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TENDER OFFER AGREEMENT
BETWEEN
GAP CAPITAL, L.L.C.
AND
XXXXXX ENVIRONMENTAL SERVICES, INC.
June 4, 1999
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TENDER OFFER AGREEMENT
TABLE OF CONTENTS
ARTICLE I
THE TENDER OFFER
1.1 THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . -2-
1.2 COMPANY ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . -4-
1.3 BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . -6-
ARTICLE II
[RESERVED]
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . -7-
3.2 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . -7-
3.3 AUTHORIZED CAPITAL . . . . . . . . . . . . . . . . . . . . . . -8-
3.4 CORPORATE AUTHORIZATION. . . . . . . . . . . . . . . . . . . . -8-
3.5 APPROVALS: NO VIOLATIONS. . . . . . . . . . . . . . . . . . . -9-
3.6 SEC FILINGS FINANCIAL STATEMENTS . . . . . . . . . . . . . . . -9-
3.7 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . -10-
3.8 COMPLIANCE WITH APPLICABLE LAW . . . . . . . . . . . . . . . . -11-
3.9 TERMINATION, SEVERANCE, AND EMPLOYMENT AGREEMENTS. . . . . . . -11-
3.10 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . -12-
3.11 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.12 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.13 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . -13-
3.14 VOTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . -15-
3.15 FINDERS AND INVESTMENT BANKERS, TRANSACTION EXPENSES . . . . . -15-
3.16 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.17 TITLE TO PROPERTIES: ENTIRE BUSINESS. . . . . . . . . . . . . -15-
3.18 INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . . -16-
3.19 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.20 YEAR 2000 COMPLIANCE . . . . . . . . . . . . . . . . . . . . . -16-
3.21 CERTAIN MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . -16-
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
4.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . -17-
4.2 ENTITY AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . -17-
4.3 APPROVALS NO VIOLATIONS. . . . . . . . . . . . . . . . . . . . -18-
4.4 NO PRIOR ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . -18-
4.5 INFORMATION SUPPLIED . . . . . . . . . . . . . . . . . . . . . -18-
4.6 FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY . . . . . . . . . . . . . . -19-
5.2 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.3 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.4 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . -22-
5.5 NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . -22-
5.6 ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . . -23-
5.7 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . -24-
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION . . . . . . . . . . . -24-
5.9 EMPLOYEE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . -24-
5.10 OTHER ACTIONS BY THE COMPANY . . . . . . . . . . . . . . . . . -24-
ARTICLE VI
[RESERVED]
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . -25-
7.2 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . -27-
7.3 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . -27-
7.4 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
7.5 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
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ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. . . . -28-
8.2 BROKERAGE FEES AND COMMISSIONS . . . . . . . . . . . . . . . . -29-
8.3 ENTIRE ASSIGNMENT; ASSIGNMENT. . . . . . . . . . . . . . . . . -29-
8.4 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . -29-
8.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
8.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . -31-
8.7 SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . . . . -31-
8.8 OTHER POTENTIAL BIDDERS. . . . . . . . . . . . . . . . . . . . -31-
8.9 DESCRIPTIVE HEADINGS, REFERENCES . . . . . . . . . . . . . . . -32-
8.10 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . . . . -32-
8.11 BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . -32-
8.12 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . -33-
8.13 OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . -33-
8.14 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . -33-
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TENDER OFFER AGREEMENT
TENDER OFFER AGREEMENT, (the "AGREEMENT") dated as of June 4, 1999, by
and among GAP Capital, L.L.C., a Texas limited liability company (the
"PURCHASER"), and Xxxxxx Environmental Services, Inc., a Delaware corporation
(the "COMPANY").
RECITALS
A. The sole Manager of the Purchaser and the Board of Directors of
the Company have unanimously determined that it is in the best interests of
the securityholders of their respective companies for the Purchaser to
acquire at least 2,577,295 shares of the Class A common stock, par value $.01
per share, of the Company (the "CLASS A COMMON STOCK").
B. To induce the Purchaser to enter into this Agreement,
simultaneously with the execution and delivery of this Agreement, the Company
has issued to the Purchaser a Warrant, dated as of the date hereof (the
"WARRANT"), pursuant to which the Company has granted to the Purchaser an
option to acquire shares of the Class A Common Stock and shares of the Class
B Common Stock (as herein defined) upon the occurrence of certain events and
in accordance with certain terms and conditions set forth in the Warrant.
C. To further induce the Purchaser to enter into this Agreement,
certain holders of the Class B Common Stock of the Company have entered into
Lockup and Voting Agreements (as hereinafter defined), with the Purchaser
pursuant to which such stockholders have agreed to vote their Class A/B
Shares (as hereinafter defined) in favor of a 50,000 to 1 reverse stock split
of the Class A Common Stock and the Class B Common Stock (the "REVERSE
SPLIT") in the event such a Reverse Split is to be voted on or otherwise
approved at a meeting of holders of Class A Common Stock or Class B Common
Stock (or by written consent in lieu thereof).
D. The Board of Directors of the Company has approved this Agreement
and the acquisition of shares of the Company pursuant to the Warrant in
accordance with the Delaware General Corporation Law (the "DGCL"). The Board
of Directors of the Company has reviewed the Lock-Up and Voting Agreement and
has approved the Company's abiding by Section 4 thereof.
THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which all parties hereby acknowledge, the parties
agree as follows:
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ARTICLE I
THE TENDER OFFER
1.1 THE TENDER OFFER.
(a) Provided that this Agreement has not been terminated in
accordance with ARTICLE VII and none of the events referred to in ANNEX A
(other than the events referred to in clauses (i) through (ii) of the second
paragraph of ANNEX A and clause (j) of ANNEX A) has occurred or is existing,
within five business days of the date of this Agreement, the Purchaser will
commence a tender offer (the "OFFER"), subject to the Minimum Condition
described below, to purchase a total of at least 2,662,975 shares of Class A
Common Stock (which will represent not less than 51% of the outstanding
shares of Class A Common Stock on a fully diluted basis, taking into account
the convertibility of the Class B common stock, par value $.01 per share of
the Company (the "CLASS B COMMON STOCK") that is not subject to the Lock-Up
and Voting Agreement described in SECTION 1.2(b)) at a price of $.20 per
share of Class A Common Stock (each share of Class A Common Stock being a
"CLASS A SHARE"; each share of Class B Common Stock being a "CLASS B SHARE";
and the Class A Shares and Class B Shares being collectively referred to as
the "CLASS A/B SHARES") (as such amount may be increased in accordance with
the terms of this Agreement, the "PER SHARE AMOUNT") net to the seller in
cash. The Purchaser agrees to accept for payment a total of at least
2,662,975 Class A Shares validly tendered pursuant to the Offer as soon as
legally permissible, and to pay for all such Class A Shares as promptly as
practicable, upon the terms and subject to the conditions of the Offer, as it
may be revised as permitted by this Agreement. The obligation of Purchaser
to commence the Offer will be subject only to the conditions set forth in
ANNEX A, and the obligation of Purchaser to accept for payment, purchase, and
pay for the Class A Shares tendered pursuant to the Offer will be subject to
such conditions and to the further condition that each of (i) 2,662,975
Class A Shares have been validly tendered and not withdrawn prior to the
expiration date of the Offer, (ii) the Class A Common Stock shall be held of
record by fewer than 300 persons and (iii) the Company shall have filed with
the Securities and Exchange Commission (the "SEC") and not withdrawn a Form
15 deregistering the Company's Class A Common Stock (the "FORM 15")
(collectively, the "MINIMUM CONDITION"). If the Minimum Condition is not
satisfied on any Expiration Date of the Offer, the Purchaser may, in
Purchaser's discretion, extend the Offer for a period or periods not to
exceed, in the aggregate ten business days. The Purchaser specifically
reserves the right to increase the price per share payable in the Offer, to
extend the expiration date of the Offer (unless, after August 1, 1999, all
conditions to the Offer listed on ANNEX A are fulfilled), and to make any
other changes in the terms and conditions of the Offer (provided that, unless
previously approved by the Company in writing, no change may be made that
decreases the price per Class A Share payable in the Offer, that changes the
form of consideration to be paid in the Offer, that reduces the minimum
number of Class A Shares to be purchased in the Offer, that imposes
conditions to the Offer in addition to those set forth in ANNEX A, or that
broadens the scope of such conditions). Notwithstanding the foregoing,
Purchaser (i) shall extend the Offer for any
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period required by any rule, regulation or interpretation of the SEC or the
staff thereof applicable to the Offer, and (ii) may, without the consent of
the Company, extend the Offer for an aggregate period of not more than ten
business days beyond the latest applicable date that would otherwise be
permitted under clause (i) of this sentence if, as of such date, all of the
offer conditions are satisfied or waived by Purchaser, but the number of
Shares validly tendered and not withdrawn pursuant to the Offer is less than
90% of the then outstanding Class A Shares on a fully diluted basis. The
parties agree that the conditions set forth in ANNEX A are for the sole
benefit of the Purchaser and may be asserted by the Purchaser regardless of
the circumstances giving rise to any such condition (including any action or
inaction by the Purchaser) or may be waived by the Purchaser, in whole or in
part, at any time and from time to time, in its sole discretion. The failure
by the Purchaser at any time to exercise any of the foregoing rights will not
be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances will not be deemed a waiver
with respect to other facts or circumstances, and each such right will be
deemed an ongoing right that may be asserted at any time and from time to
time. Any good faith determination by the Purchaser that is not demonstrated
to be unreasonable with respect to any of the foregoing conditions
(including, without limitation, the satisfaction of such conditions) will be
final and binding on all parties. The Per Share Amount will be paid net to
the seller in cash, less any required withholding taxes, on the terms and
subject to the conditions of the Offer. The Company agrees that no Class A/B
Shares held by the Company or any of its subsidiaries will be tendered in the
Offer. The Company hereby consents to the Offer and represents that (a) its
Board of Directors, at a meeting duly called and held (i) determined at such
time that the Offer is fair to the Company and its stockholders and in the
best interests of the holders of the Class A Shares; (ii) resolved at such
time to recommend acceptance of the Offer and approval and adoption of this
Agreement and the transactions contemplated by this Agreement by the
stockholders of the Company prior to such purchase; and (iii) irrevocably
approved of the Offer, this Agreement, and the transactions contemplated by
this Agreement in accordance with the DGCL and any other state or federal
statute, regulation, or rule that the Purchaser has identified, or that is
known after reasonable inquiry, to the Company requiring prior approval by
the Board of Directors of the Company of this Agreement, the Offer, or the
other transactions contemplated by this Agreement and (b) Xxxxxx, Xxxx &
Xxxxxxxx, the Company's financial advisor (the "ADVISOR"), has delivered to
the Board of Directors of the Company its opinion that, subject to the
limitations and qualifications set forth in such opinion, the Per Share
Amount is fair from a financial point of view to the holders of the Class A
Shares.
(b) As promptly as practicable on the date of the
commencement of the Offer, the Purchaser will file with the SEC a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which will
(i) reflect the execution and delivery of this Agreement; (ii) set forth the
Offer as provided for in this Agreement; and (iii) contain or incorporate by
reference a form of letter of transmittal and summary advertisement.
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(c) The Purchaser will promptly disseminate the offer to
purchase referred to in SECTION 1.1(b) (as amended pursuant to this
Agreement, the "OFFER TO PURCHASE" and, collectively with all other schedules
and exhibits required to be filed with the SEC, the "OFFER DOCUMENTS") to the
holders of the Class A/B Shares, reflecting the terms set forth in this
Agreement. The Offer Documents will contain the recommendation of the Board
of Directors of the Company that the holders of the Class A Shares accept the
Offer as described in SECTION 1.1(a) and may make reference to the opinion of
the Advisor referred to in SECTION 1.1(a) and include or incorporate such
opinion. The Purchaser and the Company, with respect to written information
supplied by the Company specifically for use in the Offer Documents or based
upon information pertaining to the Company in the Company Reports (as defined
in SECTION 3.6), agree promptly to correct any information in the Offer
Documents that becomes false or misleading in any material respect. Subject
to SECTION 1.2(b), the Purchaser further agrees to take all steps to cause
the Offer Documents to be disseminated to the holders of Class A/B Shares, as
and to the extent required by applicable law. The Company and its counsel
will be given an opportunity to review and comment on the Offer Documents
prior to their being filed with the SEC. The Purchaser will promptly provide
to the Company any written comments they receive from the SEC with respect to
the Offer Documents.
1.2 COMPANY ACTIONS.
(a) The Company hereby agrees to file with the SEC as soon as
practicable on the date of commencement of the Offer, and promptly mail to
its stockholders, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all schedules, amendments, and supplements, the "SCHEDULE 14D-9")
containing the recommendations of the Board of Directors of the Company
referred to in SECTION 1.2 (subject to the right of the Board of Directors of
the Company to withdraw such recommendations if it is obligated to do so by
its fiduciary obligations under applicable law) and the opinion of the
Advisor referred to in SECTION 1.1(a). The Purchaser and its counsel will be
given an opportunity to review and comment on the Schedule 14D-9 prior to its
being filed with the SEC. The Company will promptly provide to the Purchaser
any written comments it receives from the SEC with respect to the
Schedule 14D-9. The Company hereby further agrees to file with the SEC as
soon as practicable on the date of commencement of the Offer the Form 15.
(b) The Company has been advised that the persons named on
ANNEX B-1 have entered into Lockup and Voting Agreements in the form of
ANNEX B-2 (the "LOCKUP AND VOTING AGREEMENTS"). The Schedule 14D-9, at the
time it is first published, disseminated, or mailed to the stockholders of
the Company, will 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 therein not misleading. The Company agrees
promptly to take all steps necessary to cause the Schedule 14D-9 to be
corrected to the extent requested by the Purchaser to reflect any change in
information concerning the Purchaser, or the Offer, and, as corrected, to be
filed with the SEC and disseminated to the stockholders of the Company, as
and to the extent required by applicable law.
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(c) In connection with the Offer, the Company will promptly
furnish the Purchaser with mailing labels, security position listings, and
any available listing or computer files containing the names and addresses of
the record holders of Class A/B Shares as of the most recent practicable date
and will furnish the Purchaser with such information and assistance
(including updated lists of security position listings and listing or
computer files) as the Purchaser or its agents may reasonably request in
order to communicate the Offer to the record and beneficial holders of Class
A/B Shares. Subject to applicable law and except for such steps as are
necessary to disseminate the Offer Documents, the Purchaser and its
affiliates will hold in confidence the information contained in any such
labels, listings, and files, will use such information only in connection
with the Offer and the transactions contemplated by this Agreement, and, if
this Agreement is terminated, will deliver to the Company all copies of such
information in its possession.
1.3 BOARD OF DIRECTORS. Effective upon the payment by the Purchaser
for Class A Shares pursuant to the Offer, the Purchaser will be entitled to
designate the following number of directors of the Company: (a) in the event
the Purchaser has purchased any Class A Shares pursuant to the Offer, but
less than 51% of the outstanding Class A/B Shares on a fully diluted basis,
taking into account the convertibility of the Class B Shares that are not
subject to the Lock-Up and Voting Agreement, the Purchaser shall be entitled
to designate one director less than the number of directors on the Board of
Directors immediately prior to such designation (e.g. if there are two
directors serving immediately prior to such designation, the Purchaser shall
be entitled to designate a third director), and (b) in the event the
Purchaser has purchased Class A/B Shares pursuant to the Offer in excess of
the amount described in SECTION 1.3(a) above, the Purchaser shall be entitled
to designate the least number of directors necessary to constitute, once
designated, a majority of the Board of Directors. The Company will at such
time cause the designees of the Purchaser to be elected to or appointed by
the Board of Directors, including, without limitation, increasing the number
of directors, amending its bylaw using its reasonable best efforts to obtain
resignations of incumbent directors, and, to the extent necessary, filing
with the SEC and mailing to its stockholders the information required by
Section 14(f) of the Exchange Act and the rules promulgated thereunder, as
promptly as possible. The Purchaser will supply any information with respect
to themselves and their respective nominees, officers, directors, and
affiliates required by Section 14(f) of the Exchange Act and such rules to
the Company. Upon written request by the Purchaser, the Company will use its
reasonable best efforts to cause the designees of the Purchaser to constitute
the same percentage of representation as is on the Board of Directors after
giving effect to this SECTION 1.3 on (i) each committee of the Board of
Directors; (ii) the board of directors of each subsidiary of the Company; and
(iii) each committee of such subsidiaries' boards of directors.
ARTICLE II
[RESERVED]
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority and any
necessary governmental authority to own, operate, and lease its properties
and assets and to carry on its business as it is now being conducted, except
for failures to have such power and authority as could not reasonably be
expected to result in a Company Material Adverse Effect (as defined below).
The Company is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of its properties owned or
leased or the nature of its activities makes such qualification or licensing
necessary, except for failures to be so qualified or licensed and in good
standing as could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect. Copies of the
Certificate of Incorporation and Bylaws of the Company, including all
amendments, have been delivered to the Purchaser and such copies are accurate
and complete. The Certificate of Incorporation and Bylaws of the Company are
in full force and effect and, except as disclosed on SCHEDULE 3.1, the
Company is not in default of the performance, observation, or fulfillment of
any provision of its Certificate of Incorporation or Bylaws. For the
purposes of this Agreement, "COMPANY MATERIAL ADVERSE EFFECT" means any
change or effect that, individually or when taken together with all such
other changes or effects, could reasonably be expected to be materially
adverse to the condition (financial or other), business, operations,
properties assets, liabilities, prospects, or results of operations of the
Company and its subsidiaries, taken as a whole.
3.2 SUBSIDIARIES. The Company is, directly or indirectly, the record
and beneficial owner of all the outstanding shares of capital stock of each
of its subsidiaries (other than directors' qualifying shares), there are no
proxies or voting agreements with respect to any such shares, and no equity
security of any of its subsidiaries is or may become required to be issued by
reason of any options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any
subsidiary, and there are no contracts, commitments, understandings, or
arrangements by which any subsidiary is bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for such
shares. All such shares directly or indirectly owned by the Company are
owned by the Company or a wholly owned subsidiary, free and clear of any
claim, lien, encumbrance, or agreement. Each subsidiary of the Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and has the requisite corporate
power and authority and any necessary governmental authority to own, operate,
or lease its properties and assets and to carry on its business as it is now
being conducted, except for failures as could not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect. Each subsidiary of the Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction where the character of
its properties owned or
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leased or the nature of its activities makes such qualification or licensing
necessary, except for failures to be so qualified, licensed, or in good
standing as could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect. Copies of the
charter documents, bylaws, or equivalent organizational documents of each
subsidiary of the Company have been delivered to the Purchaser and are
accurate and complete. Neither the Company nor any subsidiary of the Company
(a) beneficially owns any equity interests in any entities that are not
subsidiaries of the Company or (b) is party to any joint venture,
partnership, or similar arrangement.
3.3 AUTHORIZED CAPITAL. The authorized capital stock of the Company
consists solely of (i) 15,000,000 shares of Class A Common Stock, par value
$.01 per share, of which 4,259,650 shares were outstanding as of the date of
this Agreement; (ii) 10,000,000 shares of Class B Common Stock, par value
$.01 per share, of which 4,575,643 shares were outstanding as of the date of
this Agreement and (iii) 2,000,000 shares of preferred stock, par value $.01
per share, of which no shares are outstanding as of the date of this
Agreement. All of the outstanding shares of capital stock of the Company
have been duly authorized and are validly issued, fully paid, nonassessable,
and free of preemptive rights. SCHEDULE 3.3 lists each outstanding stock
option of the Company (the "EMPLOYEE OPTIONS"), the number of shares
(designated by class) covered by such Employee Options, the exercise prices,
the exercise dates, and the plan or agreement pursuant to which such Employee
Options were issued. Except as set forth above or on SCHEDULE 3.3, there are
no preemptive rights nor any outstanding subscriptions, options, warrants,
rights, convertible securities, or other agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of the Company or any of its subsidiaries. There are no voting
trusts or other understandings to which the Company or any of its
subsidiaries is a party with respect to the voting capital stock of the
Company or any of its subsidiaries.
3.4 CORPORATE AUTHORIZATION. The Company has the full corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated by this Agreement. The execution, delivery,
and performance by the Company of this Agreement and of the other
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
-7-
3.5 APPROVALS: NO VIOLATIONS. Except for applicable requirements of
the Exchange Act, no filing with, and no permit, authorization, consent, or
approval of, any foreign or domestic public body or authority is necessary for
the consummation by the Company of the transactions contemplated by this
Agreement. Except as set forth on SCHEDULE 3.5, the execution and delivery of
this Agreement by the Company, the consummation by the Company of the
transactions contemplated by this Agreement and the compliance by the Company
with any of the provisions of this Agreement will not (a) conflict with or
result in any breach of any provision of the charters of bylaws or equivalent
organizational documents of the Company or any of its subsidiaries; (b) result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
or acceleration) under, any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, lease, contract agreement, or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound;
or (c) violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to the Company, any of its subsidiaries or any of their properties or
assets; except such violations, conflicts, breaches, defaults, terminations, or
accelerations referred to in this SECTION 3.5 as could not, individually or in
the aggregate, reasonably be expected to result in a Company Material Adverse
Effect or adversely affect the ability of any party to perform its obligations
under this Agreement.
3.6 SEC FILINGS FINANCIAL STATEMENTS. The Company has timely filed
with the SEC all forms, reports, statements, and documents required to be filed
by it pursuant to the Securities Act of 1933 as amended and the rules and
regulations prompted thereunder (the "SECURITIES ACT"), and the Exchange Act,
and the rules and regulations promulgated thereunder, together with all
amendments thereto (collectively, and including, when filed, the Schedule 14D-9,
the "COMPANY REPORTS") and has otherwise complied in all material respects with
the requirements of the Securities Act and the Exchange Act. The Company has
delivered to the Purchaser accurate and complete copies of all Company Reports
and will promptly deliver to the Purchaser any Company Report filed by the
Company after the date of this Agreement. As of their respective dates, the
Company Reports did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were or will be made, not misleading. Each of the historical consolidated
balance sheets included in or incorporated by reference into the Company Reports
as of its date and each of the historical consolidated statements of income and
earnings, stockholders' equity, and cash flows included in or incorporated by
reference into the Company Reports including any related notes and schedules)
fairly presents or will fairly present the consolidated financial condition,
results of operations, stockholders' equity, and cash flows, as the case may be,
of the Company and its subsidiaries for the periods set forth (subject, in the
case of unaudited statements, to normal year-end audit adjustments), in each
case in accordance with generally accepted accounting principles consistently
applied during the periods involved. The Company maintains a system of internal
accounting controls sufficient to provide that transactions are executed in
accordance with management's general or specific authorization, transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted
-8-
accounting principles and to maintain accountability for assets, access to
assets is permitted only in accordance with management's general or specific
authorization, and the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
consolidated balance sheet of the Company as of March 31, 1999, and except as
set forth in the Company Reports, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent, or otherwise, that would be required to be included on a
consolidated balance sheet of the Company and its subsidiaries as of March 31,
1999 (or disclosed in the notes thereto) prepared in accordance with generally
accepted accounting principles, and that could, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect. Since March 31, 1999, the Company and its subsidiaries have conducted
their respective businesses in a manner consistent with past practices, and
neither the Company nor any of its subsidiaries has become subject to any
liabilities or obligations that would be required to be included on a
consolidated balance sheet of the Company and its subsidiaries (or disclosed in
notes) prepared in accordance with generally accepted accounting principles and
that could, individually or in the aggregate, reasonably be expected to result
in a Company Material Adverse Effect, other than liabilities or obligations
incurred in the ordinary course of business consistent with past practices or
incurred in connection with the Offer or this Agreement and disclosed in the
Company Reports or consisting of legal, printing, accounting, and other
customary fees (but not including those of the Advisor) not exceeding $50,000 in
the aggregate and incurred in connection with the Offer or this Agreement.
3.8 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
subsidiaries currently hold and are in compliance with the terms of all
licenses, permits, and authorizations necessary for the lawful conduct of their
respective businesses, and have complied with, and, neither the Company nor any
of its subsidiaries is in violation of, or in default under, the applicable
statutes, ordinances, rules, regulations, orders, or decrees of any federal,
state, local, or foreign governmental bodies, agencies, or authorities having,
asserting, or claiming jurisdiction over it or over any part of its operations
or assets, except for violations that would not, individually or in the
aggregate, result in a Company Material Adverse Effect. The businesses of the
Company and its subsidiaries are not being and have not been conducted in
violation of any law, ordinance, or regulation of any governmental authorities
and regulatory agencies except for violations as could not, individually or in
the aggregate, reasonably be expected to result in a Company Material Adverse
Effect. No investigation or review by any governmental authorities and
regulatory agencies with respect to the Company or any of its subsidiaries is
pending or, to the best knowledge of the Company, threatened, nor, to the best
knowledge of the Company, have any governmental authorities and regulatory
agencies indicated an intention to conduct such an investigation or review, and
no fine has been levied against, or order entered with respect to, the Company
or any subsidiary by any regulatory authority.
-9-
3.9 TERMINATION, SEVERANCE, AND EMPLOYMENT AGREEMENTS. Set forth on
SCHEDULE 3.9 is a complete and accurate list of each (a) employment, severance,
or collective bargaining agreement not terminable without liability or
obligation on 60 days' or less notice; (b) agreement with any director,
executive officer, or other key employee, agent, or contractor of the Company or
any subsidiary of the Company (i) the benefits of which are contingent, or the
terms of which are materially altered, on the occurrence of a transaction
involving the Company or any subsidiary of the Company of the nature of any of
the transactions contemplated by this Agreement or relating to an actual or
potential change in control of the Company or any of its subsidiaries or (ii)
providing any term of employment or other compensation guarantee or extending
severance benefits or other benefits after termination not comparable to
benefits available to employees, agents, or contractors generally; (c)
agreement, plan, or arrangement under which any person may receive payments that
may be subject to the tax imposed by Section 4999 of the Internal Revenue Code
of 1986 (the "CODE") or included in the determination of such person's
"parachute payment" under Section 280G of the Code; and (d) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan, or stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Except as disclosed on SCHEDULE 3.9, since
December 31, 1995, neither the Company nor any of its subsidiaries has entered
into or amended any employment or severance agreement with any director,
officer, or key employee, agent, or contractor, or, granted any severance or
termination pay to any officer, director, or key employee, agent, or contractor
of the Company or any of its subsidiaries.
3.10 EMPLOYEE BENEFITS. The Company does not have any "employee pension
benefit plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (the "PENSION PLANS"), "employee
welfare benefit plans" (as defined in Section 3(l) of ERISA), or any other
plans, arrangements, or policies relating to stock options, stock purchases,
compensation, deferred compensation, severance, fringe benefits, and other
employee benefits, in each case maintained, or contributed to, or required to be
maintained or contributed to, by the Company, or any of its subsidiaries or any
other person that, together with the Company, is or has been treated as a single
employer under Section 414(b), (c), (m), or (o) of the Code (each a "COMMONLY
CONTROLLED ENTITY") for the benefit of any current or former employees,
officers, agents, or directors (or any beneficiaries of such persons) of the
Company or any of its subsidiaries (collectively, "BENEFIT PLANS"). No Commonly
Controlled Entity has ever contributed or been required to contribute to any
"multiemployer plan" (within the meaning of ERISA). The Company is not a party
to any agreement, contract, arrangement, or plan that has resulted or would
result, separately or in the aggregate, in the payment on or before the purchase
of Class A Shares pursuant to the Offer (the "EFFECTIVE TIME") of any "excess
parachute payments" within the meaning of Section 280G of the Code. Each
individual who is paid for services in any form by the Company or any Commonly
Controlled Entity and who is treated by the Company or a Commonly Controlled
Entity as an independent contractor for federal income tax purposes (including,
without limitation, Code provisions applicable or relating to employee benefit
plans), state unemployment tax purposes, or any other purpose, is an
-10-
independent contract for such purpose. Except where it could not reasonably be
expected to result in a Company Material Adverse Effect: (a) neither in the
Company nor any Commonly Controlled Entity has incurred any liability, and no
event has occurred that would result in any liability, to a Pension Plan or to
the Pension Benefit Guaranty Corporation that has not been fully paid; and (b)
neither the Company nor any Commonly Controlled Entity has incurred any direct
or indirect liability under, arising out of, or by operation of Title IV of
ERISA, in connection with the termination of, or withdrawal from, any Pension
Plan or other requirement plan or arrangement, and no fact or event exists that
could reasonably be expected to give rise to any such liability.
3.11 TAXES. The Company and its subsidiaries have timely filed all
federal income tax returns and reports and other material returns and reports
relating to federal, state, local, and foreign taxes required to be filed. Such
reports and returns are true, correct and complete, except for such failures to
be true, correct and complete as could not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect. The
Company and its subsidiaries have paid or made adequate provision for all taxes
owed except taxes that if not so paid or provided for could not reasonably be
expected to result in a Company Material Adverse Effect, and, except as
disclosed in SCHEDULE 3.11, no unpaid deficiencies in taxes or other government
charges for any period have been proposed or assessed by any government taxing
authority and, to the knowledge of the Company, no government tax authority is
threatening to propose or assess against the Company or any of its subsidiaries
any such deficiency or charge that could, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect. The
Company and its subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities or are properly holding for such payment
all failures to have so taxes required by law to be withheld or collected,
except for such withheld or collected and paid over, or to be so holding for
payment as could not, individually or in the aggregate, reasonably be expected
to result in a Company Material Adverse Effect. There are no material liens for
taxes upon the assets of the Company or its subsidiaries, other than liens for
current taxes not yet due and payable and liens for taxes that are being
contested in good faith by appropriate proceedings diligently prosecuted.
Neither the Company nor any of its subsidiaries has agreed to or is required to
make any adjustment under Section 481(a) of the Code. Neither the Company nor
any of its subsidiaries has made any election under Section 341(f) of the Code.
3.12 LITIGATION. Except as disclosed in SCHEDULE 3.12, there is no
suit, claim, action, proceeding, or investigation pending or, to the knowledge
of the Company, threatened against the Company or any of its subsidiaries or any
of their respective properties or assets before any court, regulatory agency, or
tribunal as to which an adverse determination could reasonably be considered
probable that, individually or in the aggregate, could reasonably be expected to
result in a Company Material Adverse Effect. Neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction, or decree
that, individually or in the aggregate, could reasonably be expected to result
in a Company Material Adverse Effect or would prevent or delay the consummation
of the transactions contemplated by this Agreement.
-11-
3.13 ENVIRONMENTAL MATTERS. Except for matters disclosed in SCHEDULE
3.13 and except for matters that could not reasonably be expected to result,
individually or in the aggregate with all other such matters, in liability to
the Company or any of its subsidiaries in excess of $50,000, (i) the properties,
operations and activities of the Company and its subsidiaries are in compliance
with all applicable Environmental Laws; (ii) the Company and its subsidiaries
and the properties and operations of the Company and its subsidiaries are not
subject to any existing, pending or, to the knowledge of the Company, threatened
action, suit, claim investigation, inquiry or proceeding by or before any
governmental authority under any Environmental Laws; (iii) all notices, permits,
licenses, or similar authorizations, if any, required to be obtained or filed by
the Company or any of its subsidiaries under any Environmental Laws in
connection with any aspect of the business of the Company or its subsidiaries,
including without limitation those relating to the treatment, storage, disposal
or release of a hazardous or otherwise regulated substance, have been duly
obtained or filed and will remain valid and in effect after the purchase of
Class A Shares pursuant to the Offer, and the Company and its subsidiaries are
in compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations; (iv) the Company and its subsidiaries have
satisfied and are currently in compliance with all financial responsibility
requirements applicable to their operations and imposed by any governmental
authority under any Environmental Laws, and the Company and its subsidiaries
have not received any notice of noncompliance with any such financial
responsibility requirements; (v) to the Company's knowledge, there are no
physical or environmental conditions existing on any property of the Company or
its subsidiaries or resulting from the Company's or such subsidiaries'
operations or activities, past or present, at any location, that would give rise
to any on-site or off-site remedial obligations imposed on the Company or any of
its subsidiaries under any Environmental Laws or that would impact the sole
groundwater or surface water or human health (to the extent of exposure to
hazardous substances); (vi) to the Company's knowledge, since the effective date
of the relevant requirements of applicable Environmental Laws and to the extent
required by such applicable Environmental Laws, all hazardous or otherwise
regulated substances generated by the Company and its subsidiaries have been
transported only by carriers authorized under Environmental Laws to transport
such substances and waste, and disposed of only at treatment, storage, and
disposal facilities authorized under Environmental Laws to treat, store or
dispose of such substances and wastes; (vii) there has been no exposure of any
person or property to hazardous substances or any pollutant or contaminant, nor
has there been any release of hazardous substances, or any pollutant or
contaminant, into the environment by the Company or its subsidiaries or in
connection with their properties or operations that could reasonably be expected
to give rise to any claim against the Company or any of its subsidiaries for
damages or compensation; and (viii) subject to restrictions necessary to
preserve any attorney client privilege, the Company and its subsidiaries have
made available to the Purchaser all internal and external environmental audits
and studies and all correspondence on substantial environmental matters in the
possession of the Company or its subsidiaries relating to any of the current or
former properties or operations of the Company and its subsidiaries.
For purposes of this Agreement, the term "ENVIRONMENTAL LAWS" shall mean
any and all laws, statutes, ordinances, rules, regulations, or orders of any
Governmental Entity pertaining to
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health (to the extent of exposure to hazardous substances) or the environment
currently in effect in any and all jurisdiction in which the Company and its
subsidiaries own property or conduct business, including without limitation, the
Clean Air Act as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act
of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous Materials Transportation Act, as amended, the Oil
Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing federal
laws, and all other environmental conservation or protection laws. For purposes
of this Agreement, the terms "hazardous substance" and "release" have the
meanings specified in CERCLA and RCRA and shall include petroleum and petroleum
products, radon and PCB's, and the term "disposal" has the meaning specified in
RCRA; PROVIDED, however, that to the extent the laws of the state in which the
property is located establish a meaning for "hazardous substance," "release" or
"disposal" that is broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply.
3.14 VOTING REQUIREMENTS. The Board of Directors of the Company has
approved the Offer, this Agreement and the agreements contemplated hereby. The
Company is not subject to the restrictions of Section 203 of the DGCL pursuant
to Section 203(b)(4) of the DGCL. No vote of the holders of any class or series
of the Company's capital stock is necessary to approve this Agreement and the
transactions contemplated hereby under any applicable law, rule or regulations
or pursuant to the requirements of the Company's certificate of incorporation or
bylaws.
3.15 FINDERS AND INVESTMENT BANKERS, TRANSACTION EXPENSES. Neither the
Company nor any of its officers or directors has employed any investment banker,
business consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for the Advisor, or incurred
any liability for any investment banking, business consultancy, financial
advisory, brokerage or finders' fees or commissions in connection with the
transactions contemplated hereby, except for fees payable to the Advisor (as
reflected in agreements between such firms and the Company, copies of which have
been delivered to the Purchaser).
3.16 INSURANCE. The Company and each of its subsidiaries are currently
insured, and during each of the past five calendar years have been insured, for
reasonable amounts against such risks as companies engaged in a similar business
and similarly situated would, in accordance with good business practice,
customarily be insured.
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3.17 TITLE TO PROPERTIES: ENTIRE BUSINESS. The Company and its
subsidiaries have good title or a valid and subsisting leasehold interest in and
to or a valid and enforceable license to use all material assets, properties and
rights owned, used or held of use by them in the conduct of their respective
businesses, in each case, free and clear of any Liens other than Permitted
Liens. The Company and its subsidiaries own or have sufficient right to use all
assets and properties necessary to conduct their businesses in the manner in
which they are currently conducted. As used here "PERMITTED LIENS" mean: (i) a
lien of a landlord, carrier, warehouseman, mechanic, materialmen, or any other
statutory lien arising in the ordinary course of business; (ii) a lien for taxes
not yet due or being contested in good faith; (iii) with respect to the right of
the Company or its subsidiaries to use any property leased to the Company or its
subsidiaries, arises by the terms of the applicable lease; (iv) a purchase money
security interest arising in the ordinary course of business; or (v) does not
materially detract from the value of the encumbered property or asset or
materially detract from or interfere with the use of the encumbered Property or
assets in the ordinary course of business.
3.18 INTELLECTUAL PROPERTY RIGHTS. There are no registered patents,
trademarks, service marks, trade names or copyrights, or applications for or
licenses (to or from the Company or any of its subsidiaries) with respect to any
of the foregoing that are material to the Company and its subsidiaries taken as
a whole, that (a) are owned by the Company or any of its subsidiaries, or with
respect to which the Company or any of its subsidiaries has any rights, or (b)
are used, whether directly or indirectly, by the Company or any of its
subsidiaries, other than as set forth on SCHEDULE 3.18. Except as set forth in
SCHEDULE 3.18, the Company and its subsidiaries have the right to use the
trademarks and trade names set forth on such SCHEDULE 3.18 and any other
computer software and software licenses, intellectual property, proprietary
information, trade secrets, trademarks, trade names, copyrights, material and
manufacturing specifications, drawings and designs used by the Company of any of
its subsidiaries and material to the operation of the business of the Company or
any of its subsidiaries (collectively, "INTELLECTUAL PROPERTY"), without
infringing on or otherwise acting adversely to the rights or claimed rights of
any person, except to the extent such infringement or actions adverse to
another's rights or claimed rights could not reasonably be expected to have a
Company Material Adverse Effect. Except as set forth on such SCHEDULE 3.18,
neither the Company nor any of its subsidiaries is obligated to pay any royalty
on other consideration material to the Company and its subsidiaries taken as a
whole to any person in connection with the use of any Intellectual Property.
Except as set forth in such SCHEDULE 3.18 and as could not reasonably be
expected to have a Company Material Adverse Effect, to the Company's knowledge,
no other person is infringing on the rights of the Company and its subsidiaries
in any of their Intellectual Property.
3.19 [RESERVED].
3.20 YEAR 2000 COMPLIANCE. The disclosures in the Company's Annual
Report on Form 10-K for the year ending December 31, 1998 regarding, the "status
of Year 2000 Compliance" are true, complete and correct in all material respects
as if made on the date of this Agreement.
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3.21 CERTAIN MATERIAL CONTRACTS. SCHEDULE 3.21 discloses all agreements
and arrangements (whether written or oral and including all amendments thereto)
to which the Company of any of its subsidiaries is a party or a beneficiary or
by which the Company or any of its subsidiaries is bound that are material,
directly or indirectly, to the business of the Company and any of its
subsidiaries, taken as a whole (collectively, the "MATERIAL CONTRACTS"). The
Company and its subsidiaries have performed all of its obligations under each
Material Contract, and there exist no breach or default, or event that with
notice or lapse of time would constitute a breach or default under any Material
Contract except as could not reasonably be expected to have a Company Material
Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Texas and has all requisite entity power and authority
and any necessary governmental authority to carry on its business as now
conducted. The Purchaser is duly qualified or licensed to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification or
licensing necessary, except for failures to be so duly qualified or licensed and
in good standing as could not, individually or in the aggregate, reasonably be
expected to result in a Purchaser Material Adverse Effect. For the purposes of
this Agreement, "PURCHASER MATERIAL ADVERSE EFFECT" means any change or effect
that individually or when taken together with all such other changes or effect,
could reasonably be expected to be materially adverse to the condition
(financial or other), business, operations, properties, assets, liabilities,
prospects, or results of operations of the Purchaser and its subsidiaries, taken
as a whole.
4.2 ENTITY AUTHORIZATION. The Purchaser has the full entity power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution, delivery, and
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated by this Agreement have been duly and
validly authorized by the equity holders of the Purchaser and the sole Manager
of the Purchaser and no other entity proceedings on the part of the Purchaser
are necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by the Purchaser and constitutes a valid and binding
obligation of the Purchaser, enforceable in accordance with its terms.
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4.3 APPROVALS NO VIOLATIONS. Except for applicable requirements of the
Exchange Act, no filing with, and no permit, authorization, consent, or approval
of any foreign or domestic public body or authority is necessary for the
consummation by the Purchaser of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by the
Purchaser nor the consummation by the Purchaser of the transactions contemplated
by this Agreement nor compliance by them with any of the provisions of this
Agreement will (a) conflict with or result in any breach of any provision of the
organizational documents or bylaws or regulations, as applicable, of the
Purchaser; (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (otherwise to any right
of termination, cancellation, or acceleration under), any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement, or other instrument or obligation to which the
Purchaser is a party or by which it or any of its properties or assets may be
bound; or (c) violate any order, writ, injunction, decree, statute, rule, or
regulation applicable to the Purchaser or any of its properties or assets;
except such violations, conflicts, breaches, defaults, terminations, or
accelerations referred to in this SECTION 4.3 as could not, individually or in
the aggregate, reasonably be expected to result in a Purchaser Material Adverse
Effect.
4.4 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization, the Offer, or the
negotiation and consummation of this Agreement and the transactions contemplated
by this Agreement, the Purchaser has not incurred any obligations or
liabilities, nor has it engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
4.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Purchaser for inclusion or incorporation by reference in the
Offer Documents, the Schedule 14D-9, or the information statement under Section
14(f) of the Exchange Act will, in the case of the Offer Documents and the
Schedule 14D-9, at the respective times the Offer Documents and the Schedule
14D-9 are filed with the SEC or first published, sent, or given to the
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Offer Documents will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder (to the extent the Company or the
Purchaser is so subject at such time) except that no representation or warranty
is made by the Purchaser with respect to statements made or incorporated by
reference in the Offer Documents based on information supplied by the Company
for inclusion or incorporation by reference in the Offer Documents.
4.6 FINANCING. The Purchaser will have available to it at the time
required the funds necessary to consummate the Offer or other obligation of the
Purchaser, which funds shall not be proceeds from a loan or other obligation of
the Purchaser.
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ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as expressly contemplated by this Agreement and
except in cases where, at or after such time as the designees of the
Purchaser constitute a majority of the members of the Board of Directors of
the Company and the failure to comply with the covenants set forth in this
SECTION 5.1 results from actions, or omissions to act, taken or authorized by
such designees, during the period from the date of this Agreement to the
Effective Time:
(i) Each of the Company and its subsidiaries will
conduct its business solely in the ordinary course consistent with past
practices.
(ii) Neither the Company nor any of its subsidiaries
will intentionally take or willfully omit to take any actions that results in
or could reasonably be expected to result in, a Company Material Adverse
Effect.
(iii) The Company will use its reasonable best efforts to
preserve intact the business organization of the Company and each of its
subsidiaries, to keep available the services of its and their present
officers and key employees and consultants, and to maintain satisfactory
relationships with customers, agents, reinsurers, suppliers, and other
persons having business relationships with the Company or its subsidiaries.
(a) Without limiting the provisions of SECTION 5.1(A) or as
otherwise expressly provided in this Agreement, neither the Company nor any
of its subsidiaries will:
(i) issue, sell, or dispose of additional shares of
capital stock of any class (including the Class A/B Shares) of the Company or
any of its subsidiaries, or securities convertible into or exchangeable for
any such shares or securities, or any rights, warrants or options to acquire
any such shares or securities, other than Class A/B Shares issued upon
exercise of options disclosed in SCHEDULE 3.3., in each case in accordance
with the terms disclosed on SCHEDULE 3.3;
(ii) redeem, purchase, or otherwise acquire, or propose
to redeem purchase, or otherwise acquire, any of its outstanding capital
stock, or other securities of the Company or any of its subsidiaries;
(iii) split, combine, subdivide, or reclassify any of
its capital stock or declare, set aside, make, or pay any dividend or
distribution on any shares of its capital stock except for dividends or
distributions to the Company and its subsidiaries from their respective
subsidiaries;
-17-
(iv) sell, pledge, dispose of, or encumber any of its
assets, except for sales, pledges, dispositions, or encumbrances in the
ordinary course of business consistent with past practices or between the
Company and its subsidiaries;
(v) incur or modify any indebtedness or issue or sell
any debt securities, or assume, guarantee, endorse, or otherwise as an
accommodation become absolutely or contingently responsible for obligations
of any other person, or make any loans or advances, other than in the
ordinary course of business consistent with past practices;
(vi) adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreements
trusts, plans, funds, or other arrangements for the benefit or welfare of any
director, officer, or employee, or (except for normal increases in the
ordinary course of business that are consistent with past practices and that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company) increase in any manner the compensation
or fringe benefits of any director, officer, or employee or pay any benefit
not required by any existing plan or arrangement (including, without
notation, the granting or vesting of stock options or stock appreciation
rights) or take any action or grant any benefit not expressly required under
the terms of any existing agreements, trusts, plans, funds, or other such
arrangements or enter into any contract, agreement, commitment, or
arrangement to do any of the foregoing; or make or agree to make any payments
to any directors, officers, agents, contractors, or employees relating to a
change or potential change in control of the Company;
(vii) acquire by merger, consolidation, or acquisition
of stock or assets any corporation, partnership, or other business
organization or division or make any investment either by purchase of stock
or securities, contributions to capital (other than to wholly-owned
subsidiaries), property transfer, or purchase of any material amount of
property or assets, in any other person;
(viii) except as required by this Agreement, adopt any
amendments to their respective charters or bylaws or equivalent
organizational documents;
(ix) take any action other than in the ordinary course
of business and consistent with past practices, to pay, discharge, settle, or
satisfy any claim, liability, or obligation (absolute or contingent, accrued
or unaccrued, asserted or unasserted, or otherwise);
(x) change any method of accounting or accounting
practice used by the Company or any of its subsidiaries, except for any
change required by reason of a concurrent change in generally accepted
accounting principles;
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(xi) revalue in any respect any of its assets,
including, without limitation, writing down the value of its portfolio or
writing off notes or accounts receivable other than in the ordinary course of
business consistent with past practices;
(xii) authorize any new capital expenditure or
expenditures that individually, is in excess of $10,000 or, in the aggregate,
are in excess of $50,000;
(xiii) make any tax election, settle or compromise any
federal, state, or local tax liability or consent to the extension of time
for the assessment or collection of any federal, state, or local tax;
(xiv) settle or compromise any pending or threatened
suit, action, or claim material to the Company and its subsidiaries taken as
a whole or relevant to the transactions contemplated by this Agreement;
(xv) enter into any agreement, arrangement, or
understanding to do any of the foregoing actions in this SECTION 5.1,
including any agreement, arrangement, or understanding resulting in or
providing for a sale of any assets of the Company (other than a sale of
assets in the ordinary course of business and consistent with past practices)
or a merger or other liquidation, sale, or disposition of the Company; or
(xvi) voluntarily take any action or willfully omit to
take any action that could make any representation or warranty in ARTICLE III
untrue or incorrect in any material respect at any time, including as of the
date of this Agreement and as of the time of consummation of the Offer, as if
made as of such time.
5.2 [RESERVED].
5.3 [RESERVED].
5.4 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of
this Agreement and to the fiduciary obligations of the Board of Directors of
the Company under applicable law, each of the parties agrees to use their
respective reasonable best efforts to take, or cause to be taken, all actions
to do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement (including consummation of the Offer and to
cooperate with each other in connection with the foregoing, including,
without limitation, using their respective reasonable best efforts (a) to
obtain all necessary waivers, consents, and approvals from other parties to
loan agreements, leases, and other contracts, (b) to obtain all necessary
consents, approvals, and authorizations as are required to be obtained under
any federal state, or foreign law or regulations, (c) to lift or rescind any
injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated by this
Agreement, (d) to prepare and effect all necessary registrations and
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filings, and (e) to fulfill all conditions to and covenants contained in this
Agreement. If, after the Effective Time, any action is necessary to effect
the purposes of this Agreement, the proper officers and directors of each
party will take all such necessary action.
5.5 NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt
notice to the Purchaser, and the Purchaser will give prompt notice to the
Company, of (a) the occurrence, or failure to occur, of any event, which
occurrence or failure could cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any
time, (b) any material failure of the Company or the Purchaser, as the case
may be, or of any officer, director, employee, or agent of the Company or the
Purchaser, to comply with or satisfy any covenant, condition, or agreement to
be complied with or satisfied by it under this Agreement, (c) any act,
omission to act, event, or occurrence that, with notice, the passage of time,
or otherwise, could result in a Company Material Adverse Effect or a
Purchaser Material Adverse Effect, as the case may be, and (d) any contingent
liability of the Company for which it reasonably believes it will, with the
passage of time or otherwise, become liable. No such notification will
affect the representations or warranties of the parties or the conditions to
the obligations of the parties under this Agreement.
5.6 ACCESS TO INFORMATION.
(a) From the date of this Agreement to the Effective Time,
the Company will, and will cause its subsidiaries, officers, directors,
employees, and agents upon reasonable notice to, afford to officers,
employees, and agents of the Purchaser and its affiliates and the banks,
other financial institutions, and investment bankers working with the
Purchaser, and its respective officers, employees, and agents, complete
access at all reasonable times to its officers, employees, agents,
properties, books, records, and contracts, and will furnish the Purchaser and
its affiliates and the banks, other financial institutions, and investments
bankers working with the Purchaser, all financial, operating, and other data
and information as they reasonably request.
(b) The Purchaser will hold and will cause its directors,
officers, agents, employees, consultants, and advisors to hold in confidence,
unless compelled to disclose by judicial or administrative process or, in the
written opinion of its legal counsel, by other requirements of law, all
documents and information concerning the Company and its subsidiaries
furnished to such persons in connection with the transactions contemplated by
this Agreement (except to the extent that such information can be shown to
have been (i) previously known by such persons from sources other than the
Company, or its directors, officers, representatives or affiliates, (ii) in
the public domain through no fault of such persons, or (iii) later lawfully
acquired by such persons on a non-confidential basis from other sources who
are not known by the Purchaser to be bound by a confidentiality agreement or
otherwise prohibited from transmitting the information to the Purchaser by a
contractual, legal, or fiduciary obligation) and will not release or disclose
such information to any other person, except its directors, officers, agents,
employees, consultants, and advisors, in connection with this Agreement who
need to know such information. If the transactions contemplated by this
Agreement are not consummated, such confidence shall be maintained and, if
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requested by or on behalf of the Company, the Purchaser will, and will use
all reasonable efforts to cause its auditors, attorneys, financial advisors,
and other consultants, agents, and representatives to, return to the Company
or destroy all copies of written information furnished by the Company to the
Purchaser or its agents, representatives, or advisors. It is understood that
the Purchaser will be deemed to have satisfied its obligation to hold such
information confidential if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
(c) No investigation pursuant to this SECTION 5.6 will affect
any representations or warranties of the parties in this Agreement or the
conditions to the obligations of the parties to this Agreement.
5.7 PUBLIC ANNOUNCEMENTS. The Purchaser on the one hand and the
Company on the other hand will consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement, the Offer, or the other transactions contemplated by this
Agreement, and will not issue any such press release or make any such public
statement prior to such consultation except as may be required by law or the
listing requirements of any securities exchange applicable to the Company, if
any.
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) The Purchaser agrees that all rights to indemnification
now existing in favor of the directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation or
bylaws and pursuant to the contracts listed on SCHEDULE 5.8 will to the
extent such rights are in accordance with applicable law stay in effect in
accordance with their respective terms.
(b) In the event any action, suit, proceeding, or
investigation relating to this Agreement or to the transactions contemplated
by Agreement is commenced by a third party, whether before or after the
Effective Time, the parties to this Agreement agree, subject to the fiduciary
duties of the Directors of the Company and the Manager of the Purchaser, to
cooperate and use all reasonable efforts to defend against and respond to
such action, suit, proceeding, or investigation.
5.9 EMPLOYEE OPTIONS. Except as set forth on SCHEDULE 5.9, as soon
as practicable following the date of this Agreement, the Company will take
such actions as are required to provide that each stock option to purchase
Class A/B Shares outstanding immediately prior to the consummation of the
Offer, whether or not then exercisable, will be canceled immediately prior to
the consummation of the Offer in exchange for an amount in cash payable at
the time of such cancellation equal to the product of (x) the number of Class
A/B Shares subject to such stock option and unexercised immediately prior to
the consummation of the Offer and (y) the excess of the Per Share Price to be
paid in the Offer over the per share exercise price pursuant to such stock
option.
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5.10 OTHER ACTIONS BY THE COMPANY. If any "fair price," "moratorium,"
"control share acquisition," or other form of antitakeover statute,
regulation, charter provision, or contract is or becomes applicable to the
transactions contemplated by this Agreement, the Company and the members of
the Board of Directors of the Company will use their reasonable efforts to
grant such approvals and take such actions as are necessary under such laws,
provisions, or contracts so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise act to eliminate or minimize the
effects of such statute, regulation, provision or contract on the
transactions contemplated by Agreement.
ARTICLE VI
[RESERVED]
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Offer may
be abandoned at any time prior to the purchase of Class A Shares pursuant to
the Offer:
(a) by mutual written consent of the Purchaser and the
Company;
(b) by the Purchaser or the Company if any court of competent
jurisdiction or other governmental body has issued a final order, decree, or
ruling or taken any other action restraining, enjoining, or otherwise
prohibiting the purchase of Class A Shares pursuant to the Offer and such
order, decree, ruling, or other action is or has become nonappealable;
(c) by the Purchaser if due to an occurrence or circumstance
that would result in a failure to satisfy any of the conditions set forth in
ANNEX A, the Purchaser has (i) failed to commence the Offer within five
business days following the date of the initial public announcement of the
Offer, (ii) terminated the Offer, or (iii) failed to pay for the Class A
Shares pursuant to the Offer by October 1, 1999;
(d) by the Company if (i) there has not been a breach of any
material representation, warranty, covenant, or agreement on the part of the
Company, and the Purchaser has (A) failed to commence the Offer within five
business days following the date of the initial public announcement of the
Offer, (B) terminated the Offer, (C) failed to pay for the Class A Shares
pursuant to the Offer by October 1, 1999; provided, that any termination
pursuant to this clause C must be made by written notice irrevocably stating
the intent of the Company to terminate this Agreement under this SECTION
7.1(d)(i)(C) delivered to the Purchaser by 12:00 noon, Dallas time, on
October 1, 1999, or (ii) prior to the purchase of Class A Shares pursuant to
the Offer, a person or group has made a bona fide offer that the Board of
Directors of the Company by a majority vote
-22-
determines in its good faith judgment and in the exercise of its fiduciary
duties, after consultation with its financial advisors and based as to legal
matters on the written opinion of legal counsel, is obligated by its
fiduciary duties under applicable law to terminate this Agreement, provided
that such termination under this clause (ii) will not be effective until
payment of the fee required by SECTION 7.3(b);
(e) by the Purchaser prior to the purchase of Class A Shares
pursuant to the Offer, if (i) there has been a breach (which breach is not
cured or not capable of being cured prior to the earlier of (A) ten days
following notice to the Company by the Purchaser of such breach or (B) two
business days prior to the expiration date of the Offer, as extended from
time to time pursuant to the terms of this Agreement) of any representation
or warranty on the part of the Company having a Company Material Adverse
Effect or materially adversely affecting or delaying the ability of the
Purchaser to consummate the Offer or the Company to effectuate the Reverse
Split, (ii) there has been a breach (which breach is not cured or not capable
of being cured prior to the earlier of (A) ten days following notice to the
Company by the Purchaser of such breach or (B) two business days prior to the
expiration date of the Offer, as extended from time to time pursuant to the
terms of this Agreement) of any covenant or agreement on the part of the
Company resulting in a Company Material Adverse Effect or materially
adversely affecting or delaying the ability of the Purchaser to consummate
the Offer or the Company to effectuate the Reverse Split, (iii) the Company
engages in negotiations with any person or group (other than the Purchaser)
that has proposed a Third Party Acquisition (as defined in SECTION 7.3)
except to the extent permitted by SECTION 8.8; (iv) the Company enters into
an agreement, letter of intent, or arrangement with respect to a Third Party
Acquisition, (v) the Board has withdrawn or modified (including by amendment
of the Schedule 14D-9) in a manner adverse to the Purchaser its approval or
recommendation of the Offer, this Agreement, or the Reverse Split or has
recommended another offer, or has adopted any resolution to effect any of the
foregoing, or (vi) the Minimum Condition has not been satisfied by the
expiration date of the Offer and on or prior to such date (A) any person or
group (other than the Purchaser) has made and not withdrawn a public
announcement with respect to a Third Party Acquisition or (B) any person or
group (including the Company or any of its affiliates) other than the
Purchaser has become the beneficial owner of 9.9% (except in bona fide
arbitrage transactions) or more of the Class A/B Shares; or
(f) by the Company if (i) there has been a breach (which
breach is not cured or not capable of being cured prior to the earlier of (A)
ten days following notice to the Purchaser of such breach or (B) two business
days prior to the expiration date of the Offer, as extended from time to time
pursuant to the terms of this Agreement) of any representation or warranty on
the part of the Purchaser that materially adversely affects (or materially
delays) the consummation of the Offer or (ii) there has been a material
breach (which breach is not cured or not capable of being cured prior to the
earlier of (A) ten days following notice to the Purchaser of such breach or
(B) two business days prior to the expiration date of the Offer, as extended
from time to time pursuant to the terms of this Agreement) of any covenant or
agreement on the part of the Purchaser that materially adversely affects (or
materially delays) the consummation of the Offer.
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7.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to SECTION 7.1, this Agreement will
become void and have no effect, without any liability on the part of any
party to this Agreement or its affiliates, directors, officers, or
stockholders, other than the provisions of this SECTION 7.2 and SECTIONS
5.6(b), 5.8, and 7.3. Nothing contained in this SECTION 7.2 will relieve any
party from liability for any breach of this Agreement. No termination of
this Agreement will affect any Lockup and Voting Agreement except as provided
in such Lockup and Voting Agreement.
7.3 FEES AND EXPENSES.
(a) In the event (A) the Purchaser terminates this Agreement pursuant
to SECTIONS 7.1(e)(i) through (v) or (B) the Company is not at such time in
material breach of this Agreement and terminates this Agreement pursuant to
SECTION 7.1(d)(ii), the Company will reimburse the Purchaser and its
affiliates (not later than one business day after submission of statements
together with reasonable documentation therefor) for all out-of-pocket fees
and expenses actually incurred by any of them or on its behalf in connection
with the Offer and the proposed consummation of all transactions contemplated
by this Agreement (including, without limitation, costs of advertising,
filing fees and fees payable to legal counsel, financial printers, financing
sources, investment bankers, counsel to any of the foregoing, and
accountants); provided, that in the event the Purchaser or its affiliates
seek and obtain payment under this SECTION 7.3(a), the Company shall not be
additionally liable for consequential or speculative damages arising from
such termination.
(b) If (i) (A) the Purchaser terminates this Agreement pursuant to
SECTIONS 7.1(e)(i) through (v) or (B) if the Company terminates this
Agreement pursuant to SECTION 7.1(d)(i)(C) and, within nine months after a
termination pursuant to CLAUSE (A) or CLAUSE (B), the Company enters into an
agreement, letter of intent, or binding arrangement with respect to a Third
Party Acquisition, or a Third Party Acquisition occurs or (ii) the Company
terminates this Agreement pursuant to SECTION 7.1(d)(ii), then in either case
the Company will reimburse, in cash, the Purchaser within one business day
following the execution and delivery of such agreement or letter of intent or
the entering into of such an arrangement or the occurrence of such Third
Party Acquisition, as the case may be, or simultaneously with such
termination pursuant to SECTION 7.1(d)(ii) for all out-of-pocket fees and
expenses actually incurred by or on behalf of Purchaser in connection with
the Offer and the proposed consummation of all the transactions contemplated
by this Agreement (including, without limitation, costs of advertising,
filing fees and fees payable to legal counsel, financial printers, financing
sources, investment bankers, counsel to any of the foregoing, and
accountants) not in excess of $100,000.
-24-
For the purposes of this Agreement, "THIRD PARTY ACQUISITION" means the
occurrence of any of the following events (i) the acquisition of the Company
by merger or otherwise by any person or group other than the Purchaser, or
any affiliate of the Purchaser (a "THIRD PARTY"); (ii) the acquisition by a
Third Party of any substantial portion of the business or assets of the
Company and its subsidiaries taken as a whole; (iii) the acquisition by a
Third Party of 9.9% or more of the outstanding Class A Shares or Class B
Shares from the Company or in a transaction or series of related transactions
that results in a change of control of the Company; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the acquisition by the Company or any of its
subsidiaries of more than 9.9% of the outstanding Class A Shares or Class B
Shares.
(c) Except as specifically provided in this SECTION 7.3 each
party will bear its own expenses in connection with this Agreement and the
transactions contemplated by this Agreement.
7.4 AMENDMENT. This Agreement may not be amended except in an
instrument in writing signed on behalf of all of the parties to this
Agreement; provided, that, after purchase of the Class A Shares pursuant to
the Offer, no amendment may be made to SECTION 5.8 without the consent of the
indemnified persons.
7.5 WAIVER. At any time prior to the Effective Time, any party to
this Agreement may (i) subject to the second provision in SECTION 7.4, extend
the time for the performance of any of the obligations or other acts of any
other party or parties to this Agreement, (ii) subject to the provision
contained in SECTION 7.4 of this Agreement, waive any inaccuracies in the
representations and warranties contained in this Agreement by any other
applicable party or in any documents, certificate, or writing delivered
pursuant to this Agreement by any other applicable party, or (iii) subject to
the provision contained in SECTION 7.4 of this Agreement, waive compliance
with any of the agreements of any other party or with any conditions to its
own obligations. Any agreement on the part of a party to this Agreement to
any such extension or waiver will be valid only if set forth in an instrument
in writing signed on behalf of such party by a duly authorized officer.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. The
representations and warranties made in this Agreement will not survive beyond
the Effective Time or the termination of this Agreement, as the case may be.
No investigation made, or information received by, any party to this
Agreement will affect any representation or warranty made by any other party
to this Agreement. The covenants and agreements of the parties to this
Agreement will survive in accordance with their terms.
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8.2 BROKERAGE FEES AND COMMISSIONS. The Company hereby represents and
warrants to the Purchaser with respect to the Company and any of its
subsidiaries, that except as disclosed in the Offer, and also except as
disclosed in the Offer, the Purchaser hereby represents and warrants to the
Company with respect to Purchaser or any of its subsidiaries that, no person
is entitled to receive from the Company, the Purchaser or any of their
subsidiaries, respectively, any investment banking, brokerage, or finder's
fee or fees in connection with this Agreement or any of the transactions
contemplated by this Agreement; notwithstanding the foregoing, all such fees
to the Advisor paid by the Company and any of its subsidiaries shall not
exceed $40,000.
8.3 ENTIRE ASSIGNMENT; ASSIGNMENT. This Agreement, together with the
Warrant, the Lock-Up and Voting Agreement, and all the Schedules and Annexes,
(a) constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement and supersedes all other prior written
agreements and understandings and all prior and contemporaneous oral
agreements and understandings between the parties to this Agreement of any of
them with respect to the subject matter of this Agreement and (b) will not be
assigned by operation of law or otherwise, provided that the Purchaser may
assign its rights and obligations under this Agreement to any direct or
indirect subsidiary of the Purchaser, but no such assignment will relieve the
assigning party of its obligations under this Agreement. Any purported
assignment of this Agreement not made in accordance with this SECTION 8.3
will be null, void, and of no effect. No party to this Agreement has relied
upon any representation or warranty, oral or written, of any other party to
this Agreement or any of their officers, directors, or stockholders except
for the representations and warranties contained in this Agreement and the
Lock-Up and Voting Agreement.
8.4 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect. Upon any final judicial determination that
any term or other provision is invalid, illegal, or incapable of being
enforced, the parties to this Agreement will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated by this Agreement be consummated to the extent possible.
8.5 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed to
have been duly given when delivered in person, by cable, telegram or telex,
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
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(a) if to the Purchaser, to:
GAP Capital, L.L.C.,
a Texas limited liability company
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxx Xxxxx, Manager
Fax: 000-000-0000
with a copy to:
Xxxxxxx Xxxxxx L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxx
Fax: 000-000-0000
(b) if to the Company, to:
Xxxxxx Environmental Services, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Fax: 000-000-0000
with a copy to:
Xxxxx XxXxxxxxx & Oaks Xxxxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: 000-000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address will be effective only upon
receipt).
8.6 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
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8.7 SPECIFIC PERFORMANCE. Each of the parties to this Agreement
acknowledges and agrees that the other parties to this Agreement would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, each of the parties to this Agreement agrees that
each of them will 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 of this Agreement in any action
instituted in any court of the United States or any state having subject
matter jurisdiction, in addition to any other remedy to which such party may
be entitled, at law or in equity.
8.8 OTHER POTENTIAL BIDDERS.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any of
its subsidiaries, solicit or encourage (including by way of furnishing
information) the initiation of any inquires or proposals regarding a Third
Party Acquisition (any of the foregoing inquiries or proposals being referred
to herein as an "ACQUISITION PROPOSAL"). Provided that the Company and the
Board shall have complied with the first sentence of this SECTION 8.8(a),
nothing contained in this SECTION 8.8(a) or any other provision of this
Agreement shall prevent the Board if it determines in good faith, after
consultation with, and the receipt of advice from, outside counsel, that it
is required to do so in order to discharge properly its fiduciary duties,
from considering, negotiating, approving and recommending to the stockholders
of the Company an unsolicited bona fide written Acquisition Proposal which
the Board of Directors of the Company determines in good faith (after
consultation with its financial advisors and legal counsel) would result in a
transaction more favorable to the Company's stockholders than the transaction
contemplated by this Agreement (any Acquisition Proposal meeting such
criterion being referred to herein as a "SUPERIOR PROPOSAL"). The Company
acknowledges that the exercise of its rights under this SECTION 8.8 of this
Agreement may result in payment obligations under SECTION 7.3 of this
Agreement. Nothing therein shall prohibit the Company from complying with
Rules 14d-9 and 14e-2 under the Exchange Act with respect to any other tender
offers.
(b) The Company shall promptly, but in no event later than 24
hours, notify the Purchaser after receipt of any Acquisition Proposal or any
request for nonpublic information relating to the Company or any of its
subsidiaries in connection with an Acquisition Proposal or for access to the
proper books or records of the Company or any subsidiary by any person or
entity that informs the Board that it is considering making or has made, an
Acquisition Proposal. Such notice to the Purchaser shall be made orally and
in writing and shall indicate in reasonable detail the identify of the Offer
and the terms and conditions of such proposal, inquiry or contact.
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(c) If the Board receives a request for material nonpublic
information by a Party who makes an unsolicited bona fide Acquisition
Proposal and the Board determines that such proposal, if consummated pursuant
to its term would be a Superior Proposal, then, and only in such case, the
Company may, subject to the execution of a confidentiality agreement
substantially similar to that then in effect between the Company and the
Purchaser, provide such party with access to information regarding the
Company.
(d) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties (other than the
Purchaser) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from any confidentiality or
standstill agreement to which the Company is a party.
(e) The Company shall ensure that the officer, directors, and
employees of the Company and its subsidiaries and any investment banker or
other advisor or representative retained by the Company are aware of the
restrictions described in this Section; and shall be responsible for any
breach of this SECTION 8.8 by such bankers, advisors and representatives.
8.9 DESCRIPTIVE HEADINGS, REFERENCES. The descriptive headings in this
Agreement are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
References in this Agreement to Sections, Annexes, and Schedules are
references to the Sections, Annexes, and Schedules of this Agreement unless
the context indicates otherwise.
8.10 PARTIES IN INTEREST. This Agreement will be binding upon and inure
solely to the benefit of each party to this Agreement, and, except as
provided in SECTIONS 5.9 and 8.11, nothing in this Agreement, express or
implied, is intended to confer upon any other person with rights to remedies
of any nature whatsoever under or by reason of this Agreement.
8.11 BENEFICIARIES. The Purchaser hereby acknowledges that SECTION 5.8
is intended to benefit the indemnified parties referred to in SECTION 5.8,
any of whom will be entitled to enforce SECTION 5.8 against the Company.
8.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, but all of
which will constitute one and the same agreement.
8.13 [RESERVED].
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8.14 CERTAIN DEFINITIONS. For the purposes of this Agreement: (a) the
term "SUBSIDIARY" means each person in which a person owns or controls,
directly or through one or more subsidiaries, 50% or more of the stock or
other interests having general voting power in the election of directors or
persons performing similar functions or more than 50% of the equity
interests; (b) the term "PERSON" will be broadly construed to include any
individual, corporation, company, partnership, trust, joint stock, company,
association, or other private or governmental entity; (c) the term "GROUP"
has the meaning given in Section 13(d)(3) of the Exchange Act; (d) the term
"AFFILIATE" has the meaning given in Rule 144(a)(1) under the Securities Act;
and (e) the term "BUSINESS DAY" has the meaning given in Rule 14d-1(c)(6)
under the Exchange Act.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREFORE, each of the parties to this Agreement has caused
this Agreement to be executed on its behalf by its duly authorized officers,
all as of the day and year first above written.
GAP Capital, L.L.C.,
a Texas limited liability company
By: /s/ Xxx Xxxxx
----------------------------------
Xxx Xxxxx,
its Manager
Witness:
/s/ Xxxx X. Xxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------
Title:
--------------------------
XXXXXX ENVIRONMENTAL SERVICES, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
-------------------------------
Title: Chairman
-------------------------------
Attest:
--------------------------------
Name:
---------------------------
Title:
--------------------------
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ANNEX A
Terms used in this ANNEX A have the meanings ascribed to them in the
Tender Offer Agreement dated as of June 4, 1999 (the "TENDER AGREEMENT")
Notwithstanding any other provisions of the Offer, the Purchaser will
not be required to accept for payment or (subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) relating to the obligation of
the Purchaser to pay for or return tendered Class A Shares promptly after the
termination or withdrawal of the Offer) to pay for tendered Class A Shares,
or may terminate or amend the Offer as provided in the Agreement or may
postpone the acceptance for payment of, or payment for, Class A Shares
(whether or not any other Class A Shares have been accepted for payment or
paid for pursuant to the Offer) if prior to the expiration of the Offer
(i) the Minimum Condition has not been satisfied; or (ii) if at any time on
or after the date of the Tender Agreement, and at any time before the time of
acceptance for payment of any such Class A Shares, any of the following
occurs:
(a) any of the representations or warranties of the Company
contained in the Tender Agreement is not true and correct at and as of any
date prior to the expiration date of the Offer as if made at and as of such
time, except for (i) failures to be true and correct as could not,
individually or in the aggregate, reasonable expected to result in a
Company Material Adverse Effect; or (ii) failures to comply as are capable
of being and are cured prior to the earlier of (A) ten days after written
notice from the Purchaser to the Company of such failure or (B) two
business days prior to the expiration date of the Offer.
(b) the Company has failed to comply with any of its obligations
under the Tender Agreement, except for (i) failures to so comply as could
not, individually or in the aggregate, reasonably be expected to result in
a Company Material Adverse Effect; and (ii) failures to comply as are
capable of being and are cured prior to the earlier of (A) ten days after
written notice from the Purchaser to the Company of such failure or (B) two
business days prior to the expiration date of the Offer;
(c) the Board of Directors of the Company has withdrawn or
modified in any respect adverse to the Purchaser its recommendation of the
Offer or taken any position inconsistent with such, recommendation;
(d) the Tender Agreement has been terminated in accordance with
its terms;
(e) the Company has reached an agreement with the Purchaser that
the Offer be terminated or amended;
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(f) any state, federal, or foreign government or governmental
authority has taken any action, or proposed, sought, promulgated, or
enacted, or any state, federal, or foreign government or governmental
authority or court has entered, enforced, or deemed applicable to the Offer
or the transactions contemplated by the Agreement, any statute, rule,
regulation, judgment, order, or injunction that is reasonably likely to (i)
make the acceptance for payment of, the payment for, or the purchase of,
some or all of the Class A/B Shares illegal or otherwise restrict,
materially delay, prohibit consummation of, or make materially more costly,
the Offer or the Reverse Split, (ii) result in a material delay in or
restrict the ability of the Purchaser, or render the Purchaser unable, to
accept for payment, pay for or purchase some or all of the Class A/B Shares
in the Offer or for the Company to effectuate the Reverse Split,
(iii) require the divestiture by the Purchaser, or the Company or any of
their respective subsidiaries or affiliates of all or any material portion
of the business, assets, or property of any of them or any Class A/B
Shares, or impose any material limitation on the ability of any of them to
conduct their business and own such assets, properties, and Class A/B
Shares, (iv) impose material limitations on the ability of the Purchaser to
acquire or hold or to exercise effectively all rights of ownership of the
Class A/B Shares, including the right to vote any Class A/B Shares acquired
by either of them on all matters properly presented to the Stockholders of
the Company, (v) impose any limitations on the ability of the Purchaser, or
any of its respective subsidiaries or affiliates effectively to control in
any material respect the business or operations of the Company, the
Purchaser, or any of their respective subsidiaries or affiliates;
(g) any change (or any condition, event or development involving
a prospective change) has occurred or been threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
financial condition, operations, licenses or franchises results of
operations, or prospects of the Company or any of its subsidiaries, that
could reasonably be expected to result in a Company Material Adverse
Effect;
(h) there has occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market or quotations for shares traded thereon
as reported by the NASDAQ or otherwise, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States, (iv) any limitation (whether or not
mandatory) by any governmental authority on the extension of credit by any
or other financial institutions, (v) after the date of the Agreement, an
aggregate decline of at least 25% in the Dow Xxxxx Industrial Average or
Standard & Poor's 500 Index or a decline in either such index of 12 1/2% in
any 24-hour period, or (vi) in the case of any of the occurrences referred
to in clauses (i) through (iv) existing at the time of the commencement of
the Offer, in the reasonable judgment of the Purchaser, a material
acceleration or worsening thereof;
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(i) any person or group other than the Purchaser and its
affiliates has entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Class A/B Shares or a merger, consolidation, or other business
combination or acquisition with or involving the Company or any of its
subsidiaries; or
(j) any material approval, permit, authorization, consent, or
waiting period of any domestic or foreign, governmental, administrative, or
regulatory entity (federal, state, local, provincial or otherwise) has not
been obtained or satisfied on terms satisfactory to the Purchaser in its
sole discretion.
that, in the good faith judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment of, or payment
for, Class A Shares or to proceed with the Reverse Split.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise
to any such condition or may be waived by the Purchaser in whole or in part
at an time and from time to time in its sole discretion (subject to the terms
of the Agreement). The failure by the Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances
will not be deemed to waiver with respect to any other facts or circumstances,
and each such right will be deemed an ongoing right that may be asserted at any
time and from time to time.
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