or
before the effective date of such resignation, a substitute Escrow Agent has not
been appointed, the Escrow Agent will thereupon deposit the Escrow Funds into
the registry of a court of competent jurisdiction.
14. Designees for Instructions. Parent, may, by notice to the Escrow
--------------------------
Agent, designate one or more persons who will execute notices and from whom the
Escrow Agent may take instructions hereunder. Such designations may be changed
from time to time upon notice to the Escrow Agent from Parent. The Escrow Agent
will be entitled to rely conclusively on any notices or instructions from any
person so designated by Parent.
15. Voting of Escrowed Shares. With respect to any matter on which the
-------------------------
Escrowed Shares or any other shares of Parent Common Stock in the Escrow Fund
are entitled to vote, the Escrow Agent shall seek voting instructions from the
Stockholders. With respect to Stockholders who timely provide such instruction,
the Escrow Agent shall vote the Escrowed Shares that would be distributed to
such Stockholders (assuming no Claim is made) in accordance with the
instructions received by such Stockholders, but shall not otherwise vote such
shares.
16. Notices. Any notices, consents, demands, requests, approvals and
-------
other communications to be given under this Escrow Agreement by any party to any
other party shall be in writing and shall be either (a) personally delivered,
(b) mailed by registered or certified mail, postage prepaid with return receipt
requested, (c) delivered by overnight express delivery service or same-day local
courier service, or (d) delivered by facsimile transmission, to the address set
forth below, or to such other address as may be designated by such party from
time to time in accordance with this Section. Notices delivered personally, by
overnight express delivery service or by local courier service shall be deemed
-83-
given as of actual receipt. Mailed notices shall be deemed given three business
days after mailing. Notices delivered by facsimile transmission shall be deemed
given upon receipt by the sender of the transmission confirmation.
(a) If to Parent or, after the Effective Time, the Company:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
with a copy to:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
(b) If to the Escrow Agent:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
(c) If to the Stockholder Representative,
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
with a copy to:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
17. Binding Effect. This Escrow Agreement will be binding upon and inure
--------------
to the benefit of the parties hereto and their permitted assigns. The rights of
any person or entity to receive Escrowed Shares hereunder shall not be
transferable except by operation of law.
18. Amendment and Termination. This Escrow Agreement may be amended by
-------------------------
and upon written notice to the Escrow Agent given jointly by Parent and the
Stockholders Representative, but the duties and responsibilities of the Escrow
Agent may not be increased without its written consent. This Escrow Agreement
will terminate on the date on which all the Escrow Funds have been distributed.
-84-
19. Applicable Law. This Escrow Agreement will be governed by and
--------------
construed in accordance with the laws of the State of Texas, without giving
effect to conflicts of law principles.
20. Counterparts. This Escrow Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute but one and the same instrument.
21. Captions and Paragraph Headings. Captions and paragraph headings used
-------------------------------
herein are for convenience only and are not part of this Escrow Agreement and
will not be used in construing it.
22. Arbitration. Any and all claims, demands, causes of action, disputes,
-----------
controversies and other matters in question arising out of or relating to this
Escrow Agreement, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement, including without limitation the validity of
Claims, the calculation of Damages, and the determination of and the actual
dollar amount of the Threshold Amount ("Disputes"), even though some or all of
such Disputes allegedly are extra contractual in nature, whether such Disputes
sound in contract, tort or otherwise, at law or in equity, under state or
federal law, whether provided by statute or the common law, for damages or any
other relief, shall be resolved and decided exclusively by binding arbitration
pursuant to the Federal Arbitration Act in accordance with the Commercial
Arbitration Rules then in effect with the American Arbitration Association. The
arbitration proceeding shall be conducted in Houston, Texas. The arbitration
shall be before a panel of three arbitrators. Parent and the Stockholders
Representative shall each select one arbitrator and the two arbitrators so
selected shall select the third arbitrator. The arbitrators are authorized to
issue subpoenas for depositions and other discovery mechanisms, as well as trial
subpoenas, in accordance with the Federal Rules of Civil Procedure. Any party
may initiate a proceeding in the appropriate United States District Court to
enforce this provision. This agreement to arbitrate shall be enforceable in
either federal or state court. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction. The enforcement of this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including the construction and
interpretation of this agreement to arbitrate, the scope of the arbitrable
issues, allegations of waiver, delay or defenses to arbitrability, and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act. The arbitrators shall have no
authority to award punitive damages (including, without limitation, any
exemplary damages, treble damages or any other penalty or punitive type of
damages), under any circumstances regardless of whether such damages in excess
of such amount may be available under applicable law or otherwise, the parties
hereto hereby waiving their right, if any, to recover such damages in excess of
such amount in connection with any Disputes. The costs of the arbitration and
attorney's fees shall be paid by Parent, but the arbitrators shall have the
right to increase the
-85-
Parent Net Claim by any or all of such costs, including amounts paid by the
Parent pursuant to Section 24 hereof, as they deem equitable.
23. Action by Parent. All actions to be taken by Parent hereunder shall
----------------
be taken by, or pursuant to authority granted by a committee of the Board of
Directors of Parent comprised of one or more members who were not prior to the
Effective Time affiliated with the Company or affiliates of the Company and who
are not Stockholders.
24. Stockholders Representative's Expenses. Parent shall pay all invoices
--------------------------------------
submitted by the Stockholders Representative with respect to all reasonable out-
of-pocket expenses incurred by Stockholders Representative in the performance of
his duties hereunder, including fees and expenses of counsel, or if Stockholders
Representative has paid such expenses, then to reimburse Stockholders
Representative within 30 days of the submission of a written request for
reimbursement.
25. Conduct of Audit. Parent agrees to use all reasonable efforts to
----------------
cause the Claim Expiration Time to occur as soon as practicable.
26. Tax Reporting. Unless otherwise required by Treasury Regulations
-------------
issued in the future, the parties will treat the Escrowed Shares and any other
shares of Parent Common Stock deposited with the Escrow Agent hereunder for
purposes of Section 468B(g) of the Internal Revenue Code of 1986, as amended,
and for all other income tax purposes as being owned by the Stockholders during
the period such shares are held in Escrow, and therefore any income earned on
such shares during such period will be allocated and reported to the
Stockholders as such income is earned. The parties will make any elections or
filings required to characterize such shares in a manner consistent with the
preceding sentence.
-86-
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be executed by their respective officers hereunto duly authorized, as of the day
and year first above written.
TUBOSCOPE VETCO INTERNATIONAL
CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
D.O.S. LTD.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
STOCKHOLDERS REPRESENTATIVE
--------------------------------------------
Name:
---------------------------------------
ESCROW AGENT
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
-87-
EXHIBIT C-1
BOARD OF DIRECTORS
Xxxxxx Xxxx
Xxxx Xxxxxxx
An individual to be designated by Parent and
reasonably acceptable to the Company
L. E. Xxxxxxx
Xxxx Xxxxxxxx
X. X. Xxxxxxx Xxxxx
An individual to be mutually agreed to by Parent and the Company
-88-
EXHIBIT C-2
MANAGEMENT
L. E. Simmons - Chairman
Xxxx Xxxxxxxx - President & CEO
Xxxxxx Xxxxxxx - Chief Financial Officer
Such other individuals with such positions as may be mutually agreed to by
Parent and the Company
-89-
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into and
made effective as of _______________, 1996, by and among Tuboscope Vetco
International Corporation, a Delaware corporation (the "Company"), SCF-III,
L.P., a Delaware limited partnership ("SCF-III"), D.O.S. Partners L.P., a
Delaware limited partnership ("D.O.S. Partners"), Panmell (Holdings), Ltd., a
Hong Kong corporation ("Panmell") and Xxxx Industries Limited, a Hong Kong
corporation ("Xxxx") (SCF-III, D.O.S. Partners, Panmell and Xxxx are
collectively referred to as the "D.O.S. Shareholders"). Xxxx, Panmell and
D.O.S. Partners, each a party to certain Registration Rights Agreements dated as
of July 2, 1992 and November 16, 1995, respectively, among D.O.S. Ltd. and
certain of its stockholders (the "D.O.S. Registration Rights Agreements"), as
the holders of more than 80% of the outstanding Registrable Securities (as such
term is defined in the D.O.S. Registration Rights Agreements) under such
Agreements and pursuant to Section 4.6 of each such Agreement hereby terminate
the D.O.S. Registration Rights Agreements and waive all obligations of D.O.S.,
Ltd. under such Agreements.
WITNESSETH:
-----------
WHEREAS, it is a condition to the consummation of the transactions
contemplated by that certain Agreement and Plan of Merger dated as of January 3,
1996 among the Company, Grow Acquisition Limited, the Company's wholly owned
subsidiary and D.O.S. Ltd. (the "Merger Agreement") that this Agreement be
executed and delivered by the Company and the D.O.S. Shareholders;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
-----------
have the meanings indicated:
"Affiliate" of a Holder shall mean (a) any member of the immediate family
of an individual Holder, including parents, siblings, spouse and children
(including those by adoption); the parents, siblings, spouse, or children
(including those by adoption) of such immediate family member; and in any such
case any trust whose principal beneficiary is such individual Holder or one or
more members of such immediate family and/or such Holder's lineal descendants,
(b) the legal representative or guardian of such individual Holder or of any
such immediate family members in the event such individual Holder or any such
immediate family members become mentally incompetent, and (c) any Person
controlling,
-90-
controlled by or under common control with a Holder. As used in this definition,
the term "control", including the correlative terms "controlling", "controlled
by" and "under common control with" shall mean, possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies (whether through ownership of securities or any partnership or other
ownership interest, by contract or otherwise) of a Person.
"Advice" shall have the meaning given it in Section 2.4.
"Agent" shall have the meaning given it in Section 2.6(a).
"Agreement" shall have the meaning set forth above.
"Business Day" shall mean any day other than a Saturday, Sunday or legal
holiday for banks in the State of Texas.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall mean the Company's Common Stock, par value $.01 per
share, or any successor class of the Company's Common Stock.
"Company" shall have the meaning set forth above.
"Demand Notice" shall have the meaning given it in Section 2.2(a).
"Demand Registration" shall have the meaning given it in Section 2.2(a).
"D.O.S. Registration Rights Agreements" shall have the meaning set forth
above.
"D.O.S. Shareholders" shall have the meaning set forth above.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Holder" shall mean SCF-III, D.O.S. Partners, Panmell and Xxxx and any
other Person holding Registrable Securities.
"Inspectors" shall have the meaning given it in Section 2.4(n).
"Investor" shall have the meaning set forth above.
"Liabilities" shall have the meaning given it in Section 2.6(a).
"Merger Agreement" shall have the meaning set forth above.
-91-
"new rights" shall have the meaning given it in Section 3.1.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"Outstanding Registration Rights Agreements" means (i) the Registration
Rights Agreement dated May 13, 1988, as amended, among the Company and the
signatories thereof relating to certain shares of Common Stock and (ii) the
Agreement between the Company and Xxxxx Xxxxxx Incorporated dated as of October
1, 1991.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or a political subdivision, agency or instrumentality thereof or
other entity or organization of any kind.
"Piggyback Registration" shall have the meaning given it in Section 2.1(a).
"Records" shall have the meaning given it in Section 2.4(n).
"Registrable Securities" shall mean (i) any and all shares of Common Stock
issued to D.O.S. Partners, Xxxx and Panmell pursuant to the Merger Agreement,
(ii) the 4,200,000 shares of Common Stock issued or to be issued by the Company
pursuant to a Subscription Agreement dated as of even date with the Merger
Agreement between the Company and SCF-III, (iii) the Warrant Stock, and (iv) any
securities issued in exchange for, as a dividend on, or in replacement of, or
otherwise issued in respect of (including securities issued in a stock dividend,
split or recombination or pursuant to the exercise of preemptive rights), any
shares of Common Stock or other securities described in clauses (i), (ii) and
(iii) above (in each case, "Related Securities" of such Common Stock), until
such time as such securities described in clauses (i) through (iv) hereof have
been (x) distributed to the public pursuant to a registration statement covering
such securities that has been declared effective under the 1933 Act, (y)
distributed to the public in accordance with the provisions of Rule 144 (or any
similar provision then in force) under the 1933 Act or (z) repurchased by the
Company.
"Registration Expenses" shall have the meaning given it in Section 2.5.
"Related Securities" shall have the meaning given it in this Section 1
under the definition of Registrable Securities.
"Requisite Group" shall mean (i) the Holder or Holders of an aggregate of a
majority of the Registrable Securities then owned or held by SCF-III and D.O.S.
Partners or their assignees pursuant to Section 4.10 or (ii) the Holder or
Holders of an aggregate of a majority of the Registrable Securities then owned
or held by Panmell and Xxxx or their assignees pursuant to Section 4.10. For
purposes of determining the Holders of the requisite percentages described above
(and for the purpose of any similar calculation in this Agreement), the Warrants
shall represent the number of shares of Warrant Stock for which the Warrants are
exercisable. In the event that any of the Registrable Securities set forth in
-92-
clauses (i) and (ii) of this definition become Related Securities, the
provisions of this definition shall apply mutatis mutandis to such Related
Securities.
"Warrants" shall mean those certain Warrants for the purchase of an
aggregate of 2,533,000 shares (subject to adjustment as provided therein) of
Common Stock issued by the Company to SCF-III pursuant to a Subscription
Agreement dated as of even date with the Merger Agreement between the Company
and SCF-III, and any and all Warrants issued in substitution or replacement of
such Warrants.
"Warrant Stock" shall mean the shares of Common Stock or other securities
for which the Warrants are exercisable, together with any Related Securities.
Section 2. Registration Rights.
-------------------
2.1 Piggyback Registration.
----------------------
(a) If the Company proposes to file a registration statement under the
1933 Act with respect to an offering by the Company for its own account or for
the account of any other Person of Common Stock (excluding, however, a security
convertible into Common Stock) then the Company shall in each case give written
notice of such proposed filing to the Holders of Registrable Securities at least
fifteen days before the anticipated filing date, and such notice shall offer
such Holders the opportunity to register such number of Registrable Securities
as each such Holder may request (a "Piggyback Registration"). Subject to
subsections (b), (c), (d) and (e) of this Section 2.1, the Company shall include
in each such Piggyback Registration all Registrable Securities requested to be
included in the registration for such offering. The Company shall cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Holders of Registrable Securities requesting to be included in the
registration for such offering to include such securities in such offering on
the same terms and conditions as Common Stock of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering determines that the total amount of securities which they or the
Company and any other Persons intend to include in such offering may jeopardize
the success of such offering, then the amount of securities to be offered shall
be reduced first from the Common Stock being offered for the account of Persons
(other than Holders and the Company) entitled to include Common Stock in such
offering and whose rights to include Common Stock in the offering rank
subordinate to the rights of the Holders of Registrable Securities and then, if
the offering size shall require further reduction, from the Common Stock being
offered for the account of the Holders of Registrable Securities and such other
Persons entitled to include Common Stock in such offering and whose rights to
include such Common Stock rank pari passu to the registration rights of the
----------
Holders (allocated pro rata in proportion to their respective number of shares
to be registered) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter or underwriters prior to any reduction of the securities to
be sold by the Company.
-93-
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not be required to include Registrable
Securities in any registration statement on Forms S-4 or S-8 (or their
successor forms) or if the proposed registration is (i) a registration of a
stock option or other employee incentive compensation plan or of securities
issued or issuable pursuant to any such plan, (ii) a registration of
securities issued or issuable pursuant to a stockholder reinvestment plan
or other similar plan, or (iii) a registration of securities issued in
exchange for any securities or any assets of, or in connection with a
merger or consolidation with, an unaffiliated company.
(c) The Company may withdraw any registration statement and abandon
any proposed offering initiated by the Company without the consent of any
Holder of Registrable Securities, notwithstanding the request of any such
Holder to participate therein in accordance with this provision, if the
Company determines in its sole discretion that such action is in the best
interests of the Company and its stockholders (for this purpose, the
interest of the Holders shall not be considered).
2.2 Demand Registration Rights.
--------------------------
(a) From and after the first anniversary of the effective date of this
Agreement, subject to the conditions stated hereinafter in this Section 2.2,
each Requisite Group may make one written request to the Company for
registration with the Commission of the offer and sale of all or part of the
Registrable Securities held by Holders in such Requisite Group under and in
accordance with the provisions of the 1933 Act (each a "Demand Registration");
provided, that the estimated proceeds (based on the market value of Common Stock
--------
as of the date of such request) of the Registrable Securities proposed to be
sold by the Holder or Holders in the Requisite Group shall exceed $10,000,000.
Within 5 Business Days after receipt of such request, the Company will serve
written notice (the "Demand Notice") of such registration request to all Holders
of Registrable Securities and the Company will include in such registration all
such Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 7 Business Days after the receipt
by the applicable Holder of the Demand Notice.
(b) Subject to the provisions of Section 2.2(c), each Requisite Group
shall be entitled to one Demand Registration (which must become effective under
the 1933 Act to count as having occurred) with respect to its Registrable
Securities; provided, however, that in no event shall the Company be required to
--------
effect more than one Demand Registration in any twelve month period. A
registration will not count as a Demand Registration until it has become
effective unless (i) the Holders of the Registrable Securities to be included
therein advise the Company that they do not intend to complete the sale of the
Registrable Securities covered by such registration statement or (ii) such
Holders have otherwise abandoned the offering covered by such registration
statement for any reason other than (A) the inability or unreasonable delay of
the Company in having such registration statement become effective or (B) the
disclosure of material adverse information regarding the Company that was not
known by such Holders at the time the request for such Demand Registration was
made;
-94-
provided, further, that if such registration statement is otherwise
abandoned by such Holders prior to the registration statement becoming effective
and if there has been a material decline in the market price of Company Common
Stock from the time of such request to such abandonment, then such Demand
Registration shall not count as a Demand Registration if the Holders promptly
reimburse the Company for all Registration Expenses (as defined herein) other
than the Company's internal expenses.
(c) If the managing underwriter or underwriters of a Demand Registration
(or in the case of a Demand Registration not being underwritten, the Holders of
a majority of the Registrable Securities being registered therein), advise the
Company in writing that in its or their opinion that the total number of
Registrable Securities proposed to be sold in such Demand Registration exceeds
the number which can be sold in such offering at the desired price, the Company
will include in such registration only the number of Registrable Securities
which, in the opinion of such underwriter or underwriters (or Holders, as the
case may be) can be sold, allocated pro rata among the Holders of Registrable
Securities that have requested to be included in such Demand Registration on the
basis of the amount of Registrable Securities requested to be registered by each
such Holder.
(d) If any Demand Registration is an underwritten offering, the Holders of
a majority of the Registrable Securities to be included in such Demand
Registration will select a managing underwriter or underwriters acceptable to
the Company to administer the offering, which acceptance will not be
unreasonably withheld or delayed.
(e) Notwithstanding the provisions of Sections 2.2(a)-(d), the Company
shall not be obligated to effect a registration requested pursuant to Sections
2.2(a)-(d) if (i) within 10 days after receiving the notice provided by any
Holder under Sections 2.2(a)-(d), the Company notifies all Holders of
Registrable Securities of its intention to file a registration statement for an
underwritten public offering of Common Stock for the sole account of the Company
and within twenty days after providing such notice, the Company files a
registration statement for such offering and (ii) the Company has never before
exercised its rights under this Section 2.2(e). In such case, the Holders shall
have all the rights provided herein as if no such Demand Registration had been
requested. If at any time the Company fails to diligently pursue any such
registration statement or offering, the provisions of the preceding sentence
shall not apply, and the Company shall be obligated to satisfy its obligations
under Sections 2.2(a)-(d). With respect to such Company registration, the
Company shall have the sole authority to select or terminate the employment of
underwriters, and to make all decisions in connection with the filing,
effectiveness and consummation of the proposed offering, subject to the express
provisions hereof.
(f) Notwithstanding the obligations of the Company under Sections 2.2(a)-
(d), the Company shall be entitled to postpone for a reasonable period of time
(not exceeding 90 days) the filing (but not the preparation) of any registration
statement otherwise required to be prepared and filed by it pursuant hereto if
(i) at the time the Company receives a request for such registration, the
Company is in possession of
-95-
material non-public information that would be required to be disclosed in a
registration statement but that has not been and will otherwise not be disclosed
to the public and the Company deems disclosure not to be in the best interests
of the Company and its stockholders (and the Company so notifies the Holders
requesting a Demand Registration within 5 Business Days of such request), or
(ii) the Company determines (and the Company so notifies the Holders requesting
a Demand Registration within 5 Business Days of such request) that in its
judgment, such registration and offering would materially interfere with any
financing, acquisition, corporate reorganization or other material transaction
involving the Company that prior to such request the Board of Directors of the
Company had agreed by resolution to pursue.
2.3 Holdback Agreements; Requirements of Holders.
--------------------------------------------
(a) To the extent not inconsistent with applicable law, each Holder of
Registrable Securities owning Registrable Securities that are included in a
registration statement that registers Registrable Securities pursuant to this
Agreement or who is given the option pursuant to the terms hereof to include
Registrable Securities in a registration statement that registers Registrable
Securities agrees not to effect any public sale or distribution of the issue
being registered (or any securities of the Company convertible into or
exchangeable or exercisable for securities of the same type as the issue being
registered) during the 10 days prior to, and during the 90-day period beginning
on, the effective date of a registration statement filed by the Company (except
pursuant to such registration), but only if and to the extent requested in
writing (with reasonable prior notice) by the managing underwriter or
underwriters in the case of an underwritten public offering by the Company of
securities of the same type as the Registrable Securities; provided, that the
period of time for which the Company is required to keep such registration
statement which includes Registrable Securities continuously effective shall be
increased by a period equal to such requested holdback period.
(b) The Company agrees not to effect any public sale or distribution of
any securities similar to those being registered, or any securities convertible
into or exchangeable or exercisable for such securities, except on Form S-8 (or
its successor form), during the 10 days prior to, and during the 90-day period
beginning on, the effective date of any Demand Registration in which the Holders
of Registrable Securities are participating (except pursuant to such
registration statement).
(c) The offering of Registrable Securities by any Holder shall comply in
all respects with the applicable terms, provisions and requirements set forth in
this Agreement, and such holder shall timely provide the Company with all
information and materials required to be included in a registration statement
that (a) relate to the offering, (b) are in possession of such Holder, and (c)
relate to such Holder, and to take all such action as may be reasonably required
in order not to delay the registration and offering of the securities by the
Company.
-96-
2.4 Registration Procedures. Whenever any Registrable Securities are to
-----------------------
be registered pursuant to Sections 2.1 or 2.2 of this Agreement, the Company
shall effect the registration of such Registrable Securities in accordance with
the intended method of disposition thereof as quickly as practicable. In
connection with any Piggyback Registration or Demand Registration, the Company
shall as expeditiously as possible:
(a) prepare and file with the Commission a registration statement which
includes the Registrable Securities and make every reasonable effort to cause
such registration statement to become effective; provided, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
including documents incorporated by reference after the initial filing of the
registration statement, the Company will furnish to one counsel selected by the
Holders of a majority of the Registrable Securities covered by such registration
statement and the underwriters, if any, draft copies of all such documents
containing material changes from previously filed documents proposed to be filed
at least 2 Business Days prior thereto, which documents will be subject to the
reasonable review of such Holders and underwriters, and the Company will not
file any registration statement or amendment thereto or any prospectus or any
supplement thereto (including such documents incorporated by reference) to which
Holders of a majority of the Registrable Securities covered by such registration
statement or the underwriters with respect to such Registrable Securities, if
any, shall reasonably object, and will notify each Holder of the Registrable
Securities of any stop order issued or threatened by the Commission in
connection therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and post-
effective amendments to the registration statement as may be necessary to keep
the registration statement effective for a period of not less than 60 days (or
such shorter period which will terminate when all Registrable Securities covered
by such registration statement have been sold or withdrawn or such longer period
as required pursuant to the applicable underwriting agreement); cause the
prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act; and to the
extent of its control comply with the provisions of the 1933 Act applicable to
it with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement or supplement to the prospectus; the Company shall not be
deemed to have complied with its obligations hereunder to keep a registration
statement effective during the applicable period if it voluntarily takes any
action that would result in selling Holders of the Registrable Securities being
prevented from selling such Registrable Securities during the period unless such
action is required under applicable law;
(c) furnish to any Holder of Registrable Securities included in such
registration statement and the underwriter or underwriters, if any, without
charge, such number of conformed copies of the registration statement and any
post-effective amendment thereto and such number of copies of the prospectus
(including each
-97-
preliminary prospectus) and any amendments or supplements thereto, and any
documents incorporated by reference therein, as such Holder or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities being sold by such Holder (it being understood that the Company
consents to the use of the prospectus and any amendment or supplement thereto by
each Holder of Registrable Securities covered by the registration statement and
the underwriter or underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the prospectus or any amendment or
supplement thereto); provided, that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
one counsel selected by the Holders of a majority of the Registrable Securities
covered by such registration statement copies of all documents proposed to be
filed which documents will be subject to the review of such counsel;
(d) notify each Holder of Registrable Securities included in such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, when the Company becomes aware of
the happening of any event as a result of which the prospectus included in such
registration statement (as then in effect) contains any untrue statement of a
material act or omits to state a material fact necessary to make the statements
therein (in the case of the prospectus or any preliminary prospectus, in light
of the circumstances under which they were made) not misleading and, as promptly
as practicable thereafter, prepare and file with the Commission and furnish a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(e) cause all Registrable Securities included in such registration
statement to be listed, by the date of the first sale of Registrable Securities
pursuant to such registration statement, on each securities exchange (including,
for this purpose, NASDAQ) on which the Common Stock of the Company is then
listed or proposed to be listed, if any;
(f) make generally available to its security holders an earnings statement
satisfying the provisions of Section 11(a) of the 1933 Act no later than 45 days
after the end of the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective date of the
registration statement, which earnings statement shall cover said 12-month
period, which requirement will be deemed to be satisfied if the Company timely
files complete and accurate information on Forms 10-Q, 10-K and 8-K under the
Exchange Act and otherwise complies with Rule 158 under the 1933 Act as soon as
feasible;
(g) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
-98-
(h) if requested by the managing underwriter or underwriters or any Holder
of Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or such Holder
reasonably requests to be included therein, including, without limitation, with
respect to the number of Registrable Securities being sold by such Holder to
such underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and any other terms of the underwritten offering of
such Registrable Securities, and promptly make all required filings of such
prospectus supplement or post-effective amendment;
(i) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference into a registration statement,
deliver a copy of such document to each Holder of Registrable Securities covered
by such registration statement;
(j) on or prior to the date on which the registration statement is
declared effective, use reasonable diligence to register or qualify, and
cooperate with the Holders of Registrable Securities included in such
registration statement, the underwriter or underwriters, if any, and their
counsel, in connection with the registration or qualification of the Registrable
Securities covered by the registration statement for offer and sale under the
securities or blue sky laws of each state and other jurisdiction of the United
States as any such Holder or underwriter reasonably requests in writing, to use
reasonable diligence to keep each such registration or qualification effective,
including through new filings, or amendments or renewals, during the period such
registration statement is required to be kept effective and to do any and all
other acts or things necessary or advisable to enable the disposition in all
such jurisdictions of the Registrable Securities covered by the applicable
registration statement; provided, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(k) cooperate with the Holders of Registrable Securities covered by the
registration statement and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing securities to be sold under the registration
statement, and enable such securities to be in such denominations and registered
in such names as the managing underwriter or underwriters, if any, or such
Holders may request, subject to the underwriters' obligation to return any
certificates representing securities not sold;
(l) cause the Registrable Securities covered by the registration statement
to be registered with or approved by such other governmental agencies or
authorities within the United States as may be necessary to enable the seller or
sellers thereof or the underwriter or underwriters, if any, to consummate the
disposition of such securities;
-99-
(m) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other reasonable actions as the
Holders of a majority of the Registrable Securities being sold or the
underwriters retained by Holders participating in an underwritten public
offering, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(n) make available for inspection by any Holder of Registrable Securities
included in such registration statement, any underwriter participating in any
disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all Records reasonably requested by any such Inspector in connection with
such registration statement; provided, that with respect to any Records that are
confidential, the Inspectors shall execute such confidentiality agreements as
the Company may reasonably request in order to maintain the confidentiality of
confidential Records; and
(o) obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters as the Holders of a majority of the Registrable
Securities being sold reasonably request.
Each Holder, upon receipt of any notice from the Company of the happening
of any event of the kind described in subsection (d) of this Section 2.4, will
forthwith discontinue disposition of the Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subsection (d) of this Section 2.4 or until it is advised in
writing (the "Advice") by the Company that the use of the prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the prospectus, and, if so directed by the
Company, such Holder will, or will request the managing underwriter or
underwriters, if any, to, deliver to the Company (at the Company's expense) all
copies in their possession or control, other than permanent file copies then in
such Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods mentioned in subsection (b) of this
Section 2.4 shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
such seller of Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended prospectus
contemplated by subsection (d) of this Section 2.4 hereof or the Advice.
If such registration statement refers to any Holder by name or otherwise as
the holder of any securities of the Company then such Holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such Holder, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation of such Holder of the
investment quality of the Company's securities covered thereby and
-100-
that such holding does not imply that such Holder will assist in meeting any
future financial requirements of the Company, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act or any similar federal statute then in force, the deletion of the reference
to such Holder.
2.5 Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with this Agreement, including without limitation,
all Commission and securities exchange or National Association of Securities
Dealers, Inc. registration and filing fees, fees and expenses (other than the
pro rata portion of filing fees attributable, as required by state law, to the
securities to be sold) of compliance with securities or blue sky laws (including
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed and fees and disbursements of counsel for the Company
and its independent certified public accountants (including the expenses of any
special audit or "cold comfort" letters required by or incident to such
performance), securities act liability insurance (if the Company elects to
obtain such insurance), the fees and expenses of any special experts retained by
the Company in connection with such registration (but not including any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities), the reasonable fees and expenses of a single counsel to
represent participating Holders in a Demand Registration (all such expenses
being herein called "Registration Expenses"), will be borne by the Company.
2.6 Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Securities, its officers, directors and each Person who controls
such Holder (within the meaning of the 1933 Act), and any Agent (as hereinafter
defined) or investment advisor thereof against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation)
(collectively, "Liabilities") arising out of or based upon any untrue or alleged
untrue statement of material fact contained in any registration statement, any
amendment or supplement thereto, any prospectus or preliminary prospectus or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as any such Liabilities arise out of or are based upon any untrue
statement or omission based upon information with respect to such indemnified
Person furnished in writing to the Company by such indemnified Person expressly
for use therein. Notwithstanding the foregoing, with respect to any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact in a preliminary prospectus, the indemnity agreement of
the Company in this Section 2.6(a) shall not inure to the benefit of any Holder
of Registrable Securities, underwriter or their respective control persons or
Agents on account of any loss, claim, damage, liability or action arising from
the sale of the Registrable Securities to any Person if the underwriter failed
to give or send a copy of the final prospectus, as the same may be supplemented
or amended, to that Person
-101-
within the time required by the 1933 Act, and the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact in such preliminary prospectus was corrected in such final prospectus. In
connection with an underwritten offering, the Company will indemnify the
underwriters thereof, their officers and directors and each Person who controls
such underwriters (within the meaning of the 0000 Xxx) to the same extent as
provided above with respect to the indemnification of the Holders of Registrable
Securities or to such other extent as the Company and such underwriters may
agree. For purposes of this Section 2.6(a), an "Agent" of a Holder of
Registrable Securities is any Person acting for or on behalf of such Holder with
respect to the holding or sale of such Registrable Securities.
(b) In connection with any registration statement in which a Holder of
Registrable Securities is participating, each such Holder will furnish to the
Company in writing such information with respect to the name and address of such
Holder and the amount of Registrable Securities held by such Holder and such
other information as the Company shall reasonably request for use in connection
with any such registration statement or prospectus, and agrees to indemnify to
the extent permitted by law, the Company, its directors and officers and each
Person who controls the Company (within the meaning of the 0000 Xxx) against any
losses, claims, damages, liabilities and expenses resulting from any untrue
statement of a material fact or any omission of a material fact required to be
stated in the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein no misleading, to
the extent, but only to the extent, that such untrue statement or omission is
based upon any information with respect to such Holder so furnished in writing
by such Holder specifically for inclusion in any prospectus or registration
statement. In no event shall the liability of any selling Holder or Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Any Person entitled to indemnification hereunder agrees to give prompt
written notice to the indemnifying party after the receipt by such Person of any
written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such Person may claim
indemnification or contribution pursuant to this Agreement and, unless in the
written opinion of counsel for such indemnified party a conflict of interest may
exist between such indemnified party and the indemnifying party with respect to
such claim, permit the indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to such indemnified party. Whether or not
such defense is assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without its consent. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. If the indemnifying party is
not entitled to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel with respect to
such claim.
-102-
(d) If the indemnification provided for in this Section 2.6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 2.6(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2.6(d), no selling Holder shall
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such selling Holder were offered to
the public exceeds the amount of any damages which such selling Holder has
otherwise been required to pay by reason of such untrue statement or omission.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
2.7 No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's securities on the terms of and on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements (which shall be the Company in the case of an offering of
securities by the Company) and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
2.8 The Company covenants that it will file the reports required to be
filed by it under the 1933 Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other nonconfidential
information so long as necessary to permit sales under Rule 144 under the 1933
Act), and it will take such action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the 1933 Act
within the limitation of the
-103-
exemptions provided by (a) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 3 Other Registration Rights.
-------------------------
3.1 Future Rights. After the date of this Agreement, the Company will not
-------------
grant to any Person (including the Holders of Registrable Securities) any
registration rights ("new rights") with respect to any securities of the Company
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities unless such new rights (i) are subordinate to and of a
lesser priority than the registration rights granted by the Company under this
Agreement and (ii) are not inconsistent with the terms of this Agreement.
Additionally, unless otherwise consented to in writing by the Holders of a
majority of the then outstanding Registrable Securities, new rights may not be
granted without expressly providing that, with respect to demand registration
rights granted to such other Persons, the Holders of Registrable Securities have
a piggyback right upon the exercise of such new rights and shall be included in
any related registration statement on the same terms and conditions as the
holders of the new rights, subject to possible reduction at the initiative of
the managing underwriter or underwriters, on terms substantially equivalent to
those set forth in Section 2.1. The Company may grant registration rights that
permit any Person the right to piggyback or may itself exercise the right to
piggyback on any Demand Registration; provided, that if the managing underwriter
or underwriters of such offering determines that the total amount of securities
which they and the holders of such new piggyback rights intend to include in any
offering may jeopardize the success of such offering (including the price at
which such securities can be sold), then the amount or kind of securities to be
offered for the account of holders of such new piggyback rights, or the Company
if it is exercising piggyback rights, will be reduced to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by the managing underwriter prior to any reduction in the
amount of Registrable Securities to be included; and further provided, that if
such offering is not underwritten, then any such piggyback right shall be
exercised only with the consent of the Holders of a majority of the Registrable
Securities being offered.
3.2 Representation and Warranty. The Company hereby represents and
---------------------------
warrants to the Holders that on or prior to the date hereof, (a) the Company has
not granted any outstanding registration rights to any Person except for the
registration rights granted under this Agreement and the Outstanding
Registration Rights Agreements and (b) no consent, approval, authorization or
waiver of any Person is required to permit the Company to execute or deliver
this Agreement or perform this Agreement in accordance with its terms.
Section 4 Miscellaneous.
-------------
4.1 Recapitalizations, Exchange, etc. The provisions of this Agreement
---------------------------------
shall apply, to the full extent set forth herein with respect to the Registrable
Securities, to any and all shares of equity capital of the Company or any
successor or assign of the Company
-104-
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of the Registrable
Securities, in each case as the amounts of such securities outstanding are
appropriately adjusted for any equity dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date of this
Agreement.
4.2 Opinions. When any legal opinion is required to be delivered
--------
hereunder, such opinion may contain such qualifications as may be customary or
otherwise appropriate for legal opinions in similar circumstances.
4.3 Notices. For purposes of this Agreement, notices and all other
-------
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company to:
if to Holders to, the address set forth next to their signature line or to
such other address as any party may furnish to the others in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt, and that failure to copy legal counsel shall not
invalidate notices otherwise properly given.
4.4 Applicable Law. This contract is entered into under, and shall be
--------------
governed for all purposes by, the laws of the State of Texas without regard to
principles of conflicts of laws.
4.5 Amendment and Waiver. This Agreement may be amended, and the
--------------------
provisions hereof may be waived, only by a written instrument signed by (i) the
Holders of a majority of the then outstanding Registrable Securities, and (ii)
the Company; provided, however, that in no event shall any amendment impose any
additional material obligations on any Holder without such Holder's written
consent. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
4.6 Remedy for Breach of Contract. The parties agree that in the event
-----------------------------
there is any breach or asserted breach of the terms, covenants or conditions of
this Agreement, the remedy of the parties hereto shall be in law and in equity
and injunctive relief shall lie for the enforcement of or relief from any
provisions of this Agreement. If any remedy or relief is sought and obtained by
any party against one of the other parties pursuant to this Section 4.6, the
other party shall, in addition to the remedy of relief so obtained, be liable to
the party seeking such remedy or relief for the reasonable expenses incurred by
such
-105-
party in successfully obtaining such remedy or relief, including the fees
and expenses of such party's counsel.
4.7 Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
4.8 Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties nor undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
4.9 Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Registrable Securities.
4.10 Assignment of Rights. The Registrable Securities and rights of any
--------------------
Holder under this Agreement with respect to any Registrable Securities may be
assigned to any person who acquires Registrable Securities from a Holder, except
that any person who acquires such Registrable Securities (x) pursuant to a
public offering registered under the 1933 Act, or (y) pursuant to a transfer
made in accordance with Rule 144 under the 1933 Act (or any similar successor
provision) may not be assigned rights hereunder with respect to such Registrable
Securities. Notwithstanding the foregoing, rights to cause a demand
registration under Section 2.2 may only be assigned if such rights are expressly
assigned in writing from a Holder. Any assignment of registration rights
pursuant to this Section 4.10 shall be effective upon receipt by the Company of
written notice from such assigning Holder (i) stating the name and address of
any assignee, (ii) describing the manner in which the assignee acquired the
Registrable Securities from such Holder and (iii) identifying the number of
Registrable Securities with respect to which the rights under this Agreement are
being assigned.
4.11 Termination. This Agreement shall terminate with respect to any
-----------
Holder upon the earliest of (i) the first such instance as such Holder ceases to
own any Registrable Securities or Warrants, (ii) the first such instance after
the second anniversary of the Effective Time as such Holder ceases to own at
least five percent of the outstanding shares
-106-
of Common Stock and may sell all Registrable Securities owned by such Holder
pursuant to Rule 144(k) (or similar provisions then in force) of the Rules and
Regulations under the 1933 Act ("Rule 144(k)"), (iii) the first such instance
after the third anniversary of the Effective Time as such Holder ceases to own
at least five percent of the outstanding shares of Common Stock or (iv) upon
written notice from such Holder to the Company that such Holder is irrevocably
terminating such Holder's rights hereunder. Upon such termination, such Holder
shall have no right to participate in any future Piggyback Registration or
Demand Registration and shall have no obligation hereunder other than pursuant
to Section 2.3(a), with respect to restrictions relating to any registration
statement that had become effective prior to such termination, and Section 2.6,
if applicable. Notwithstanding the foregoing, this Agreement shall not terminate
with respect to any holder of Warrants with respect to any Warrant Stock until
such time as all Warrant Stock acquirable or acquired by such holder pursuant to
such Warrants may be sold pursuant to Rule 144(k). For the purposes of this
Section 4.11, a Holder shall be deemed to own any and all Common Stock owned by
(i) such Holder and (i) its Affiliates.
-107-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ADDRESS: TUBOSCOPE VETCO INTERNATIONAL
CORPORATION
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
-------------------------------------------
SCF-III, L.P.
By: SCF-II, L.P., its general partner
By: X.X. Xxxxxxx & Associates, Incorporated
its general partner
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
-------------------------------------------
D.O.S. PARTNERS, L.P.
By: SCF Partners, L.P., its general partner
By: X.X. Xxxxxxx & Associates, Incorporated,
its general partner
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
-------------------------------------------
-108-
PANMELL (HOLDINGS) LTD.
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
-------------------------------------------
XXXX INDUSTRIES LIMITED
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
-------------------------------------------
-109-
