EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
GEOKINETICS INC.,
GEOPHYSICAL DEVELOPMENT CORPORATION
AND
THE HOLDERS OF THE
CAPITAL STOCK OF
GEOPHYSICAL DEVELOPMENT CORPORATION
MARCH 24, 1998
TABLE OF CONTENTS
Page
ARTICLE 1.
GENERAL..............................................................................1
1.1 DEFINITIONS.................................................................1
1.2 AGREEMENT TO PURCHASE AND SELL ACQUIRED SHARES..............................6
1.3 PURCHASE PRICE..............................................................6
1.4 REGISTRATION RIGHTS.........................................................6
1.5 XXXXXXX MONEY DEPOSIT.......................................................6
1.6 THE CLOSING.................................................................7
1.7 DELIVERIES AT THE CLOSING...................................................7
1.8 NO ASSIGNMENTS..............................................................7
1.9 PAYMENT IN FULL SATISFACTION OF RIGHTS......................................7
1.10 WORKING CAPITAL ADJUSTMENT..................................................7
(a) DETERMINATION OF WORKING CAPITAL ADJUSTMENT........................7
(b) REVIEW OF WORKING CAPITAL STATEMENT................................8
(c) PAYMENT OF WORKING CAPITAL ADJUSTMENT..............................8
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES.......................................................8
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS...............................8
(a) AUTHORIZATION OF TRANSACTION.......................................9
(b) NONCONTRAVENTION...................................................9
(c) BROKERS' FEES......................................................9
(d) ACQUIRED SHARES....................................................9
(e) RESTRICTED SECURITIES.............................................10
2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER................................10
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER OF THE BUYER......10
(b) AUTHORIZATION OF TRANSACTION......................................11
(c) NONCONTRAVENTION..................................................11
(d) BROKERS' FEES.....................................................11
(e) INVESTMENT........................................................11
(f) BUYER COMMON STOCK................................................11
2.3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY......................12
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER..................13
(b) AUTHORITY RELATIVE TO AGREEMENT...................................13
(c) CAPITALIZATION....................................................13
(d) SUBSIDIARIES......................................................14
(e) NONCONTRAVENTION..................................................14
(f) BROKERS' FEES.....................................................14
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TABLE OF CONTENTS (Cont'd.)
(g) TITLE TO ASSETS...................................................14
(h) FINANCIAL STATEMENTS..............................................15
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS..............................15
(j) UNDISCLOSED LIABILITIES...........................................17
(k) PERMITS AND LEGAL COMPLIANCE......................................17
(l) TAX MATTERS.......................................................17
(m) REAL PROPERTY.....................................................19
(n) INTELLECTUAL PROPERTY.............................................20
(o) TANGIBLE ASSETS...................................................23
(p) CONTRACTS.........................................................23
(q) NOTES AND ACCOUNTS RECEIVABLE.....................................24
(r) POWERS OF ATTORNEY................................................24
(s) INSURANCE.........................................................24
(t) LITIGATION........................................................25
(u) WARRANTY..........................................................26
(v) LABOR AND EMPLOYMENT MATTERS......................................26
(w) EMPLOYEE BENEFITS.................................................27
(x) GUARANTIES........................................................29
(y) ENVIRONMENT, HEALTH, AND SAFETY...................................29
(z) CERTAIN BUSINESS RELATIONSHIPS....................................29
(aa) INVESTMENT COMPANY................................................29
(bb) DISCLOSURE........................................................30
ARTICLE 3.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING...........................................30
3.1 GENERAL....................................................................30
3.2 NOTICES AND CONSENTS.......................................................30
3.3 OPERATION OF BUSINESS......................................................30
3.4 PRESERVATION OF BUSINESS...................................................33
3.5 FULL ACCESS................................................................33
3.6 NOTICE OF DEVELOPMENTS.....................................................33
3.7 EMPLOYMENT OF COMPANY EMPLOYEES............................................33
3.8 ASSUMPTION OF COMPENSATION OBLIGATIONS.....................................34
3.9 BONUSES TO COMPANY EMPLOYEES...............................................34
3.10 SELLER INDEBTEDNESS AND RECEIVABLES........................................34
3.11 EXCLUSIVITY................................................................34
3.12 SELLERS RELEASE OF CLAIMS..................................................34
3.13 CONFIDENTIALITY............................................................35
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TABLE OF CONTENTS (Cont'd.)
ARTICLE 4.
POST-CLOSING COVENANTS..............................................................36
4.1 GENERAL....................................................................36
4.2 LITIGATION SUPPORT.........................................................36
4.3 TRANSITION.................................................................37
4.4 BUYER OPTIONS..............................................................37
4.5 DISTRIBUTION OF COMPANY PROFIT SHARING PLAN................................37
4.6 ELIGIBILITY UNDER BENEFIT PLANS............................................37
4.7 EMPLOYEE BONUS COMPENSATION................................................37
4.8 ASSIGNMENT OF ACCOUNTS RECEIVABLE..........................................38
4.9 ADDITIONAL CAPITAL CONTRIBUTIONS...........................................38
4.10 CONFIDENTIALITY............................................................39
4.11 CERTAIN TAX MATTERS........................................................39
4.12 COMPLIANCE WITH SECURITIES LAWS............................................40
ARTICLE 5.
CONDITIONS OF CLOSING...............................................................40
5.1 CONDITIONS OF OBLIGATIONS OF THE BUYER.....................................40
5.2 CONDITIONS OF OBLIGATIONS OF THE SELLERS...................................42
ARTICLE 6.
REMEDIES FOR BREACHES OF AGREEMENT..................................................43
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................43
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER........................43
6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS......................44
6.4 INDEMNIFICATION LIMITATIONS................................................44
6.5 INDEMNIFICATION PROCEDURES.................................................44
6.6 OTHER INDEMNIFICATION PROVISIONS...........................................46
ARTICLE 7.
MISCELLANEOUS.......................................................................46
7.1 TERMINATION OF AGREEMENT...................................................46
7.2 EFFECT OF TERMINATION......................................................46
7.3 NO THIRD-PARTY BENEFICIARIES...............................................46
7.4 ENTIRE AGREEMENT...........................................................46
7.5 SUCCESSION AND ASSIGNMENT..................................................47
7.6 COUNTERPARTS...............................................................47
7.7 HEADINGS...................................................................47
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TABLE OF CONTENTS (Cont'd.)
7.8 NOTICES....................................................................47
7.9 GOVERNING LAW..............................................................48
7.10 AMENDMENTS AND WAIVERS.....................................................48
7.11 SEVERABILITY...............................................................48
7.12 EXPENSES...................................................................48
7.13 CONSTRUCTION...............................................................48
7.14 INCORPORATION OF EXHIBITS AND SCHEDULES....................................48
7.15 SPECIFIC PERFORMANCE.......................................................49
7.16 SUBMISSION TO JURISDICTION.................................................49
7.17 JOINDER OF SPOUSE..........................................................49
EXHIBITS:
Exhibit 1.3 Allocation of Purchase Price
Exhibit 1.4 Registration Rights Agreement
Exhibit 1.5 Escrow Agreement
Exhibit 2.1(d) Acquired Shares
Exhibit 4.4 Option Schedule
Exhibit 5.1(f)(1) Xxxxxxxxx Employment Agreement
Exhibit 5.1(f)(2) Xxxxxxxxx Employment Agreement
Exhibit 5.1(f)(3) Neale Employment Agreement
Exhibit 5.1(i) Opinion of Counsel to Sellers
Exhibit 5.2(g) Opinion of Counsel to Buyer
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered
into as of March 24, 1998, by and among Geokinetics Inc., a Delaware
corporation (the "BUYER"), Geophysical Development Corporation, a Texas
corporation (the "COMPANY"), and the holders of all of the outstanding capital
stock of the Company (each, individually, referred to herein as a "SELLER" and
all, collectively, referred to herein as the "SELLERS"). The Buyer, the Sellers
and the Company are sometimes referred to collectively herein as the "PARTIES."
The Company is engaged in the business of providing geophysical
processing, software and consultation services to the oil and gas industry (the
"BUSINESS").
The Sellers own, in the aggregate, all of the issued and outstanding
common stock of the Company, no par value per share (the "COMMON STOCK"),
representing 100% of the outstanding capital stock of the Company.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer all of the
shares of the Common Stock in return for cash and shares of the Buyer's common
stock, par value $.01 per share ("BUYER COMMON STOCK").
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
ARTICLE 1.
GENERAL
1.1 DEFINITIONS. Unless otherwise stated in this Agreement, capitalized
terms shall have the following meanings:
"ACQUIRED SHARES" means 6,750 shares of Common Stock of the Company
owned by the Sellers, representing one hundred percent (100%) of the total
outstanding shares of the capital stock of the Company.
"ADDITIONAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section
4.9 below.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act.
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"AFFILIATED GROUP" means any affiliated group within the meaning of
Section 1504 of the Code or any similar group defined under a similar provision
of state, local or foreign law.
"AGREEMENT" has the meaning set forth in the first paragraph above.
"ARBITRATING ACCOUNTANTS" has the meaning set forth in Section 1.10(b)
below.
"BASE CONSIDERATION" has the meaning set forth in Section 1.3 below.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"BUSINESS" has the meaning set forth in the second paragraph above.
"BUYER" has the meaning set forth in the first paragraph above.
"BUYER COMMON STOCK" has the meaning set forth in the fourth paragraph
above.
"BUYER INDEMNIFIED PARTIES" has the meaning set forth in Section 6.2
"BUYER PREFERRED STOCK" has the meaning set forth in Section 2.2(h)
below.
"BUYER SEC FILINGS" has the meaning set forth in Section 2.2(g) below.
"CAUSE" has the meaning set forth in Section 4.7 below.
"CLOSING" has the meaning set forth in Section 1.6 below.
"CLOSING DATE" has the meaning set forth in Section 1.6 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock, no par value, of the Company.
"COMPANY" has the meaning set forth in the first paragraph above.
"COMPANY DISCLOSURE SCHEDULE" has the meaning set forth in Section 2.3
below.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in Section
2.3(h) below.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 3.13(a)
below.
"CONTINUING EMPLOYEES" has the meaning set forth in Section 3.7 below.
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"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Section
1563 of the Code.
"DISCREPANCY NOTICE has the meaning set forth in Section 1.10 below.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth in Treas.
Reg. ss.1.1502-13.
"XXXXXXX MONEY DEPOSIT" has the meaning set forth in Section 1.5 below.
"EMPLOYEE BENEFIT PLAN" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"EMPLOYEE BONUSES" has the meaning set forth in Section 3.9 below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section
3(2) of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section
3(1) of ERISA.
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" has the meaning set forth in Section 1.5 below.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg.
ss.1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in Section 3(21) of ERISA.
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"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GDC PROFIT SHARING PLAN" has the meaning set forth in Section 4.5
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.5(a) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 6.5(a) below.
"INDIVIDUAL BALANCE" has the meaning set forth in Section 4.5 below.
"INTELLECTUAL PROPERTY" means (a) all inventions, including algorithms
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, seismic data bases, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including source codes and object codes, data and related documentation), (g)
all other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"KNOWN" OR "KNOWLEDGE" means that whenever a statement regarding the
existence or absence of facts in this Agreement is qualified by a phrase such as
"to such Person's knowledge" or "known by such Person," the Parties intend that
the information to be attributed to such Person is information that is actually
or constructively known to (a) the Person in the case of an individual, or (b)
in the case of a corporation or other entity, an officer or an employee who
devoted substantive attention to matters of such nature during the ordinary
course of his employment. A Person has "constructive knowledge" of those matters
which the individual involved could reasonably be expected to have as a result
of undertaking an investigation of such a scope and extent as a reasonably
prudent man would undertake concerning the particular subject matter.
"LETTER OF INTENT" means that certain letter dated February 18, 1998
executed among Sellers, the Company and Buyer.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) of
ERISA.
4
"NET WORKING CAPITAL" has the meaning set forth in Section 1.10(a)(i)
below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OPTIONS" has the meaning set forth in Section 4.4 below.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PARTY" has the meaning set forth in the first paragraph above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PREFERRED STOCK" means the preferred stock, no par value, of the
Company.
"PROCESS AGENT" has the meaning set forth in Section 7.16 below.
"PROHIBITED TRANSACTION" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"PURCHASE PRICE" has the meaning set forth in Section 1.3 below.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
1.4 below.
"REPORTABLE EVENT" has the meaning set forth in Section 4043 of ERISA.
"REQUISITE SELLERS" means Sellers holding a majority in interest of the
Acquired Shares as set forth in SECTION 2.3(C) of the Company Disclosure
Schedule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, deed of trust, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SELLER" and "SELLERS" have the meanings set forth in the first
paragraph above.
"SETTLEMENT NOTICE" has the meaning set forth in Section 6.5(c) below.
5
"SUBSIDIARY" means any Person in which the Company (a) owns or controls
more than 50% of the voting securities, directly or indirectly, (b) has the
power to vote, or direct the voting of sufficient securities to elect a majority
of the directors, or (c) acts as manager or general partner.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"WORKING CAPITAL ADJUSTMENT" has the meaning set forth in Section
1.10(a)(ii) below.
"WORKING CAPITAL STATEMENT" has the meaning set forth in Section
1.10(a) below.
1.2 AGREEMENT TO PURCHASE AND SELL ACQUIRED SHARES. Subject to the
terms and conditions of this Agreement, the Buyer agrees to purchase from each
of the Sellers, and each of the Sellers agrees to sell to the Buyer, all of the
Common Stock owned by each such Seller, in the aggregate constituting the
Acquired Shares, for the consideration specified below in Section 1.3.
1.3 PURCHASE PRICE. Subject to the adjustments, set forth in Section
1.10 below, in consideration for the delivery of the Acquired Shares, Buyer
agrees to pay and deliver to the Sellers at the Closing the aggregate
consideration allocated among the Sellers in the manner set forth on EXHIBIT 1.3
attached hereto (the "PURCHASE PRICE") consisting of (i) $26,000,000 in cash
payable to the Sellers by wire transfer or delivery of immediately available
funds (the "BASE CONSIDERATION") and (ii) 1,000,000 shares of validly issued,
fully paid and nonassessable shares of Buyer Common Stock; PROVIDED, HOWEVER,
that each Seller shall have the right to receive the Base Consideration
allocated to such Seller in any combination of cash and Buyer Common Stock as
such Seller shall designate by written notice to the Buyer no later than three
business days prior to the scheduled Closing Date. In the event any Seller
elects to receive any of the Base Consideration in shares of Buyer Common Stock,
such shares shall be valued at $3.00 per share.
1.4 REGISTRATION RIGHTS. The Buyer and each of the Sellers shall
execute and deliver the Registration Rights Agreement in the form attached
hereto as EXHIBIT 1.4 (the "REGISTRATION RIGHTS AGREEMENT") .
1.5 XXXXXXX MONEY DEPOSIT. Upon the execution and delivery of this
Agreement, the Buyer shall deposit $1,000,000 in immediately available funds
(the "XXXXXXX MONEY DEPOSIT") with Xxxxxxx X. Small in accordance with the terms
of the Escrow Agreement attached hereto as EXHIBIT 1.5 (the "ESCROW AGREEMENT").
At the Buyer's option, the Xxxxxxx Money Deposit, plus interest earned thereon,
shall be applied towards payment of the Base Consideration portion of the
6
Purchase Price; PROVIDED, HOWEVER, that in the event that the transactions
contemplated by this Agreement shall not proceed to Closing by reason of the
failure of any condition precedent under Section 5.1 (except Section 5.1(d)) or
5.2 hereof (unless the failure results from the Company or the Sellers breaching
a representation, warranty or covenant contained in this Agreement or otherwise
breaching an obligation to proceed with the Closing hereunder), the Xxxxxxx
Money Deposit, together with interest earned thereon, shall be forfeited to
Sellers as liquidated damages and not as a penalty.
1.6 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Chamberlain,
Hrdlicka, White, Xxxxxxxx & Xxxxxx in Houston, Texas, commencing at 9:00 a.m.
local time on the second business day following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
Buyer and the Sellers may mutually determine (the "CLOSING DATE").
1.7 DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5.1 below, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in Section 5.2
below, (iii) the Sellers will deliver to the Buyer stock certificates
representing all of the Acquired Shares, together with completed stock powers
transferring the shares to Buyer duly executed by such Seller, and (iv) the
Buyer will deliver to the Sellers the Purchase Price as specified in Section 1.3
above.
1.8 NO ASSIGNMENTS. No assignment, transfer or other disposition of
record or beneficial ownership of any shares of Common Stock may be made on or
after the date hereof.
1.9 PAYMENT IN FULL SATISFACTION OF RIGHTS. The delivery of the
Purchase Price to the Sellers with respect to the Common Stock shall be deemed
to be payment in full satisfaction of all rights pertaining to the outstanding
Common Stock.
1.10 WORKING CAPITAL ADJUSTMENT. The Purchase Price is subject to the
adjustment described in this Section 1.10:
(a) DETERMINATION OF WORKING CAPITAL ADJUSTMENT. Within 90
days after the Closing, the Buyer shall prepare and deliver to the
Sellers a statement (the "WORKING CAPITAL STATEMENT") based on the
financial statements of the Company, prepared in accordance with GAAP,
and showing (i) the calculation of the amount of the Company's current
assets and current liabilities as of the Closing Date and the amount of
the Company's Net Working Capital (defined below), and (ii) the
calculation of the Working Capital Adjustment (defined below), if any.
For purposes of this Section 1.10:
(i) "NET WORKING CAPITAL" means the current assets
minus current liabilities of the Company as determined in
accordance with GAAP; PROVIDED, HOWEVER, that current
liabilities for unpaid taxes shall be excluded from the
current liabilities of the Company PROVIDED FURTHER, that
accruals for unpaid (x) contributions
7
to the GDC Profit Sharing Plan, (y) bonuses payable to GDC
employees (exclusive of the Sellers) in respect of the fiscal
year ending June 30, 1998, and (z) expenses described in
Section 7.12 below shall be included in the current
liabilities of the Company; and
(ii) "WORKING CAPITAL ADJUSTMENT" means (A) the
amount, if any, by which the Company's Net Working Capital as
of the Closing Date is less than One Million Seven Hundred
Fifty Thousand and 00/100 Dollars ($1,750,000), PLUS (B) the
aggregate cash surrender value of the life insurance policies
assigned by the Company to the Sellers at or prior to the
Closing. The cash surrender value of each policy shall be
determined based on a statement issued by each underwriter of
such life insurance policies delivered to the Buyer at or
prior to Closing, which statements shall be dated not earlier
than 30 days prior to the Closing Date.
(b) REVIEW OF WORKING CAPITAL STATEMENT. Sellers shall have
the right to review the Working Capital Statement (and supporting work
papers) and provide written notice to the Buyer of Sellers' objections
with respect to any error, omission or other discrepancy in the Working
Capital Statement (the "DISCREPANCY NOTICE") until 20 days following
the Sellers' receipt of the Working Capital Statement. Buyer and the
Sellers shall work together in good faith to resolve any such dispute
and agree on the final Working Capital Statement. In the event that the
Buyer and the Sellers cannot agree on the final Working Capital
Statement within 10 days after delivery of the Sellers' Discrepancy
Notice, the Buyer and Sellers shall refer the disputed issue or issues
to a national independent public accounting firm (other than the
regular accountants for any Party or any accountants who prepared the
Working Capital Statement) which is reasonably acceptable to each Party
(the "ARBITRATING ACCOUNTANTS") within 15 days following delivery of
the Sellers' Discrepancy Notice. The Arbitrating Accountants shall be
instructed to render a decision, which shall be binding upon both
parties, within 20 days. Each Party shall be entitled to present any
information or analysis concerning the matter in good faith to the
Arbitrating Accountants with a copy provided to the other Party. The
Buyer and Sellers shall each bear their own fees and expenses, and the
fees and expenses of the Arbitrating Accountants shall be shared
equally by the Buyer and the Sellers.
(c) PAYMENT OF WORKING CAPITAL ADJUSTMENT. The Sellers shall
deliver payment of the Working Capital Adjustment to the Buyer (if the
Working Capital Adjustment is greater than zero) via wire transfer or
other immediately available funds, within 10 days after the Working
Capital Adjustment is finally determined. No interest will be payable
in respect of the Working Capital Adjustment.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers
represents and warrants to the Buyer, severally and not jointly with any other
Seller, that the statements contained in this Section 2.1 are correct and
complete as of the date of this Agreement and will be correct and
8
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2.1
with respect to each Seller).
(a) AUTHORIZATION OF TRANSACTION. The Seller has the full
right, power, and legal authority to execute and deliver this Agreement
and to consummate the transactions contemplated on his part hereby. No
proceeding on the part of the Seller and, no notice, consent,
authorization, order or approval of, filing or registration with, any
governmental commission, board or other regulatory body or any bank,
bonding company, lender, surety, customer, supplier, or any other
Person whatsoever is required for or in connection with the performance
by the Seller of this Agreement and the consummation by the Seller of
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and is a valid and binding
agreement of the Seller, enforceable against the Seller in accordance
with its terms.
(b) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Seller is subject, or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Seller is a
party or by which it is bound or to which any of Seller's assets is
subject. The execution, delivery and performance of this Agreement by
the Seller do not and the consummation by the Seller of the
transactions contemplated hereby will not violate or conflict with any
other restriction of any kind or character to which the Seller is
subject or by which any of the Seller's assets may be bound.
(c) BROKERS' FEES. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(d) ACQUIRED SHARES. The Seller holds of record and owns
beneficially the number of shares of Common Stock set forth next to his
or her name in EXHIBIT 2.1(d) attached hereto. The Seller is, and as of
the Closing Date will be, the sole and exclusive lawful owner of such
shares of Common Stock, free and clear of all liens, claims,
encumbrances and rights of others of any nature whatsoever, with full
power to vote all such shares on any matter that may properly come
before shareholders of the Company, and the Seller may exercise such
voting power on any matter without violation of the rights of any
person. There are no rights, warrants or options outstanding with
respect to such Common Stock, and the Seller has no obligation to
deliver capital stock of the Company to any Person as of the date
hereof, at any time on or prior to the Closing Date, except as provided
in this Agreement.
9
(e) RESTRICTED SECURITIES.
(i) The Seller acknowledges that the shares of Buyer
Common Stock which the Seller shall acquire pursuant to this
Agreement have not been registered under the Securities Act,
and are being acquired for the Seller's own account for
investment and not with a view to the distribution thereof.
The Buyer Common Stock will be subject to the stock transfer
restrictions described in Section 4.12 below.
(ii) The Seller has the knowledge and experience in
financial and business matters to enable him to evaluate the
merits and risks of approving this Agreement and the
transactions contemplated herein and acquiring shares of Buyer
Common Stock.
(iii) The Seller is able to bear the economic risks
of his investment in the Buyer Common Stock.
(iv) The Seller has been represented by legal counsel
in this transaction and the Seller and his advisors, including
such counsel, have been given the opportunity to ask questions
of, and receive answers from, the officers of the Buyer
concerning the terms of the transactions contemplated by this
Agreement and the affairs and the business and financial
condition of the Buyer.
(v) The Seller has received copies of Buyer's most
recent Form 10-KSB and each report or document subsequently
filed by the Buyer with the Securities and Exchange Commission
pursuant to the Securities Exchange Act, and the Seller and
his advisors have been given access to all documents, books
and additional information concerning the Buyer which they
have requested regarding the Buyer.
(vi) The Seller has made such inquiries by himself
and/or through his advisors in making a decision to approve
this Agreement and the transactions contemplated herein as the
Seller has deemed necessary and advisable.
(vii) The Seller acknowledges and agrees that the
Buyer Common Stock issued to the Seller may not be disposed of
except in accordance with the requirements of the Securities
Act and any applicable state securities laws.
2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Sellers and the Company that the statements contained in
this Section 2.2 are correct as of the date of this Agreement and will be
correct as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
2.2).
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER OF THE
BUYER. The Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware. The Buyer is
duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required. The
Buyer has full
10
corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance by the Buyer of this Agreement and the consummation by the
Buyer of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors. This Agreement constitutes,
and each other agreement to be executed by Buyer hereunder, when
executed and delivered by Buyer, will constitute the valid and legally
binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms and conditions. The Buyer is not required to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Buyer is subject or any provision of its certificate of
incorporation or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by
which any of Buyer's assets is subject.
(d) BROKERS' FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(e) INVESTMENT. The Buyer is not acquiring the Acquired Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(f) BUYER COMMON STOCK. The shares of Buyer Common Stock to be
issued to Seller pursuant to Section 1.3 above have been duly
authorized for issuance, and when issued and delivered pursuant to this
Agreement, will be validly issued, fully paid and non-assessable. The
issuance of the Buyer Common Stock pursuant to this Agreement is not
subject to any preemptive or similar rights.
(g) SEC FILINGS. Buyer has heretofore delivered to Sellers
accurate and complete copies of all reports, registration statements
and other filings filed by Buyer with the Securities and Exchange
Commission since January 1, 1997 ("BUYER SEC FILINGS"). As of their
respective dates, the Buyer SEC Filings did not 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 contained therein, in light of the circumstances under which
they
11
were made, not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial statements of
Buyer included in the Buyer SEC Filings present fairly, in conformity
with GAAP applied on a consistent basis the consolidated financial
position of Buyer as of the dates thereof and its consolidated results
of operations and cash flows for the periods then ended (subject to
normal year-end audit adjustments in the case of any unaudited interim
financial statements).
(h) CAPITALIZATION As of the execution date of this Agreement,
the entire authorized capital stock of the Buyer consists of
100,000,000 shares of Buyer Common Stock and 2,000,000 shares of
Preferred Stock, $10.00 par value per share ("BUYER PREFERRED STOCK"),
of which 18,326,816 shares of Buyer Common Stock and no shares of Buyer
Preferred Stock are validly issued and outstanding, fully paid and
nonassessable. No shares of the capital stock of the Buyer have been
issued in violation of the preemptive rights of any past or present
shareholder. In addition, as of the execution date of this Agreement,
the Buyer has outstanding options granted to employees, officers and
directors of the Buyer to acquire an aggregate of 2,882,500 shares of
Buyer Common Stock and warrants entitling the holders thereof to
purchase an aggregate of 11,542,375 shares of Buyer Common Stock.
Except as described in this Section 2.2(h), there are no outstanding
subscriptions, shares of capital stock, calls, warrants, options,
contracts, commitments, or demands relating to the capital stock of the
Buyer or other agreements of any character under which the Buyer would
be obligated to issue or purchase shares of its capital stock. There is
no voting agreement, voting trust, proxy, or other agreement or
understanding with respect to the voting of the capital stock of the
Buyer.
(i) DISCLOSURE. The representations and warranties contained
in this Section 2.2 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 2.2 not
misleading.
2.3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. Xx.
Xxxxxxxx, severally but not jointly, and each of the remaining Sellers and the
Company, jointly and severally, represents and warrants to the Buyer that the
statements contained in this Section 2.3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 2.3), except as set forth in the
disclosure schedule delivered by the Sellers and the Company to the Buyer on the
date hereof and initialed by the Parties (the "COMPANY DISCLOSURE SCHEDULE").
Nothing in the Company Disclosure Schedule shall be deemed adequate to disclose
an exception to a representation or warranty made herein unless the Company
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Company Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 2.3. References in Section 2.3 to
a numbered schedule mean the section of the Company Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.3(a)" mean
SECTION 2.3(a) of the Company Disclosure Schedule.
12
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Texas. The Company is duly
authorized to conduct business and is in good standing under the laws
of each jurisdiction where such qualification is required. The Company
has full corporate power and authority and all licenses, permits and
authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. SECTION
2.3(a) of the Company Disclosure Schedule lists the directors and
officers of the Company. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of the Company,
as amended to date. The minute book (containing the records of meetings
of the Sellers, the board of directors, and any committees of the board
of directors), the stock certificate books, and the stock record books
of the Company are correct and complete. The Company is not in default
under or in violation of any provision of its charter or bylaws.
(b) AUTHORITY RELATIVE TO AGREEMENT. The Company has the full
right, power, and legal authority to execute, deliver and perform this
Agreement, and to consummate the transactions contemplated on the part
of the Company hereby. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated on its part hereby have been duly authorized
by its Board of Directors and the Sellers in their capacity as the
holders of all of the capital stock of the Company. No proceeding on
the part of the Company, and, except for those approvals described in
SECTION 2.3(b) of the Company Disclosure Schedule, no notice, consent,
authorization, order or approval of, filing or registration with, any
governmental commission, board or other regulatory body, or any bank,
bonding company, lender, surety, customer, supplier, or any other
Person whatsoever is required for or in connection with the Company's
execution, delivery and performance of this Agreement. This Agreement
has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(c) CAPITALIZATION. The entire authorized capital stock of the
Company consists of 50,000 shares of Common Stock and 50,000 shares of
Preferred Stock, of which 6,750 shares of Company Common Stock and no
shares of Preferred Stock are validly issued and outstanding, fully
paid and nonassessable, are held of record by the Sellers and represent
all of the outstanding capital stock of the Company. No shares of the
capital stock of the Company have been issued in violation of the
preemptive rights of any past or present shareholder. An aggregate of
2,250 shares of the capital stock of the Company are in the treasury of
the Company. There are no outstanding subscriptions, shares of capital
stock, calls, warrants, options, contracts, commitments, or demands
relating to the capital stock of the Company or other agreements of any
character under which the Company would be obligated to issue or
purchase shares of its capital stock. There is no voting agreement,
voting trust, proxy, or other agreement or understanding with respect
to the voting of the capital stock of the Company. The Company has no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company Common
Stock. The Company has no commitments to issue or sell any securities
or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or
13
acquire from the Company, any shares of its capital stock and no
securities or obligations evidencing any such rights are outstanding.
(d) SUBSIDIARIES. SECTION 2.3(d) of the Company Disclosure
Schedule sets forth the name, the interest of the Company, and the
capitalization of each of the Company's Subsidiaries. Except as
described on SECTION 2.3(d), neither the Company nor any Subsidiary
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person
or company, and neither the Company nor any Subsidiary is a party to or
bound by any partnership, joint venture, voluntary association, or
other agreement with any Person for the conduct of any business.
(e) NONCONTRAVENTION. Except as set forth in SECTION 2.3(E) of
the Company Disclosure Schedule, the execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, government agency, or court to which the
Company or any of their assets is subject or (ii) violate any provision
of the Articles of Incorporation or Bylaws of the Company, or (iii)
violate or result in (whether with the giving of notice or the lapse of
time or both) the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any Security Interest or other
encumbrance upon any of the property of the Company pursuant to any
provision of any mortgage, lien, lease, contract, agreement, license,
or instrument to which the Company is a party or by which any of its
assets is bound. The execution, delivery and performance of this
Agreement by the Company do not and will not violate or conflict with
any other restriction of any kind or character to which the Company is
subject or by which any of its assets may be bound, and the same do not
and will not constitute an event permitting termination of any such
mortgage, lien, lease, agreement, license or instrument to which the
Company is a party or by which any of its assets are bound. Except as
set forth in Section 2.3(e) of the Company Disclosure Schedule, the
Company does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency or any other Person in order for the Parties to
consummate the transactions contemplated by this Agreement.
(f) BROKERS' FEES. The Company has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(g) TITLE TO ASSETS. Except as set forth in SECTION 2.3(G) of
the Company Disclosure Schedule, the Company has good and marketable
title to, or a valid leasehold interest in, the properties and assets
owned or used by them, located on their premises, or shown on the
unaudited balance sheet as of February 28, 1998 or acquired after the
date thereof through the Closing Date, free and clear of all Security
Interests.
14
(h) FINANCIAL STATEMENTS. The Sellers have previously
furnished Buyer with true and complete copies of the audited balance
sheets of the Company as of June 30, 1997, June 30, 1996, June 30,
1995, and the related statements of income, retained earnings and cash
flows for each of the three years in the period ended June 30, 1997.
Such financial statements have been prepared in conformity with GAAP
consistently applied and present fairly the financial position and
results of operations of the Company as of and for the respective
periods then ended. The Sellers have also previously furnished the
Buyer with a copy of the unaudited monthly balance sheets of the
Company as of the last day of each month from July 31, 1997 through
February 28, 1998, and the related monthly unaudited statement of
income, retained earnings and cash flows of the Company with respect to
each month from July 31, 1997 through February 28, 1998. Such financial
statements have been prepared using a tax basis method of accounting
consistently applied and present fairly the financial position and
results of operations of the Company as of and for the periods then
ended (subject to normal year-end audit adjustments). Subject to
Section 2.3(l)(ix), the Company does not have any liabilities or
obligations of a type which should be included in or reflected as such
in financial statements , whether related to tax or non-tax matters,
accrued or contingent, due or not yet due, liquidated or unliquidated,
or otherwise, except (i) Liabilities disclosed or reflected in such
financial statements, (ii) Liabilities described in the notes
accompanying the Company Financial Statements, (iii) Liabilities which
have arisen since the date of the balance sheet included in the Company
Financial Statements in the Ordinary Course of Business, (iv)
Liabilities arising under executory contracts in the Ordinary Course of
Business, and (v) other Liabilities which are not, individually or in
the aggregate, material to the Company. The financial statements,
including the certificates, described in this Section 2.3(h) are the
"COMPANY FINANCIAL STATEMENTS."
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997,
there has not been any adverse change in the Business, financial
condition, operations, results of operations, or future prospects of
the Company. Without limiting the generality of the foregoing, since
that date, except as set forth in SECTION 2.3(i) of the Company
Disclosure Schedule, the Company has not:
(i) sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair
consideration;
(ii) entered into any agreement, contract, lease or
license (or series of related agreements, contracts, leases,
and licenses) involving more than $25,000;
(iii) accelerated, terminated, modified, or canceled
any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) to which
the Company is a party or by which the Company is bound, nor
has any other Person accelerated, terminated, modified, or
canceled any of the foregoing;
(iv) imposed any Security Interests upon any of its
assets, tangible or intangible;
15
(v) made any capital expenditure (or series of
related capital expenditures) involving more than $25,000;
(vi) made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions);
(vii) issued any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation;
(viii) delayed or postponed the payment of accounts
payable and other Liabilities;
(ix) canceled, compromised, waived, or released any
right or claim (or series of related rights and claims);
(x) granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) made or authorized any change in the charter or
bylaws of the Company;
(xii) issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(xiii) declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiv) experienced or suffered any damage,
destruction, or loss (whether or not covered by insurance) to
its property;
(xv) made any loan to, or entered into any other
transaction with, any of its directors, officers, and
employees;
(xvi) entered into any employment contract or
collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement;
(xvii) granted any increase in the base compensation
of any of its directors, officers, and employees outside the
Ordinary Course of Business;
16
(xviii) adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its
directors, officers, and employees;
(xix) made any other change in employment terms for
any of its directors, officers, and employees;
(xx) made or pledged to make any charitable or other
capital contribution; or
(xxi) become aware of any other material occurrence,
event, incident, action, failure to act, or transaction
involving the Company.
(j) UNDISCLOSED LIABILITIES. Except as described in SECTION
2.3(J) of the Company Disclosure Schedule, the Company has no Liability
(and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Company Financial Statements
(or in any notes thereto), (ii) Liabilities which have arisen after
February 28, 1998 in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law), (iii) Liabilities arising under
executory contracts in the Ordinary Course of Business, and (iv) other
Liabilities which are not, individually or in the aggregate, material
to the Company.
(k) PERMITS AND LEGAL COMPLIANCE. The Company has all permits,
licenses, orders, qualifications, and approvals of all governmental and
regulatory authorities material to the conduct of their business, a
correct and complete list of which is set forth in SECTION 2.3(k) of
the Company Disclosure Schedule. All such permits, licenses, orders and
approvals are in full force and effect, and no suspension or
cancellation of any of them is pending or threatened. None of such
permits, licenses, orders or approvals, and no application for any of
such permits, licenses, orders or approvals, will be adversely affected
by the consummation of the transactions contemplated by this Agreement.
The Company has complied in all material respects with all applicable
laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against the Company or its Subsidiaries alleging any failure so to
comply.
(l) TAX MATTERS.
(i) All Tax Returns required to be filed by the
Company prior to the date hereof have been filed on a timely
basis with the appropriate governmental authorities in all
jurisdictions in which such Tax Returns are required to be
filed, and all such returns are correct and complete. Sellers
have delivered to Buyer correct and complete copies of all Tax
Returns, examination reports, and statements of
17
deficiencies asserted against or agreed to by the Company
since January 1, 1993. The Company is not currently the
subject of any audit, examination or any similar investigation
by any governmental authority. SECTION 2.3(L) of the Company
Disclosure Schedule sets forth all audits, examinations or
similar investigations of the Company and its Subsidiaries by
any governmental authority since January 1, 1993. The Company
currently is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any
of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) All Taxes due from or properly accruable by the
Company and its Subsidiaries have been fully and timely paid
or, in the cases of Taxes for which payment is not yet
required, properly and fully accrued for on the Company
Financial Statements with respect to all taxable periods
ending on or prior to the date of this Agreement and interim
periods through the date of this Agreement.
(iii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(iv) The Company has not filed a consent under
Section 341(f) of the Code concerning collapsible
corporations. None of the Sellers or the Company is a party to
any agreement, contract or arrangement that would, by reason
of the consummation of any of the transactions contemplated by
this Agreement, individually or in the aggregate, result in
the payment of any "EXCESS PARACHUTE PAYMENT" within the
meaning of Section 280G of the Code. None of the assets of the
Company is required to be treated as being owned by any other
person pursuant to the "SAFE HARBOR" leasing provisions of
Section 168 of the Internal Revenue Code of 1954, as in effect
prior to the repeal of such leasing provisions.
(v) No Seller or director or officer (or employee
responsible for Tax matters) of the Company expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Company either (A)
claimed or raised by any authority in writing or (B) as to
which any of the Seller and the directors and officers (and
employees responsible for Tax matters) of the Company has
Knowledge, based upon personal contact with any agent of such
authority.
(vi) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(vii) The Company is not a party to any Tax
allocation or sharing agreement. The Company (A) has not been
a member of an Affiliated Group filing a consolidated
18
federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has no Liability for
the Taxes of any Person (other than the Company) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(viii) SECTION 2.3(L)(VIII) of the Company Disclosure
Schedule sets forth the following information with respect to
the Company as of the most recent practicable date: (A) the
basis of the Company in its assets; (B) the amount of any net
operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution
allocable to the Company; and (C) the amount of any deferred
gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction (as defined in Treas. Reg.
Section 1.1502-13).
(ix) The Tax Liability of the Company as of June 30,
1997, has been paid and was materially correct as recorded.
The February 28, 1998 financial statements reflect the
customary practice of recording federal estimated tax payments
in the balance sheet with no year-to-date federal income tax
provision recorded in the Company's financial statements.
(x) The Company will not be liable for any Taxes
under Section 1374 of the Code in connection with the deemed
sale of the Company's assets (including the assets of any
qualified subchapter S subsidiary) caused by the an election
under Section 338(h)(10) of the Code. Neither the Company nor
any qualified subchapter S subsidiary of the Company has, in
the past 10 years, (A) acquired assets from another
corporation in a transaction in which the Company's Tax basis
for the acquired assets was determined, in whole or in part,
by reference to the Tax basis of the acquired assets (or any
other property) in the hands of the transferor or (B) acquired
the stock of any corporation which is a qualified subchapter S
subsidiary.
(m) REAL PROPERTY.
(i) The Company does not own any real property.
(ii) SCHEDULE 2.3(m)(II) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company (whether as lessor or as
lessee). The Sellers have delivered to the Buyer correct and
complete copies of the leases and subleases listed in SCHEDULE
2.3(m)(II) (as amended to date). With respect to each lease
and sublease listed in SCHEDULE 2.3(m)(II):
(A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(B) the lease or sublease will continue to
be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately
following the consummation of the transactions
contemplated hereby;
19
(C) neither the Company, nor to the Sellers'
Knowledge, any other party to the lease or sublease,
is in breach or default, and to the Sellers'
Knowledge no event has occurred which, with notice or
lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration
thereunder;
(D) neither the Company, nor to the Sellers'
Knowledge, any other party to the lease or sublease,
has repudiated any provision thereof;
(E) there are no disputes, or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the
representations and warranties set forth in
subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(G) the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(H) to the Sellers' Knowledge all facilities
leased or subleased thereunder have received all
approvals of governmental authorities (including
licenses and permits) required in connection with the
operation thereof and have been operated and
maintained in accordance with applicable laws, rules,
and regulations;
(I) all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said
facilities.
(n) INTELLECTUAL PROPERTY. SECTION 2.3(n) of the Company
Disclosure Schedule sets forth a correct and complete list of
Intellectual Property owned by the Company. With respect to each of
such item of Intellectual Property:
(i) The Company owns or has the right to use pursuant
to license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation
of the businesses of the Company as presently conducted and as
presently proposed to be conducted. Each item of Intellectual
Property owned or used by the Company immediately prior to the
Closing hereunder will be owned or available for use by the
Company on identical terms and conditions immediately
subsequent to the Closing hereunder. Except as otherwise
disclosed in Section 2.3(n) of the Company Disclosure
Schedule, the Company has taken all necessary and desirable
action to maintain and protect each item of Intellectual
Property that it owns or uses.
(ii) The Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights
20
of third parties, and none of the Sellers and the directors
and officers (and employees with responsibility for
Intellectual Property matters) of the Company has ever
received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement,
misappropriation, or violation (including any claim that the
Company must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any
of the Sellers and the directors and officers (and employees
with responsibility for Intellectual Property matters) of the
Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any of the Company.
(iii) SECTION 2.3(n)(III) of the Company Disclosure
Schedule identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual
Property, identifies each pending patent application or
application for registration which the Company has made with
respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which the Company
has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Upon
request, the Sellers will deliver to the Buyer correct and
complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as
amended to date) and will make available to the Buyer correct
and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each
such item. SECTION 2.3(n)(III) of the Company Disclosure
Schedule also identifies each trade name or unregistered
trademark used by any of the Company and its Subsidiaries in
connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in
SECTION 2.3(n)(III) of the Company Disclosure Schedule, except
as otherwise set forth therein:
(A) the Company possesses all right, title,
and interest in and to the item, free and clear of
any Security Interest, license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of
the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership
of the item; and
(D) the Company has not ever agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict
with respect to the item.
(iv) SECTION 2.3(n)(IV) of the Company Disclosure
Schedule identifies each item of Intellectual Property that
any third party owns and that the Company uses
21
pursuant to license, sublicense, agreement, or permission.
Upon request, the Sellers will deliver to the Buyer correct
and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect
to each item of Intellectual Property required to be
identified in SECTION 2.3(n)(iv) of the Company Disclosure
Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on
identical terms immediately following the Closing;
(C) neither the Company, nor to the Sellers'
Knowledge, any other party to the license,
sublicense, agreement, or permission is in breach or
default, and to the Sellers' Knowledge no event has
occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) neither the Company, nor to the Sellers'
Knowledge, any other party to the license,
sublicense, agreement, or permission has repudiated
any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in
subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual
Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for Intellectual Property matters) of
the Company and its Subsidiaries, is threatened which
challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(H) the Company has not granted any
sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) To the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company, the use of the
Company's Intellectual Property will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights
22
of third parties as a result of the continued operation of its
business as presently conducted and as presently proposed to
be conducted.
(vi) None of the Sellers and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Company had any Knowledge of any new
products, inventions, procedures, or methods of manufacturing
or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or
make obsolete any product or process of the Company, other
than those affecting the industry generally.
(o) TANGIBLE ASSETS. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the
conduct of its businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject
to normal wear and tear), and is suitable for the purposes for which it
presently is used and presently is proposed to be used. A correct and
complete list of all such properties and assets (other than properties
and assets described in Sections 2.3(m) and 2.3(n)) is set forth in
SECTION 2.3(O) of the Company Disclosure Schedule.
(p) CONTRACTS. SECTION 2.3(p) of the Company Disclosure
Schedule lists the following contracts and other agreements to which
the Company is a party:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which
will extend over a period of more than one year, may result in
a material loss to the Company, or involve consideration in
excess of $25,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, or under which it has imposed a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Sellers or their
Affiliates (other than the Company);
23
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation,
severance, or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of $20,000 or
providing severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and
employees;
(xi) any agreement under which the consequences of a
default or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations, or future prospects of the Company; or
(xii) any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of $25,000.
Upon request, the Sellers will deliver to the Buyer a correct and
complete copy of each written agreement listed in SECTION 2.3(p) of the
Company Disclosure Schedule (as amended to date) and a written summary
setting forth the terms and conditions of each oral agreement referred
to in SECTION 2.3(p) of the Company Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following the consummation of
the transactions contemplated hereby; (C) neither the Company, nor to
the Sellers' Knowledge, any other party is in breach or default, and to
the Sellers' Knowledge, no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and
(D) neither the Company, nor to the Sellers' Knowledge, any other party
has repudiated any provision of the agreement.
(q) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Company are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with
their terms at their recorded amounts.
(r) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company.
(s) INSURANCE. SECTION 2.3(s) of the Company Disclosure
Schedule sets forth the following information with respect to each
insurance policy (including policies providing property, casualty,
liability, life, health and workers' compensation coverage and bond and
24
surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within
the past three years:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis)
and amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the
policy will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms immediately following the
consummation of the transactions contemplated hereby; (C) neither the
Company, nor to the Sellers' Knowledge any other party to the policy is
in breach or default (including with respect to the payment of premiums
or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy;
and (D) neither the Company, nor to the Sellers' Knowledge, any other
party to the policy has repudiated any provision thereof. The Company
has been covered during the past three years by insurance in scope and
amount customary and reasonable for the businesses in which they have
engaged during such period. SECTION 2.3(s) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the
Company.
(t) LITIGATION. SECTION 2.3(t) of the Company Disclosure
Schedule sets forth each instance in which the Company (i) is subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or to the Sellers' Knowledge is threatened to
be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. Unless specifically noted in
SECTION 2.3(t) of the Company Disclosure Schedule, none of the actions,
suits, proceedings, hearings, and investigations set forth in SECTION
2.3(t) of the Company Disclosure Schedule could result in any material
adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. None of the
Sellers and the directors and officers (and employees with
responsibility for litigation matters) of the Company has any reason to
believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Company.
25
(u) WARRANTY. Each product and service sold or delivered by
the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company has
no Liability (and to the Sellers' Knowledge there is no Basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company giving rise to
any Liability) for replacement or correction thereof or other damages
in connection therewith. No product or service sold or delivered by the
Company is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. SECTION
2.3(U) of the Company Disclosure Schedule includes copies of the
standard terms and conditions of sale for the Company (containing
applicable guaranty, warranty, and indemnity provisions).
(v) LABOR AND EMPLOYMENT MATTERS.
(i) SECTION 2.3(v) of the Company Disclosure Schedule
sets forth all collective bargaining agreements, employment
and consulting agreements (other than consulting agreements
terminable by the Company within 60 days without payment of a
premium or a penalty), executive compensation plans, bonus
plans, deferred compensation agreements, employee pension
plans or retirement plans, employee profit sharing plans,
employee stock purchase and stock option plans, group life
insurance, hospital ization insurance or other plans or
arrangements providing for benefits to employees of the
Company.
(ii) To the Sellers' Knowledge, there are no
controversies between the Company and any employees or any
unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending or threatened, related
to the Company and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company. Except as
otherwise set forth in Section 2.3(v) of the Company
Disclosure Schedule, to the Knowledge of the Sellers and the
directors and officers of the Company, no executive, key
employee, or group of employees has any plans to terminate
employment with the Company.
(iii) Sellers and the Company have complied in all
material respects with any laws relating to the employment of
labor, including any provisions thereof relating to wages,
hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment
discrimination and employment safety, and to the Sellers'
Knowledge, the Company is not liable for any arrears of wages
or any taxes or penalties for failure to comply with any of
the foregoing.
(iv) SECTION 2.3(v) of the Company Disclosure
Schedule sets forth the current annual compensation, including
base salary, bonuses and fringe benefits (and the basis
thereof) of all employees of the Company (by position or by
department) as of the date hereof.
26
(w) EMPLOYEE BENEFITS.
(i) SECTION 2.3(w) of the Company Disclosure Schedule
lists each Employee Benefit Plan that the Company maintains or
to which the Company contributes:
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all material
respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual
Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of
ERISA and of Section 4980B of the Code have been met
with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date which are
not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company and its
Subsidiaries. All premiums or other payments for all
periods ending on or before the Closing Date have
been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Section
401(a) of the Code and has received, within the last
two years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer
Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors,
and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for
determination.
(F) The Sellers have delivered to the Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance
contracts, and other funding agreements which
implement each such Employee Benefit Plan.
27
(ii) With respect to each Employee Benefit Plan that
the Company and the Controlled Group of Corporations which
includes the Company maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever
has been required to contribute:
(A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event
as to which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than
any Multiemployer Plan) has been instituted or, to
the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for
employee benefits matters) of the Company,
threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee
Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act
or comply in connection with the administration or
investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or
the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits)
is pending or, to the Knowledge of any of the Sellers
and the directors and officers (and employees with
responsibility for employee benefits matters) of the
Company, threatened. None of the Sellers and the
directors and officers (and employees with
responsibility for employee benefits matters) of the
Company has any Knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation.
(C) The Company has not incurred, and none
of the Sellers and the directors and officers (and
employees with responsibility for employee benefits
matters) of the Company has any reason to expect that
the Company will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) None of the Company and the other members of
the Controlled Group of Corporations that includes the Company
contributes to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal Liability) under any
Multiemployer Plan.
(iv) The Company does not maintain or contribute to,
and has never maintained, contributed, or been required to
contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type
benefits
28
for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with
Section 4980B of the Code).
(x) GUARANTIES. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any
other Person.
(y) ENVIRONMENT, HEALTH, AND SAFETY.
(i) Each of the Company and its predecessors and
Affiliates has complied in all material respects with all
Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, each of the Company and
its predecessors and Affiliates has obtained and been in
compliance in all material respects with all of the terms and
conditions of all permits, licenses, and other authorizations
which are required under, and has complied in all material
respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental,
Health, and Safety Laws.
(ii) The Company has no Liability (and none of the
Company, or its predecessors and Affiliates has handled or
disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or
facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the
Company giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health,
and Safety Law.
(iii) All properties and equipment used in the
business of the Company and its predecessors and Affiliates
have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(z) CERTAIN BUSINESS RELATIONSHIPS. Except as disclosed on
Section 2.3(z) of the Company's Disclosure Schedules, none of the
Sellers and their Affiliates has been involved in any business
arrangement or relationship with any of the Company within the past 12
months, and none of the Sellers and their Affiliates owns any asset,
tangible or intangible, which is used in the business of the Company.
(aa) INVESTMENT COMPANY. The Company is not an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or a
"holding company", a "subsidiary company" of a
29
"holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(bb) DISCLOSURE.
(i) The representations and warranties contained in
this Section 2.3 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 2.3 not misleading.
(ii) There is no fact known to any of the Sellers
that has any specific application to the Company (other than
general economic or industry conditions) and that materially
adversely affects the assets, business, prospects, financial
condition, or results of operations of the Company (on a
consolidated basis) that has not been set forth in this
Agreement or in the Company Disclosure Schedule.
ARTICLE 3.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
3.1 GENERAL. The Parties agree that with respect to the period between
the execution of this Agreement and the Closing, each of the Parties will use
his or its best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Article 5 below).
3.2 NOTICES AND CONSENTS. The Sellers will cause the Company to give
any notices to third parties, and will cause the Company to obtain any
third-party consents in connection with the matters referred to in Section
2.3(e) above or as may be required in connection with the representations made
in Sections 2.3(m)(ii)(B), 2.3(n)(iv)(B), 2.3(p) and 2.3(s) pertaining to the
legal, valid, binding and enforceable nature of leases and subleases, licenses
and sublicenses of Intellectual Property, contracts and agreements and insurance
policies following the consummation of the transactions contemplated hereby.
Each of the Parties will (and the Sellers will cause the Company to) give any
notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
required for the transactions contemplated by this Agreement.
3.3 OPERATION OF BUSINESS. The Sellers shall cause the Company to, and
the Company shall, conduct its operations according to its ordinary and usual
course of business, and shall use its best efforts to preserve intact its
business organization, keep available the services of its officers and
employees, and maintain its present relationships with licensors, suppliers,
distributors, customers and others having significant business relationships
with it. Representatives of the Company will on request confer during such
period with representatives of Buyer to keep it informed with respect to the
general status of the on-going operations of the business of the Company.
Without limiting the
30
generality of the foregoing and except as otherwise affected by matters
contemplated by this Agreement or in connection with the transactions
contemplated by this Agreement, the Sellers will cause the Company during such
period to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
operation or accounting, nor provide discounted services outside the
ordinary course of business;
(b) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its business,
assets, properties, equipment and rights, and pay all vendors,
suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due, except to the extent that
such payments may be subject to undisputed claims of offset or
reimbursement in favor of the Company, and pay in full all payroll
obligations when due;
(d) maintain its present debt and lease instruments (unless
same are otherwise mature) and refrain from entering into new or
amended debt or lease instruments, except for debt incurred or leases
entered into in the ordinary course of business which involve a total
liability of the Company not in excess of $20,000 per instance or
$50,000 in the aggregate, without prior written notice to Buyer;
PROVIDED, HOWEVER, that the Buyer hereby consents to the Company's
incurring debt and leasing obligations up to $600,000 in favor of Bank
Texas N.A. relating to the upgrading of the Sun Enterprises 10,000
Server used by the Company in the Business; PROVIDED, FURTHER, that
Buyer consents to the Company's incurring additional debt obligations
and/or making capital expenditures not to exceed $100,000 for upgraded
replacement discs;
(e) not incur any indebtedness other than ordinary trade
accounts payable in the ordinary course of business, except for debts
incurred to fund the distributions contemplated in Section 3.9 below;
PROVIDED, HOWEVER, that Buyer consents to the Company's incurring
additional debt obligations and/or making capital expenditures not to
exceed $100,000 for upgraded replacement discs;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage PROVIDED, HOWEVER, that
prior to the Closing, the Company may assign to the Sellers the life
insurance policies currently maintained by the Company covering the
Sellers;
(g) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and others having significant
business relations with the Company;
31
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the normal
course of business, including any capital expenditures (or series of
related expenditures) in excess of $20,000, without prior written
notification to Buyer; PROVIDED, HOWEVER, that Buyer consents to the
Company's incurring additional debt obligations and/or making capital
expenditures not to exceed $100,000 for upgraded replacement discs;
(j) refrain from starting or acquiring any new businesses
without the prior written notification to Buyer;
(k) maintain its present salaries and commission levels for
all officers, directors, employees or agents, except as permitted by
Section 3.9 below and except for raises that may be awarded to
employees at or below the level of supervisor in keeping with past
practices of the Company in the ordinary course of its business,
refrain from entering into employment agreements except in the ordinary
course of business, and refrain from entering into any collective
bargaining agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, except as permitted by
Section 3.9 below; and
(m) refrain from declaring or paying any dividends or
distributions to Sellers in excess of an aggregate of $100,000;
(n) promptly notify Buyer of any claim or litigation
threatened or instituted, or any other material adverse event or
occurrence involving or affecting the Company or any of its assets,
properties, operations, businesses or employees;
(o) comply with and cause to be complied with all applicable
laws, rules, regulations and orders of all federal, state and local
governments or governmental agencies affecting or relating to the
Company or its assets, properties, operations, businesses or employees;
(p) other than in the ordinary course of business, refrain
from any sale, disposition, distribution or encumbrance of any of its
properties or assets and refrain from entering into any agreement or
commitment with respect to any such sale, disposition, distribution or
encumbrance (other than the sale or use of inventories in the ordinary
course of business);
(q) refrain from any purchase or redemption of any capital
stock or other voting interest of the Company and refrain from issuing
any capital stock or other voting interest;
32
(r) refrain from making any change in any accounting
principle, classification, policy or practice, except as required by
GAAP; and
(s) manage working capital in the ordinary course consistent
with past practice; PROVIDED, HOWEVER, that the Company will be
entitled to distribute bonuses pursuant to Section 3.9, pay dividends
to the extent not prohibited by Section 3.3(m) and make contributions
to the GDC Profit Sharing Plan prior to the Closing Date, in each case
to the extent that the Company's Net Working Capital shall be not less
than $1,750,000 on the Closing Date.
3.4 PRESERVATION OF BUSINESS. The Sellers will (i) cause the Company to
keep its Business and properties substantially intact, keep in full force and
effect all rights, licenses, permits and franchises relating to its Business or
properties, keep available the services of its officers and employees as a group
and maintain satisfactory relationships with suppliers, distributors, customers
and others having significant business relationships with the Company; (ii)
report on a regular basis to representatives of Buyer regarding operational
matters and the general status of ongoing operations; (iii) not take any action
which would render any representation or warranty made by the Company in this
Agreement untrue at any time prior to the Closing if then made; and (iv) notify
Buyer of any emergency or other change in the normal course of its Business or
in the operation of its properties and of any tax audits, tax claims,
governmental or third party complaints, investigation or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, audit, claim, complaint, investigation or hearing would reasonably be
material, individually or in the aggregate, to the financial condition, results
of operations or Business of the Company, or to the Company's and Buyer's
ability to consummate the transactions contemplated by this Agreement.
3.5 FULL ACCESS. The Sellers will permit, and the Sellers will cause
the Company to permit, representatives of the Buyer to have full access, at all
reasonable times, to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to the
Company.
3.6 NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the others of any material adverse development causing a breach of any of his
or its own representations and warranties contained in Article 2 above. No
disclosure by any Party pursuant to this Section 3.6, however, shall be deemed
to amend or supplement the Company Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
3.7 EMPLOYMENT OF COMPANY EMPLOYEES. Prior to the Closing, the Buyer
will (and Sellers will cause the Company to permit Buyer to) offer continued
employment with the Company following the Closing to all of the individuals that
are employees of the Company immediately prior to the Closing. The Buyer shall
have full and absolute discretion in determining the terms, conditions and
benefits relating to such employment after the Closing; PROVIDED, HOWEVER, that
the terms, conditions and benefits offered to each such employee, in the
aggregate, shall be no less favorable to such employee than the terms,
conditions and benefits applicable to his or her employment, in the aggregate,
immediately prior to the Closing. The Buyer agrees to cause the Company to
maintain,
33
for a period of not less than two (2) years after the Closing, a health
insurance program pursuant to which the Company pays the premium cost for its
employees and their dependents and such employees and dependents are entitled to
participate in a preferred provider organization ("PPO") program (as opposed to
a health maintenance organization or "HMO") program. Nothing contained in this
Section is intended to create any claim or right on the part of any employee of
the Company, and no such employee shall be entitled to assert any such claim or
right as of the Closing Date. In addition, nothing in this Section shall
obligate the Buyer to maintain any bonus or incentive compensation plans
currently sponsored by the Company for the benefit of the Company's employees.
Those Company employees (excluding the Sellers) electing to remain employed by
the Company following the Closing are referred to herein as the "CONTINUING
EMPLOYEES."
3.8 ASSUMPTION OF COMPENSATION OBLIGATIONS. The Buyer will take
appropriate actions to assume the current obligations of the Company under the
compensation arrangements between the Company and each of Xxxxxx Xxxxxxx and
Xxxxxxx Xxxx as described in SECTION 2.3(w) of the Company Disclosure Schedule.
3.9 BONUSES TO COMPANY EMPLOYEES. The Buyer acknowledges and agrees
that the Company will be entitled to pay bonuses (either before or after
Closing) for the fiscal year ended June 30, 1998 (the "EMPLOYEE BONUSES") to its
employees (including Sellers) in any amount and in any combination of cash or
unsecured notes payable as determined by the Company; PROVIDED, HOWEVER, that
the Company's Net Working Capital (as defined in Section 1.10 hereof) shall be
not less than $1,750,000 following the payment of the Employee Bonuses. Buyer
acknowledges that a portion of the Employee Bonuses may be paid after Closing,
after receipt by the Parties of the Working Capital Statement.
3.10 SELLER INDEBTEDNESS AND RECEIVABLES. Immediately prior to Closing,
the Sellers shall cause to be paid in full in cash all accounts payable, notes
payable and advances payable by any Seller to the Company, and the Company shall
pay in full in cash all accounts payable, notes payable (other than notes
payable incident to the Employee Bonuses) and advances payable by the Company to
any Seller.
3.11 EXCLUSIVITY. Prior to the earlier of the termination of this
Agreement or the Closing Date, the Sellers will not (and the Sellers will not
cause or permit the Company or any of its officers, directors, employees,
representatives or agents to) (i) directly or indirectly solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, the Company (including any acquisition
structured as a merger, consolidation, business combination or share exchange or
any joint venture involving the Company) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
3.12 SELLERS RELEASE OF CLAIMS. Effective as of the Closing, each of
the Sellers hereby (i) releases, acquits and forever discharges the Company and
its Subsidiaries from any and all liabilities,
34
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event, occurrence, act, omission or condition occurring
or existing on or prior to the Closing, including, without limitation, any claim
for indemnity or contribution from the Company or any of its Subsidiaries,
except for (A) salary and expense reimbursement payable to the Sellers as an
officer, director or employee in the Ordinary Course of Business, (B) notes
payable incident to the Employee Bonuses, and (C) all benefits (including
interests in Employee Benefit Plans) and fringe benefits to which the Sellers
are entitled; and (ii) waives any and all preemptive or other rights to acquire
any shares of capital stock of the Company and releases any and all claims
arising in connection with any prior default, violation or failure to comply
with or satisfy any such preemptive or other rights.
3.13 CONFIDENTIALITY. The provisions of this Section 3.13 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Until the Closing of the transactions contemplated herein,
all Confidential Information, as hereinafter defined, acquired by Buyer
with respect to the Sellers or the Company, or by the Sellers or the
Company with respect to Buyer, shall be (i) maintained in strict
confidence, (ii) used only for the purpose of and in connection with
evaluating the transactions contemplated herein, and (iii) disclosed
only (A) to employees and duly authorized agents and representatives
who have been informed of the obligations of the parties under this
Agreement with respect to such Confidential Information, who have a
need to know the information in connection with consummating the
transactions contemplated herein, and who agree to keep such
information confidential, or (B) as required by legal process (of which
the other parties shall be given prompt notice). Buyer, the Sellers and
the Company shall be responsible for any breach of this Section by any
of their respective representatives and each agrees to take all
reasonable measures to restrain its representatives from prohibited or
unauthorized disclosure of the Confidential Information. For the
purpose of this Agreement, the term "CONFIDENTIAL INFORMATION" shall
mean all information acquired by any Party from another Party hereto or
its representatives pursuant to Section 3.5 hereof or otherwise with
respect to the business or operations of such other Party, other than
(A) information generally available to the public which has not become
available as a result of disclosure in violation of this Section and
(B) information which becomes available on a nonconfidential basis from
a source other than a Party to this Agreement or its representatives,
provided that such source is not known by the Party to this Agreement
receiving such information to be bound by a confidentiality agreement
or other obligation of secrecy to another Party to this Agreement or
its representatives. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or
other tangible form (whether copies or originals) shall be returned to
the Party of origin, and all documents, memoranda, notes and other
writings whatsoever prepared by any Party or its representatives based
on Confidential Information shall be destroyed; and Buyer and its
representatives will thereafter hold all Confidential Information
concerning the Company or the Sellers in strict confidence.
(b) No press release, public announcement, confirmation or
other information regarding this Agreement or the contents hereof shall
be made by Buyer, the Sellers or the Company without prior consultation
with the Buyer and the Company, except as may be
35
necessary in the opinion of counsel to any Party to meet the
requirements of any applicable law or regulations, the determination of
any court, or the requirements of any stock exchange on which the
securities of such Party may be listed. Prior to the Closing, the Buyer
and the Company shall jointly approve the contents of any press
releases, written employee presentations, or other comparable materials
of potentially wide distribution that disclose or refer to the
transaction contemplated hereby, except for such press releases or
other communications required by law. If the transactions contemplated
herein are not consummated, neither the Buyer nor the Sellers shall
disclose to any third party or publicly announce the proposed
transaction contemplated hereby, except as otherwise permitted
hereinabove and except as agreed in advance, in writing, by the parties
or otherwise required by law, in which case the Party so compelled will
give reasonable written notice in advance to the other parties.
(c) Notwithstanding Sections 3.13(a) or 3.13(b) above, the
Buyer may, subject to Section 3.13(a) above, disclose pertinent
information, including Confidential Information, regarding the
transaction contemplated hereby and the Company to its existing and
prospective investors, lenders or investment bankers or financial
advisors for the purposes of obtaining financing. Buyer may also make
appropriate disclosure as required in connection with any registration
statement or confidential private placement memorandum prepared by the
Buyer.
3.14 REPLACEMENT GUARANTIES. With respect to any loan, letter of credit
or other outstanding obligation of the Company which has been personally
guaranteed by any Seller, Buyer shall, on or before the Closing Date, obtain the
release of such Seller's personal guaranty and, to the extent necessary to
obtain such release, assume such guaranties or replace or refinance such
guaranteed debts, liability and obligations of the Company.
ARTICLE 4.
POST-CLOSING COVENANTS
4.1 GENERAL. If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Article 6 below).
Each of the Sellers acknowledges and agrees that from and after the Closing, the
Buyer will be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to the
Company.
4.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other
36
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Article 6 below).
4.3 TRANSITION. For so long as each Seller remains employed by the
Company, such Seller will not take any action that is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of any of the Company and its subsidiaries from
maintaining the same business relationships with the Company after the Closing
as it maintained with the Company prior to the Closing.
4.4 BUYER OPTIONS. On the Closing Date, the Buyer will grant
nonqualified stock options (the "OPTIONS") to purchase an aggregate of 1,000,000
shares of the Buyer Common Stock at an exercise price of $3.00 per share. The
Options shall be granted among the Continuing Employees (including the Sellers)
as allocated at the sole discretion of the Sellers and as set forth on EXHIBIT
4.4 attached hereto. The Options shall be exercisable during a five-year term,
vesting over a period of three years, with one-third of the Options granted to
each individual vesting at the first, second and third anniversary of the
effective date of this Agreement. The Options shall be granted pursuant to the
terms of the "Geokinetics Inc. 1997 Stock Awards Plan" maintained by the Buyer.
4.5 DISTRIBUTION OF COMPANY PROFIT SHARING PLAN. As soon as practicable
after the Closing, the Buyer shall request the trustee(s) of the Employee
Benefit Plan known as the "Geophysical Development Corporation Profit Sharing
Plan" described in SCHEDULE 2.3(W) of the Company Disclosure Schedule (the "GDC
PROFIT SHARING PLAN") to report on the aggregate value of the assets comprising
the GDC Profit Sharing Plan and the account balance under the GDC Profit Sharing
Plan for each employee of the Company (for each employee, the "INDIVIDUAL
BALANCE"). As soon as administratively feasible after the Closing, the Buyer
shall (a) establish a defined contribution plan which shall be qualified under
Section 401(a) of the Code and (b) thereafter cause the trustee(s) of the GDC
Profit Sharing Plan to either (i) distribute each Individual Balance in a lump
sum cash payment to the employee or (ii) if requested by the employee, transfer
the Individual Balance to such qualified rollover investment (including the
Geokinetics Inc. 401(k) Savings Plan which shall be adopted by the Buyer on or
before the Closing Date) as may be specified by the employee.
4.6 ELIGIBILITY UNDER BENEFIT PLANS. Neither Buyer nor, following the
Closing, the Company shall terminate any health or medical insurance, life
insurance, 401(k) plan or other Employee Benefit Plan (including the GDC Profit
Sharing Plan) in effect with respect to the Company until such time as Buyer
replaces such plan. Any such replacement plan shall give the officers and
employees of the Company full credit, for purposes of eligibility and vesting,
for the period of time each has been employed by the Company prior to the
Closing and for the period of time each is employed by the Company after the
Closing, and all waiting periods and pre-existing condition limitations under
any such replacement plan shall be waived.
4.7 EMPLOYEE BONUS COMPENSATION. On each of the first and second
anniversary of the Closing Date, the Buyer shall pay (or cause the Company to
pay) to each Continuing Employee a
37
non-discretionary bonus payment in an amount equal to 50% of the Continuing
Employee's annual salary as of the Closing Date; PROVIDED, HOWEVER, that if the
Company terminates the employment of any Continuing Employee without Cause (as
defined below) prior to the second anniversary of the Closing Date, the
Continuing Employee shall be entitled to receive the full amount of such bonus
payment that would otherwise have been payable if the Continuing Employee had
remained employed by the Company through the anniversary date immediately
following the effective date of termination. Notwithstanding the foregoing, if
the Company terminates any Continuing Employee's employment with the Company for
Cause, or if the Continuing Employee voluntarily resigns, all rights to receive
the bonus compensation not yet paid to and received by such Continuing Employee
described in the Section shall be forfeited. When used in connection with the
termination of employment with the Company, "CAUSE" shall mean: (i) the
Continuing Employee's failure to adhere to any written Company policy after the
Continuing Employee has been given a reasonable opportunity to comply with such
policy or cure his failure to comply; (ii) the conviction of, or the indictment
for (or its procedural equivalent), or the entering of a guilty plea or plea of
no contest with respect to, a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment; (iii) the
commission by the Continuing Employee of an act of fraud upon the Company or any
of its Affiliates; (iv) the misappropriation (or attempted misappropriation) of
any funds or property of the Company or any of its Affiliates by the Continuing
Employee; (v) the failure by the Continuing Employee to perform duties assigned
to him after reasonable notice and opportunity to cure such performance; (vi)
the engagement by the Continuing Employee in any direct, material conflict of
interest with the Company without compliance with the Company's conflict of
interest policy, if any, then in effect; (vii) the engagement by the Continuing
Employee, without the written approval of the board of directors of the Company,
in any activity that competes with the business of the Company or any of its
Affiliates or that would result in a material injury to the Company or any of
its Affiliates; or (viii) the engagement by the Continuing Employee in any
activity that would constitute a material violation of the provisions of the
Company's or Buyer's xxxxxxx xxxxxxx policy, if any, then in effect. As soon as
practicable after the Closing Date, the Buyer shall (or cause the Company to)
prepare and deliver to each Continuing Employee a written summary of the
provisions of this Section to be executed by the Continuing Employees providing,
among other things, for such Continuing Employee's acknowledgment and acceptance
of the terms and provisions of this Section.
4.8 ASSIGNMENT OF ACCOUNTS RECEIVABLE. Within 180 days after the
Closing Date, Buyer may elect to assign to Sellers any accounts receivable that
were part of the calculation of the Working Capital Adjustment and which remain
uncollected for 120 days or more, and Sellers shall purchase such accounts
receivable from Buyer for cash in the amount of the uncollected face amount,
less any allowance for doubtful accounts reflected in the calculation of Net
Working Capital based on the financial statements of the Company.
4.9 ADDITIONAL CAPITAL CONTRIBUTIONS. During each of the two
twelve-month periods immediately following the Closing Date, the Buyer will make
additional contributions to the capital of the Company in an aggregate amount of
not less than $1,000,000 per twelve-month period (the "ADDITIONAL CAPITAL
CONTRIBUTIONS"). The Buyer shall make the Additional Capital Contributions for
research and development of new Company projects as determined by the board of
directors of the Buyer.
38
4.10 CONFIDENTIALITY. Each of the Sellers will treat and hold as such
all of the Confidential Information and refrain from using any of the
Confidential Information except in connection with this Agreement. In the event
that any of the Sellers is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 4.10. If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller shall use his reasonable best efforts to obtain, at the request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate.
4.11 CERTAIN TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Buyer
shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit
Sellers to review and comment on each such Tax Return described in the
preceding sentence prior to filing. Sellers shall reimburse Buyer for
any Taxes of the Company with respect to such periods within fifteen
(15) days after payment by Buyer or the Company of such Taxes to the
extent such Taxes (i) are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the
face of the Company Financial Statements, and (ii) are calculated based
on the assumption that the entire $1,750,000 in working capital
required by this Agreement to be retained by the Company on the Closing
Date is treated as a deductible expense during the period prior to the
Closing Date.
(b) COOPERATION ON TAX MATTERS.
(i) Buyer, the Company and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Company and Sellers agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the other Party reasonable
written notice prior to transferring, destroying or discarding any such
books and records and, if the
39
other Party so requests, the Company or Sellers, as the case may be,
shall allow the other Party to take possession of such books and
records.
(ii) Buyer and Sellers further agree, upon request,
to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(c) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement,
shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable
law, Buyer will, and will cause its Affiliates to, join in the
execution of any such Tax returns and other documentation.
4.12 COMPLIANCE WITH SECURITIES LAWS. Each Seller agrees that he will
not transfer or dispose of any of the Buyer Common Stock acquired pursuant
hereto other than (i) pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or (ii) pursuant to an
exemption from registration under the Securities Act or applicable state
securities laws; PROVIDED, HOWEVER, that, except for sales pursuant to Rule 144
promulgated under the Securities Act, the Buyer Common Stock shall not be sold
pursuant to this clause (ii) at any time prior to the first anniversary of the
Closing Date unless and until such Seller shall have furnished to the Buyer, at
the expense of such Seller or his transferee, an opinion of counsel, reasonably
satisfactory to the Buyer, to the effect that such transfer may be made without
registration under the Securities Act or applicable state securities laws. Any
certificate representing shares of the Buyer Common Stock shall bear appropriate
legends restricting the sale or other transfer of such Buyer Common Stock in
accordance with applicable federal or state securities or blue sky laws and in
accordance with the provisions of this Section 4.12.
4.13 LISTING. As soon as practicable following the Closing Date, Buyer
shall use its best efforts to cause all shares of Buyer Common Stock issued
pursuant to this Agreement to be listed or authorized for inclusion on each
securities exchange or similar trading system on which securities of Buyer are
then listed or authorized for trading.
ARTICLE 5.
CONDITIONS OF CLOSING
5.1 CONDITIONS OF OBLIGATIONS OF THE BUYER. The obligations of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing are subject to satisfaction of the following conditions:
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(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Section 2.1 and Section 2.3
above shall be true and correct in all material respects at and as of
the Closing Date.
(b) PERFORMANCE OF COVENANTS. The Sellers shall have performed
all obligations and agreements and complied with all of their covenants
in this Agreement in all material respects at or before the Closing.
(c) APPROVALS. The Sellers and/or the Company shall provide
evidence, satisfactory to Buyer, that there have been obtained all
consents, approvals and authorizations required for the consummation by
the Sellers of the transactions contemplated by this Agreement.
(d) LEGAL ACTIONS OR PROCEEDINGS. No action, suit, or
proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect adversely
the right of the Buyer to own the Acquired Shares and to control the
Company, or (D) affect adversely the right of the Company to own its
assets and to operate the Business (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect).
(e) CLOSING CERTIFICATE. The Sellers shall have delivered to
the Buyer a certificate dated as of the Closing Date and executed by
each of the Sellers and the President of the Company to the effect that
each of the conditions specified above in Sections 5.1(a) to 5.1(d) is
satisfied in all respects.
(f) EMPLOYMENT AGREEMENTS. The Employment Agreements attached
hereto as Exhibits 5.1(f)(1), 5.1(f)(2) and 5.1(f)(3) shall have been
executed by the Company and each of the individuals specified therein.
(g) REGISTRATION RIGHTS AGREEMENT. The Sellers shall have
executed and delivered the Registration Rights Agreement substantially
in the form attached as EXHIBIT 1.4 hereto.
(h) CONTRIBUTIONS TO GDC PROFIT SHARING PLAN. The Company
shall have either (i) made its contributions to the GDC Profit Sharing
Plan (in an aggregate amount of not less than $300,000 and not more
than $500,000) and paid its bonuses to employees (other than the
Sellers) (in an aggregate amount of not less than $550,000 and not more
than $750,000) for its fiscal year ending June 30, 1998 or (ii) shall
have accrued any unpaid contributions or bonuses on the Company's
balance sheet from which the Working Capital Adjustment is to be
calculated.
(i) TERMINATION OF STOCK REDEMPTION AGREEMENT. The Sellers
shall have produced evidence to the satisfaction of the Buyer that all
the stock redemption agreements by and
41
among the Company and its current or former shareholders have been
terminated in their entirety and are without legal effect as of the
Closing Date.
(j) DUE DILIGENCE SATISFACTORY. The Buyer's due diligence
investigation of the Company as contemplated by Section 3.5 hereof
shall have been completed to the satisfaction of Buyer, no later than
fifteen (15) days after the date of this Agreement.
(k) OPINION OF COUNSEL TO SELLERS. Buyer shall have received
the favorable opinion of Xxxxxx & Xxxxxxxx, P.C., counsel for the
Company and the Sellers, dated the Closing Date, substantially in the
form and to the effect set forth in EXHIBIT 5.1(K) hereto.
(l) ALL PROCEEDINGS SATISFACTORY. All necessary director and
shareholders resolutions, waivers and consents and all other actions to
be taken by the Sellers and the Company in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to the
Buyer and its counsel.
The Buyer may waive any condition specified in this Section 5.1 if it executes a
writing so stating at or prior to the Closing.
5.2 CONDITIONS OF OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing are subject to satisfaction of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Section 2.2 above shall be
true and correct in all material respects at and as of the Closing
Date.
(b) PERFORMANCE OF COVENANTS. The Buyer shall have performed
all obligations and agreements and complied with all of its covenants
in this Agreement in all material respects at or before the Closing.
(c) APPROVALS. The Buyer shall provide evidence, satisfactory
to Sellers and/or the Company that there have been obtained all
consents, approvals and authorizations required for the consummation by
Buyer of the transactions contemplated by this Agreement.
(d) CLOSING CERTIFICATE. The Buyer shall have delivered to the
Sellers a certificate dated as of the Closing Date and executed by the
Buyer to the effect that each of the conditions specified above in
Sections 5.2(a), 5.2(b) and 5.2(c) is satisfied in all respects.
(e) EMPLOYMENT AGREEMENTS. The Employment Agreements attached
hereto as Exhibits 5.1(f)(1), 5.1(f)(2) and 5.1(f)(3) shall have been
executed by the Company and each of the individuals specified therein.
42
(f) REGISTRATION RIGHTS AGREEMENT. The Buyer shall have
executed and delivered the Registration Rights Agreement substantially
in the form attached as EXHIBIT 1.4 hereto.
(g) OPINION OF COUNSEL TO BUYER. The Sellers shall have
received the favorable opinion of Xxxxxxxxxxx Xxxxxxxx White Xxxxxxxx &
Xxxxxx, counsel for the Buyer, dated the Closing Date, substantially in
the form and to the effect set forth in EXHIBIT 5.2(G) hereto.
(h) ALL PROCEEDINGS SATISFACTORY. All actions to be taken by
the Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to the Sellers, the Company
and their counsel.
The Sellers may waive any condition specified in this Section 5.2 if they
execute a writing so stating at or prior to the Closing.
ARTICLE 6.
REMEDIES FOR BREACHES OF AGREEMENT
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement and
the other documents, instruments and agreements contemplated hereby shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two (2) years thereafter,
except for representations regarding Company's Tax Liabilities, which
representations will expire and be terminated on the date of expiration of the
statute of limitations for collection of such Tax Liability in question.
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER. Subject to the
provisions of Sections 6.1 and 6.4, Xx. Xxxxxxxx, severally but not jointly, and
the remaining Sellers, jointly and severally, shall indemnify, save and hold
harmless the Buyer and its officers, directors, employees, representatives,
agents, advisors and consultants and all of their respective heirs, legal
representatives, successors and assigns (collectively, the "BUYER INDEMNIFIED
PARTIES") from and against any and all Adverse Consequences arising from, out of
or in any manner connected with or based on:
(a) the breach of any covenant of any Seller or the Company or
the failure by any Seller or the Company to perform in any material
respects any obligation of a Seller or the Company contained herein,
the Company Disclosure Schedule, or any certificate, document or
agreement delivered by the Sellers or the Company pursuant to this
Agreement;
(b) any inaccuracy in or breach of any representation or
warranty of any Seller or the Company contained herein, the Company
Disclosure Schedule, or any certificate, document or agreement
delivered by the Sellers or the Company pursuant to this Agreement; or
43
(c) any act, omission, occurrence, event, condition or
circumstance occurring or existing at any time on or before the Closing
Date and involving or related to the assets, properties, business or
operations now or previously owned or operated by the Company and not
(A) disclosed in the Company Disclosure Schedule or (B) disclosed in
the Company Financial Statements.
The foregoing indemnities shall not limit or otherwise adversely affect the
Seller Indemnified Parties' rights of indemnity for Adverse Consequences under
Section 6.3.
6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. Subject to
the provisions of Sections 6.1 and 6.4, the Buyer shall indemnify, save and hold
harmless the Sellers and the Sellers' heirs, legal representatives, agents,
advisors, consultants, successors and assigns (collectively the "SELLER
INDEMNIFIED PARTIES") from and against all Adverse Consequences arising from,
out of or in any manner connected with or based on:
(a) the breach of any covenant of the Buyer or the failure by
the Buyer to perform any obligation of Buyer contained herein or any
certificate, document or agreement delivered by the Buyer pursuant to
this Agreement;
(b) any inaccuracy in or breach of any representation or
warranty of the Buyer contained herein or any certificate, document or
agreement delivered by the Buyer pursuant to this Agreement;
The foregoing indemnities shall not limit or otherwise adversely affect the
Buyer Indemnified Parties' rights of indemnity for Adverse Consequences under
Section 6.2.
6.4 INDEMNIFICATION LIMITATIONS. Notwithstanding the foregoing to the
contrary, (i) none of the Sellers shall be required to indemnify the Buyer
Indemnified Parties from any Adverse Consequences pursuant to Section 6.2 until
any of the Buyer Indemnified Parties has suffered Adverse Consequences in excess
of a $50,000 aggregate threshold (at which point the Sellers will be obligated
to indemnify the Buyer from and against all such Adverse Consequences in excess
of $50,000); (ii) the aggregate liability of the Sellers to the Buyer pursuant
to this Article 6 shall be limited to 50% of the Base Consideration; (iii) the
liability of each Seller to the Buyer, pursuant to this Article 6 shall be
limited to such Seller's proportionate share of 50% of the Base Consideration,
and (iv) in no event shall any recovery under this Agreement include the loss of
anticipated profits, cost of money, loss of use of revenue, or any special,
incidental or consequential losses or damages of any nature arising at any time
or from any cause whatsoever, including lost profits or revenue, lost savings,
diminution in value, loss of managerial time, business interruption or other
lost opportunity.
6.5 INDEMNIFICATION PROCEDURES.
(a) NOTICE. The Party (the "INDEMNIFIED PARTY") that may be
entitled to indemnity hereunder shall give prompt notice to the Party
obligated to give indemnity hereunder (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought hereunder. Any
failure on the
44
part of any Indemnified Party to give the notice described in this
Section 6.5 shall relieve the Indemnifying Party of its obligations
under this Article 6 only to the extent that such Indemnifying Party
has been prejudiced by the lack of timely and adequate notice (except
that the Indemnifying Party shall not be liable for any expenses
incurred by the Indemnified Party during the period in which the
Indemnified Party failed to give such notice). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, promptly
(and in any event within 10 days thereof) after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to such claim,
action, suit or proceeding.
(b) LEGAL DEFENSE. The Indemnifying Party shall be responsible
for the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder,
provided that (i) the Indemnified Party shall at all times have the
right, at their option, to participate fully therein, and (ii) if the
Indemnified Party does not proceed diligently to defend the third-party
claim, suit, action or proceeding within 10 days after receipt of
notice of such third-party claim, suit, action or proceeding, the
Indemnifying Party shall have the right, but not the obligation, to
undertake the defense of any such third-party claim, suit, action or
proceeding.
(c) SETTLEMENT. The Indemnifying Party shall not be required
to indemnify the Indemnified Party with respect to any amounts paid in
settlement of any third-party suit, action, proceeding or investigation
entered into without the written consent of the Indemnifying Party;
PROVIDED, HOWEVER, that if the Indemnified Party is a Buyer Indemnified
Party, such third-party claim, suit, action, proceeding or
investigation may be settled without the consent of the Indemnifying
Party on 10 days' prior written notice to the Indemnifying Party if
such third-party suit, action, proceeding or investigation is then
unreasonably interfering with the business or operations of the Company
and the settlement is commercially reasonable under the circumstances;
and PROVIDED FURTHER, that if the Indemnifying Party gives 10 days'
prior written notice to the Indemnified Party of a settlement offer
which the Indemnifying Party desires to accept and to pay all Adverse
Consequences with respect thereto ("SETTLEMENT NOTICE") and the
Indemnified Party fails or refuses to consent to such settlement within
10 days after delivery of the Settlement Notice to the Indemnified
Party, and such settlement otherwise complies with the provisions of
this Section 6.5 the Indemnifying Party shall not be liable for Adverse
Consequences arising from such third-party claim, suit, action,
proceeding or investigation in excess of the amount proposed in such
settlement offer. Notwithstanding the foregoing, no Indemnifying Party
will consent to the entry of any judgment or enter into any settlement
without the consent of the Indemnified Party, if such judgment or
settlement imposes any obligation or liability upon the Indemnified
Party other than the execution, delivery or approval thereof and
customary releases of claims with respect to the subject matter
thereof.
(d) COOPERATION. The Parties shall cooperate in defending any
such third-party claim, suit, action, proceeding or investigation, and
the defending party shall have reasonable access to the books and
records, and personnel in the possession or control of the Indemnified
Party that are pertinent to the defense. The Indemnified Party may join
the Indemnifying
45
Party in any suit, action, claim or proceeding brought by a third
party, as to which any right of indemnity created by this Agreement
would or might apply, for the purpose of enforcing any right of the
indemnity granted to such Indemnified Party pursuant to this Agreement.
6.6 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions constitute the exclusive method for compensating the other Parties
for, or indemnifying the other Parties against, claims relating to the
transactions contemplated by this Agreement.
ARTICLE 7.
MISCELLANEOUS
7.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(a) the Buyer and the Requisite Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of ten (10) days after the notice
of breach or (B) if the Closing shall not have occurred on or before
April 30, 1998, by reason of the failure of any condition precedent
under Section 5.1 above (unless the failure results from the Buyer
itself breaching any representation, warranty, or covenant contained in
this Agreement); and
(c) the Requisite Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Requisite Sellers have notified the Buyer of the breach,
and the breach has continued without cure for a period of ten (10) days
after the notice of breach or (B) if the Closing shall not have
occurred on or before April 30, 1998, by reason of the failure of any
condition precedent under Section 5.2 hereof (unless the failure
results from any of the Sellers or the Company breaching any
representation, warranty, or covenant contained in this Agreement).
7.2 EFFECT OF TERMINATION. Subject to the provisions of Section 1.5
hereof and the Escrow Agreement, if any Party terminates this Agreement pursuant
to Section 7.1 above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
7.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
46
7.4 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof including, without limitation, the Letter of Intent.
7.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller; PROVIDED, HOWEVER, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
7.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.7 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.8 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO THE SELLERS OR THE COMPANY: c/o Geophysical Development Corporation
--------------------------------
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, N. Xxxxx
Xxxxxxxxx, Xxxxxxxx X. Xxxxx, and
Xxxx X. X. Xxxxxxxx
Copy to: Xxxxxx & Xxxxxxxx, P.C.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
IF TO BUYER: Geokinetics Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxx X. Xxxxx
47
Copy to: Chamberlain, Hrdlicka, White,
Xxxxxxxx & Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Spring, III
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any jurisdiction other than the State of Texas.
7.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresen tation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
7.12 EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
7.13 CONSTRUCTION. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
48
7.14 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
7.15 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in Section 7.16
below), in addition to any other remedy to which they may be entitled, at law or
in equity.
7.16 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any federal or state court sitting in Houston, Texas, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Each Party appoints Xxxxxx & Xxxxxxxx, P.C. (the
"PROCESS AGENT") as his or its agent to receive on his or its behalf service of
copies of the summons and complaint and any other process that might be served
in the action or proceeding. Any Party may make service on any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 7.8
above. Nothing in this Section 7.16, however, shall affect the right of any
Party to serve legal process in any other manner permitted by law or at equity.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
7.17 JOINDER OF SPOUSE. The spouse of certain of the Sellers is
executing this Agreement to acknowledge its fairness and that it is in such
spouse's best interests to bind such spouse's community property interest, if
any, to the terms of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
GEOKINETICS INC.
_______________________________
XXXXXXX X. XXXX, VICE PRESIDENT
49
SELLERS:
_____________________________________
XXXX X. XXXXXXXXX (INDIVIDUALLY)
____________________________
SPOUSE (IF APPLICABLE)
NAME: XXXXXXXX X. XXXXXXXXX
_____________________________________
N. XXXXX XXXXXXXXX (INDIVIDUALLY)
____________________________
SPOUSE (IF APPLICABLE)
NAME: XXXXXXX XXXXXXXXX
_____________________________________
XXXXXXXX X. XXXXX (INDIVIDUALLY)
_____________________________________
XXXX X.X. XXXXXXXX (INDIVIDUALLY)
COMPANY:
GEOPHYSICAL DEVELOPMENT
CORPORATION
_____________________________________
XXXXXXXX X. XXXXX, PRESIDENT
50
EXHIBIT 1.3
(TO STOCK PURCHASE AGREEMENT)
ALLOCATION OF PURCHASE PRICE
BASE CONSIDERATION NO. OF SHARES
XXXX X. XXXXXXXXX $7,800,000 300,000
N. XXXXX XXXXXXXXX $2,600,000 100,000
XXXXXXXX X XXXXX $7,800,000 300,000
XXXX X. X. XXXXXXXX $7,800,000 300,000
EXHIBIT 1.4
(TO STOCK PURCHASE AGREEMENT)
REGISTRATION RIGHTS AGREEMENT
EXHIBIT 1.5
(TO STOCK PURCHASE AGREEMENT)
ESCROW AGREEMENT
EXHIBIT 2.1(d)
(TO STOCK PURCHASE AGREEMENT)
ACQUIRED SHARES
NO. OF SHARES OWNED
Xxxx X. Xxxxxxxxx 2,025
N. Xxxxx Xxxxxxxxx 000
Xxxxxxxx X. Xxxxx 2,025
Xxxx X. X. Xxxxxxxx 2,025
EXHIBIT 4.4
(TO STOCK PURCHASE AGREEMENT)
BUYER OPTIONS
EXHIBIT 5.1(f)(1)
(TO STOCK PURCHASE AGREEMENT)
XXXXXXXXX EMPLOYMENT AGREEMENT
EXHIBIT 5.1(f)(2)
(TO STOCK PURCHASE AGREEMENT)
XXXXXXXXX EMPLOYMENT AGREEMENT
EXHIBIT 5.1(f)(3)
(TO STOCK PURCHASE AGREEMENT)
NEALE EMPLOYMENT AGREEMENT
EXHIBIT 5.1(i)
(TO STOCK PURCHASE AGREEMENT)
REGISTRATION RIGHTS AGREEMENT
EXHIBIT 5.1(k)
(TO STOCK PURCHASE AGREEMENT)
OPINION OF COUNSEL TO SELLERS
EXHIBIT 5.2(g)
(TO STOCK PURCHASE AGREEMENT)
OPINION OF COUNSEL TO BUYER
GEOPHYSICAL DEVELOPMENT CORPORATION
DISCLOSURE SCHEDULE
