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EXHIBIT 10.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXX X. XXXXXXXXX, III,
XXXX XXXXXXXXX MARINE, INC.,
XXXXXXXXX SHIPYARD AND FABRICATION, INC.
EAE SERVICES, INC.
AND
FIRST WAVE MARINE, INC.
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TABLE OF CONTENTS
(Not a Part of the Agreement)
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01 Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03 Closing/Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04 Closing Deliveries by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.05 Closing Deliveries by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.06 Additional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
SELLERS AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01 Capacity of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02 Organization, Authority and Qualification
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03 Capital Stock of the Company; Ownership
of the Shares and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.04 Subsidiaries; Capital Stock; Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.05 Corporate Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.06 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.07 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.08 Financial Information and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.09 Certain Additional Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.10 No Undisclosed Liabilities or Capital
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.11 Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.12 Conduct in the Ordinary Course; Absence
of Certain Changes, Events and Conditions . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.14 Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.16 Environmental and Other Permits
And Licenses; Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 3.17 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.19 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.20 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.21 Assets; Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.22 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.23 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.24 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.25 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.26 Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.27 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.28 Accounts; Lockboxes; Safe Deposit Boxes;
Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.29 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.30 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.31 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01 Organization and Authority of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.03 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.05 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.06 Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.01 Conduct of Business Prior to the
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.02 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.04 Regulatory and Other Authorizations;
Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.05 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.06 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.07 Use of Names and Intellectual Property
SECTION 5.08 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.09 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.10 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 5.11 Miscellaneous Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.12 Certain Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.13 Termination of Inter-Company
Arrangements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.14 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.15 Break Up Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.16 Long Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI COVENANT OF FIRST WAVE MARINE, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01 Tax Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03 Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.04 Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.05 Cooperation and Exchange of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.01 Conditions to Obligations of the Sellers
and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.02 Conditions to Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.01 Survival of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.02 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.03 Limits on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.04 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE X TERMINATION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.01 Termination by the Sellers or Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.03 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.01 Joint and Several Obligation of the
Sellers and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.02 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.04 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.05 Headings; Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.06 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.07 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.08 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.09 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.13 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.14 Legal Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.15 Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.16 Arbitration of EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.17 Arbitration of Other Claims . . . . . . . . . . . . . . . . . . .
EXHIBITS
Exhibit A Assets
Exhibit 1.01(ii) Permitted Encumbrances
Exhibit 8.01(f) Legal Opinion of Purchaser's Counsel
Exhibit 8.01(h)(1) Employment Agreement
Exhibit 8.02(f) Legal Opinion of Company's Counsel
Exhibit 8.02(l) Escrow Agreement
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PREAMBLE
THIS STOCK PURCHASE AGREEMENT (hereinafter referred to as the
"Agreement"), dated as of the _________ day of ___________________, 1997 (the
"Execution Date"), is made and entered into by and among:
XXXX X. XXXXXXXXX, III, an individual of lawful age domiciled in
Hockley, Texas, who is the sole shareholder of Xxxx Xxxxxxxxx Marine,
Inc. (collectively, along with his undersigned spouse, the "Sellers");
and
XXXX XXXXXXXXX MARINE, INC., a Texas corporation whose principal place
of business is located at Pasadena, Texas, and which is the owner of
all the outstanding shares of all of its subsidiaries, including but
not limited to its subsidiary, Xxxxxxxxx Shipyard and Fabrication,
Inc., a Texas corporation; and
XXXXXXXXX SHIPYARD AND FABRICATION, INC., a Texas corporation whose
principal place of business is located at Galveston, Texas, and which
is the wholly owned subsidiary of Xxxx Xxxxxxxxx Marine, Inc.
The above two corporations hereinafter collectively referred to as the
"Company;" and
EAE SERVICES, INC., a Texas corporation whose principal place of
business is located at Baton Rouge, Louisiana (the "Purchaser"); and
FIRST WAVE MARINE, INC., a Delaware corporation whose principal place
of business is located at Baton Rouge, Louisiana, appearing herein for
the limited purposes of providing for certain stock options and
guarantying the Purchaser's promissory note provided for in Section
2.02.
RECITALS
WHEREAS, the Sellers own all the issued and outstanding shares (the
"Shares") of common stock, no par value per share (the "Common Stock"), of the
Company; and
WHEREAS, the Company owns all of the contract rights, properties and
assets used in the conduct of its Businesses (all such properties, contract
rights and assets being the "Assets"), including the major assets listed on
EXHIBIT A attached hereto and incorporated herein by reference; and
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WHEREAS, the Sellers wish to sell the Shares to the Purchaser, and the
Purchaser wishes to purchase the Shares from the Sellers, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Sellers, the Company and
the Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accounts Receivable" has the meaning specified in Section 3.22.
"Acquisition" means the acquisition of the Shares of the Company by
the Purchaser from the Sellers.
"Acquisition Documents" has the meaning specified in Section 9.01.
"Acquisition Proposal" has the meaning specified in Section 5.06.
"Action" means any claim, action, suit, arbitration, inquires,
proceeding or investigation by or before any Governmental Authority or
arbitration or mediation association.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreed Date" means the date on which the confirmation of the
Company's Xxxxx 00, 0000 XXXXXX amounts and any dispute resolution process
associated therewith shall be completed pursuant to Section 11.16. Such Agreed
Date shall be as soon as practicable, and in no event later than July 31, 1998.
"Agreement" or "this Agreement" means this Stock Purchase Agreement
dated as of the date set forth in the Preamble to this Agreement, by and among
the Sellers, the Company, and the Purchaser (including the Exhibits hereto and
the Disclosure Schedule)
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and all amendments hereto made in accordance with the provisions of Section
11.10 hereof.
"Appraisal Adjustment" means, in the event the Appraised Value of the
Company's fixed assets at Pasadena and Galveston, Texas, is between
$16,000,000.00 and $18,000,000.00, the Cash Payment due by the Purchaser to the
Sellers at the Closing pursuant to Section 2.02(a), shall be reduced by the
difference between the actual Appraised Value and $18,000,000.00. The
Appraisal Adjustment shall be added to the Note due by Purchaser to Sellers
pursuant to Section 2.02(c).
"Appraised Value" means the appraised value of all of the Company's
fixed assets at Pasadena and Galveston, Texas. Such Appraised Value shall be
not less than Sixteen Million and No/100 Dollars ($16,000,000.00). In the
event the Appraised Value of such fixed assets is between $16,000,000.00 and
$18,000,000.00, the Cash Payment due by the Purchaser to the Sellers at the
Closing pursuant to Section 2.02(a), shall be reduced by the difference between
the actual Appraised Value and $18,000,000.00 (the "Appraisal Adjustment").
The Appraisal Adjustment shall be added to the Note.
"Asset" or "Assets" has the meaning specified in Section 3.21.
"Balance Sheet Date" means August 30, 1997.
"Best" means A.M. Best Company, Inc.
"Business" means the operation of a commercial shipyard, and all other
businesses which are on the date hereof being or intended to be conducted by
the Company, its subsidiaries, the Sellers and their Affiliates, except Xxx
Xxxxxxxxx, Inc.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the State
of Texas.
"Cash Payment" has the meaning specified in Section 2.02(a).
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 4-2 U.S.C. Sections 9601 et seq.
"Claim Notice" has the meaning specified in Section 9.02.
"Closing" has the meaning specified in Section 2.03.
"Closing Date" has the meaning specified in Section 2.03.
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"COBRA" means continuation coverage as set forth in Sections 601 and
602 of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof, and any references to any Section of the Code includes
predecessors and successors of such Code Section, as appropriate.
"Commonly Controlled Entity" has the meaning specified in Section
3.24.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Company" has the meaning specified in the preamble to this Agreement.
"Company GAAP Statements" has the meaning specified in Section 3.08.
"Company Interim GAAP Statements" has the meaning specified in Section
3.08.
"Company's Counsel" means Xxxxx, Knight & Xxxxxxxx, L.L.P., Houston,
Texas, legal counsel to the Sellers and the Company in connection with this
Agreement and the transactions contemplated hereby.
"Control" (including, without limitations, the terms "controls",
"controlled by" and "under common control with"), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, or as director, officer, trustee or executor, of the
power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as director,
officer, trustee or executor, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such Person.
"D&P" means Duff & Xxxxxx Credit Rating Co.
"Debt Adjustment" shall be the amount by which the Long Term Debt (as
defined in Section 1.01) as of the Closing Date, is less than Seven Million and
No/100 Dollars ($7,000,000.00).
"Disclosure Schedule" means the schedules delivered to the Purchaser
by the Sellers and the Company together with this Agreement.
"EBITDA" the Company's EBITDA shall be calculated by using the
Company's net income before income taxes plus interest expense, depreciation
and amortization, and
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excluding nonoperating income (example: sale or exchange of assets). Such net
income is to be calculated in accordance with generally accepted accounting
principles consistently applied on a historical basis, and such income shall be
computed as if this sale had not been closed.
The parties agree that confirmation of the Company's Xxxxx 00, 0000
XXXXXX amounts and any dispute resolution process associated therewith shall be
completed as soon as practicable and pursuant to Section 11.16, but in no event
later than July 31, 1998, such date to be referred to herein as the "Agreed
Date."
"Execution Date" has the meaning specified in the Preamble of this
Agreement.
"Encumbrance" or "Encumbrances" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, settlements, consent orders or consent agreements
by any Person relating in any way to any Environmental Law, Environmental
Permits or Hazardous Materials, or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Law" means any Law, now in effect, including, without
limitation, any judicial or administrative order, consent decree or judgment,
relating to or addressing the environment, health, safety or Hazardous
Materials, including without limitation any Occupational Safety and Health Law.
"Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental Law, or (b) damages
arising from, or costs incurred by, such Governmental Authority in response to
a Release of a Hazardous Material.
"Environmental Permits" means all Permits required under any applicable
Environmental Law.
"ERISA" has the meaning specified in Section 3.24.
"Escrow Agent" means Southwest Bank of Texas, N.A.
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"Escrow Agreement" means the agreement referred to in Section 8.02(1).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning specified in Section 3.08.
"GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time.
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" or "Governmental Orders" means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Materials" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"HUD" means the Department of Housing and Urban Development of the
United States of America or any successor thereto.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property) , (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
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warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness
of others referred to in clauses (a) through (f) above guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property,
or to purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including, without limitation, any agreement to pay for
property or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against loss, and
(i) all Indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02.
"Indemnifying Party" has the meaning specified in Section 9.02.
"Indemnity Notice" has the meaning specified in Section 9.02.
"Intellectual Property" means (a) trademarks, service marks, trade
dress, logos, trade names and corporate names, whether or not registered, (b)
copyrights, whether or not registered, and all patents, patent applications and
inventions and discoveries, (c) registrations of and applications for
registration of any of the foregoing, (d) computer software, including, without
limitation, source code, operating systems and specifications, data, data
bases, files, documentation and other materials related thereto, data and
documentation, (e) trade secrets and confidential, technical and business
information, and (f) whether or not confidential, technology (including,
without limitation, know-how and show-how), research and development
information, drawings, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing information, business and
marketing plans and customer and supplier Lists and information.
"Inter-Company Arrangement" has the meaning specified in Section 3.14.
"IRS" means the Internal Revenue Service of the United States.
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"Law" or "Laws" means any United States federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, order, Permit, other
legal requirement or rule of law.
"Lease" for purposes of Sections 3.17, 3.19 and 3.20 means any and all
leases, subleases, sale/leaseback agreements or similar arrangements, whether
or not capitalized.
"Leased Real Property" means the real property leased by the Company,
as tenant, together with, to the extent leased by the Company, all buildings
and other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of the
Company attached or appurtenant thereto, and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Liabilities" means any and all Indebtedness, debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law (including, without limitation, any Environmental Law) ,
Action or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company from a third party.
"Long Term Debt" means all debt from commercial lenders incurred by
the Company prior to May 1, 1997. Long Term Debt shall not include: (a) the
revolving credit facility based on Accounts Receivable, or (b) the Company's
debt on the 1,200-ton and the 9,000-ton dry docks under construction. Pursuant
to Section 2.02(b), the Company's Long Term Debt shall not exceed Seven Million
and No/100 Dollars ($7,000,000.00) at Closing.
"Losses" has the meaning specified in Section 9.02.
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business or the Company that, individually or in the aggregate with any
other circumstances, changes in, are effects on the Business or the Company:
(a) is or could be materially adverse to the business, operations, prospects,
results of operations or financial condition of the Company so as to cause its
annual gross revenues or actual net after tax income to decrease by 10% or
more, or (b) could materially and adversely affect the ability of the Purchaser
or the Company to operate or conduct the Business in the manner in which it is
currently operated or conducted by the Company.
"Material Contracts" has the meaning specified in Section 3.17.
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"Multi employer Plan" has the meaning specified in Section 3(37) or
4001(a)(3) of ERISA and Section 3.24 hereof.
"Name" has the meaning specified in Section 5.07.
"Note" has the meaning specified in Section 2.02(c).
"Notice Period" has the meaning specified in Section 9.02.
"Occupational Safety and Health Law" means any law, rule or regulation
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any mandatory program designed to
provide safe and healthful working conditions.
"Owned Intellectual Property" means all Intellectual Property in and
to which the Company holds, or has a right to hold, any right, title and
interest.
"Owned Real Property" means the real property owned by the Company
prior to the Closing, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of the Company
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.
"PBGC" has the meaning specified in Section 3.24.
"Permits" has the meaning specified in Section 3.16.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
Levies not yet due and payable which are not in excess of $15,000 in the
aggregate or which are being contested in good faith and for which reserves in
accordance with GAAP have been established on the Financial Statements; (b)
Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period
of more than 30 days or (ii) are not in excess of $5,000 in the case of a
single property or $10,000 in the aggregate at any time or which are being
contested in good faith and for which reserves in accordance with GAAP have
been established on the Financial Statements; (c) pledges or deposits to secure
obligations under worker's compensation laws or similar legislation or to
secure public or statutory obligations; (d) minor survey exceptions, reciprocal
easement agreements and other customary
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encumbrances on title to real property that (i) were not incurred in connection
with any Indebtedness, (ii) do not render title to the property encumbered
thereby unmarketable and (iii) do not, individually or in the aggregate,
materially adversely affect the value or use of such property for its current
purposes; (e) in the case of stock of a corporation, restrictions on the
payment of dividends arising under applicable corporate law or on
transferability arising under applicable securities Laws; (f) the Encumbrances
identified on Exhibit 1.01(ii); and (g) any liens or other Encumbrances of
record which do not secure any debt or other obligation of the Company.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization,
governmental authority or other entity, as well as any syndicate or group that
would be deemed to be a person under Section 13(d)(3) of the Exchange Act.
"Plans" has the meaning specified in Section 3.24.
"Post-Closing Adjustment." The Purchase Price defined in Section 2.02
hereof is based upon a 5.7X multiple of the minimum $4,500,000 EBITDA
requirement. The Post-Closing Adjustment shall be the amount obtained by
subtracting $4,500,000 from the Company's EBITDA for its fiscal year ending
March 31, 1998. If such amount is zero or a positive number, there shall be no
Post-Closing Adjustment. If such number is a negative number, it shall be
applied as follows as an offset to the Note:
For each dollar EBITDA falls below $4,500,000, $5.70 shall be offset
against the Note. For purposes of this Agreement, "EBITDA" shall be
calculated by using the Company's net income before income taxes plus
interest expense, depreciation and amortization, and excluding
nonoperating income (example: sale of assets). Such net income to be
calculated in accordance with generally accepted accounting principles
consistently applied on a historical basis.
The Post-Closing Adjustment shall be offset against the Note and the Note shall
be paid on the Agreed Date (as defined in Section 1.01) within ten (10)
Business days after final confirmation of the Company's EBITDA amounts for the
period ending March 31, 1998.
"Purchase Price" has the meaning specified in Section 2.02.
"Purchase Price Bank Account" means a bank account in the United
States of America to be designated by the Sellers in a written notice to the
Purchaser at least one Business Day before the Closing.
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"Purchaser" has the meaning specified in the Preamble to this
Agreement.
"Purchaser Businesses" means the provision of shipbuilding services,
including, but not limited to, repair, cleaning, maintenance and construction
of marine and inland barges and vessels.
"Purchaser's Counsel" means Xxxxxxxxx, Xxxxxx & Xxxxxx, L.L.P., legal
counsel to the Purchaser in connection with this Agreement and the transactions
contemplated hereby.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Regulations" means the Treasury Regulations (including, without
limitation, Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes.
"Release" means the release or threatened release, spill, emission,
leaking, pumping, injection , deposit , disposal , discharge, dispersal ,
leaching or migrating into the indoor or outdoor environmental of any Hazardous
Material.
"Routine Purchases" means purchases by the Company of materials and
personal property in the ordinary course of business pursuant to oral and
written purchase agreements necessary for the Company to complete the
agreements identified in clause (i) of Section 3. 17(a), which oral and written
purchase agreements provide prices and terms consistent with the performance
obligations of the Company under, and the profit estimates utilized by the
Company in entering into, the agreements identified in such clause (i).
"S&P" means Standard & Poor's Corporation.
"Secured Real Property" has the meaning specified in Section 3.16.
"Securities" has the meaning specified in Section 2(11) of the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has the meaning specified in the preamble to this Agreement.
"Sellers' Accountants" means Xxxxxx, Xxxxxxxx & Xxxxxxxxx, independent
accountants of the Company.
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"Sellers' Knowledge" means the knowledge of Sellers or any of the key
managerial employees of the Company.
"Shares" has the meaning specified in the Recitals to this Agreement.
"Subsidiary" or "Subsidiaries" means any and all other corporations,
partnerships, joint ventures, limited liability companies, associations and
other entities controlled by Xxxx Xxxxxxxxx Marine, Inc. directly or indirectly
through one or more intermediaries, including Xxxxxxxxx Shipyard and
Fabrication, Inc., but excluding Xxx Xxxxxxxxx, Inc.
"Tangible Personal Property" has the meaning specified in Section
3.20.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, premiums, property,
sales, use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees; and customs
duties, tariffs, and similar charges.
"Tax Return" means any return, claim for refund, report, declaration,
information return, statement or other document, whether original or amended,
and including all schedules, forms and/or elections required or permitted in
connection therewith, filed or required to be filed with any Governmental
Authority or provided to any person in connection with the determination,
assessment or collection of any Tax or the administration of any laws,
regulations or administrative requirements relating to any Tax.
"Third Party Claim" has the meaning specified in Section 9.02.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Sellers shall
execute and deliver all documents and take all actions necessary to sell to the
Purchaser, and the Purchaser shall execute and deliver all documents and take
all actions necessary to purchase from the Sellers, the Shares.
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SECTION 2.02. Purchase Price. The aggregate purchase price for the
Shares shall be TWENTY-SIX MILLION AND NO/100 DOLLARS ($26,000,000.00) (the
"Purchase Price"), to be paid as follows, subject to adjustments as provided
below:
(a) Cash Payment. FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00) cash to be paid at Closing subject to the Appraisal Adjustment
as defined herein in Section 1.01 (the "Cash Payment").
(b) Assumption/Retirement of Debt. At Closing, the Company shall
have not more than and the Purchaser shall guarantee and/or retire up to SEVEN
MILLION AND NO/100 DOLLARS ($7,000,000.00) of Company's Long Term Debt as
defined herein in Section 1.01.
(c) Promissory Note. At Closing, the Purchaser shall deliver to
the Sellers a subordinated promissory note in the principal amount of FOUR
MILLION AND NO/100 DOLLARS ($4,000,000.00), adjusted by: (i) the amount of the
Debt Adjustment, (ii) the Appraisal Adjustment, and (iii) the Post-Closing
Adjustment (the "Note"). The final amount of the Note shall be allocated as
consideration for the noncompete agreement of Xxxx X. Xxxxxxxxx, III.
When delivered, the Note shall be in the original principal amount of
Four Million and No/100 Dollars ($4,000,000.00), adjusted by: (i) the amount of
the Debt Adjustment and (ii) the Appraisal Adjustment, and shall bear interest
at 8.5% per annum for a term of five (5) years from the Closing Date. Interest
only (no principal) shall be due quarterly on the Note for the first two (2)
years. In the remaining three (3) years, the principal shall be amortized on a
5-year schedule, with equal payments of principal plus interest due quarterly
and a final balloon payment of principal and interest due five (5) years from
the Closing Date. The Note shall be secured by a guaranty of First Wave
Marine, Inc. The Note shall be subject to offset by the Post-Closing
Adjustment. The Note may be prepaid without penalty at any time. If First
Wave Marine, Inc. consummates a public offering of its securities, the
Purchaser agrees to prepay the Note within ten (10) Business Days after the
Agreed Date, as defined in Section 1.01, and following any Post-Closing
Adjustment.
SECTION 2.03. Closing/Closing Date. The parties shall use all
reasonable efforts to consummate the purchase and sale of stock hereby on or
before February 15, 1998, or such other date as agreed. Upon the terms and
subject to the conditions of this Agreement, the execution of the documents and
other actions relating to the sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at the
offices of Xxxxxx & Xxxxxxxx, P.C., 0000 XxXxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx,
00000, at 10:00 a.m., on a day mutually selected by the Purchaser
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and the Sellers within twenty (20) days of the Purchaser's closing on its debt
or equity financing for the Acquisition and following the expiration or
termination of any waiting period required under applicable law (the day on
which the Closing takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by the Sellers. At the Closing, the
Sellers shall deliver or cause to be delivered to the Purchaser:
(a) Stock certificates evidencing the Shares duly endorsed in
blank, or accompanied by stock powers duly executed in blank, in form
satisfaction to the Purchaser and with all required stock transfer tax stamps
affiliated, if applicable;
(b) A receipt from the Sellers; and
(c) The opinions, certificates and other documents required to be
delivered pursuant hereto.
SECTION 2.05. Closing Deliveries by the Purchaser. At the Closing,
the Purchaser shall deliver to the Sellers:
(a) The Cash Payment as provided for in Section 2.02(a), as
adjusted, by wire transfer in immediately available funds to the Purchase Price
Bank Account or as requested in writing by the Sellers;
(b) The Note as provided for in Section 2.02(c); and
(c) The opinions, certificates and other documents required to be
delivered pursuant hereto.
SECTION 2.06. Additional Consideration. In the event that the Xxxxx
00, 0000 XXXXXX of the Company exceeds $4,500,000.00, the Purchaser shall,
within ten (10) Business Days after the Agreed Date, pay to Xxxx X. Xxxxxxxxx,
III, as a bonus, one-half ( 1/2) of the amount by which the Company's final
Xxxxx 00, 0000 XXXXXX exceeds $4,500,000.00. The parties anticipate that
through March 31, 1998, Xxxx X. Xxxxxxxxx, III, shall remain employed as an
active executive officer of the Company for $30,000 per month, with normal and
customary fringes and use of Company car. Any dispute or disagreement with
respect to the computation of the Company's EBITDA or the bonus of Xxxx X.
Xxxxxxxxx, III, shall be resolved by arbitration as provided in Section 11.16
hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SELLERS AND THE COMPANY
Subject to the terms and conditions of this Agreement, each of the
Sellers and the Company hereby represents and warrants to the Purchaser as of
the Execution Date, except as may otherwise be set forth on the Disclosure
Schedule, as set forth in Sections 3.01 through 3.31, as follows. The term the
"Company" as used herein includes Xxxx Xxxxxxxxx Marine, Inc. and all of its
subsidiaries unless otherwise indicated.
SECTION 3.01. Capacity of the Sellers. Each of the Sellers is an
individual with full legal capacity to enter into this Agreement, to carry out
the Sellers' obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Sellers is a resident of the State of Texas.
This Agreement has been duly executed and delivered by the Sellers, and
(assuming due authorization, execution and delivery by the Purchaser) upon
receipt of the necessary approvals by Governmental Authorities this Agreement
constitutes a legal, valid and binding obligation of each of the Sellers
enforceable against each of the Sellers in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity.
SECTION 3.02. Organization, Authority and Qualification of the
Company. The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to conduct the
Business. The Company has all necessary power and authority to enter into this
Agreement to carry out the Company's obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company, and (assuming due authorization,
execution and delivery by the Purchaser) upon receipt of the necessary
approvals by Governmental Authorities this Agreement constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting rights of creditors generally or by general principles of equity. The
Company and each of its subsidiaries is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary (other than those jurisdictions where the failure to be
so licensed or qualified are not reasonably likely to have a Material Adverse
Effect) and all such jurisdictions are set forth on Schedule 3.02 of the
Disclosure Schedule. All of the foregoing registrations,
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licenses, and qualifications are in full force and effect and the Company has
not received any notice of any event, inquiry, investigation or proceeding that
could result in the suspension, revocation or limitation of any such
registration, license, or qualification and to the best of the knowledge of the
Sellers and the Company, there is no sustainable basis for any such suspension,
revocation or limitation. All corporate actions taken by the Company have been
duly authorized or ratified, and the Company has not taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of its articles of incorporation or bylaws. True and
correct copies of the articles of incorporation and bylaws of the Company, each
as in effect on the date hereof, have been delivered by the Sellers to the
Purchaser.
SECTION 3.03. Capital Stock of the Company; Ownership of the Shares
and Assets.
(a) The authorized capital stock of the Company consists of
300,000 shares of Common Stock. As of the date hereof, 100 shares of Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable. None of the issued and outstanding shares of Common Stock
was issued in violation of any preemptive rights.
(b) There are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Company or obligating the Sellers or the Company to
issue or sell any shares of capital stock of, or any securities or obligations
convertible into or exchangeable for shares of capital stock of the Company, or
any other interest in, the Company; and no options, warrants, convertible
securities or other such rights, agreements, assignments or commitments shall
be outstanding as of the Closing Date.
(c) The Shares constitute all the issued and outstanding capital
stock of the Company. The Shares are owned of record and beneficially solely by
the Sellers and are registered in the respective names of the Sellers free and
clear of all Encumbrances other than those set forth in item (e) of Permitted
Encumbrances.
(d) Except as disclosed in Section 3.03(d) of the Disclosure
Schedule, there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Shares.
(e) The Company is the owner of all of the properties, contract
rights and assets used in the conduct of its Businesses (all such properties,
contract rights and assets being the "Assets"), including the major assets
listed on EXHIBIT A attached hereto and incorporated herein by reference.
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SECTION 3.04. Subsidiaries; Capital Stock; Ownership of Shares.
(a) Xxxx Xxxxxxxxx Marine, Inc. has only one (1) subsidiary which
is Xxxxxxxxx Shipyard and Fabrication, Inc. (the "Subsidiary"). Xxxx Xxxxxxxxx
Marine, Inc. owns all of the outstanding stock of its Subsidiary free and clear
of all Encumbrances.
(b) The authorized capital stock of the Subsidiary, Xxxxxxxxx
Shipyard and Fabrication, Inc., consists of 1,000,000 shares of common stock.
As of the date hereof, 100 shares of common stock are issued and outstanding,
all of which are validly issued, fully paid and nonassessable and owned by Xxxx
Xxxxxxxxx Marine, Inc. None of the issued and outstanding shares of common
stock was issued in violation of any preemptive rights.
(c) There are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Subsidiary or obligating the Subsidiary or the
Company to issue or sell any shares of capital stock of, or any securities or
obligations convertible into or exchangeable for shares of capital stock of the
Subsidiary, or any other interest in, the Subsidiary; and no options, warrants,
convertible securities or other such rights, agreements, assignments or
commitments shall be outstanding as of the Closing Date.
(d) The 100 shares of common stock constitute all the issued and
outstanding capital stock of the Subsidiary. The shares are owned of record and
beneficially solely by Xxxx Xxxxxxxxx Marine, Inc. and are registered in its
name free and clear of all Encumbrances other than those set forth in item (e)
of Permitted Encumbrances.
(e) Except as disclosed in Section 3.04(e) of the Disclosure
Schedule, there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the shares of stock of the Subsidiary or the Company.
(f) Except as disclosed in Section 3.04(f) of the Disclosure
Schedule, neither the Company nor its Subsidiary is a partner or member of (nor
is any part of the Business conducted through) any partnership or limited
liability company. Neither the Company nor its Subsidiary is a participant in
any other joint venture or similar arrangement.
(g) None of the Sellers is a partner or member of any partnership,
limited liability company, joint venture or similar arrangement except as
completely and accurately set forth in Section 3.04(g) of the Disclosure
Schedule.
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(h) The Business is not conducted through any Affiliates of the
Company or the Sellers except as completely and accurately set forth in Section
3.04(h) of the Disclosure Schedule.
SECTION 3.05. Corporate Books and Records. The minute books of the
Company contains minutes of all meetings and unanimous consents of the
stockholders, Board of Directors and all committees, if any, of the Board of
Directors of the Company. Complete and accurate copies of such minute books of
the Company have been made available to the Purchaser by the Sellers and the
Company.
SECTION 3.06. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section 3.07 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by the Sellers and the Company do not and will not (a) violate,
conflict with or result in the breach of any provision of the articles of
incorporation or bylaws (or similar organizational documents) of the Company,
(b) conflict with or violate any Law or Governmental Order applicable to the
Sellers, the Company, or any of their respective assets, properties or
businesses, including, without limitation, the Business, or (c) conflict with,
result in any breach of, constitute a default (or event which with the giving
of notice or the lapse of time, or both, would become a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Shares or on any of the assets or
properties of the Sellers or the Company pursuant to any note, bond, mortgage
or indenture, contract, agreement, lease, sublease, license, permit, franchise
or other installment or arrangement to which the Sellers or the Company is a
party or by which any of the Shares or any of such assets or properties is
bound or affected.
SECTION 3.07. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other third party.
SECTION 3.08. Financial Information and Books and Records.
(a) The Sellers have previously furnished the Purchaser complete
and accurate copies of (i) the reviewed GAAP balance sheet of the Company for
each of the fiscal years ended as of March 31, 1995, March 31, 1996, and March
31, 1997, , and the related audited GAAP statements of earnings, stockholder's
equity and cash flows for each of such periods then ended together with all
related notes and schedules thereto, accompanied by the reports thereon of the
Company and the Sellers' Accountants
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(collectively referred to herein as the "Company GAAP Statement") and (ii) the
unaudited GAAP balance sheets of the Company as of July 31, 1997 and September
30, 1997, and the related unaudited GAAP statements of earnings, stockholder's
equity and cash flows for each three-month period then ended, together with all
related notes and schedules thereto (collectively referred to herein as the
"Company Interim GAAP Statements" and, together with the Company GAAP
Statements, the "Financial Statements"). The Financial Statements (i) were
prepared in accordance with the books of account and other financial records of
the Company, (ii) present fairly in all material respects the financial
condition and results of operations of the Company as of the dates thereof or
for the periods covered thereby in accordance with GAAP, applied on a basis
consistent with the past practices of the Company, and (iii) include all
adjustments that are necessary for a fair presentation of the financial
condition and the results of the operations of the Company as of the dates
thereof or for the periods covered thereby in accordance with GAAP (subject, in
the case of the Company Interim GAAP Statements, to normal year-end audit
adjustments).
(b) The books of account and other financial records of the
Company: (i) reflect all items of income and expense and all assets and
liabilities required to be reflected therein in accordance with GAAP, (ii) are
in all material respects complete and correct, and (iii) have been maintained
in accordance with good business and accounting practices. Except as disclosed
on Section 3.08(b) of the Disclosure Schedule, no more than ten (10) percent of
the EBITDA of the Company for any fiscal year or the partial fiscal year
beginning April 1, 1997 is derived from the sale or exchange of assets.
SECTION 3.09. Certain Additional Representations. Except as
completely and accurately set forth in Section 3.09 of the Disclosure Schedule,
the Company has no obligation to pay any amounts to or perform any obligations
owing to, or indemnify, the Sellers or otherwise hold the Sellers harmless
pursuant to any agreement or other arrangement entered into prior to the
Closing between any of the Sellers or any Affiliate of the Sellers (other than
the Company) and the Company.
SECTION 3.10. No Undisclosed Liabilities or Capital Commitments.
(a) There are no Liabilities of the Company, other than
Liabilities (i) reflected or reserved against in the Financial Statements, (ii)
completely and accurately disclosed in Section 3. 10 of the Disclosure Schedule
or (iii) incurred since the Balance Sheet Date in the ordinary course of
business of the Company and which have not had and could not have a Material
Adverse Effect.
(b) Except as completely and accurately set forth in Section 3.10
of the Disclosure Schedule or arising in the ordinary course of business, the
Company is not
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subject to any commitment, actual or contingent, to make any investment or
capital contribution, or purchase any securities, or supply funds to any
Person, in each case in excess of $10,000 or $25,000 in the aggregate.
SECTION 3.11. Acquired Assets. Each asset of the Company (including,
without limitation, the benefit of any licenses, leases or other agreements or
arrangements) acquired since the Balance Sheet Date has been acquired from
independent third parties.
SECTION 3.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Balance Sheet Date, except as
completely and accurately disclosed in Section 3.12 of the Disclosure Schedule:
(a) the Business has been conducted in the ordinary course; and
(b) the Company has not:
(i) Permitted or allowed any of the assets or properties
(whether tangible or intangible) of the Company to be
subjected to any Encumbrance, other than Permitted
Encumbrances and Encumbrances that will be released
at or prior to the Closing;
(ii) Except in the ordinary course of business, discharged
or otherwise obtained the release of any Encumbrance
or paid or otherwise discharged any Liability, other
than current liabilities reflected on the Financial
Statements and current liabilities incurred in the
ordinary course of business since the Balance Sheet
Date;
(iii) Guaranteed any Indebtedness of, or otherwise incurred
any Indebtedness on behalf of, any Person other than
the Company;
(iv) Failed to pay any creditor any amount owed to such
creditor for which a demand letter has been received
or suit instituted against the Company;
(v) Redeemed any of the capital stock or, except as
completely and accurately set forth in Section 3.12
of the Disclosure Schedule, declared, made or
paid-any dividends or distributions with respect to
capital (whether in cash, securities or other
property) to the holders of capital stock of the
Company or otherwise;
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(vi) Made any material changes in the customary methods of
operations of the Company, including, without
limitation, purchasing, marketing, selling,
servicing, pricing, investing or accounting practices
and policies;
(vii) Merged with, entered into a consolidation with or
acquired any interest in any Person or acquired a
substantial portion of the assets or business of any
Person or any division or line of business thereof,
or otherwise acquired any assets other than in the
ordinary course of business consistent with past
practice;
(viii) Made any capital expenditure or commitment for any
capital expenditure in excess of $10,000 in any
individual instance, $25,000 in the aggregate;
(ix) Sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real,
personal or mixed (including, without limitation,
investment assets, leasehold interests and intangible
assets), other than in the ordinary course of
business;
(x) Issued or sold any capital stock, notes, bonds or
other securities, or any option, warrant or other
right to acquire the same, of, or any other interest
in, the Company;
(xi) Except as completely and accurately set forth in
Section 3.12 of the Disclosure Schedule, entered into
any agreement, arrangement or transaction with any of
its directors, officers, employees or shareholders
(or with any relative, beneficiary, spouse or
Affiliate of such Person);
(xii) Except as completely and accurately set forth in
Section 3.12 of the Disclosure Schedule, (A) granted
any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by the Company to
any of its employees, including, without limitation,
any increase or change pursuant to any Plan, other
than in the ordinary course of business and which are
included in the compensation amounts payable to its
employees set forth in the written materials
previously provided by the Sellers to the Purchaser,
or (B) established or increased or promised to
increase any benefits under any Plan;
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(xiii) Revalued (other than in accordance with GAAP and as
completely and accurately set forth in Section 3.12
of the Disclosure Schedule) or restructured any
assets of the Company;
(xiv) Amended, terminated, canceled or compromised any
material claims of the Company or waived any other
rights of substantial value to the Company;
(xv) Made any change in any method of accounting or
accounting practice or policy used by the Company
other than changes which were required by GAAP and
are completely and accurately set forth in Section
3.12 of the Disclosure Schedule;
(xvi) Failed to maintain the Assets material to the
operation of the Business in such operating condition
and repair as is suitable for the purposes for which
they are used;
(xvii) Allowed any material Permit or material Environmental
Permit that was issued or relates to the Company or
otherwise relates to any Asset to lapse or terminate
or failed to renew any such Permit or Environmental
Permit or any insurance policy under which the
Company is an insured that is scheduled to terminate
or expire within forty-five (45) days of the Closing
Date;
(xviii) Incurred any Indebtedness in excess of $10,000 in
any individual instance or since the Balance Sheet
Date $25,000 in the aggregate;
(xix) Amended or modified in any material respects, or
consented to the termination of, any Material
Contract or the Company's rights thereunder;
(xx) Amended or restated the articles of incorporation or
the bylaws (or other organizational documents) of the
Company;
(xxi) Terminated, discontinued, closed or disposed of any
office, facility or other business operation, or laid
off any employees (other than in the ordinary course
of business consistent with past practice and which
did not require any notifications to or filings with
any Governmental Authority or notifications to any
employees) or implemented any early retirement,
separation or program providing early retirement
window benefits within the meaning of Section
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1.401(a)-4 of the Regulations or announced or planned
any such action or program for the future;
(xxii) Settled or compromised any liability, with respect to
Taxes of the Company;
(xxiii) Suffered any casualty loss or damage with respect
to any of the assets which is not covered by
insurance (excluding applicable insurance
deductibles);
(xxiv) Disclosed any confidential Intellectual Property
(other than as requested by the Purchaser) or
permitted to lapse or abandoned any Intellectual
Property (or any registration or grant thereof or any
application relating thereto) to which, or under
which, the Company has any right, title, interest or
license and which is material to the Business;
(xxv) Suffered any Material Adverse Effect; or
(xxvi) Agreed, whether in writing or otherwise, to take any
of the actions specified in this Section 3.12 or
granted any options to purchase, rights of first
refusal, rights of first offer or any other similar
rights or commitments with respect to any of the
actions specified in this Section 3.12, except as
expressly contemplated by this Agreement; and
(c) (i) All unfilled purchase orders of the Company at the
date of this Agreement are, and all unfilled purchase
orders of the Company on the Closing Date will be, at
prices that were competitive at the time the purchase
order was entered into, and no such purchase order
was, is or will be with Sellers or anyone who is
related to or affiliated with Sellers;
(ii) All uncompleted sales contracts of the Company at the
date of this Agreement are, and all uncompleted sales
contracts of the Company on the Closing Date will be,
with persons, corporations or other entities that are
not related to or affiliated with Sellers. The
Company has accounted for all uncompleted contracts
for financial accounting purposes under the
percentage of completion method in accordance with
generally accepted accounting principles consistently
applied; and
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(iii) At the Execution Date, there are no material (in
excess of $25,000.00) warranty claims or similar
demands that have been made against the Company by
any customer and at the Execution Date, the aggregate
amount of all warranty claims or similar demands that
have been made against the Company by all customers
do not exceed in the aggregate $100,000.00. At the
date of this Agreement, there are no known customer
claims, charge backs, offsets, refunds or similar
demands that have been made by customers of the
Company.
SECTION 3.13. Litigation. Set forth in Section 3.13 of the Disclosure
Schedule (with respect to each Action disclosed therein) are the parties, the
nature of the proceeding, the date and method commenced and the amount of
damages or other relief sought and, if applicable, paid or granted. Except as
completely and accurately set forth in Section 3.13 of the Disclosure Schedule,
there are no Actions by or against the Company (or by or against any of the
Sellers or any Affiliate of the Company or any of the Sellers and relating to
the Business, or affecting any of the Assets , pending before any Governmental
Authority (or, to the best knowledge of the Sellers and the Company, threatened
to be brought by or before any Governmental Authority). No such scheduled
Action has, has had or could have a Material Adverse Effect or could affect the
legality, validity or enforceability of this Agreement or the consummation of
the transactions contemplated hereby. None of the Company, any of the Assets,
the Sellers or any Affiliate of the Company or the Sellers is subject to any
Governmental Order (nor, to the best of the knowledge of the Sellers and the
Company, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has, has had or could have a Material Adverse
Effect.
SECTION 3.14. Certain Interests. Neither the Sellers nor any
Affiliate of the Sellers (other than the Company) has and no officer or
director of the Company, and no relative or spouse (or relative of such spouse)
who resides with, or is a dependent of, any such officer or director has (i)
outstanding any Indebtedness to the Company, or (ii) entered into any
transactions with the Company, individually or in the aggregate, exceeding
$20,000, other than market rate loans which have been paid in full as of the
date hereof (any arrangement referred to in (i) or (ii) shall be referred to as
an "Inter-Company Arrangement") except as completely and accurately set forth
in Section 3.14 of the Disclosure Schedule. Except as set forth in Section 3.14
of the Disclosure Schedule, all Inter-Company Arrangements are on terms that
are at least as favorable to the Company as would prevail in a comparable
arm's-length transaction with a third party.
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SECTION 3.15. Compliance with Laws. The Company has conducted and
continues to conduct the Business in accordance with all material Laws and
Governmental Orders applicable to the Company or any of the Assets or the
Business, and the Company is not in violation of any such material Law or
Governmental Order. The Company has duly and validly filed or caused to be
filed all material reports, statements, documents, registrations, filings or
submissions that were required by applicable Laws to be filed; all such filings
complied with all applicable laws in all material respects when filed, and no
material deficiencies have been asserted with respect to any such filings which
have not been satisfied. None of the Company, any of the Sellers, any
Affiliates of the Company or any of the Sellers or any officer or director of
the Company has been subject to any of the matters described in clauses (1) -
(6), inclusive, of Paragraph (f) of Item 401 of Regulation S-K promulgated by
the Securities and Exchange Commission.
SECTION 3.16 Environmental and Other Permits and Licenses, Related
Matters.
Except as set forth in Section 3.16 of the Disclosure Schedule
(including without limitation the Phase II environmental audit report described
therein):
(a) The Sellers and the Company currently hold all the permits,
licenses, authorizations, certificates, consents, exemptions and approvals
required under any Law (collectively, "Permits"), including, without
limitation, Environmental Permits, necessary for the ownership, use, occupancy
and operation of each Asset of the Company and the conduct of the Business, and
all such Permits are in full force and effect.
(b) (i) Each tenant and occupant of the Real Property, to the
best of Sellers' Knowledge, holds all Permits, including, without limitation,
Environmental Permits, necessary for the use, occupancy and operation of the
Real Property by such tenant or occupant, and all such Permits are in full
force and effect; (ii) to the best of Sellers' Knowledge, there is no existing
practice, action or activity of any tenant or occupant of the Real Property, or
of any owner, tenant or occupant of any real property in which the Company or,
with
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respect to the Business, the Sellers currently hold a security interest (the
"Secured Real Property"), which will give rise to any criminal liability or
civil Liability under, or violate or prevent compliance with, any applicable
material law, including, without limitation, any applicable Environmental law;
(iii) no tenant or occupant of the Owned Real Property, to the best of Sellers'
Knowledge, has received any notice from any Governmental Authority revoking,
canceling, rescinding, materially modifying or refusing to renew any Permit or
providing written notice of violations under any Law, including, without
limitation, any applicable Environmental Law; (iv) to the best of Sellers'
Knowledge, each tenant and occupant of the Owned Real Property is in all
respects in compliance with its Permits, including, without limitation,
Environmental Permits; (v) there is no existing practice, action or activity
of the Company or, with respect to any portion of the Business, the Sellers and
no existing condition of the Assets of the Company or the Business which has
given or will give rise to any unresolved civil liability or to the best of
Sellers' Knowledge, criminal Liability under, or violate or prevent compliance
with, any applicable law, including, without limitation, any applicable
Environmental Law; (vi) neither the Sellers nor the Company has received any
notice from any Governmental Authority revoking, canceling, rescinding,
materially modifying or refusing to renew any Permit; and (vii) the Company is
in all material respects in compliance with the Permits, including, without
limitation, Environmental Permits. Section 3.16(a) of the Disclosure Schedule
completely and accurately identifies all Permits, including, without
limitation, Environmental Permits and indicates by asterisk those that will
require the consent of any Governmental Authority in the event of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement.
(c) (i) Neither the Company, nor, with respect to any portion of
the Business, the Sellers has violated or is violating any applicable
Environmental Law; (ii) to the best of Sellers' Knowledge, no tenant or
occupant of the Real Property or owner, tenant or occupant of the Secured Real
Property is violating any applicable Environmental Law in connection with the
ownership, use, occupancy or operation of the Real Property or Secured Real
Property; (iii) there has been no material Release of Hazardous Materials at,
to, from, or under any real property currently or formerly owned, leased, or
operated by the Company during its occupancy or, with respect to any portion of
the Business, the Sellers, or at, to, from or under any Secured Real Property
except (x) Releases which individually or collectively do not exceed the
applicable reportable quantity established pursuant to CERCLA, Federal Water
Pollution Control Act, 33 U.S.C. Section 1251, et seq. or the Oil Pollution
Act of 1990, or (y) Releases of petroleum or its derivatives which individually
or collectively do not exceed ten gallons; (iv) neither the Company nor, with
respect to any portion of the Business, the Sellers has generated, transported
or arranged for the transport of, or disposed of any Hazardous Materials at any
location, other than amounts and types of Hazardous Materials normally present
in ordinary office trash or household waste other than the transportation set
forth in Section 3.16 of the Disclosure Schedule; (v) to the best of Sellers'
Knowledge, no tenant or occupant of the Real Property has generated at such
Real Property any Hazardous Material, other than amounts and types of Hazardous
Materials normally present in ordinary office trash or household waste; (vi)
neither the Company nor, with respect to any portion of the Business, the
Sellers has any Liability in connection with the material Release of any
Hazardous Material at any location; (vii) there is not present at any of the
Real Property any underground storage tanks or sumps, asbestos, or
polychlorinated biphenyls; (viii) no Environmental Lien has attached to any of
the Real Property; and (ix) there are no unresolved past, pending or threatened
Environmental Claims against the Company, or,
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with respect to the Business, the Sellers, nor are there any circumstances that
may form the basis of any such Environmental Claim.
(d) No Hazardous Materials exist on, under or in any properties
(i) securing loans, installment sale contracts or other receivables owned,
serviced and/or subserviced by the Company or (ii) of which the Company took
possession or title in its own name or as servicer or agent for a third Person
pursuant to foreclosure, liquidation, repossession, deed in lieu or otherwise.
SECTION 3.17. Material Contracts.
(a) Section 3.17(a) of the Disclosure Schedule completely and
accurately lists each of the following contracts and agreements including,
without limitation, oral agreements of the Company (such contracts and
agreements, together with all contracts, agreements and Leases concerning the
management or operation of any Real Property (including, without limitation,
brokerage contracts) listed or otherwise disclosed in Section 3. 19(a) or
3.19(b) of the Disclosure Schedule to which the Company is a party and all
agreements relating to Intellectual Property set forth in Section 3.18(a) of
the Disclosure Schedule, being "Material Contracts"):
(i) Each contract and agreement for maintenance or
construction services to be performed by the Company
which is not complete or which has been completed
within two (2) years of the date hereof;
(ii) Other than Routine Purchases, each contract and
agreement for the purchase of materials or personal
property with any supplier or for the furnishing of
services to the Company or otherwise related to the
Business under the terms of which the Company: (A) is
likely to pay or otherwise give consideration of more
than $25,000 individually and $50,000 in the
aggregate during the current fiscal year, (B) is
likely to pay or otherwise give consideration of more
than $25,000 in the aggregate over the remaining term
of such contract, or (C) cannot be canceled by the
Company without penalty or further payment and
without more than 30 days' notice;
(iii) Each contract and agreement for the sale of materials
or personal property or for the furnishing of
services by the Company which: (A) is likely to
involve consideration of more than $10,000 in the
aggregate during the calendar year ending December
31, 1997, (B) is likely to involve consideration of
more than $10,000 in the aggregate over the remaining
term of the contract or (C) cannot be
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canceled by the Company without penalty or further
payment and without more than 30 days' notice;
(iv) All distributor, agency, sales promotion, market
research, marketing consulting and advertising
contracts and agreements to which the Company is a
party pursuant to which services were being provided
on the Balance Sheet Date in an amount more than
$10,000 individually and $20,000 in the aggregate
over the term of the contract or agreement;
(v) All management contracts and contracts with
independent contractors or consultants (or similar
arrangements) to which the Company is a party and
which are not cancelable without penalty or further
payment and without more than 30 days' notice;
(vi) All contracts and agreements relating to Indebtedness
of the Company in an amount more than $20,000
individually and $40,000 in the aggregate over the
term of the contract or agreement;
(vii) All contracts and agreements with any Governmental
Authority to which the Company is a party;
(viii) All contracts and agreements that limit or purport to
limit the ability of any of the Sellers or the
Company to compete in any line of business or with
any Person or in any geographic area or during any
period of time;
(ix) All Inter-Company Arrangements and all other
contracts and agreements between or among the Company
and the Sellers or any Affiliate of the Sellers
(other than the Company) or any Affiliate of the
Company (other than the Seller);
(x) All trust agreements, custodial agreements or other
security agreements related thereto, to which the
Company is a party that remain in force;
(xi) Each subcontract for the period from September 1,
1996 to August 31, 1997, under which the Company is
or was obligated to pay an amount more than $10,000
for a single subcontract and $50,000 in the aggregate
for all such subcontracts; and
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(xii) All other contracts and agreements whether or not
made in the ordinary course of business, which are
material to the Company or the conduct of the
Business or the absence of which would have a
Material Adverse Effect.
(b) Each Material Contract is, to the best of Sellers' Knowledge,
legal, valid, binding, enforceable and in full force and effect except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratium or similar laws affecting rights of creditors, of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Material Contract. The Company is not in breach
of, or default under, any Material Contract. The Sellers have received no
notification, communication or other information that any of the customers of
the Company intend to terminate any Material Contract.
(c) To the best knowledge of the Sellers and the Company, no other
party to any Material Contract is in breach thereof or default thereunder.
(d) Except as set forth in Item 2 of Section 3.14 of the
Disclosure Schedule, there is no contract, agreement or other arrangement
granting any Person any preferential right to purchase, other than the ordinary
course of business consistent with past practice, any of the properties or
assets of the Company.
SECTION 3.18. Intellectual Property.
(a) Section 3.18(a)(i) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description of the Owned Intellectual
Properly consisting of trademarks, service marks, corporate and assumed names,
trade names and copyrights, patents and pending registrations and applications
therefor, and Section 3.18(a)(ii) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description, including, without
limitation, a description of any license or sublicense thereof, of all Licensed
Intellectual Property. In each case where a registration or application for
registration listed in Section 3.18(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office. To the best of Sellers' and the Company's knowledge, the
rights of the Company in or to such Intellectual Property do not conflict with
or infringe on the rights of any other Person, and neither the Sellers nor the
Company has received any claim or written notice of infringement or conflict in
respect of any Intellectual Property.
(b) (i) All the Owned Intellectual Property is owned by either the
Company free and clear of any Encumbrance other than Permitted Encumbrances,
(ii) the Company has
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the right, pursuant to valid and enforceable licenses, to use the Licensed
Intellectual Property in the manner in which the Licensed Intellectual Property
is currently being used, and (iii) no Actions have been made or asserted or are
pending (nor, to the best knowledge of the Sellers and the Company, has any
such Action been threatened) against the Company either (A) based upon or
challenging or seeking to deny or restrict the use by the Company of any of the
Intellectual Property, or (B) alleging that any services provided or products
sold by the Company are being provided or sold in violation of any trademarks,
or any other rights of any Person. To the best of the knowledge of the Sellers
and the Company, no Person is using any trademarks, service marks, trade names
or similar property that are confusingly similar to the Owned Intellectual
Property or that infringe upon the Owned Intellectual Property or upon the
rights of the Company therein. Neither the Sellers nor the Company has granted
any license or other right to any other Person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by
this Agreement will not result in the termination or impairment of any of the
owned Intellectual Property or any of the rights of the Company in any of the
Licensed Intellectual Property.
(c) The Intellectual Property described in Section 3.18(a)(i) and
3.18(a)(ii) of the Disclosure Schedule constitutes all of the Intellectual
Property used or held or intended to be used by the Company or forming a part
of all such Intellectual Property necessary and material in the conduct of the
Business and there are no other items of Intellectual Property that are
material to the Company or the Business. Such Intellectual Property is all that
is necessary for the operation of the Businesses as currently conducted.
SECTION 3.19. Real Property.
(a) Section 3.19(a) of the Disclosure Schedule lists: (i) the
street address of each parcel of Owned Real Property, (ii) the date on which
each parcel of Owned Real Property was acquired, (iii) the current owner of
each such parcel of Owned Real Property, (iv) information relating to the
recordation of the deed pursuant to which each such parcel of Owned Real
Property was acquired and (v) the current use of each such parcel of Owned Real
Property.
(b) Section 3.19(b) of the Disclosure Schedule lists: (i) the
street address of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property and (iii) the current use of each such parcel of
Leased Real Property.
(c) The Sellers have or have caused to be, delivered to the
Purchaser complete and accurate copies of all Leases listed in Section 3.19(b)
of the Disclosure Schedule.
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Each such Lease is legal, valid, binding, enforceable and in full force and
each such Lease will not cease to be in full force and effect on terms
identical to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such Lease or otherwise give the landlord a right to terminate such Lease
in accordance with the terms thereof.
(d) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the best of the knowledge of the Sellers
and the Company, threatened against the Real Property.
(e) The rental set forth in each Lease of the Leased Real Property
is the actual rental being paid, and there are no separate agreements or
understandings with respect to the same.
SECTION 3.20. Tangible Personal Property.
(a) Section 3.20 of the Disclosure Schedule lists, each group of
equipment, inventory, supplies, furniture, fixtures, personalty, vehicles and
other tangible personal property (the "Tangible Personal Property") used in the
Business or owned or leased by the Company with a value reasonably estimated by
the Sellers for each group to exceed $20,000. Except as set forth in Section
3.20 of the Disclosure Schedule, all of the Tangible Personal Property is
located at Pasadena and Galveston, Texas.
(b) The Sellers have, or have caused to be, delivered to the
Purchaser complete and accurate copies of all Leases for Tangible Personal
Property providing for annual rentals in excess of $20,000 and any and all
material ancillary documents pertaining thereto. Each such Lease is legal,
valid, binding, enforceable and in full force and effect and each such Lease
will not cease to be legal, valid, binding, enforceable and in full force and
effect on terms identical to those currently in effect as a result of the
consummation of the transactions contemplated by this Agreement except, in
either case, as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Lease or otherwise give the lessor a right to
terminate such Lease in accordance with the terms thereof.
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SECTION 3.21. Assets.
(a) Except as set forth in Section 3.21(a) of the Disclosure
Schedule, the Company owns, leases or has the legal right to use all the
properties and assets, including, without limitation, all of the issued and
outstanding Stock of Xxxxxxxxx Shipyard and Fabrication, Inc., the Owned
Intellectual Property, the Licensed Intellectual Property, the Real Property
and the Tangible Personal Property, used in the conduct of the Business or
otherwise purported to be owned, leased or used by the Company and, with
respect to contract rights, is a party to and enjoys the right to the benefits
of all material contracts, agreements and other arrangements used by the
Company or in or relating to the conduct of the Business (all such properties,
assets and contract rights being the "Assets"). The Company has good and
marketable title to, or, in the case of leased or subleased Assets, valid and
subsisting leasehold interests in, all the Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances. All buildings, plants, and
structures owned by the Company lie wholly within the boundaries of the real
property owned by the Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
(b) Except as set forth in Section 3.21 of the Disclosure
Schedule, all the Assets, including without limitation the buildings, plants,
structures, and equipment of the Company, are to the best of Sellers' Knowledge
structurally sound, are in good opening condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, equipment or other Assets is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Company
are, to the best of Sellers' Knowledge, sufficient for the continued conduct of
the Business after the Closing in substantially the same manner as conducted
prior to the Closing.
(c) Immediately following the Closing, the Company will continue
to own, pursuant to good and marketable title, or lease, under valid and
subsisting leases, or otherwise retain its respective interest in, the Assets
without incurring any material penalty or other materially adverse consequence,
including, without limitation, any increase in rentals, royalties, or licenses
or other fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement. Immediately following the Closing,
the Company shall own and possess all presently existing material documents,
books, records, agreements and financial data of any sort used by the Company
in the conduct of the Business or otherwise.
SECTION 3.22. Accounts Receivable. All accounts receivable of the
Company that are reflected on the Financial Statements or on the accounting
records of the Company
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as of the Closing Date less the reserve for doubtful accounts receivable
reflected on the August 30, 1997 balance sheet of the Company (collectively,
the "Accounts Receivable") represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business or represent advance xxxxxxxx on contracts where xxxxxxxx to
date have exceeded costs and estimated earnings due and payable to date on
certain contracts. Unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date, to the best of Sellers'
Knowledge, collectible and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging at the Closing Date.
Each of the Accounts Receivable either has been or will be collectible in full,
without any set-off. There is no contest, claim or right of set-off, other than
returns in the ordinary course of business, under any contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Section 3.22 of the Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of the last day of the calendar
month preceding the date of this Agreement, which list sets forth the aging of
such Accounts Receivable.
SECTION 3.23. Customers. Listed in Section 3.23 of the Disclosure
Schedule are the names of the most significant customers (by dollar amount of
contract) of the Company for the twelve-month period ended March 31, 1997, and
the amount of revenue recognized by the Company for each during such period.
SECTION 3.24. Employee Benefit Matters.
(a) Plans and Material Documents. Section 3.24(a) of the
Disclosure Schedule is a complete and accurate list of (1) all employee welfare
benefit and employee pension benefit plans as defined in Sections 3(1) and 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, but not limited to, plans that provide retirement income or result
in a deferral of income by employees for periods extending to termination of
employment or beyond, and plans that provide medical, surgical, or hospital
care benefits or benefits in the event of sickness, accident, disability, death
or unemployment, (2) all other employee benefit agreements or arrangements,
including without Limitation deferred compensation plans, incentive plans,
bonus plans or arrangements, stock option plans, stock purchase plans, stock
award plans, golden parachute agreements, severance pay plans, dependent care
plans, cafeteria plans, employee assistance programs, scholarship programs,
employment contracts, vacation policies, and other similar plans, agreements
and arrangements that are currently in effect or were maintained within three
(3) years of the date of this Agreement, or have been approved before this date
but are not yet effective, for the benefit of directors, officers, employees or
former employees (or their beneficiaries) of the Company, (3) each employee
benefit plan for which the Company could reasonably be expected to incur
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liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated, and (4) any plan in respect of which the Company could
reasonably be expected to incur liability under Section 4212(c) of ERISA
(collectively, the "Plans"). Section 3.24(a) of the Disclosure Schedule sets
forth a complete description of each Plan that is not in writing and, with
respect to each Plan that is in writing, the Sellers have furnished the
Purchaser with a complete and accurate copy of each Plan and a complete and
accurate copy of each material document prepared in connection with each such
Plan including, where applicable, without limitation, (i) a copy of each trust
or other funding arrangement, (ii) the most current summary plan description,
booklet, or other descriptive written materials, and each summary of material
modifications prepared since the last summary plan description, (iii) the three
(3) most recently filed annual IRS Forms 5500, 990 and 1041 reports, (iv) the
most recent actuarial report and financial statement, (v) the most recent IRS
determination letter and all rulings or determinations requested from the IRS
after the date of that determination letter, and (vi) all other correspondence
from the IRS or the Department of Labor received that relate to one or more of
the Plans with respect to any matter, audit or inquiry that is still pending.
Except as completely and accurately set forth in Section 3.24(a) of the
Disclosure Schedule, the Company has no express or implied commitment (i) to
create, incur liability with respect to, or cause to exist, any other employee
benefit plan, program or arrangement, (ii) to enter into any contract or
agreement to provide compensation or benefits to any individual, or (iii) to
modify, change or terminate any Plan, other than any modification required to
comply with ERISA or the Code.
(b) Absence of Certain Types of Plans. Except as completely and
accurately disclosed in Section 3.24(b) of the Disclosure Schedule, none of the
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any Person or obligates the Company to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control" within the meaning of Section 280G of the Code. Except as completely
and accurately described in Section 3.24(b) of the Disclosure Schedule, none of
the Plans provides for the deferral of compensation (other than any Plan
intended to be qualified under Section 401(a) of the Code) or for the grant of
stock options, restricted stock, stock appreciation rights, phantom shares or
other equity-based awards or contingent compensation. Except as completely and
accurately disclosed in Section 3.24(b) of the Disclosure Schedule, neither the
Company nor any entity (whether or not incorporated) that was at any time
during the six (6) years before the date of this Agreement treated as a single
employer together with the Company under Section 414 of the Code (a "Commonly
Controlled Entity") has ever maintained, had any obligation to contribute to,
or incurred any liability with respect to, a pension plan that is or was
subject to the provisions of Title IV of ERISA. During the last six (6) years
the Company has not (x) maintained, (y) had an obligation to contribute to or
(z) incurred any liability
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with respect to a voluntary employees beneficiary association that is or was
intended to satisfy the requirements of Section 501(c)(9) of the Code. Each of
the Plans is subject only to the laws of the United States or a political
subdivision thereof.
(c) Compliance with Applicable Law. Except as completely and
accurately disclosed in Section 3.24(c) of the Disclosure Schedule, each Plan
is now materially and always materially has been operated in accordance with
the requirements of all applicable law, including, without limitation, ERISA
and the Code, and all "fiduciaries" of such Plans (within the meaning of
Section 3(21) of ERISA) have always materially acted in accordance with the
provisions of all applicable Law, including, without limitation, ERISA and the
Code. The Company has performed all material obligations required to be
performed by it under, is not in any respect in default under or in violation
of, and has no knowledge of any default or violation by any party to, any Plan.
There is no litigation, action, proceeding, investigation or claim asserted or,
to the Sellers' or the Company's knowledge, threatened or contemplated, with
respect to any Plan (other than the payment of benefits in the normal course)
nor any issue resolved adversely to the Company that may subject the Company to
the payment of a penalty, interest, tax or other amount.
(d) Qualification of Certain Plans. Except as completely and
accurately disclosed in Section 3.24(d) of the Disclosure Schedule, each Plan
which is intended to be qualified under Section 401(a) of the Code or Section
401(k) of the Code has received a favorable determination letter from the IRS
that it is so qualified and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that it is
so exempt. No fact or event has occurred since the date of such determination
letter from the IRS which could adversely affect the qualified status of any
such Plan or the exempt status of any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Except as completely and accurately
set forth in Section 3.24(e) of the Disclosure Schedule, the Company has, to
the best of Sellers' Knowledge, not incurred any liability for any penalty or
tax arising under Section 4971, 4972, 4979, 4980, 4980B or 6652 of the Code or
any liability under Section 502 of ERISA, and no fact or event exists which
could
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reasonably be expected to give rise to any such liability. The Company has, to
the best of Sellers' Knowledge, not incurred any liability under, arising out
of or by operation of Title IV of ERISA (other than liability for premiums to
the Pension Benefit Guaranty Corporation (the "PBGC") arising in the ordinary
course), including, without limitation, any liability in connection with (i)
the termination or reorganization of any employee benefit plan subject to Title
IV of ERISA, or (ii) the withdrawal from any Multi employer Plan, and no fact
or event exists which could reasonably be expected to give rise to any such
liability. With respect to any employee benefit plan, within the meaning of
Section 3(3) of ERISA, that is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to within six years prior to the
Closing Date, by any Commonly Controlled Entity, (A) no withdrawal liability,
within the meaning of Section 4201 of ERISA, has been incurred by a Commonly
Controlled Entity, which withdrawal liability has not been satisfied, (B) no
liability to the PBGC has been incurred by a Commonly Controlled Entity, which
liability has not been satisfied, (C) no event has occurred that presents a
material risk of partial withdrawal, within the meaning of Section 4205 of
ERISA, by a Commonly Controlled Entity, (D) no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302 of ERISA or Section
412 of the Code has been incurred, and (E) all contributions (including
installment payments) to such plan required by Section 302 of ERISA and Section
412 of the Code have been timely made. The aggregate withdrawal liability under
ERISA of the Company and any Commonly Controlled Entity, computed as if a
complete withdrawal by each Commonly Controlled Entity had occurred on the date
hereof under each employee benefit plan that is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to within six
years prior to the Closing Date by a Commonly Controlled Entity, would not
exceed $50,000.00. Except as completely and accurately set forth in Section
3.24(e) of the Disclosure Schedule, no complete or partial termination has
occurred within the five (5) years preceding the date hereof with respect to
any Plan. No reportable event (within the meaning of Section 4043(c) of ERISA)
for which the 30 days' notice to the PBGC is not waived has occurred or is
expected to occur with respect to any Plan subject to Title IV of ERISA. No
Plan had an accumulated funding deficiency (within the meaning of Section 302
of ERISA or Section 412 of the Code), whether or not waived, as of the most
recently ended plan year of such Plan. None of the assets of the Company is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; the Company has not been required to post any security under Section
307 of ERISA or Section 401(a)(29) of the Code; and no fact or event exists
which could reasonably be expected to give rise to any such lien or requirement
to post any such security. The Company has no Liability for any (i)
supplemental retirement benefits or other non-qualified deferred compensation,
(ii) severance pay relating to any termination of employment which occurs prior
to the Closing, (iii) for non-qualified deferred compensation or incentive or
contingent compensation relating to any Plan as in effect, or commitment made,
prior to the Closing Date (to the extent related to periods prior to the
Closing Date), (iv) for uninsured health, medical, disability or worker's
compensation claims incurred prior to the Closing Date, regardless of whether
such claims are reported prior to the Closing Date or are not so reported, or
(v) the payment of accrue bonuses to the extent related to periods prior to the
Closing Date and not accrued or reflected on the Balance Sheet.
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(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Certain Employee-Benefit Assets. Except as completely and
accurately disclosed in Section 3.24(g) of the Disclosure Schedule, each of the
guaranteed investment contracts and other funding contracts with any insurance
company that are held by any of the Plans and any annuity contracts purchased
by any of the Plans was issued by an insurance company which carried the
highest rating from each of D&P, S&P, Best and Xxxxx'x Investors Service, Inc.,
as of the date such contract was issued, the date hereof and the Closing Date.
(h) Retiree Medical Benefits. No Plan is or includes any plan or
arrangement providing for post-employment health and/or medical benefit
coverage except to the extent required by COBRA.
(i) No Implied Rights. Nothing contained herein, express or
implied, is intended to or shall confer upon any employee or former employee of
the Company any right or remedy of any nature or kind whatsoever under or by
reason of this Agreement, including any rights of continued employment for any
period.
(j) Severance Pay and Vacation Pay. The Company has no liability
for severance pay or vacation pay except to the extent shown in Section 3.24(j)
of the Disclosure Schedule. No Plan will cause the Company to have liability
for severance pay or vacation pay as a result of the consummation of the
transactions described in this Agreement.
SECTION 3.25. Labor Matters.
(a) Except as completely and accurately disclosed in Section
3.25(a) of the Disclosure Schedule, the Company is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company and currently there are no known organizational
campaigns, petitions or other unionization activities seeking recognition of
any other collective bargaining unit.
(b) There are no strikes, slowdowns, work stoppages or material
labor relations controversies pending or, to the best knowledge of the Sellers
and the Company, threatened between the Company and any of its employees, and
the Company has not
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experienced any such strike, slowdown, work stoppage or material controversy
within the past three years.
(c) The Company is in compliance, in all material respects, with
all applicable Laws relating to the employment of labor, including, without
limitation, those related to wages, hours and the payment and withholding of
taxes and other sums as required by the appropriate Governmental Authority, and
has withheld and paid to the appropriate Governmental Authority or is holding
for payment not yet due to such Governmental Authority all amounts required to
be withheld from employees of the Company and are not liable for any arrears of
wages, taxes, penalties or other sums for failure to comply with any of the
foregoing.
(d) The Company has paid in full to all its respective employees,
retired employees and contractors or adequately accrued for in accordance with
GAAP all wages, salaries, commissions, bonuses, benefits and other compensation
due to or on behalf of such employees, retired employees and contractors.
(e) There is no claim against the Company with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or,
to the best knowledge of the Sellers and the Company, threatened before any
Governmental Authority with respect to any Persons currently or formerly
employed by the Company.
(f) The Company is not a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices.
(g) There is no charge or proceeding with respect to a violation
of any occupational safety or health standards that has been asserted or is now
pending or, to the best of the knowledge of the Sellers and the Company,
threatened with respect to the Company.
(h) There is no charge against the Company of discrimination in
employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category ,
which has been asserted or is now pending or, to the best knowledge of the
Sellers and the Company, threatened before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction
in which the Company has employed or currently employs any Person.
SECTION 3.26. Key Employees. Section 3.26 of the Disclosure Schedule
lists (i) the name, place of employment, the current annual salary rates,
bonuses, deferred or contingent compensation, pension, accrued vacation,
"golden parachute" and other like
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benefits paid or payable (in cash or otherwise) in 1996 and 1997, (ii) the name
and current annual salary rates in 1996, 1995, and 1994, and (iii) the date of
employment and a brief description of position and job function for each
current salaried employee, officer or director of the Company whose current
base salary exceeded (or, in 1997, is expected to exceed) $40,000.
SECTION 3.27. Risk Management.
(a) Section 3.27(a) of the Disclosure Schedule sets forth the
following Information with respect to each insurance policy (including, without
limitation, policies providing property, casualty, business interruption,
liability, workers' compensation, and bond and surety arrangements) under which
the Company is an insured, a named insured or otherwise the principal
beneficiary of coverage: (i) the name of the agent or broker; (ii) the name of
the insurer and the names of the principal insured and each named insured;
(iii) the policy number and the period of coverage; (iv) the type, scope
(including an indication of whether the coverage was on a claims made,
occurrence or other basis) and amount of coverage; and (v) the premium charged
for the policy, including, without limitation, a description of any retroactive
premium adjustments or other loss-sharing arrangements.
(b) With respect to each such insurance policy: (i) the policy is
in full force and effect; (ii) the Company is not in material breach or default
(including any breach or default with respect to the payment of premiums or the
giving of notice), and no event has occurred which, with the giving of notice
or the lapse of time or both, would constitute such a material breach or
default or permit termination or modification, under the policy; (iii) no party
to the policy has repudiated in writing, or given written notice of an intent
to repudiate, any provision thereof; and (iv) to the best knowledge of the
Sellers and the Company, no insurer on the policy has been declared insolvent
or placed in receivership, conservatorship or liquidation or currently has a
rating of "B+ " or below from Best or a claims paying ability rating of "EBB"
or below from S&P.
(c) Section 3.27(c) of the Disclosure Schedule completely and
accurately sets forth all risks of the Company which are covered under any
material risk retention program in which the Company participates, together
with details for the last three years of the Company's loss experience with
respect to such risks.
(d) Since April 1, 1993, the Company has been covered by insurance
policies or binders of insurance in such types and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Company in amounts deemed
reasonable by the Company.
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(e) Except as set forth in Section 3.27(e) of the Disclosure
Schedule, at no time subsequent to April 1, 1990, has the Company (i) been
denied any insurance or indemnity bond coverage which it has requested, (ii)
made any material reduction in the scope or amount of its insurance coverage,
or received notice from any of its insurance carriers that any insurance
coverage listed in Section 3.27(a) of the Disclosure Schedule will not be
available in the future substantially on the same terms as are now in effect,
or (iii) suffered any extraordinary increase in premium for renewed coverage.
Since April 1, 1993, no insurance carrier has canceled, failed to renew or
materially reduced any insurance coverage for the Company or given any notice
or other indication of its intention to cancel, not renew or reduce any such
coverage.
(f) The Sellers are not aware of any facts pertaining to the
Company or the Business which are reasonably likely to prevent the Purchaser
from obtaining insurance following the consummation of the transactions
contemplated by this Agreement on terms substantially similar to the terms
currently in effect.
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney. Section 3.28(i) of the Disclosure Schedule is a complete and
accurate list of (a) the names of each bank, savings and loan association,
securities broker or other financial institution in which the Company has an
account, including, without limitation, cash contribution accounts, and the
names of all persons authorized to draw thereon or have access thereto, (b) the
location of all lockboxes and safe deposit boxes of the Company and the names
of all Persons authorized to draw thereon or have access thereto, and (c) the
names of all Persons, if any, holding powers of attorney from the Sellers
relating to the Company or the Business, or from the Company. At the time of
the Closing, without the prior written consent of the Purchaser, the Company
shall not have any such account, lockbox or safe deposit box other than those
listed in Section 3.28(ii) of the Disclosure Schedule, nor shall any Person
have been authorized, from the date of this Agreement, to draw thereon or have
access thereto or to hold any such power of attorney relating to the Company or
the Business or from the Company except such Persons listed in Section
3.28(iii) of the Disclosure Schedule. There are no commingled monies or
accounts of the Company with other monies or accounts of the Sellers or
relating to the other businesses of the Sellers nor has the Sellers transferred
monies or accounts of the Company other than to an account of the Company. At
the time of the Closing, all monies and accounts of the Company shall be held
by, and be accessible only to, the Company.
SECTION 3.29. Full Disclosure. To the best of Sellers' Knowledge, no
representation or warranty of the Sellers or the Company in this Agreement, nor
any certificate furnished or to be furnished by the Sellers or the Company to
the Purchaser pursuant to this Agreement, contains or will contain any untrue
statement of a material
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fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 3.30. Reserved.
SECTION 3.31. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement from the Company based
upon arrangements made by or on behalf of the Sellers or the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
Subject to the terms and conditions of this Agreement, the Purchaser
hereby represents and warrants to the Sellers and the Company as of the
Execution Date as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The
Purchaser is corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Purchaser, the performance by the Purchaser
of its respective obligations hereunder and the consummation by the Purchaser
of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the Company and the Sellers) upon
receipt of the necessary approvals by Governmental Authorities, this Agreement
will constitute a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors or by
general principles of equity.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
findings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, the execution, delivery and performance of this
Agreement by the Purchaser does not and will not (a) violate, conflict with or
result in the breach of any provision of the articles of incorporation or
by-laws of the Purchaser, (b) conflict with or violate any Law or Governmental
Order applicable to the Purchaser which would materially adversely
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affect the ability of the Purchaser to consummate the transactions contemplated
by this Agreement, or (c) conflict with, or result in any breach of, constitute
a default (or event which with the giving of notice or the lapse of time, or
both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Purchaser is a party
or by which any of such assets or properties are bound or affected.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any Governmental Authority or any other third
party, (except the expiration or termination of the waiting period under the
HSR Act.)
SECTION 4.04. Litigation. Except as disclosed in a writing given to
the Sellers by the Purchaser prior to the execution of this Agreement, no
claim, action, proceeding or investigation is pending or, to the best of the
knowledge of the Purchaser after due inquiry, threatened, which seeks to delay
or prevent the consummation of, or which could reasonably be expected to
materially adversely affect the Purchaser's ability to consummate, or which
could otherwise affect the legality, validity or enforceability of, the
transactions contemplated by this Agreement.
SECTION 4.05. Brokers. No broker, finder investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
SECTION 4.06. Investment Purpose. The Purchaser is acquiring the
Shares solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof. The Purchaser is
aware and understands that the Shares have not been registered under the
Securities Act or under the securities laws of any state, that any transfer of
the Shares by the Purchaser shall be restricted under the provisions of the
Securities Act and such state laws, and that the certificates representing the
Shares will bear legends to such effect. The Purchaser possesses such knowledge
and experience in financial and business matters generally and with respect to
the Business so as to enable it to evaluate the risks and merits of its
purchase of the Shares.
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SECTION 4.07. Personal Guaranties. The Purchaser agrees to indemnify
and hold harmless each of the Sellers from any and all personal guarantees of
indebtedness of the Company which is disclosed on the financial statement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing Date.
(a) Each of the Sellers and the Company covenants and agrees that
from the Execution Date through the earlier of the Closing Date or the
termination of this Agreement, the Company shall not conduct its business other
than in the ordinary course in order to protect the value of the Company.
Without Limiting the generality of the foregoing, the Sellers shall cause the
Company, and the Company agrees, to (i) continue its business activities and
operations, and business plan implementation; (ii) not materially shorten or
lengthen the customary payment cycles for any of its payables or receivables,
however, the Company may reduce the principal amount of its indebtedness,
provided that the Company incurs no pre-payment penalties; (iii) use reasonable
efforts to attempt to (A) keep available to the Purchaser the services of the
employees of the Company, (B) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Company and the Business except as required by
applicable law, and (C) preserve its current relationships with its employees,
customers, suppliers, subcontractors, regulators, and other persons with which
it has significant business relationships; (iv) exercise, but only after notice
to the Purchaser and receipt of the Purchaser's prior written approval, any
rights of renewal pursuant to the terms of any of the leases or subleases set
forth in Section 3.19(b) or Leases for Tangible Personal Property set forth in
Section 3.20 of the Disclosure Schedule which by their terms would otherwise
expire; (v) maintain all material licenses, qualifications, registrations and
authorizations to do business in each jurisdiction in which it is so licensed,
qualified, registered or authorized; (vi) not engage in any practice, take any
action, fail to take any action or enter into any transaction, in each case
outside the normal course of business which could reasonably be expected to
cause any representation or warranty of the Sellers or the Company to be untrue
for purposes of this Section 5.01(a) as of the date made in any material
respect or result in a breach of any covenant made by the Sellers or the
Company in this Agreement; and (vii) not pay any dividends, bonuses or other
extraordinary payments, except for $250,000.00 in bonuses to key Company
employees.
(b) Each of the Sellers and the Company covenants and agrees that,
prior to the Closing Date, without the prior written consent of the Purchaser,
which consent will not
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be unreasonably withheld, the Company will not make outside the ordinary course
of business any commitment, actual or contingent, to make any investment or
capital expenditure, or otherwise expend capital, or purchase any inventory, or
supply funds to any Person, in each case in excess of $20,000 individually or
$50,000 in the aggregate.
(c) Prior to the Closing Date, each of the Sellers and the Company
covenants and agrees to, and shall cause the Company to, use reasonable efforts
to minimize the termination, withdrawal or non-renewal of any Material
Contract.
(d) Prior to the Closing Date, neither the Sellers nor the
Company, without the prior written consent of the Purchaser, will:
(i) Except as set forth in Section 3.03 of the Disclosure
Schedule, issue, deliver, sell, dispose of, pledge or
otherwise encumber, or authorize or propose the
issuance, delivery, sale, disposition or pledge or
other encumbrance of, (A) any additional shares of
the capital stock of any class of the Company, or any
securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for any
shares of the capital stock of the Company, or any
rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or
acquire any shares of the capital stock of the
Company or any securities or rights convertible into,
exchangeable for or evidencing the right to subscribe
for any shares of the capital stock, or (B) any other
securities in respect of, in lieu of, or in
substitution for the Shares;
(ii) Redeem, purchase or otherwise acquire any of the
outstanding Securities of the Company;
(iii) Declare, set aside for payment or pay any dividend,
or make any other actual constructive or deemed
distribution in respect of any shares of the capital
stock of the Company, or otherwise make any payments
to the shareholder or shareholders of the Company, as
the case may be, in its capacity as such, or split,
combine, subdivide or reclassify any shares of the
capital stock.
SECTION 5.02. Access to Information.
(a) From the Execution Date until the earlier of the Closing Date
or the termination of this Agreement, upon reasonable notice, each of the
Sellers and the Company shall and shall cause each of its Affiliates and each
of the Company's and such
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Affiliates' officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel, financing sources, prospective financing sources,
and representatives of the Purchaser full access to the offices, properties,
other facilities, books and records of the Company and to those officers,
directors, employees, managers, members, agents, accountants and counsel of the
Sellers and the Company and each of their Affiliates who have any knowledge
relating to, and to the books and records of the Sellers and their Affiliates
relating to, the Company or the Business, (ii) furnish to the Purchaser monthly
financial and management statements of the Company as prepared in the ordinary
course of business, and (iii) furnish to the officers, employees and authorized
agents, accountants, counsel, financing sources, prospective financing sources,
and representatives of the Purchaser such additional financial and operating
data and other information regarding the assets, properties and good will of
the Company and the Business (or legible copies thereof as the Purchaser or any
of its officers, employees, authorized agents, accountants, counsel, financing
sources, prospective financing sources or representatives may from time to time
reasonably request.
(b) Subject to Section 7.01, in order to facilitate the resolution
of any claims made by or against or incurred by the Sellers or the Company
prior to the Closing for a period of seven years after the Closing, or for such
longer period as may be required so as to extend to the end of the applicable
statute of limitations, the Purchaser shall (i) retain the books and records
(or copies thereto of the Company relating to periods prior to the Closing in a
manner reasonably consistent with past practice, and (ii) upon reasonable
notice, afford the authorized agents and representatives of the Sellers
reasonable access (including, without limitation, the right to make, at the
Sellers' expense, photocopies), during normal business hours, to such books and
records.
(c) Subject to Section 7.01, in order to facilitate the resolution
of any claims made by or against or incurred by the Purchaser, any Affiliate of
the Purchaser or the Company after the Closing, for a period of seven years
following the Closing, or for such longer period as may be required so as to
extend to the end of the applicable statute of limitations, the Sellers shall
(i) retain the books and records (or copies thereof) of the Sellers which
relate to the Company and its operations for periods prior to the Closing and
which shall not otherwise have been delivered to the Purchaser or the Company
and (ii) upon reasonable notice, afford the officers, employees and authorized
agents and representatives of the Purchaser, any Affiliate of the Purchaser or
the Company reasonable access (including, without limitation, the right to make
photocopies, at the expense of the Purchaser, or such Affiliate of the
Purchaser or the Company), during normal business hours, to such books and
records.
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(d) Within twenty (20) days after the end of each month, each of
the Sellers and the Company covenants and agrees to provide to the Purchaser
the monthly financial statements of the Company prepared in accordance with
GAAP for each month ending between the Execution Date and the Closing Date,
together with all related notes, exhibits and schedules thereto.
SECTION 5.03. Confidentiality.
(a) Each of the Sellers and the Company agrees to, and shall use
his and its respective best efforts to cause his and its respective agents,
representatives, Affiliates, employees, officers and directors and those of his
and its respective Affiliates to: (i) treat and hold as confidential all
non-public information relating to trade secrets, trademark applications,
product development, price, customer lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts,
operations, methods, product development techniques, business acquisition
plans, new personnel acquisition plans and all other confidential information
with respect to the Business and the Company, except as the Sellers or the
Company reasonably believes is otherwise required to be disclosed by applicable
Law, in which event each of the Sellers or the Company agrees to, and shall
instruct its agents, representatives, Affiliates, employees, officers and
directors and those of its Affiliates to, furnish only that portion of such
confidential information which the Sellers or the Company are legally required
to be provided and exercise its reasonable efforts to obtain assurances that
confidential treatment will be accorded such information, and (ii) in the event
that the Sellers or the Company or any such agent, representative, Affiliate,
employee, officer or director and those of its Affiliates are served with a
subpoena, order or other legal process to disclose any such information,
provide the Purchaser with prompt written notice of such requirement so that
the Purchaser or the Company may, at the expense of the Purchaser, seek a
protective order or other remedy. Each of the Sellers and the Company agrees
to, and shall cause his and its respective agents, representatives, Affiliates,
employees, officers and directors to, furnish promptly (prior to, at, or as
soon as practicable following, the Closing) to the Purchaser any and all copies
(in whatever form or medium) of all such confidential information then in the
possession of the Sellers or the Company or any of his and its respective
agents, representatives, Affiliates, employees, officers and directors and,
except as otherwise required by Section 5.02(c), destroy any and all additional
copies then in the possession of the Sellers or any of such agents,
representatives, Affiliates (other than the Company), employees, officers and
directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, this Section 5.03(a) shall not apply to any information that, at the
time of disclosure, is available publicly or was not disclosed in breach of
this Agreement by the Sellers or the Company or their agents, representatives,
Affiliates, employees or officers or directors of its Affiliate. Each of the
Sellers and the Company
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agrees and acknowledges that remedies at law for any breach of his or its
obligations under this Section 5.03(a) are inadequate and that in addition
thereto the Purchaser shall be entitled to seek equitable relief, including
injunction and specific performance, in the event of any such breach. The
non-disclosure obligations of the Company and the Sellers in this Section
5.03(a) shall include any non-public or proprietary information relating to the
Purchaser or its Affiliates which they may obtain in the course of their due
diligence activities permitted by this Agreement.
(b) Prior to the Closing Date or upon earlier termination of this
Agreement, the Purchaser agrees to, and shall use its best efforts to cause its
agents, representatives, Affiliates, employees, officers and directors and
those of its Affiliates to: (i) treat and hold as confidential all non-public
information relating to trade secrets, trademark applications, product
development, price, correspondent and dealer, and borrower lists, pricing and
marketing plans, policies and strategies, details of client and consultant
contracts, operations, methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
information with respect to the Business and the Company, except as the
Purchaser reasonably believes is otherwise required to be disclosed by
applicable law, in which event the purchaser agrees to, and shall instruct its
agents, representatives, Affiliates, employees, officers and directors and
those of its Affiliates to, furnish only that portion of such confidential
information which the purchaser are legally required to be provided and
exercise its reasonable efforts to obtain assurances that confidential
treatment will be accorded such information, and (ii) in the event that the
Purchaser or any such agent, representative, Affiliate, employee, officer or
director and those of its Affiliates are served with a subpoena, order or other
legal process to disclose any such information, provide the Sellers with prompt
written notice of such requirement so that the Company or the Sellers may, at
the expense of the Sellers seek a protective order or other remedy. Upon
termination of this Agreement, the Purchaser agrees to, and shall cause its
agents, representatives, Affiliates, employees, officers and directors to,
furnish promptly to the Company any and all copies (in whatever form or medium)
of all such confidential information then in the possession of the Purchaser or
any of their agents, representatives, Affiliates, employees, officers and
directors and, except as otherwise required by Section 5.02(b), destroy any and
all additional copies then in the possession of the Purchaser, or any of such
agents, representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof: provided, however, this
Section 5.02(b) shall not apply to any information that, at the time of
disclosure, is available publicly or was not disclosed in breach of this
Agreement by the Purchaser or its agents, representatives, Affiliates,
employees or officers or directors of its Affiliate. The Purchaser agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 5.03(b) are inadequate and that in addition thereto, the Purchaser
shall be entitled to seek
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equitable relief, including injunction and specific performance, in the event
of any such breach, The non-disclosure obligations of the Purchaser in this
Section 5.03(b) shall include any non-public or proprietary information
relating to the Company or the Sellers which it may obtain in the course of its
due diligence activities permitted by this Agreement.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents.
(a) Each of the Sellers, the Company, and the Purchaser shall use
all reasonable efforts to make all findings required under applicable law, and
will cooperate fully with each other in connection therewith.
(b) The Sellers and the Purchaser agree that, in the event any
consent, approval or authorization reasonably necessary to preserve for the
Business of the Company any right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which the Sellers or
the Company are or is a party is not obtained prior to the Closing, the
Sellers will, subsequent to the Closing, cooperate with the purchaser in
attempting to obtain such consent, approval or authorization as promptly
thereafter as practicable and, in the case of contracts and agreements, so as
to provide for the Purchaser the benefits under such contracts and agreements-
SECTION 5.05. Notice of Developments.
(a) Prior to the earlier of the Closing Date or termination of
this Agreement, the Sellers and the Company shall notify promptly, and in any
event within two (2) Business Days, the Purchaser in writing, to the extent of
the best of the knowledge of the Sellers and the Company, of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any material breach
of a representation or warranty or covenant of the Sellers or the Company in
this Agreement or which could reasonably be expected to have the effect of
making any representation or warranty of the Sellers or the Company in this
Agreement untrue or incorrect in any material respect, and (ii) all other
material developments, other than general economic or market changes, and
changes in Tax Law materially adversely affecting the assets, Liabilities,
business, financial condition, operations, results of operations, customer or
employee relations or prospects of the Company or the Business.
(b) Prior to the earlier of the Closing Date or termination of
this Agreement, the Purchaser shall promptly, and in any event within two (2)
Business Days, notify the Sellers in writing, to the extent of the best of the
knowledge of the Purchaser, of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could reasonably be
expected to result in any material breach of a
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representation or warranty or covenant of the Purchaser in this Agreement or
which could reasonably be expected to have the effect of making any
representation or warranty of the Purchaser in this Agreement untrue or
incorrect in any material respect.
SECTION 5.06. Acquisition Proposals.
(a) The Sellers and the Company and their respective officers,
directors, employees, representatives and agents shall immediately cease any
existing discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal. Neither the Sellers, the Company, nor
their respective officers, directors, employees or investment bankers,
attorneys, accountants or other agents retained by either of them will (i)
initiate or solicit, directly or indirectly, any inquiries regarding the making
of any Acquisition Proposal, or (ii) engage in negotiations or discussions
with, or furnish any information or data to any third party relating to an
Acquisition Proposal.
(b) For purposes of this Agreement, the term "Acquisition
Proposal" shall mean any purchase offer made by a third party to acquire (i)
beneficial ownership (as defined pursuant to Section 13(d) of the Exchange Act)
of an equity interest in the Company or the Assets or Business pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock or similar transaction involving the Company, including, without
limitation, any single or multi step transaction or series of related
transactions which is structured to permit such third party to acquire
beneficial ownership of a majority or greater equity interest in the Company or
the Assets or Business, or (ii) all or substantially all of the business or
assets of the Company or the Business (other than the transactions contemplated
by this Agreement).
SECTION 5.07. Use of Names and Intellectual Property.
(a) The Sellers covenant and agree that following the Closing
Date, the Purchaser shall have the exclusive and royalty-free right to use the
Company's name (the "Name").
(b) From and after the Closing Date, neither the Sellers nor any
of its Affiliates shall use the Name, any of the Owned Intellectual Property or
any of the Licensed Intellectual Property.
SECTION 5.08. Non-Competition.
(a) For a period of five (5) years following the Closing, none of
the Sellers shall, directly or indirectly, or as a member, shareholder,
officer, director, consultant or employee of any other Person or entity, and
each of the Sellers shall cause his Affiliates
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not to, compete with the Purchaser or any of its subsidiaries or Affiliates, or
own, manage, operate, join, control or participate in the ownership,
management, operation, or control of, or become employed by, consult or advise,
or be connected in any manner with any business or activity which is in actual,
direct or indirect competition or anticipated competition with any of the
Purchaser Businesses in the States of Texas and Louisiana, so long as the
Purchaser or any of its subsidiaries or Affiliates carries on such Purchaser
Businesses. Not by way of limitation or exclusion, none of the Sellers shall,
and each of the Sellers shall cause his Affiliates not to, within the aforesaid
locations and during the aforesaid time period, call upon, solicit, advise or
otherwise do, or attempt to do, business with any customers of the Business,
the Company with whom the Business or the Company or any of the Sellers had any
dealings during the period of time in which the Company was an Affiliate of
such Sellers, or take away or interfere or attempt to interfere with any
custom, trade, business or patronage of the Business or the Company, or
interfere with or attempt to interfere with any officers, employees,
representatives or agents of the Business or the Company, or employ or induce
or attempt to induce any of them to leave the employ of the Company or violate
the terms of their contracts, or any employment arrangements, with the Company.
Each of the Sellers acknowledges and agrees that any breach of the foregoing
covenant not to compete would cause irreparable injury to the Purchaser and its
subsidiaries and Affiliates, and that the amount of injury would be impossible
or difficult to fully ascertain. Each of the Sellers agrees that the Purchaser
and its subsidiaries and affiliates shall, therefore, be entitled to obtain an
injunction restraining any violation, further violation or threatened violation
of the covenant not to compete hereinabove set forth, in addition to any other
remedies that the Purchaser or its subsidiaries or Affiliates may pursue.
Notwithstanding the foregoing provisions of this Section 5.08, each of the
Sellers, may own, solely as an investment, securities if the Sellers (A) is not
an affiliate of the issuer of such securities, and (B) does not, directly or
indirectly, beneficially own more than five percent (5%) of the class of which
such securities are a part. If the five (5) year period referred to in this
Section 5.08(a) shall be finally determined by a court to exceed the maximum
period which is permissible by applicable law, the said period shall be reduced
to the maximum period permitted by such law; provided, however, nothing herein
shall apply to Sellers' ownership or operation of Xxx Xxxxxxxxx, Inc. in Corpus
Christi, Texas, so long as such shipyard is operating with no more than one (1)
dry dock and acquires no more acreage than currently exists on the date hereof
at such shipyard.
(b) Each of the Sellers acknowledges that the covenants of the
Sellers set forth in Section 5.08(a) are an essential element of this Agreement
and that, but for the agreement of each of the Sellers to comply with these
covenants, the Purchaser would not have entered into this Agreement. Each of
the Sellers has independently consulted with its counsel and after such
consultation agrees that the covenants set forth in this Section 5.08 are
reasonable.
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SECTION 5.09. Right of First Refusal. For a period of five (5) years,
Sellers agree that the Purchaser shall have a right of first refusal to
purchase the Sellers' stock in Xxx Xxxxxxxxx, Inc. Sellers further agree that
they will not vote in favor of a sale of the assets of Xxx Xxxxxxxxx, Inc.
until first offering the assets for sale to Purchaser on the same terms and
conditions.
SECTION 5.10. Further Action. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 5.11. Miscellaneous Assets. After Closing, Purchaser agrees
to lease the dry dock, presently located on the premises of Xxx Xxxxxxxxx,
Inc., but owned by the Company, to Xxx Xxxxxxxxx, Inc. for a period of five (5)
years at a monthly rental of $5,416.00 per year, on a triple net basis provided
that (1) Lessee is required to maintain such dry dock in its present condition,
ordinary wear and tear excepted, and (2) Lessee has the dry dock appraised at
the commencement of the Lease, at Lessee's cost, and every two (2) years
thereafter.
SECTION 5.12. Certain Additional Covenants. At or prior to the
Closing, the Sellers shall cause any shareholders agreement to be terminated.
Such shareholders agreements are identified in Section 3.03(d) of the
Disclosure Schedule.
SECTION 5.13. Termination of Inter-Company Arrangements etc. At or
prior to the Closing, the Sellers shall cause the Inter-Company Arrangements,
other than those described in Section 5.13 of the Disclosure Schedule, to be
terminated on terms reasonably satisfactory to the Purchaser.
SECTION 5.14. Reserved.
SECTION 5.15. Break Up Fee.
(a) If by February 15, 1998, the Purchaser fails to consummate
this Agreement due to its failure to obtain financing satisfactory to the
Purchaser, the Purchaser shall pay to Xxxx X. Xxxxxxxxx, III, $250,000.00 in
cash within two (2) Business Days of the occurrence of such event under the
terms of the Escrow Agreement with Southwest Bank of Texas, N.A.
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(b) If by February 15, 1998, the Sellers fail to consummate this
Agreement for any reason, other than Purchaser's default, the Sellers shall pay
to the Purchaser, $250,000.00 in cash within two (2) Business Days under the
terms of the Escrow Agreement with Southwest Bank of Texas, N.A. This sum
shall be in addition to any other damages or remedies available to Purchaser
at law or in equity.
SECTION 5.16 Long Term Debt. Nothing in this Agreement shall prevent
the Company from paying long term indebtedness of the Company, but the Company
shall not prepay long term indebtedness where a prepayment penalty results.
ARTICLE VI
COVENANT OF FIRST WAVE MARINE, INC.
SECTION 6.01. Stock Options. In the event First Wave Marine, Inc.
consummates its public offering or securities, First Wave Marine, Inc. agrees
to grant stock options to key Company employees on the same terms and
conditions as all key employees of other First Wave Marine, Inc. pursuant to a
First Wave Marine, Inc. Employee Stock Option Plan.
ARTICLE VII
TAX MATTERS
SECTION 7.01 Tax Representations, Warranties and Covenants. Each of
the Sellers and the Company hereby represent and warrant, as of the date hereof
and as of the Closing Date, except as specifically set forth in Schedule 7.01,
as follows:
(i) The Company has timely filed all returns, claims for refund,
reports, declarations, information returns, statements or
other documents (whether original or amended and including all
schedules, forms and/or elections required or permitted in
connection therewith) filed or required to be filed with any
federal, state, local or foreign governmental or
administrative authority, agency or commission ("Governmental
Authority"), or provided to any person in connection with the
determination, assessment or collection of any tax or the
administration of any laws, regulations or administrative
requirements relating to any tax ("Tax Returns" or "Tax
Return") and each such Tax Return is correct, accurate and
complete in all material respects.
(ii) All taxes, fees, levies, duties, tariffs, impost and other
charges of any kind (together with any and all interest,
penalties, additions to tax and additional
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amounts imposed with respect thereto) imposed by any
government or taxing authority ("Tax" or "Taxes") owed by the
Company, whether or not shown on any Tax Return, have been
appropriately paid.
(iii) Adequate reserves for the payment of all Taxes of the Company
with respect to any period or portion thereof ending on or
prior to the Closing Date for which Tax Returns have or have
not yet been filed have been established.
(iv) No liens for Taxes exist with respect to any of the assets or
properties of the Company, except for statutory liens for
Taxes not yet due.
(v) No Tax Returns of the Company have been audited or examined or
are being audited or examined by any tax authority, nor are
there any outstanding requests for information made by any tax
authority.
(vi) No assessment, audit or other proceeding by any tax authority
or other Governmental Authority is proposed, pending, or, to
the knowledge of the Seller or the Company, threatened with
respect to any Taxes or Tax Returns of the Company, nor has
any taxing authority advised the Seller or the Company of any
proposed reassessments of the value or other Tax base of any
property owned by the Company that could increase the amount
of a property Tax to which the Company would be subject.
(vii) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitations applicable to
any claim for, or the period for the collection or assessment
of, Taxes of the Company due for any taxable period.
(viii) The Company will not be required to include in a taxable
period ending after the Closing Date any taxable income
attributable to income that economically accrued in a taxable
period ending on or before the Closing Date, as a result of
any method of accounting deferring such inclusion after the
time of such economic accrual. The Company is not required to
include in taxable income any adjustment pursuant to IRC
Section 481(a) (or similar provisions of other laws or
regulations) in its current or in any future taxable period by
reason of a change in accounting method; nor do the Sellers or
the Company have any knowledge that the IRS (or any other tax
authority) has proposed or is considering proposing any such
change in accounting method.
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(ix) The Company has not been advised by any Governmental Authority
of any proposed reassessments of the value (or other Tax base)
of any property owned by the Company that could increase the
amount of a property Tax to which the Company would be
subject.
(x) Schedule 7.01(x) completely and accurately list all Tax
Returns required to be filed by the Company between the date
of this Agreement and March 31, 1998.
SECTION 7.02 Access to Information.
(a) From the date hereof, the Sellers shall and shall cause the
Company to make available to the Purchaser and its representatives: (i) all Tax
Returns prepared and/or filed by or on behalf of the Company for taxable
periods ended on or after December 31, 1993, and any examination reports and
statements of deficiencies assessed against, proposed to be assessed against,
or agreed to by the Company for such taxable periods; (ii) any tax allocation
agreement or arrangement involving the Company and a complete and accurate
description of any such unwritten or informal agreement or arrangement; (iii)
any work papers or schedules showing (A) the Tax basis of the shareholder in
the Common Stock, (B) the Tax basis of the Company in its assets, and (C) the
amount, if any, of earnings and profits for Tax purposes for the Company.
(b) The information described in Section 5.02(A) shall be made
available to the Purchaser prior to the Closing Date upon reasonable request.
SECTION 7.03 Returns and Payments.
(a) The Sellers shall prepare and file or otherwise furnish in
proper form to the appropriate Governmental Authority (or cause to be prepared
and filed or furnished) in a timely manner all Tax Returns required to be filed
by the Company for all periods ending on or prior to the Closing Date. The
Sellers shall indemnify the Company and its employees or agents against any
liability or cost by reason of a claim by a Tax authority under IRC Section
6694, or any corresponding provision of any other law, to the extent relating
to such preparation. The Sellers shall pay or cause to be paid when due and
payable all Taxes with respect to the Company for any taxable period ending on
or before the Closing Date. Tax Returns of the Company filed for any taxable
period ending on or before the Closing Date shall be prepared substantially in
accordance with applicable laws.
(b) The Purchaser shall prepare and file or otherwise furnish in
proper form to the appropriate Governmental Authority (or cause to be prepared
and filed or furnished)
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in a timely manner all Tax Returns required to be filed by the Company for all
periods ending after the Closing Date. The Purchaser shall pay or cause to be
paid when due and payable all Taxes with respect to the Company for any taxable
period ending after the Closing Date (subject to any right of indemnification
from the Sellers hereunder for Taxes).
SECTION 7.04 Tax Indemnification. The Sellers agree to indemnify and
hold the Purchaser and the Company harmless against any breach of a covenant
contained in this Article VII, and against the following Taxes, and, against
any loss, damage, liability, or expense, including reasonable fees for
attorneys and consultants, incurred in contesting or otherwise in connection
with any such Taxes: (i) Taxes imposed on the Company with respect to taxable
periods ending before or on the Closing Date; (ii) Taxes imposed on the
Purchaser or the Company as a result of any breach of warranty or
misrepresentation under Section 7.01 (for which purpose the representations in
Section 7.01 shall be deemed to have been made with no exception for items
disclosed in Section 7.01 of the Disclosure Schedule or otherwise); (iv) Taxes
arising in any taxable period ending after the Closing Date as a result of the
disallowance or deferral of any expense or capitalized item from prior periods
or the deferral of income items from prior periods to the current period (net
of any applicable Tax reductions); and (v) Taxes arising in any taxable period
ending after the Closing Date from the failure of the Company to establish to
retain records required under applicable Tax law with respect to any
transaction, event or item occurring prior to the Closing Date.
SECTION 7.05. Cooperation and Exchange of Information. Pursuant to
the terms set forth in Section 7.02 of this Agreement, the Sellers, on the one
hand, and the Purchaser and the Company on the other hand, will provide each
other with such cooperation and information as any of them reasonably may
request of the others in filing any Tax Return, determining a liability for
Taxes or a right to a refund of Taxes, participating in or conducting any audit
or other proceeding in respect of Taxes or making representations to or
furnishing information to parties subsequently desiring to purchase the Company
or any part of the Business from the Purchaser. Such cooperation and
information shall include providing copies of relevant Tax Returns or portions
thereof, together with accompanying schedules, related work papers and
documents relating to rulings or other determinations by Tax authorities, as
well as such explanations of the same as may be requested by the Purchaser. The
Sellers, on the one hand, and the Purchaser and the Company, on the other hand,
shall sign any Tax Return reasonably requested by the party required to file
such Tax Return and for which the other party's signature is required.
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ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Sellers and the
Company. The respective obligations of the Sellers and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions, any of which may be waived by the Sellers and the Company in
writing:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Purchaser contained in this Agreement
shall have been true and correct as of the date they were deemed to have been
made, and the representations and warranties set forth in Sections 4.01 and
4.06 shall be true and correct in all material respects as of the Closing, with
the same force and effect as if made as of the Closing. The covenants and
agreements contained in this Agreement to be complied with by the Purchaser on
or before the Closing shall have been complied with. The Sellers shall have
received a certificate from the Purchaser to such effect signed by a duly
authorized representative thereof and dated as of the Closing Date;
(b) Escrow Agreement. The Purchaser shall have executed and
delivered the Escrow Agreement in the form of Exhibit 8.02(1);
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Sellers, the Company, or the Purchaser, seeking to restrain or adversely
alter the transactions contemplated by this Agreement or which is likely to
render it impossible or unlawful to consummate such transactions; provided,
however, that the provisions of this Section 8.01(c) shall not apply if the
Sellers or the Company has directly or indirectly solicited or encouraged any
such Action;
(d) Resolutions. The Sellers shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Purchaser of the resolutions duly and validly adopted by the Board of Directors
of the Purchaser evidencing its authorization of the execution and delivery of
this Agreement and the other agreements to be executed by the Purchaser as
contemplated hereby and the consummation of the transactions contemplated
hereby;
(e) Incumbency Certificate. The Sellers shall have received a
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures
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of the officers of the Purchaser authorized to sign this Agreement and the
other documents to be delivered hereunder;
(f) Legal Opinion. The Sellers shall have received from
Purchaser's Counsel a legal opinion, addressed to the Sellers and dated the
Closing Date, substantially in the form of Exhibit 8.01(f);
(g) Consents and Approvals. Any waiting period (and any extension
thereof) under a law applicable to the purchase of the Shares contemplated
hereby (including the HSR Act) shall have expired or shall have been
terminated, and any consent or approval required shall have been obtained;
(h) Agreement. The Employment Agreement, in the form of Exhibit
8.01(h)(l), shall have been duly executed and delivered by the parties thereto;
(i) Reserved.
SECTION 8.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions, any of which may be waived by the
Purchaser in writing, and the Company and the Sellers shall use their best
efforts to cause such conditions to be fulfilled, provided, however, the
Purchaser's election to proceed with the Closing of the transactions
contemplated herein shall not be deemed a waiver of any breach of any
representation, warranty or covenant herein, whether or not known to the
Purchaser or existing on the Closing Date:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Sellers and the Company contained in this Agreement shall
have been true and correct as of the date as of which they were deemed to have
been made, and the representations and warranties set forth in Sections 3.01
and 3.03 shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing. The covenants and
agreements contained in this Agreement to be complied with by the Sellers and
the Company on or before the Closing shall have been complied with. The
Purchaser shall have received a certificate from the Sellers to such effect
dated as of the Closing Date;
(b) Due Diligence. The completion to the Purchaser's
satisfaction, of a due diligence investigation of the Company, including
completion of a satisfactory Phase II environmental audit and the preparation
of all sections of the Disclosure Schedules to this Agreement; provided
however, the Sellers and the Company shall deliver to the
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Purchaser, within twenty (20) Business days after the date of this Agreement, a
complete and accurate Disclosure Schedule. Within ten (10) Business Days of
the Purchaser's receipt of said Disclosure Schedule, the Purchaser shall
provide to the Sellers a list of objections and concerns regarding the
information contained in the Disclosure Schedule. The Sellers and the Company
shall then have thirty (30) Business days after the receipt of such list to
cure all such objections and concerns to the Purchaser's satisfaction. If
after said thirty (30) Business day cure period, the Purchaser remains
dissatisfied with the due diligence finding and the information disclosed in
the Disclosure Schedule and rejects in writing such Disclosure Schedule, or the
Purchaser does not accept in writing the Disclosure Schedule and the
information disclosed therein within ten (10) Business Days, the Purchaser
shall be deemed to have rejected the Disclosure Schedule. If the Purchaser
rejects or is deemed to have rejected the Disclosure Schedule, the Purchaser
may terminate this Agreement at any time pursuant to Article X hereof;
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Sellers, the Company or the Purchaser, seeking to restrain or adversely
alter the transactions contemplated hereby or which is likely to render it
impossible or unlawful to consummate the transactions contemplated by this
Agreement or which could have a Material Adverse Effect, provided, however,
that the provisions of this Section 8.02(c) shall not apply if the Purchaser
has directly or indirectly solicited or encouraged any such Action;
(d) Termination of Shareholders Agreement. The shareholders
agreement identified in Section 3.03(d) of the Disclosure Schedule shall have
been terminated and evidence thereof satisfactory to the Purchaser shall have
been provided to the Purchaser;
(e) Compliance with FIRPTA. The Company shall have provided the
Purchaser with a statement, in a form reasonably satisfactory to the Purchaser,
pursuant to Section 1.897-2(h) of the Treasury Regulations certifying that the
Common Stock is not a U.S. real property interest within the meaning of Section
897(c)(1) of the Code and dated not more than thirty (30) days prior to the
Closing Date;
(f) Legal Opinions. The Purchaser shall have received from
Company's Counsel a legal opinion, addressed to the Purchaser and dated the
Closing Date, substantially in the form of Exhibit 8.02(f);
(g) Consents and Approvals. Any waiting period (and any extension
thereof) under a law applicable to the purchase of the Shares contemplated
hereby (including the HSR Act) shall have expired or shall have been
terminated, and any consent or approval required shall have been obtained;
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(h) Resignations of Directors and Officers. The Purchaser shall
have received the resignations, effective as of the Closing Date, or evidence
of removal as of the Closing Date, of all the directors and officers of the
Company;
(i) Organizational Documents. The Purchaser shall have received a
copy of (i) the articles of incorporation, as amended, of the Company,
certified by the Secretary of State of the State of its organization, as of a
date not earlier than 30 Business Days prior to the Closing Date and
accomplished by a certificate of the Secretary or Assistant Secretary of the
Company, dated as of the Closing Date, stating that no amendments have been
made to such articles of incorporation since such date and (ii) the by-laws of
the Company, as amended, certified by the Secretary or Assistant Secretary of
the Company as of the Closing Date;
(j) Minute Books and Stock Register. The Purchaser shall have
received copies of the minute books and stock register of the Company,
certified by its Secretary or Assistant Secretary as of the Closing Date;
(k) Good Standing; Licenses; Qualification to Do Business. The
Purchaser shall have received good standing certificates, licenses,
certificates of compliance, or certificates of existence, as applicable, for
the Company from the secretary of state, or the other applicable Governmental
Authority, of (i) the jurisdiction in which the Company is incorporated or
organized, and (ii) each other jurisdiction in which the Company does business
requiring it to be licensed and/or to qualify in such jurisdiction, in each
case dated as of a date not earlier than 30 Business Days prior to the Closing
Date;
(l) Escrow Agreement. The Sellers shall have executed and
delivered the Escrow Agreement in the form of Exhibit 8.02(l) and made the
transfers to the Escrow Agent as contemplated thereby;
(m) Resolutions. The Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Company resolutions duly and validly adopted by the Board of Directors of the
Company evidencing its authorization of the execution and delivery of this
Agreement and the other agreements to be executed by the Company as
contemplated hereby and the consummation of the transactions contemplated
hereby;
(n) Financing. The Purchaser shall have obtained financing for
the Acquisition satisfactory to the Purchaser, in its sole discretion, through
public or private placement of debt or equity, including an initial public
offering of securities by First Wave Marine, Inc. or traditional commercial
lender financing;
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(o) Appraisals. Seller shall have obtained appraisals from
qualified appraisers that the appraised value of all the fixed assets of the
Company in the Pasadena and Galveston, Texas shipyards is not less than Sixteen
Million and No/100 Dollars ($16,000,000.00).
(p) No Regulatory Restrictions. The Company shall not be subject
to any material restriction (whether on its business, operations, ability to
pay dividends or incur indebtedness, or otherwise) imposed or proposed to be
imposed as a result of the transactions contemplated by this Agreement by any
Governmental Authority except restrictions generally applicable to companies
engaging in businesses substantially similar to the Business and restrictions
which result primarily from any action or inaction of the Purchaser or the fact
that the Purchaser is a participant in the transactions contemplated by this
Agreement;
(q) Minimum Asset and Debt Values. The total amount of the
accounts receivable, cash and cash equivalents and work-in-process of the
Company shall not be less than Six Million and No/100 Dollars ($6,000,000.00),
and the debt on the Revolving Credit Facility shall not be greater than Two
Million and No/100 Dollars ($2,000,000.00). The Company's Long Term Debt from
commercial lenders incurred prior to May 1, 1997, shall not exceed Seven
Million and No/100 Dollars ($7,000,000.00).
(r) Reserved.
(s) Inter-Company Arrangements. The Sellers and the Company, as
applicable, shall have terminated the Inter-Company Arrangements in accordance
with Section 5.13 and delivered to the Purchaser evidence thereof which is
reasonably acceptable to Purchaser; and
(t) Employment Agreement. The Employment Agreement in the form of
Exhibit 8.01(h)(l) shall have been duly executed and delivered by the parties
thereto.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of the Sellers contained in
this Agreement, the Exhibits to this Agreement and the Disclosure Schedule and
any certificate, statement or report or other document delivered pursuant to
this Agreement
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(collectively, the "Acquisition Documents"), shall survive the Closing until
the third (3rd) anniversary of the Closing Date; provided, however, that all
representations and warranties made by Sellers in Sections 3.01, 3.03, 3.16 and
Article VII shall survive until the close of business on the 30th day
following the expiration of the applicable statute of limitations or any
extension thereof. No covenants of the Sellers shall survive after the Closing
Date except for those contained in Sections 5.03, 5.04, 5.07, 5.08, 5.09 5.10,
Article VII, Article IX and such other Sections, if any, as so expressly
provided. Neither the period of survival nor the liability of the Sellers or
the Purchaser with respect to the Sellers' or the Purchaser's representations
and warranties shall be reduced by any investigation made at any time by or on
behalf of the Purchaser or the Sellers, as the case may be. If written notice
of a claim has been properly given in the manner required by Section 9.02(d)
prior to the expiration of the applicable representations and warranties, then
the relevant representations and warranties shall survive as to such claim
until such claim has been finally resolved. No representation, warranty or
covenant of the Company contained in the Acquisition Documents shall survive
the Closing.
(b) The representations and warranties of the Purchaser contained
in this Agreement, the Exhibits to this Agreement and the Disclosure Schedule
and any certificate, statement or report or other document delivered pursuant
to this Agreement (collectively, the "Acquisition Documents"), shall survive
the Closing until the third (3rd) anniversary of the Closing Date. No covenants
of the Purchaser shall survive after the Closing Date except for those
contained in Sections 5.03, 5.04, 5.10, Article VII, Article IX, and such other
Sections, if any, as so expressly provided. If written notice of a claim has
been properly given in the manner required by Section 9.02(d) Prior to the
expiration of the applicable representations and warranties, then the relevant
representations and warranties shall survive as to such claim until such claim
has been finally resolved.
SECTION 9.02. Indemnification.
(a) The Purchaser (and, after the Closing, the Company) and its
other Affiliate, and each of their officers, directors, employees, agents,
consultants, successors and assigns shall be indemnified and held harmless by
the Sellers for the net amount (as provided for in Section 9.02 (e)(ii)) of any
and all liabilities, losses, damages, claims, reasonable costs and expenses,
interest, awards, judgments, damages (including punitive damages), fines, fees
and penalties (including, without limitation, attorneys', experts' and
consultants' fees and expenses) (collectively, "Losses") actually suffered or
incurred by them (including, without limitation, any Action brought or
otherwise initiated by any of them), arising out of or resulting from:
(i) The inaccuracy of any representation or warranty made
by the Sellers contained in any of the Acquisition
Documents; or
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(ii) the breach of any covenant or agreement by the
Sellers contained in the Acquisition Documents.
(b) The Sellers and their respective Affiliates, officers,
directors, employees, agents, consultants, successors and assigns shall be
indemnified and held harmless by the Purchaser for any and all Losses actually
suffered or incurred by any Indemnified Party (including, without limitation,
any Action brought or otherwise initiated by any of them), arising out of or
resulting from:
(i) the inaccuracy of any representation or warranty made
by the Purchaser contained in the Acquisition
Documents;
(ii) the breach of any covenant or agreement by the
Purchaser contained in the Acquisition Documents;
(iii) any liability of the Company relating solely to
actions taken by the Company after the Closing Date
and which do not relate, in whole or in part, to the
breach of any representation, warranty or covenant in
the Acquisition Documents by any of the Sellers,
disregarding for purposes of this clause (iii) any
knowledge limitation contained in the Acquisition
Documents on the Sellers' representations, warranties
or covenants, provided, however, the obligation of
the Purchaser pursuant to this clause (iii) shall
terminate on the (third) anniversary of the Closing
Date.
(c) To the extent that an Indemnifying Party's undertakings set
forth in this Section 9.02 may be unenforceable, such Indemnifying Party shall
contribute the maximum amount that it is permitted to contribute under
applicable law, and as limited by this Agreement, to the payment and
satisfaction of all Losses incurred by an Indemnified Party.
(d) All claims for indemnification against the Sellers or the
Purchaser, as the case may be (an "Indemnifying Party"), under any provision of
this Article IX shall be asserted and resolved as follows:
(i) In the event of any claim or demand for which an
Indemnifying Party would be liable for Losses to the
Persons specified in Section 9.02(a) or (b), as
applicable, (each an "Indemnified Party") which is
asserted against or sought to be collected from such
Indemnified Party by a Person other than the
Purchaser or the Sellers ("Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice (as
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defined below) with reasonable promptness to the
Indemnifying Party after the Indemnified Party has
actual notice of the Third Party Claim. The failure
by any Indemnified Party to provide the Indemnifying
Party with the Claim Notice required by the preceding
sentence shall not impair the Indemnified Party's
rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been
materially prejudiced thereby. The Indemnifying Party
shall notify the Indemnified Party within thirty (30)
days of receipt of the Claim Notice ("Notice Period")
whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend
the Indemnified Party against such Third Party Claim.
(ii) If the Indemnifying Party notifies the Indemnified
Party within the Notice Period that the Indemnifying
Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this
Section 9.02(d), then the Indemnifying Party shall
have the right to defend, at its sole cost and
expense, and, except as provided in the following
sentence, through counsel of its choice reasonably
acceptable to the Indemnified Party such Third party
Claim by all appropriate proceedings, which
proceedings shall be diligently defended by the
Indemnifying Party to a final conclusion or shall be
settled at the discretion of the Indemnifying Party
(with the prior written consent of the Indemnified
Party, which consent shall not be unreasonably
withheld), so long as the Indemnified Party is fully
released with respect to such Third Party Claim. If
there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate
in the reasonable judgment of the Indemnified Party
for the same counsel to represent both the
Indemnified Party and the Indemnifying Party and the
Indemnifying Party does not provide separate counsel
reasonably acceptable to the Indemnified Party, then
the Indemnified Party shall be entitled to retain its
own counsel, in each jurisdiction for which the
Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party.
Assumption by the Indemnifying Party of the defense
of such Third Party Claim will not constitute an
admission by the Indemnifying Party that the claim or
litigation is one for which the Indemnifying Party is
required to indemnify the Indemnifying Party under
this Article IX. The Indemnifying Party shall have
full control of such defense and proceedings;
provided, however, that the Indemnified Party may at
the sole cost and expense of the Indemnifying Party,
file during the Notice Period any motion,
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answer, or other pleadings that the Indemnified Party
may deem necessary or appropriate to protect its
interests and not irrevocably prejudicial to the
Indemnifying Party (it being understood and agreed
that, except as provided in Section 9.02(d)(iii)
hereof, if an Indemnified Party takes any such action
that is irrevocably prejudicial and conclusively
causes a final adjudication that is materially
adverse to the Indemnifying Party, the Indemnifying
Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim
prejudiced by the Indemnified Party's action); and
provided further, however, that if requested by the
Indemnifying Party, the Indemnified Party agrees, at
the sole cost and expense of the Indemnifying Party,
to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the
Indemnifying Party elects to contest, or, if
appropriate in the judgment of the Indemnified Party
and related to the Third Party Claim in question, in
making any counterclaim against the person asserting
the Third Party Claim or any cross-complaint against
any Person (other than the Indemnified Party). The
Indemnified Party may, at its sole cost and expense,
participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this Section
9.02(d)(ii).
(iii) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the
Indemnifying Party desires to defend the Indemnified
Party pursuant to Section 9.02(d)(i), or if the
Indemnified Party gives such notice but fails to
defend the Third Party Claim, then the Indemnified
Party will have the right (but not the obligation) to
defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be
vigorously defended by the Indemnifying Party or will
be settled at the discretion of the Indemnified
Party. The Indemnified Party shall have full control
of such defense and proceedings, including any
compromise or settlement thereof provided, however,
that if requested by the Indemnified Party, the
Indemnifying Party agrees, at the sole cost and
expense of the Indemnifying Party, to cooperate with
the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is
contesting, or, if appropriate and relating to the
Third Party Claim in question, in making any
counterclaim against the person asserting the Third
Party Claim, or
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any cross-complaint against any person (other than
the Indemnifying Party or any of its Affiliates).
Notwithstanding the foregoing provisions of this
Section 9.02(d)(iii), if the Indemnifying Party has
notified the Indemnified Party with reasonable
promptness that the Indemnifying Party disputes, or
reserves its rights to dispute, its liability to the
Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party will not
be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section
9.02(d) (iii) or of the Indemnifying Party's
participation there in at the Indemnified Party's
request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all costs and expenses
incurred by the Indemnifying Party in connection with
such litigation. The Indemnifying Party may
participate in, but not control, any defense or
settlement controlled by the Indemnified Party
pursuant to this Section 9.02(d)(iii), but the
Indemnifying Party will bear its own costs and
expenses with respect to such participation.
Regardless of whether the Indemnifying Party defends
a Third Party Claim on behalf of the Indemnified
Party or participates in the defense thereof, the
Indemnified Party and the Indemnifying Party shall
reasonably cooperate with each other in all material
respects in connection with the defense for such
Third Party Claim. Each Indemnified Party shall
furnish such information regarding itself and the
Third Party Claim as the Indemnifying Party may
reasonably request in writing and as shall be
reasonably required in connection with the defense
hereof. No Third Party Claim may be settled by the
Indemnifying Party without the prior written consent
of the Indemnified Party (which consent shall not be
unreasonably withheld), unless such settlement
provides a release of the Indemnified Party for such
claim.
(iv) In the event any Indemnified Party should have a
claim for Losses against any Indemnifying Party
hereunder that does not involve a Third Party Claim
being asserted against or sought to be collected from
the Indemnified Party, the Indemnified Party shall
deliver an Indemnity Notice (as defined below) with
reasonable promptness to the Indemnifying Party after
the Indemnified Party has actual notice of such
claim. The failure by any Indemnified Party to give
the notice referred to in the preceding sentence
shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby.
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The Indemnifying Party and the Indemnified Party
agree to proceed in good faith to negotiate a
resolution of any dispute relating to such a claim
for Losses within sixty (60) days following receipt
of any Indemnity Notice. If any such claim is not
resolved within the foregoing period, the parties may
pursue any available remedies.
(v) The term "Claim Notice" shall mean written
notification of a Third Party Claim by an Indemnified
Party to an Indemnifying Party pursuant to Section
9.02(d)(i), enclosing a copy of all papers served, if
any, and specifying the nature of the alleged basis
for such Third Party Claim and, to the extent then
feasible, the alleged amount or the estimated amount
of such Third Party Claim.
(vi) The term "Indemnity Notice" shall mean written
notification of a claim for indemnity (which claim
does not involve a Third Party Claim) by an
Indemnified Party to an Indemnifying Party pursuant
to Section 9.02(d)(iv) hereof, specifying the nature
of and specific basis for such claim and, to the
extent then feasible, the amount or the estimated
amount of such claim.
(vii) Any estimated amount of a claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive
of the final amount of such claim.
(viii) Reserved.
(ix) In connection with each Third Party Claim, the
Indemnifying Party shall obligated to provide only
one counsel to all Indemnified Parties.
(e) (i) The terms and provisions set forth in this Section
9.02 shall constitute the sole rights and remedies of
the parties for money damages in respect of any
inaccuracies of representations or warranties or any
breaches of covenants or agreements contained in this
Agreement.
(ii) In the event of a claim pursuant to Section
9.02(a)(v), the Purchaser agrees, to the extent
practical, to seek recovery for the related Losses
from any proceeds of insurance providing coverage to
the Purchaser therefor, prior to collection of such
Losses from the Sellers; provided, however, the
foregoing provision shall in no way
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limit or restrict any actions or proceedings by the
Purchaser against any Indemnifying Party, including
without limitation the Sellers, to the extent the
Purchaser deems, in its discretion, such actions or
proceedings to be necessary to preserve, maintain or
enforce any of its rights against any Indemnifying
Party.
SECTION 9.03. Limits on Indemnification.
(a) No amount shall be payable by any Indemnifying Party pursuant
to Section 9.02(a) unless and until the aggregate amount of Losses
indemnifiable under Section 9.02(a) exceeds $350,000.00 and then the
Indemnifying Party shall indemnify the Indemnified Party to the full extent of
such Losses in excess of $350,000.00, up to but not to exceed $6,000,000.00.
(b) The limitations set forth in Sections 9.03(a) shall not apply
with respect to any Losses suffered or incurred by the Purchaser in connection
with the representations contained in Sections 3.01, 3.03, and Article VII, and
the Sellers shall fully indemnify the Purchaser for any such Losses from the
first dollar of such Losses to the full extent of such Losses.
(c) However, this Section 9.03 shall not apply to any to any
breach of any representations and warranties of the Sellers or the Company
which any of the Sellers knew to be untrue or false at the time such
representation and warranty was made or any intentional breach of any covenant
or obligation of any of the Sellers or the Company under this Agreement.
SECTION 9.04. Reserved.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination by the Sellers or Purchaser. This
Agreement may be terminated at any time prior to the Closing Date:
(a) By the Purchaser if, between the date hereof and the Closing
Date: (i) any representation or warranty of the Sellers or the Company
contained in this Agreement shall not have been true and correct in all
material respects as of the date when deemed to have been made and, in the case
of a breach reasonably susceptible to cure, shall not have been cured within
thirty (30) calendar days, (ii) the Sellers or the Company shall not have
complied in all material respects with any covenant or agreement to be complied
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with by it and contained in this Agreement and, in the case of a breach
reasonably susceptible to cure, shall not have been cured within thirty (30)
calendar days, or (iii) any of the Sellers or the Company makes a general
assignment for the benefit of creditors, or any proceeding shall be instituted
by or against, any of the Sellers or the Company seeking to adjudicate any of
them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any Law relating to bankruptcy, insolvency or reorganization;
and (iv) the Sellers fail to provide a complete and accurate Disclosure
Schedule satisfactory to Purchaser, in Purchaser's sole discretion, or are
unable to cure any objections or concerns which the Purchaser has regarding the
information contained in the Disclosure Schedule within the time periods
provided for in Section 8.02(b) hereof; or
(b) By the Sellers, if, between the date hereof and the Closing
Date; (i) any representation or warranty of the Purchaser contained in this
Agreement shall not have been true and correct in all material respects as to
the date when deemed to have been made and, in the case of a breach reasonably
susceptible to cure, shall not have been cured within thirty (30) calendar
days, (ii) the Purchaser shall not have complied in all material respects with
any covenant or agreement to be complied with by it and contained in this
Agreement, and, in the case of a breach reasonably susceptible to cure, shall
not have been cured within thirty (30) calendar days, or (ii) the Purchaser
makes a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against the Purchaser seeking to adjudicate it
bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization; or
(c) By either the Sellers or the Purchaser if the Closing Date
shall not have occurred by February 15, 1998; provided, however, that the right
to terminate this Agreement under this Section 10.01(c) shall not be available
to any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Closing
Date to occur on or prior to such date; or
(d) By either the Purchaser or the Sellers in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, or enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or in the reasonable determination
of the Purchaser of the Sellers, otherwise render inadvisable the consummation
of the transaction contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable; or
(f) By the mutual written consent of the Sellers, the Company and
the Purchaser.
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SECTION 10.02 Effect of Termination. In the event of termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except that nothing herein shall relieve any party from liability for any fraud
or willful breach of this Agreement.
SECTION 10.03 Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representation and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto, or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Joint and Several Obligation of the Sellers and the
Company. Prior to the Closing Date, the obligations of the Sellers and the
Company under this Agreement shall be joint and several. Following the Closing
Date, the Sellers shall remain jointly and severally obligated hereunder but
shall have no right of or claim to contribution or indemnity against the
Company with respect to any breach, violation, default, or alleged breach,
violation or default of any representation, warranty or covenant of the Company
in any of the Acquisition Documents.
SECTION 11.02. Expenses. All costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy (confirmed by telephone within 24
hours following receipt thereof, or by registered or certified mail (postage
prepaid, return receipt requested) to the
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respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
11.03):
(a) If to the Company:
Xxxx Xxxxxxxxx Marine, Inc.
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, Xxxxx 00000-0000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
(b) If to the Sellers:
Xxxx X. Xxxxxxxxx, III
00000 Xxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
With a copy to:
Xxxxx, Xxxxxx & Xxxxxxxx, L.L.P.
Attention: L. Xxx Xxxxxx
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
and
(c) If to the Purchaser:
EAE Services, Inc.
0000 Xxxxx Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Secretary
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
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With a copy to:
Xxxxxxxxx, Sachse & Xxxxxx, L.L.P.
One American Place, 23rd Floor (70825)
P. O. Xxx 0000
Xxxxx Xxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
SECTION 11.04. Public Announcements. Except to the extent that the
Sellers or the Purchaser believes on the advice of counsel that public
disclosure is required by law, no party to this Agreement shall make, or cause
to be made, any press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without prior notification to the other parties, and the parties
shall cooperate as to the timing and contents of any such press release or
public announcement.
SECTION 11.05. Headings; Construction. The descriptive headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The
provisions of this Agreement were negotiated by the parties hereto and this
Agreement shall be deemed to have been drafted by all the parties hereto.
SECTION 11.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall 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 in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof.
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SECTION 11.08. Assignment. This Agreement may not be assigned by any
party hereto by operation of law or otherwise without the express written
consent of the other parties hereto (which consent may be granted or withheld
in the sole discretion of such other parties); provided, however,
notwithstanding the foregoing, the Purchaser may assign its rights under this
Agreement to a wholly-owned subsidiary but such assignment shall not release
the Purchaser from any of its obligations hereunder.
SECTION 11.09. No Third Party Beneficiaries. Except for the provisions
of Article IX relating to Indemnified Parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 11.10. Amendment. This Agreement may not be amended or
modified except (a) by an installment in writing signed by, or on behalf of,
the parties hereto, or (b) by a waiver in accordance with Section 10.03.
SECTION 11.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, applicable to
contracts executed in and to be performed entirely within that state.
SECTION 11.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.14. Legal Advice. Each party hereto represents and warrants
to the other party that he, she or it has consulted attorneys, accountants and
tax advisors of their own choosing concerning the legal, financial and tax
consequences of this Agreement.
SECTION 11.15. Remedies Not Exclusive. Subject to the provisions of
Section 9.02(e), no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by state or
otherwise. The election of any one or
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more remedies by any party hereto shall not constitute a waiver of the right to
pursue other available remedies.
SECTION 11.16. Arbitration of EBITDA. Any dispute or disagreement
with respect to the computation of the EBITDA of the Company with respect to
the (1) Post-Closing Adjustment, as defined in Section 1.01, or (2) the bonus
of Xxxx X. Xxxxxxxxx, III, as defined in Section 2.06, shall be submitted for a
final and binding determination of an arbitrator, which shall be an independent
so called "Big Six" accounting firm (the "Arbitrator"). The Arbitrator shall
be mutually agreed upon by the parties or if the parties cannot agree, by the
agreement of the Sellers' and Purchaser's accountants. A condition precedent
to the appointment of the Arbitrator shall be its agreement that the Arbitrator
shall render a decision within ten (10) days of the submission by the
respective parties of information to the Arbitrator. To the extent applicable,
the Commercial Arbitration Rules of the American Arbitration Association as
then in effect shall apply. The findings of the Arbitrator shall be in
writing. The determination of the Arbitrator shall be final and conclusive
upon the parties for which judgment thereon may be entered by any court of
competent jurisdiction. The costs of such arbitration shall be shared equally.
SECTION 11.17 Arbitration of Other Claim. Any dispute, controversy or
claim arising out of or relating to this Agreement, except for disputes arising
out of the calculation of the Company's EBITA with respect to the Post Closing
Adjustment or the bonus of Xxxx x. Xxxxxxxxx, III, which shall be finally
settled in accordance with Section 11.16 hereof, shall be finally settled under
the Commercial Arbitration Rules of the American Arbitration Association as
then in force, by three (3) arbitrators, one of whom shall be designated by
Sellers, one of whom shall be designated by the Purchaser, and one of whom
shall be designated jointly by the Sellers' and the Purchasers' designees in
accordance with said rules. In rendering a decision, the arbitrators shall
make specific findings of fact and take into account all applicable judicial
precedents and industry practice. All disputes, controversies or claims, or
any rights or obligations of the parties hereto, shall be governed by and
resolved in accordance with the governing law provisions set forth in Section
11.11 hereof. The place of arbitration shall be Houston, Texas. An award or
determination of the arbitration tribunal shall be final and conclusive upon
the parties, judgment thereon may be entered by any court of competent
jurisdiction and no appeal thereof shall be made by the parties.
The parties agree that the award of the arbitrators (i) shall provide
that the prevailing party shall be entitled to recover from the other party
reasonable attorneys' fees and expenses in addition to any other relief that
may be awarded; (ii) shall be promptly payable free of any tax, deduction or
off-set except as otherwise provided by any law; (iii) shall provide that any
cost, fees or taxes incident to enforcing the award
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shall, to the maximum extent permitted by law, be charged against the party
resisting such enforcement; and (iv) shall include interest from the date of
any damages incurred, and from the date of the award until paid in full, at a
rate fixed by the arbitrators but in no event less than the "prime rate" per
annum quoted for the corresponding period by Bank One, Louisiana.
IN WITNESS WHEREOF, the Sellers, the Company, the Purchaser and First
Wave Marine, Inc. have caused this Agreement to be executed as of the date
first written above, the corporate parties represented herein by their
respective officers thereunto duly authorized.
SELLERS:
/s/ XXXX X. XXXXXXXXX, III
----------------------------------
Xxxx X. Xxxxxxxxx, III
/s/ XXXXX X. XXXXXXXXX
----------------------------------
Xxxxx X. Xxxxxxxxx
THE COMPANY:
XXXX XXXXXXXXX MARINE, INC.
By: /s/ XXXX X. XXXXXXXXX, III
-------------------------------
Name: Xxxx X. Xxxxxxxxx, III
Title: President
XXXXXXXXX SHIPYARD AND FABRICATION,
INC.
By: /s/ XXXX X. XXXXXXXXX, III
-------------------------------
Name: Xxxx X. Xxxxxxxxx, III
Title: President
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THE PURCHASER:
EAE SERVICES, INC.
By: /s/ XXXXXX X. XXXXX
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
and Chairman of the Board
Intervening for the purpose of
agreeing to guarantee Purchaser's
Note as provided in Section
2.02(f), and to grant stock
options as provided in Section 6.01:
FIRST WAVE MARINE, INC.
BY: /s/ XXXXXX X. XXXXX
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
and Chairman of the Board
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EXHIBIT A
ASSETS
1. Assets listed in appraisals, dated ______________________, 1997
2. Assets listed in depreciation schedules attached hereto
82
EXHIBIT 1.01 (ii)
PERMITTED ENCUMBRANCES
-i-
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EXHIBIT 8.01(f)
LEGAL OPINION OF PURCHASER'S COUNSEL
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1 EXHIBIT 8.01(h)(l)
EMPLOYMENT AGREEMENT
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EXHIBIT 8.02(f)
LEGAL OPINION OF COMPANY'S COUNSEL
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EXHIBIT 8.02(l)
ESCROW AGREEMENT
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