EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and among
LTI, Inc. ("LTI"),
LTI Wire Services, Inc. ("Sub"),
Xxxxxx Xxx-Xxxx Au,
Xxxx-Xxxxx Au,
Xxxxx Xxxx, and
Xxxxx XxXxxxxx
(collectively, the "Stockholders"),
and
Houston Geophysical Products, Inc. (the "Buyer")
and
OYO Geospace Corporation ("OYOG")
Dated November 17, 1998
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TABLE OF CONTENTS
Page
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ARTICLE 1
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES; CLOSING................... 1
1.1 Transferred Assets.................................................... 1
1.2 Excluded Assets....................................................... 3
1.3 Closing............................................................... 3
1.4 Purchase Price for the Assets......................................... 3
1.5 Adjustment to Cash Consideration...................................... 4
1.6 Liabilities Not Assumed by the Buyer.................................. 5
1.7 Transfer Taxes; Recording Fees........................................ 5
1.8 Allocation of Purchase Price.......................................... 5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF LTI AND THE STOCKHOLDERS.................. 6
2.1 Corporate Organization................................................ 6
2.2 Power and Authority; Execution and Delivery; Effect of Agreement...... 6
2.3 No Consents; No Violations; No Loss of Rights......................... 7
2.4 Financial Statements.................................................. 7
2.5 Absence of Material Adverse Changes................................... 7
2.6 Properties, Title and Related Matters................................. 8
2.7 Equipment............................................................. 9
2.8 Inventory............................................................. 9
2.9 Accounts Receivable................................................... 9
2.10 Intellectual Property................................................. 9
2.11 Condition and Sufficiency of Transferred Assets....................... 9
2.12 Legal Proceedings..................................................... 10
2.13 Insurance............................................................. 10
2.14 Contracts and Commitments; Entitlements............................... 10
2.15 Brokerage............................................................. 11
2.16 Environmental Matters................................................. 11
2.17 Governmental Licenses and Permits..................................... 12
2.18 Taxes and Tax Matters................................................. 13
2.19 Compensation and Benefit Plans; Labor Matters......................... 13
2.20 Warranties and Product Liability...................................... 15
2.21 No Misleading Statements.............................................. 16
2.22 Securities Law Matters................................................ 16
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND OYOG........................ 17
3.1 Corporate Organization................................................ 18
3.2 Power and Authority; Execution and Delivery; Effect of Agreement...... 18
3.3 No Consents; No Violations............................................ 18
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3.4 Authorization for OYOG Stock.......................................... 18
3.5 Brokerage............................................................. 18
3.6 SEC Documents......................................................... 18
ARTICLE 4
COVENANTS AND AGREEMENTS OF LTI, SUB AND THE STOCKHOLDERS................... 19
4.1 Due Diligence; Access to Information.................................. 19
4.2 Conduct of the Business............................................... 19
4.3 Negotiation with Others............................................... 21
4.4 Delivery of Business Documents........................................ 21
4.5 Further Assurances.................................................... 21
4.6 Continuing Confidentiality of Intellectual Property................... 21
4.7 Covenant Not to Compete With the Business............................. 22
4.8 Employee Matters...................................................... 22
4.9 Name Change........................................................... 23
ARTICLE 5
CONDITIONS TO THE BUYER'S AND OYOG'S OBLIGATIONS............................ 23
5.1 Accuracy of Representations and Warranties............................ 23
5.2 Performance of Covenants and Agreements............................... 23
5.3 No Litigation......................................................... 23
5.4 No Material Adverse Change............................................ 23
5.5 Closing Certificate................................................... 23
5.6 Certified Resolutions................................................. 23
5.7 Instruments of Transfer............................................... 23
5.8 Satisfactory Completion of Due Diligence.............................. 24
ARTICLE 6
CONDITIONS TO LTI'S, SUB'S AND THE STOCKHOLDERS' OBLIGATIONS................ 24
6.1 Accuracy of Representations and Warranties............................ 24
6.2 Performance of Covenants and Agreements............................... 24
6.3 No Litigation......................................................... 24
6.4 Closing Certificate................................................... 24
6.5 Certified Resolutions................................................. 24
6.6 Employment Agreements................................................. 25
ARTICLE 7
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,REPRESENTATIONS,
WARRANTIES AND AGREEMENTS................................................... 25
ARTICLE 8
INDEMNIFICATION AND REIMBURSEMENT........................................... 25
8.1 Seller Indemnities.................................................... 25
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8.2 Buyer Indemnities..................................................... 26
8.3 Notice of Claim....................................................... 27
8.4 Indemnification Procedures............................................ 27
8.5 Subrogation Rights.................................................... 30
8.6 Interest.............................................................. 30
8.7 Independent Indemnities............................................... 30
8.8 Investigation and Due Diligence....................................... 30
ARTICLE 9
TERMINATION................................................................. 30
9.1 Termination........................................................... 31
9.2 Liability Upon Termination............................................ 31
9.3 Notice of Termination................................................. 31
ARTICLE 10
DEFINITIONS................................................................. 32
ARTICLE 11
MISCELLANEOUS............................................................... 37
11.1 Entire Agreement...................................................... 37
11.2 Successors and Assigns................................................ 38
11.3 Expenses.............................................................. 38
11.4 Invalidity............................................................ 38
11.5 Counterparts.......................................................... 38
11.6 Headings.............................................................. 38
11.7 Construction and References........................................... 38
11.8 Modification and Waiver............................................... 38
11.9 Notices............................................................... 39
11.10 Governing Law; Interpretation......................................... 40
11.11 Resolution of Disputes................................................ 40
11.12 Confidentiality....................................................... 41
SCHEDULES AND EXHIBIT
Schedule 1.1(a) October Balance Sheet
Schedule 1.2 Excluded Assets
Schedule 1.6 Excluded Liabilities
Schedule 2.6(a) Certain Permitted Encumbrances
Schedule 2.14 Contracts and Commitments
Schedule 2.17 Governmental Licenses and Permits
Schedule 2.19 Employee Benefits Matters
Schedule 2.20 Warranties
Exhibit A Form of Employment Agreements.
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is dated November 17,
1998, and is by and among LTI, Inc., a Texas corporation ("LTI"), LTI Wire
Services, Inc., an Alberta corporation ("Sub"), Xxxxxx Xxx-Xxxx Au, Xxxx-Xxxxx
Au, Xxxxx Xxxx and Xxxxx XxXxxxxx (collectively, the "Stockholders"), and
Houston Geophysical Products, Inc., a Texas corporation (the "Buyer") and OYO
Geospace Corporation, a Delaware corporation ("OYOG").
Capitalized terms used in this Agreement will have the meanings given to
them in Article 10 hereof, unless defined elsewhere in this Agreement.
W I T N E S S E T H:
Whereas Sub is a wholly-owned subsidiary of LTI;
Whereas the Stockholders, each of which is an individual residing in
Houston, Texas, own all of the issued and outstanding capital stock of LTI;
Whereas the Buyer is a wholly-owned subsidiary of OYOG;
Whereas LTI and Sub desire to transfer to the Buyer the Business and
substantially all of the assets and certain of the liabilities related to the
Business, and the Buyer desires to acquire the Business and such assets and
assume such liabilities, all on the terms and subject to the conditions set
forth herein (the "Acquisition"); and
Whereas the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which the Acquisition will occur;
Now, therefore, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES; CLOSING
1.1 Transferred Assets.
(a) Subject to the terms and conditions of this Agreement and in
consideration of the obligations of the Buyer as provided herein, and except as
otherwise provided in Section 12 hereof, at the Closing, LTI and Sub will sell,
assign, transfer, grant, bargain, deliver and convey to the Buyer, free and
clear of all Encumbrances, LTI's and Sub's entire right, title and interest in,
to and under the Business, as a going concern, and all assets owned or used by
LTI or Sub (other than Excluded Assets) in connection with, relating to or
arising out of the Business of every type and
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description, tangible and intangible, wherever located and whether or not
reflected on the books and records of LTI or Sub (all of such assets,
properties, rights and business collectively referred to as the "Transferred
Assets"), including, but not limited to:
(i) all Real Property, including the Real Property reflected in
the October Balance Sheet attached as Schedule 11;
(ii) all Equipment, including the Equipment reflected in the
October Balance Sheet;
(iii) all Inventory, including the Inventory reflected in the
October Balance Sheet except to the extent the Inventory set forth therein
has been or is sold for value in the ordinary course of the Business
between the date thereof and the Closing Date;
(iv) all Accounts Receivable, including the Accounts Receivable
reflected in the October Balance Sheet except to the extent the Accounts
Receivable set forth therein have been or are collected in the ordinary
course of the Business;
(v) all Intellectual Property;
(vi) subject to Section 11 hereof, all Entitlements as of the
Closing Date, including the benefits of all Insurance Policies;
(vii) all prepaid expenses and deposits made by LTI relating to
the Business; and
(viii) any goodwill associated with the Business.
(b) LTI and Sub will use best efforts to obtain such consents of third
parties as are necessary for the assignment of the Transferred Assets. To the
extent that any of the Transferred Assets are not assignable by the terms
thereof or consents to the assignment thereof cannot be obtained as provided
herein, the Transferred Assets will be held by LTI or Sub, as applicable, in
trust for the Buyer and will be performed by the Buyer in the name of LTI or
Sub, as applicable, and all benefits and obligations derived thereunder will be
for the account of the Buyer; provided, however, that where entitlement of the
Buyer to such Transferred Assets hereunder is not recognized by any third party,
LTI or Sub, as applicable, will, at the request of the Buyer, enforce in a
reasonable manner, at the cost of and for the account of the Buyer, any and all
rights of LTI or Sub, as applicable, against such third party.
(c) Within three days of the Closing Date, LTI and Sub will notify
each Person which may have possession of any of the Transferred Assets at the
Closing Date, whether by consignment or otherwise, of the transfer of such
Transferred Assets to the Buyer.
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1.2 Excluded Assets. Anything in Section 1.1(a) to the contrary
notwithstanding, those assets of LTI or Sub listed or described in Schedule 1.2
(collectively, the "Excluded Assets") will be excluded from the assets,
properties, rights and Business to be transferred to the Buyer hereunder.
1.3 Closing. Subject to the conditions set forth in this Agreement, the
closing of the Acquisition ("Closing") will begin at the offices of the Buyer,
0000 X. Xxxxxxx, Xxxxxxx, Xxxxx, at 9:00 a.m. on December 31, 1998, or at such
other time, date or place as the parties hereto mutually agree upon in writing
(the "Closing Date"), and will be effective as of 11:59 p.m. on the Closing
Date. Failure to consummate the transactions contemplated hereby on such date
will not result in a termination of this Agreement or relieve any party hereto
of any obligation hereunder. Title to, ownership of, control over and risk of
loss of the Transferred Assets will pass to the Buyer at the Closing.
1.4 Purchase Price for the Assets. In consideration of the transfer to
the Buyer of the Transferred Assets, the Buyer will:
(a)(i) Pay to LTI and Sub at the Closing an aggregate of $1,250,000 in
United States dollars (the "Closing Cash Consideration") in immediately
available funds by wire transfer to a bank account or accounts to be
designated by LTI;
(ii) Pay to LTI and Sub 60 calender days following the Closing Date
(subject to delay or adjustment pursuant to Section 1.5 and/or Section
8.4(c)) an aggregate of $500,000 in United States dollars (the "Holdback Cash
Consideration", and, together with the Closing Cash Consideration, the "Cash
Consideration") in immediately available funds by wire transfer to a bank
account or accounts to be designated by LTI;
(b) Deliver or cause to be delivered to LTI and Sub at the Closing an
aggregate number of shares of OYOG common stock, par value $.01 per share ("OYOG
Stock"), equal to the quotient of (i) $750,000 divided by (ii) the OYOG Market
Price, which OYOG Stock will be registered on the books of OYOG in the name of
LTI, or, at LTI's option, in the names of the Stockholders in such denominations
as LTI will designate to the Buyer not less than three Business Days before the
Closing Date;
(c) Assume at the Closing the obligations and liabilities of LTI or
Sub reflected in the October Balance Sheet to the extent and only to the extent
such obligations and liabilities are not Pre-Closing Obligations or Excluded
Liabilities (collectively, the "Assumed Liabilities").
The Cash Consideration (including the Holdback Cash Consideration, unless the
Holdback Cash Consideration is reduced pursuant to Section 8.4(c)), as adjusted
pursuant to Section 1.5, the OYOG Stock deliverable pursuant to Section 1.4(b)
and the Assumed Liabilities are herein collectively referred to as the "Purchase
Price".
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1.5 Adjustment to Cash Consideration.
(a) Adjustment to Cash Consideration. If the Closing Date Net Equity
is greater than $1,175,000, the Purchase Price will be increased by an amount
equal to the difference between the Closing Date Net Equity and $1,175,000. If
the Closing Date Net Equity is less than $1,175,000, the Purchase Price will be
decreased by an amount equal to the difference between $1,175,000 and the
Closing Date Net Equity.
(b) Closing Date Net Equity. The "Closing Date Net Equity" will be an
amount equal to the book value of the Transferred Assets less the book value of
all Assumed Liabilities, in each case as of the Closing Date as determined in
accordance with GAAP. The Closing Date Net Equity will be calculated by
reference to a balance sheet, dated as of the Closing Date, showing the
Transferred Assets and the Assumed Liabilities (the "Closing Date Balance
Sheet"), as prepared by the Buyer and accepted by LTI or as otherwise becomes
final and binding on the parties hereto in accordance with this Section 1.5.
(c) Closing Date Balance Sheet.
(i) Within 60 calendar days after the Closing Date, the Buyer
will prepare and deliver to LTI the Closing Date Balance Sheet reflecting
the Closing Date Net Equity and the calculation thereof. The Buyer will
provide LTI with access to copies of all work papers and other relevant
documents to verify the information contained in the Closing Date Balance
Sheet. The Seller will have a period of 10 calendar days after delivery to
it of the Closing Date Balance Sheet (the "Review Period") to review it and
make any objections LTI may have in writing to the Buyer.
(ii) If the Buyer does not receive any written objections to
the Closing Date Balance Sheet from LTI within Review Period, the Closing
Date Balance Sheet will be deemed accepted by LTI and will be final and
binding on the parties hereto.
(iii) If the Buyer receives written objections to the Closing
Date Balance Sheet from LTI within the Review Period, then the Buyer and
LTI will attempt to resolve the matter or matters in dispute, upon which
resolution the Closing Date Balance Sheet will be final and binding on the
parties hereto. If disputes with respect to the Closing Date Balance Sheet
are not resolved by the Buyer and LTI within 15 calendar days after the
receipt by the Buyer of the objections to the Closing Date Balance Sheet,
then either party with notice to the other party may submit the specific
matters in dispute to PriceWaterhouseCoopers LLP or such other recognized
independent accounting firm as may be approved by the Buyer and LTI, which
firm will render its opinion as to the matters in dispute. Based on its
opinion, such accounting firm will then send to the Buyer and LTI its
determination on the specific matters in dispute, together with a Closing
Date Balance Sheet reflecting that resolution, which Closing Date Balance
Sheet will be final and binding on the parties
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hereto. Any fees and expenses of the independent accounting firm appointed
pursuant to this Section 1.5 will be borne 50% by the Buyer and 50% by LTI.
(d) Payment. The Buyer will pay LTI the amount required by this
Section 1.5, if any, or LTI will pay the Buyer the amount required by this
Section 1.5, if any, within five calendar days after the Closing Date Balance
Sheet has become final and binding on the parties hereto; provided that the
Buyer may offset any such amount owed by LTI against the Holdback Cash
Consideration. Any amount required by this Section 1.5 to be paid will be paid
in United States dollars in immediately available funds by wire transfer to a
bank account or accounts to be designated by the receiving party.
1.6 Liabilities Not Assumed by the Buyer. Except for the Assumed
Liabilities, LTI and Sub will pay and discharge in due course all liabilities,
debts and obligations relating to LTI and Sub, the Transferred Assets or the
Business, whether known or unknown, now existing or hereafter arising,
contingent or liquidated, including, without limitation, (a) any Tax liabilities
pertaining to any of LTI or Sub, the Transferred Assets or the Business for
periods prior to and including the Closing Date, (b) all liabilities and
obligations relating to any products manufactured, sold or distributed or
services provided by or on behalf of LTI or Sub or with respect to any claims
made pursuant to warranties to third Persons in connection with products
manufactured, sold or distributed or services provided by or on behalf of LTI,
(c) all Pre-Closing Obligations, (d) liabilities listed on Schedule 1.6
("Excluded Liabilities") and (e) all liabilities and obligations of any Person
arising prior to the Closing or related to the conduct or operation of the
Transferred Assets or the Business on or prior to the Closing Date
(collectively, the "Retained Liabilities"), and the Buyer will not assume, or in
any way be liable or responsible for, any of such Retained Liabilities.
1.7 Transfer Taxes; Recording Fees. The parties hereto acknowledge and
agree that the Purchase Price includes and is inclusive of any and all sales,
use, value added, stamp, transfer or other similar Taxes imposed as a result of
the consummation of the transactions contemplated by this Agreement, and LTI,
Sub and the Stockholder jointly and severally agree to indemnify the Buyer
against, and agree to protect, save and hold the Buyer harmless from, any loss,
liability, obligation or claim (whether or not ultimately successful) for sales,
use, transfer or other similar Taxes (and any interest, penalties, additions to
tax and fines thereon or related thereto) imposed as a result of the
consummation of the transactions contemplated by this Agreement, including,
without limitation, any liability to which any of the parties may become subject
as a result of the fact that the transactions contemplated by this Agreement are
effected without compliance with the bulk sales provisions of the Uniform
Commercial Code as in effect in any state or any similar statute as enacted in
any jurisdiction. The Buyer will pay any and all recording, filing or other
fees relating to the conveyance or transfer of the Transferred Assets to the
Buyer.
1.8 Allocation of Purchase Price. The Purchase Price will be allocated
among the Transferred Assets by the Buyer within 30 calendar days after the
Closing Date Balance Sheet has become final and binding on the parties hereto,
subject to the following: (i) the allocation of the Purchase Price will be
reflected in Form 8594 that will be filed by the Buyer, LTI and Sub in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended,
with such
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adjustments as may be necessary pursuant to Section 1.5; (ii) the parties hereto
agree to treat and report in filings under the Internal Revenue Code of 1986, as
amended (and, if necessary, to cause each of their respective Affiliates to so
treat and report) the transactions contemplated by this Agreement in a manner
consistent with one another; and (iii) the Buyer will deliver to LTI and Sub on
the Closing Date a certificate or certificates certifying that the Inventory are
being purchased for resale to the extent stated therein.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF LTI AND THE STOCKHOLDERS
LTI, Sub and the Stockholders jointly and severally represent and
warrant to and covenant and agree with the Buyer and OYOG as follows:
2.1 Corporate Organization.
(a) LTI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has all requisite corporate
power and authority to conduct the Business as currently conducted.
(b) Sub is a corporation duly organized, validly existing and in good
standing under the laws of Alberta and has all requisite corporate power and
authority to conduct the Business as it is now being conducted.
(c) Sub is the only subsidiary of LTI.
2.2 Power and Authority; Execution and Delivery; Effect of Agreement.
(a) Each of LTI and Sub has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by each of LTI and Sub
and the performance of its obligations hereunder have been duly authorized by
all necessary corporate action on its part. Each of LTI and Sub has duly
executed and delivered this Agreement. This Agreement constitutes a legal, valid
and binding obligation of each of LTI and Sub, enforceable against it in
accordance with its terms, except as such enforceability may be limited by or
subject to (a) any bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally and (b) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) Each Stockholder has the requisite legal capacity and full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Each Stockholder has duly executed and delivered this
Agreement. This Agreement constitutes a legal, valid and binding obligation of
each Stockholder, enforceable against him in accordance with its terms, except
as such enforceability may be limited by or subject to (a) any bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
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2.3 No Consents; No Violations; No Loss of Rights.
(a) The execution, delivery and performance of this Agreement by LTI,
Sub and the Stockholders and consummation by LTI, Sub and the Stockholders of
the transactions contemplated hereby (i) do not require the consent, approval,
clearance, waiver, order or authorization of any Person, (ii) do not violate any
provision of the Articles of Incorporation or By-laws of LTI or organizational
or governing documents of Sub, (iii) do not conflict with or violate any permit,
concession, grant, franchise, statute, law, rule or regulation of any
Governmental Entity or any order, judgment, award or decree of any court or
other Governmental Entity to which LTI, Sub or any Stockholder is subject or any
of the Transferred Assets is bound and (iv) do not conflict with, or result in
any breach of, or default or loss of any right under (or an event or
circumstance that, with notice or the lapse of time, or both, would result in a
default), or the creation of an Encumbrance pursuant to, or cause or permit the
acceleration prior to maturity or "put" right with respect to, any obligation
under, any indenture, mortgage, deed of trust, lease, loan agreement or other
agreement or instrument to which Sub is a party or to which any of the
Transferred Assets are subject.
(b) The execution, delivery and performance of this Agreement by LTI,
Sub and the Stockholders will not result in the loss of any governmental
license, franchise or permit possessed by LTI or Sub or give a right of
acceleration or termination to any Person in respect of any material agreement
or other instrument to which LTI or Sub is a party or by which any of the
Transferred Assets are bound, or result in the loss of any right or benefit
under such agreement or instrument.
2.4 Financial Statements.
(a) True and correct copies of the consolidated balance sheets of LTI
as of December 31, 1996 and 1997, and as of June 30, 1998 and the statements of
income for each of the years ended December 31, 1996 and 1997 and the six months
ended June 30, 1998 (collectively, the "Financial Statements"), have been
previously delivered to the Buyer. The Financial Statements fairly present in
all material respects the consolidated financial position of LTI as at the dates
thereof and the results of operations for the periods covered thereby.
(b) As of June 30, 1998, LTI and Sub did not have any material
liability of any kind or manner, either direct, accrued, absolute or otherwise,
that is not reflected or disclosed in the Financial Statements. The accounts
receivable of LTI and Sub at June 30, 1998, shown on the Financial Statements,
arose from valid transactions in the ordinary course of the Business and have
been collected in full or are believed to be collectible at their full aggregate
amounts (net of allowance for doubtful accounts as reflected in the Financial
Statements). Accounts receivable created by LTI and Sub after June 30, 1998,
and through the Closing Date, have arisen or will arise only from valid
transactions in the ordinary course of the Business. The inventory of LTI and
Sub at June 30, 1998, is good and saleable and has been recorded in the
Financial Statements net of an adequate reserve for obsolete and slow-moving
inventory.
2.5 Absence of Material Adverse Changes. Since December 31, 1997, there
has not been (a) any Material Adverse Change, (b) any declaration, setting aside
or payment of any dividend
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(whether in cash, stock or property) with respect to any of LTI's capital stock,
any contribution to the capital of LTI or any sale by LTI of capital stock, (c)
any damage, destruction or loss, whether or not covered by insurance, that has
or could have a Material Adverse Effect, (d) any change in accounting methods,
principles or practices by LTI or Sub materially affecting LTI's or Sub's
assets, liabilities or business, (e) any condition, event or occurrence that,
individually or in the aggregate, could reasonably be expected to prevent,
hinder or materially delay the ability of LTI and Sub to consummate the
transactions contemplated by this Agreement or (f) any agreement, in writing or
otherwise, or any corporate action with respect to the foregoing.
2.6 Properties, Title and Related Matters.
(a) LTI and Sub have good and marketable title to all of the
Transferred Assets free and clear of all Encumbrances, except for Permitted
Encumbrances (including those listed in Schedule 2.6(a).
(b) LTI and Sub have good title to all the leasehold estates pursuant
to which all of the personal property leased by them is leased, free and clear
and all Encumbrances, except for Permitted Encumbrances. Neither LTI nor Sub
has breached any provision of or is in default (and no event or circumstance
exists that with notice, or the lapse of time or both, would constitute a
default by LTI or Sub) under the terms of any lease or other agreement pursuant
to which the personal property leased by LTI or Sub is leased, except for a
default or breach that could not have a Material Adverse Effect. To the best
knowledge of LTI, Sub and the Stockholders, all of such leases or other
agreements are in full force and effect. There are no pending or, to the best
knowledge of LTI, Sub and the Stockholders, threatened disputes with respect to
any lease or other agreement pursuant to which the personal property leased by
LTI or Sub is leased and, to the best knowledge of LTI, Sub and the
Stockholders, the lessor thereunder has not breached any provision of and is not
in default (and no event or circumstance exists that with notice, or the lapse
of time or both, would constitute a default by the lessor) under the terms of
any such lease or other agreement.
(c) LTI will provide the Buyer with a legal description of all Real
Property owned by LTI or Sub. LTI or Sub has good and marketable title to all
of the Real Property reflected in the October Balance Sheet, in fee simple
absolute, free and clear of all Encumbrances, except for Permitted Encumbrances.
No parcel of the Real Property is subject to any governmental decree or is being
condemned, expropriated or otherwise taken by any public authority, with or
without payment of compensation therefor, and, to the best knowledge of LTI, Sub
and the Stockholders, no such condemnation, expropriation or taking has been
proposed.
(d) LTI will provide the Buyer with a description of all Real Property
leased by LTI or Sub. LTI and Sub have good title to all the leasehold estates
pursuant to which the Real Property is leased, free and clear of all
Encumbrances, except for Permitted Encumbrances. Neither LTI nor Sub has
breached any provision of or is in default (and no event or circumstance exists
that with notice, or the lapse of time or both, would constitute a default by
LTI or Sub) under the terms of any lease or other agreement pursuant to which
the Real Property is leased. To the best knowledge of LTI, Sub and the
Stockholders, all of such leases or other agreements are in full force
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and effect. There are no pending or, to the best knowledge of LTI, Sub and the
Stockholders, threatened disputes with respect to any lease or other agreement
pursuant to which the Real Property is leased and, to the best knowledge of LTI,
Sub and the Stockholders, the lessor thereunder has not breached any provision
of and is not in default (and no event or circumstance exists that with notice,
or the lapse of time or both, would constitute a default by the lessor) under
the terms of any such lease or other agreement.
2.7 Equipment. All Equipment is owned or leased by LTI or Sub. With
respect to each such lease, neither LTI nor Sub is in material default under
such lease. All of such Equipment is in good condition, ordinary wear excepted,
and is suitable for the uses to which is being put in connection with the
Business.
2.8 Inventory. The Financial Statements reflect the Inventory at the lower
of cost or market, and adequate reserves for obsolete inventory and inventory
not readily saleable in the ordinary course of the Business within one year have
been established and are reflected in the Financial Statements.
2.9 Accounts Receivable. All Accounts Receivable to be included in the
Transferred Assets will represent valid obligations collectible in the ordinary
course of the Business (but in no event later than 60 days from the due date),
are fully transferable to the Buyer and are not subject to any offset or other
defenses to the payment thereof.
2.10 Intellectual Property. LTI or Sub owns, or is licensed or otherwise
has the right to use all of the Intellectual Property. To the best knowledge of
LTI, Sub and the Stockholders, (a) the use of the Intellectual Property by LTI
and Sub does not infringe on the rights of any Person and (b) no Person is
infringing on any right of LTI or Sub with respect to any of the Intellectual
Property. No claims are pending or, to the best knowledge of LTI, Sub and the
Stockholders, threatened that LTI or Sub is infringing or otherwise adversely
affecting the rights of any Person with regard to any of the Intellectual
Property. All of the Intellectual Property owned by LTI or Sub is owned by LTI
or Sub free and clear of all Encumbrances (including any obligation to pay any
royalties or other sums) and was not misappropriated from any Person. The
consummation of the transactions contemplated by this Agreement will not result
in the loss of any of the Intellectual Property. LTI and Sub have taken all
reasonable and appropriate actions to protect their trade secrets. There are no
licensees or sublicensees of the Intellectual Property. Neither LTI nor Sub has
given any indemnification for patent, trademark, service xxxx or copyright
infringements to any Person.
2.11 Condition and Sufficiency of Transferred Assets.
(a) All property, plant and equipment included in the Transferred
Assets is in good and serviceable condition, subject only to normal wear and
tear, and is sufficient to conduct the Business in the manner heretofore
conducted. Neither LTI nor Sub has deferred any regularly scheduled maintenance
procedure, which deferred maintenance procedures for any individual Transferred
Asset that would cost in excess of $5,000.
9
(b) The Transferred Assets constitute all of the assets (real,
personal and mixed, tangible and intangible, and including but not limited to
all computers, desks, chairs, file cabinets and office equipment used in support
of the Business) and rights necessary to conduct the Business in the same manner
as has been conducted in the 12-month period immediately preceding the Closing
Date.
2.12 Legal Proceedings. There is no legal, judicial, administrative,
governmental, arbitration or other action or proceeding or governmental
investigation pending or threatened against LTI, Sub or any director, officer or
employee of LTI or Sub, or materially affecting any of the Transferred Assets or
that would prevent, hinder or materially delay the ability of LTI and Sub to
consummate the transactions contemplated by this Agreement (and none of LTI, Sub
and the Stockholders is aware of any basis for any such action, proceeding or
investigation), nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against LTI or Sub having, or
that could have, any such effect. Neither LTI nor Sub is in violation of or
default under any laws, ordinances, regulations, judgments, injunctions, orders
or decrees (including any immigration laws or regulations) of any court or other
Governmental Entity applicable to its business. There are no judgments, orders,
injunctions or decrees of any Governmental Entity in which LTI or Sub is a named
party or any of the Transferred Assets are identified and subject.
2.13 Insurance. All existing insurance policies held by LTI or Sub
relating to any of the Transferred Assets are "Insurance Policies". Each such
policy is in full force and effect, is with responsible insurance carriers and
is in an amount and scope customary for Persons engaged in businesses and having
assets similar to those of LTI and Sub. There is no dispute with respect to such
policies and all claims arising from events or circumstances occurring prior to
the date hereof have been paid in full or adequate reserves therefor are
recorded in the Financial Statements. There have been no retroactive premium
adjustments for any period ended on or before December 31, 1997, under insurance
policies of LTI or Sub. None of such policies will terminate as a result of the
transactions contemplated by this Agreement.
2.14 Contracts and Commitments; Entitlements.
(a) Except as set forth in Schedule 214, none of the Transferred
Assets is subject to and neither LTI nor Sub is a party to or bound by: (i) any
agreement, contract or commitment requiring the expenditure or series of related
expenditures of funds in excess of $10,000 (other than purchase orders in the
ordinary course of the Business for goods necessary for LTI and Sub to complete
then existing contracts or purchase orders); (ii) any agreement, contract or
commitment requiring the payment for goods or services whether or not such goods
or services are actually provided or the provision of goods or services at a
price less than LTI's or Sub's cost of producing such goods or providing such
services; (iii) any loan or advance to, or investment in, any Person or any
agreement, contract, commitment or understanding relating to the making of any
such loan, advance or investment; (iv) any Debt Obligations; (v) any management
service, employment, consulting or other similar type contract or agreement;
(vi) any agreement, contract or commitment that would limit the freedom of the
Buyer or any of its Affiliates following the Closing Date to engage in any line
of business, to own, operate, sell, transfer, pledge or otherwise dispose of or
encumber any of the Transferred Assets or to compete with any Person or to
engage in any business or activity in
10
any geographic area; (vii) any agreement, lease, contract or commitment or
series of related agreements, leases, contracts or commitments not entered into
in the ordinary course of the Business or, except for agreements to purchase or
sell goods and services entered into in the ordinary course of the Business, not
cancelable by LTI or Sub within 30 calendar days without penalty to LTI or Sub;
(viii) any agreement or contract obligating either of LTI or Sub or that would
obligate or require any subsequent owner of the Business or any of the
Transferred Assets to provide for indemnification or contribution with respect
to any matter; (ix) any sales, distributorship or similar agreement relating to
the products sold or services provided by LTI or Sub; or (x) any license,
royalty or similar agreement.
(b) Neither LTI nor Sub is in breach of any provision of, or in
default (and has no knowledge of any event or circumstance that with notice, or
lapse of time or both, would constitute an event of default) under the terms of
any of the Entitlements that constitute a part of the Transferred Assets. All
of the Entitlements that constitute a part of the Transferred Assets are in full
force and effect. None of LTI, Sub or the Stockholders is aware of any pending
or threatened disputes with respect to any of the Entitlements. The
enforceability of the Entitlements that constitute a part of the Transferred
Assets will not be affected in any manner by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
2.15 Brokerage. No investment banker, broker or finder has acted directly
or indirectly for LTI, Sub or any of the Stockholders in connection with this
Agreement or the transactions contemplated hereby. No investment banker,
broker, finder or other Person is entitled to any brokerage or finder's fee or
similar commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of LTI, Sub or any of the
Stockholders.
2.16 Environmental Matters. Except as would not have an adverse effect on
the Transferred Assets:
(a) LTI and each of its subsidiaries has at all times operated in
compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of Environmental Laws and related
orders of any court or other Governmental Entity;
(b) There are no existing, pending or, to the best knowledge of LTI,
Sub and the Stockholders, threatened actions, suits, claims, investigations,
inquiries or proceedings by or before any court or any other Governmental Entity
directed against LTI, Sub or the Transferred Assets that pertain or relate to
(i) any remedial obligations under any applicable Environmental Law, (ii)
violations of any Environmental Law, (iii) personal injury or property damage
claims relating to the release of Waste Materials or (iv) response, removal or
remedial costs under CERCLA or any similar state law;
(c) All notices, permits, licenses or similar authorizations required
to be obtained or filed by LTI or any of its subsidiaries under all applicable
Environmental Laws in connection with its current and previous operation or use
of the Transferred Assets, any other assets or properties
11
currently or previously leased or owned by LTI or any of its subsidiaries or the
current and previous conduct of its business have been duly obtained or filed
and are in full force and effect;
(d) Neither the Company nor Sub has received notice that any permit,
license or similar authorization is to be revoked or suspended by any
Governmental Entity;
(e) Neither the Company any of its subsidiaries has ever owned or
operated any underground storage tank;
(f) No portion of the Transferred Assets or any other assets or
properties currently or previously leased or owned by LTI or any of its
subsidiaries is part of a Superfund site under CERCLA or any similar ranking or
listing under any similar state law;
(g) All Waste Materials generated by LTI or any of its subsidiaries
that are or have been stored or that require or required treatment or disposal
have been transported, stored, treated and disposed of by carriers, and by
storage, treatment and disposal facilities authorized and maintaining valid
permits under all applicable Environmental Laws;
(h) No Person has disposed or released any Waste Materials on or under
the Transferred Assets or any other asset or property currently or previously
leased or owned by LTI or any of its subsidiaries and neither LTI nor any of its
subsidiaries has disposed or released Waste Materials on or under the
Transferred Assets or any other asset or property currently or previously leased
or owned by LTI or any of its subsidiaries, except in compliance with all
applicable Environmental Laws; and
(i) No facts or circumstances exist that could reasonably be expected
to result in any material liability to any Person with respect to the current or
past business and operations of the LTI, any of its subsidiaries, the
Transferred Assets or any other assets or properties currently or previously
leased or owned by LTI nor any of its subsidiaries in connection with (i) any
release, transportation or disposal of any Waste Materials, hazardous substance
or solid waste or (ii) action taken or omitted that was not in full compliance
with or was in violation of any applicable Environmental Law.
2.17 Governmental Licenses and Permits. LTI and Sub has all material
federal, state, local and foreign governmental licenses and permits necessary to
the conduct of its operations of the Business as currently conducted, such
licenses and permits are in full force and effect, no material violations are or
have been recorded in respect of any thereof and no proceeding is pending or, to
the best knowledge of LTI, Sub and the Stockholders, threatened to revoke or
limit any thereof. Schedule 2.17 contains a true, complete and accurate list of
(a) all such governmental licenses and permits, (b) all consents, orders,
decrees and other compliance agreements under which LTI or Sub is operating or
bound, copies of all of which have been furnished to the Buyer and OYOG, and (c)
all governmental licenses and permits applied for but not yet received by LTI or
Sub. Neither LTI nor Sub has received or is aware of any reports of inspections
under the United States Occupational Safety and Health Act, or under any other
applicable federal, state or local health and safety laws and
12
regulations relating to LTI, Sub, the Transferred Assets or the operation of the
Business. As of the date hereof, there are no safety, health, anti-competitive
or discrimination claims that have been made or are pending or, to the best
knowledge of LTI, Sub and the Stockholders, that are threatened relating to the
Business or employment practices of LTI or Sub.
2.18 Taxes and Tax Matters.
(a) All returns (including income, franchise, sales and use,
unemployment compensation, excise, severance, property, gross receipts, profits,
payroll and withholding tax returns and information returns) and reports
(collectively, the "Tax Returns") of or relating to any foreign, federal, state
or local tax, assessment, levy, impost, duty, withholding, estimated payment or
other similar governmental charge (collectively, together with any penalties,
additions to Tax, fines, interest and similar charges thereon or related
thereto, the "Taxes") that are required to be filed on or before the Closing
Date, subject to any allowable extension periods, for, by, on behalf of or with
respect to LTI or Sub, including, but not limited to, those relating to the
income, business, operations or property of LTI or Sub (whether on a separate,
consolidated, affiliated, combined, unitary or any other basis), have been or
will be fully, properly and accurately completed timely filed with the
appropriate foreign, federal, state and local authorities, and all Taxes shown
to be due and payable on such Tax Returns or related to such Tax Returns have
been or will be paid in full on or before the Closing Date, in each case except
as would not have an adverse effect on the Transferred Assets or result in any
successor liability on the part of the Buyer.
(b) None of such Tax Returns are under audit or examination by any
foreign, federal, state or local authority and there are no agreements, waivers
or other arrangements providing for an extension of time with respect to the
assessment or collection of any Tax or deficiency of any nature against LTI or
Sub or with respect to any such Tax Return, or any suits or other actions,
proceedings, investigations or claims now pending or, to the best knowledge of
LTI, Sub and the Stockholders, threatened against LTI or Sub with respect to any
Tax, or any matters under discussion with any foreign, federal, state or local
authority relating to any Tax, or any claims for any additional Tax asserted by
any such authority, in each case except as would not have an adverse effect on
the Transferred Assets or result in any successor liability on the part of the
Buyer.
(c) All Taxes assessed and due and owing from or against LTI or Sub on
or before the Closing Date (including, but not limited to, ad valorem Taxes
relating to any property of LTI or Sub) have been or will be timely paid in full
on or before the Closing Date, except as would not have an adverse effect on the
Transferred Assets or result in any successor liability on the part of the
Buyer.
2.19 Compensation and Benefit Plans; Labor Matters.
(a) Schedule 2.19 contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of ERISA)
(sometimes referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA) and all other Benefit Plans
maintained, or contributed to, by LTI for the benefit of any present or former
officers or
13
employees of LTI or any of its subsidiaries. LTI has delivered to the Buyer
true, complete and correct copies of (i) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (ii) the most recent three
annual reports on Form 5500 filed with the IRS with respect to each Benefit
Plan, (if any such report was required), (iii) the most recent IRS determination
letter and all rulings or determinations requested subsequent to the date of
that letter, (iv) the most recent actuarial report for each Benefit Plan for
which an actuarial report is required, (v) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required and each summary of material modifications prepared after the last
summary plan description, (vi) each trust agreement and group annuity contract
relating to any Benefit Plan and (vii) all material correspondence for the last
three years with the IRS or Department of Labor relating to plan qualification,
filing of required forms, or pending, contemplated or announced plan audits.
(b) Except as set forth in Schedule 2.19, all Pension Plans have been
the subject of determination letters from the IRS to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under Section
401(a) and 501(a), respectively, of the Code and no such determination letter
has been revoked nor, to the best knowledge of LTI, Sub or the Stockholders, has
revocation been threatened, nor has any such Pension Plan been amended since the
date of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or materially increase its
costs. LTI and its subsidiaries have paid all premiums (including any applicable
interest, charges and penalties for late payment) due the PBGC with respect to
each Pension Plan for which premiums are required. No Pension Plan maintained
by LTI or any of its subsidiaries has been terminated under circumstances which
would result in liability to the PBGC.
(c) Each Benefit Plan that has been or is sponsored, participated in
or contributed to by LTI or any subsidiary: (i) is in compliance in all
material respects with all reporting and disclosure requirements of ERISA,
including, but not limited to, Part 1 of Subtitle B of Title I of ERISA, (ii)
has had the appropriate Form 5500 filed timely for each year of its existence,
(iii) has at all times complied with the bonding requirements of Section 412 of
ERISA and (iv) has no issue pending (other than the payment of benefits in the
normal course) nor any issue resolved adversely to LTI or any subsidiary which
may subject LTI or any subsidiary to the payment of any penalty, interest, tax
or other obligation.
(d) All voluntary employee benefit associations have been submitted to
and approved as exempt from Federal income tax under Section 501(c)(9) of the
Code by the IRS.
(e) Except as set forth in Schedule 2.19, the execution of this
Agreement or the consummation of the transactions contemplated by this Agreement
will not give rise to any, or trigger any, change of control, severance or other
similar provision in any Benefit Plan.
(f) Neither LTI nor any subsidiary provides employee post-retirement
medical or health coverage or contribute to or maintain any employee welfare
benefit plan which provides for health benefit coverage following termination of
employment except as is required by Section 4980B(f) of the Code or other
applicable statute, nor has it made any representations, agreements, covenants
or commitments to provide that coverage.
14
(g) No Pension Plan that LTI or any subsidiary maintains, or to which
LTI or any subsidiary is obligated to contribute, other than any Pension Plan
that is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA, collectively, the "Multiemployer Pension Plans"), had, as of the
respective annual valuation date for each such Pension Plan, an "unfunded
benefit liability" (as such term is defined in Section 4001(a)(18) of ERISA),
based on actuarial assumptions which have been furnished to the Buyer. None of
the Pension Plans has an "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived. None of LTI or any subsidiary nor, to the best knowledge of LTI, Sub or
the Stockholders, any officer of LTI or any subsidiary or any of the Benefit
Plans which are subject to ERISA, including the Pension Plans, or any trusts
created thereunder, or any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406, 407 or 408 of
ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject LTI or any subsidiary or any officer of LTI or
any subsidiary to the tax or penalty on prohibited transactions imposed by such
Section 4975 or to any liability under Section 502(i)(1) of ERISA. Neither any
of such Benefit Plans nor any of such trusts have been terminated, nor has there
been any "reportable event" (as that term is defined in Section 4043 of ERISA)
with respect to which the 30-day notice requirement has not been waived and LTI
is not aware of any other reportable events with respect thereto during the last
five years. None of LTI or any subsidiary has suffered or otherwise caused a
"complete withdrawal" or a "partial withdrawal" (as such terms are defined in
Section 4203 and Section 4205, respectively, of ERISA) since the effective date
of such Sections 4203 and 4205 with respect to any of the Multiemployer Pension
Plans.
(h) With respect to any Benefit Plan that is an employee welfare
benefit plan, (i) no such Benefit Plan includes a welfare benefits fund, as such
term is defined in Section 419(e) of the Code, (ii) each such Benefit Plan that
is a group health plan, as such term is defined in Section 5000(b)(1) of the
Code, complies with the applicable requirements of Section 4980B(f) of the Code
and (iii) each such Benefit Plan (including any such Plan covering retirees or
other former employees) may be amended or terminated without material liability
to LTI or any subsidiary on or at any time after the consummation of the
Acquisition.
(i) There are no collective bargaining or other labor union agreements
to which LTI or Sub is a party or by which it is bound. There are no labor
disputes to which LTI or Sub is a party. There are no strikes, slowdowns or
picketing against LTI or Sub (or any supplier of goods or services to LTI or
Sub) pending or, to the best knowledge of LTI, Sub and the Stockholders,
threatened. Neither LTI nor Sub has received notice from any union or employees
setting forth demands for representation, elections or for present or future
changes in wages, terms of employment or working conditions.
2.20 Warranties and Product Liability.
(a) Except for warranties implied by law and those set forth on
Schedule 2.20, neither LTI nor Sub has given or made any warranties in
connection with the sale or rental of goods or services, including warranties
covering the customer's consequential damages. LTI is not aware of any state of
facts or the occurrence of any event forming the basis of any present claim
against LTI
15
or Sub with respect to warranties relating to products manufactured, sold or
distributed by LTI or Sub or services performed by or on behalf of LTI or Sub.
(b) There is no state of facts or any event forming the basis of any
present claim against LTI or Sub not fully covered by insurance, except for
deductibles and self-insurance retentions, for personal injury or property
damage alleged to be caused by products shipped or services rendered by or on
behalf of LTI or Sub.
2.21 No Misleading Statements. This Agreement, including the Schedules,
and the information referred to herein, when taken as a whole, do not include
any untrue statement of a material fact and do not omit to state any material
fact necessary to make the statements contained herein or therein not
misleading.
2.22 Securities Law Matters.
(a) Each of the Stockholders recognizes and understands that the OYOG
Stock to be issued to him pursuant to this Agreement (the "Securities") will not
be registered under the Securities Act, or under the securities laws of any
state (the "Securities Laws"). The Securities are not being so registered in
reliance upon exemptions from the Securities Act and the Securities Laws which
are predicated, in part, on the representations, warranties and agreements of
the Stockholders contained herein.
(b) Each of the Stockholders represents and warrants that (i) he has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of an investment in the OYOG Stock
and the suitability thereof as an investment for him, (ii) the OYOG Stock to be
acquired by him in connection with the Acquisition will be acquired solely for
investment and not with a view toward resale or redistribution in violation of
the Securities Laws, (iv) his residence and domicile is in the State of Texas
and (v) in connection with the transactions contemplated hereby, no assurances
have been made concerning the future results of OYOG or as to the value of the
OYOG Stock. Each of the Stockholders understands that neither OYOG nor the
Buyer is under any obligation to file a registration statement or to take any
other action under the Securities Laws with respect to the Securities.
(c) Each of the Stockholders is an "accredited investor" within the
meaning of Regulation D promulgated by the Commission pursuant to the Securities
Act.
(d) Each of the Stockholders has consulted with his own counsel in
regard to the Securities Laws and is fully aware (i) of the circumstances under
which he is required to hold the Securities, (ii) of the limitations on the
transfer or disposition of the Securities, (iii) that the Securities must be
held indefinitely unless the transfer thereof is registered under the Securities
Laws or an exemption from registration is available and (iv) that no exemption
from registration is likely to become available for at least one year from the
date of acquisition of the Securities. Each of the Stockholders has been
advised by his counsel as to the provisions of Rules 144 and 145 as promulgated
by the Commission under the Securities Act and has been advised of the
applicable
16
limitations thereof. Each of the Stockholders acknowledges that OYOG and the
Buyer are relying upon the truth and accuracy of the representations and
warranties made by them in this Section 2.22 in consummating the transactions
contemplated by this Agreement without registering the Securities under the
Securities Laws.
(e) Each of the Stockholders has been furnished with the SEC
Documents. OYOG and the Buyer have made available to each of the Stockholders
the opportunity to ask questions and receive answers concerning the terms and
conditions of the transactions contemplated by this Agreement and to obtain any
additional information which they possess or could reasonably acquire for the
purpose of verifying the accuracy of information furnished to the Stockholders
as set forth herein or for the purpose of considering the transactions
contemplated hereby. OYOG has offered to make available to the Stockholders
upon request at any time all exhibits filed by OYOG with the Commission as part
of any of the reports filed therewith.
(e) Each of the Stockholders agrees that the certificates representing
his OYOG Stock to be acquired pursuant to the Acquisition will be imprinted with
the following legend, the terms of which are specifically agreed to:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION REQUIREMENTS. WITHOUT SUCH REGISTRATION, SUCH SHARES MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON
DELIVERY TO THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE ISSUER THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE, PLEDGE,
HYPOTHECATION OR TRANSFER OR THE SUBMISSION TO THE ISSUER OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT SUCH SALE,
PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.
Each of the Stockholders understands and agrees that appropriate stop transfer
notations will be placed in the records of OYOG and with its transfer agents in
respect of the Securities which are to be issued to him in the Acquisition.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND OYOG
The Buyer and OYOG represent and warrant to and covenant and agree with LTI
and Sub as follows:
17
3.1 Corporate Organization. OYOG is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The Buyer
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas.
3.2 Power and Authority; Execution and Delivery; Effect of Agreement.
(a) Each of the Buyer and OYOG has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Buyer and OYOG
and the performance by the Buyer and OYOG of their respective obligations
hereunder have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by the Buyer and OYOG and
constitutes a legal, valid and binding obligation of each of the Buyer and OYOG,
enforceable against each in accordance with its terms, except as such
enforceability may be limited by or subject to (a) any bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.3 No Consents; No Violations.
(a) The execution, delivery and performance of this Agreement by the
Buyer and OYOG and consummation by the Buyer and OYOG of the transactions
contemplated hereby (i) do not require the consent, approval, clearance, waiver,
order or authorization of any Person, (ii) do not violate any provision of the
Articles of Incorporation or By-laws of the Buyer or OYOG and (iii) do not
conflict with or violate any permit, concession, grant, franchise, statute, law,
rule or regulation of any Governmental Entity or any order, judgment, award or
decree of any court or other Governmental Entity to which the Buyer or OYOG is
subject.
3.4 Authorization for OYOG Stock. OYOG has taken all necessary action to
permit it to issue the number of shares of OYOG Stock required to be issued
pursuant to the terms of this Agreement. The shares of OYOG Stock issued
pursuant to the terms of this Agreement will, when issued, be validly issued,
fully paid and nonassessable and not subject to preemptive rights.
3.5 Brokerage. No investment banker, broker or finder has acted directly
or indirectly for the Buyer or OYOG in connection with this Agreement or the
transactions contemplated hereby. No investment banker, broker, finder or other
Person is entitled to any brokerage or finder's fee or similar commission in
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of the Buyer or OYOG.
3.6 SEC Documents. OYOG has provided to LTI, Sub and the Stockholders a
copy of the Prospectus, dated November 20, 1997, of OYOG filed by OYOG with the
Commission pursuant to Rule 424(b) under the Securities Act and copies of all
documents filed by OYOG with the Commission since the filing of such Prospectus,
(such documents collectively referred to herein as the "SEC Documents"). As of
their respective dates, none of the SEC Documents contained any
18
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE 4
COVENANTS AND AGREEMENTS OF LTI, SUB AND THE STOCKHOLDERS
The LTI, Sub and the Stockholders jointly and severally covenant and agree
as follows:
4.1 Due Diligence; Access to Information. Until the Closing, LTI and Sub
will furnish the Buyer and its employees, officers, accountants, attorneys,
agents, investment bankers and other authorized representatives with all
financial, operating and other data and information concerning the Business, the
Transferred Asset, commitments and properties of LTI and Sub as the Buyer shall
from time to time request and will afford the Buyer and its employees, officers,
accountants, attorneys, agents, investment bankers and other authorized
representatives reasonable access to LTI's and Sub''s offices, properties,
books, records, contracts and documents and will be given the opportunity to ask
questions of, and receive answers from, representatives of LTI and Sub with
respect to the Business and the Transferred Assets. No investigations by the
Buyer or its employees, representatives or agents shall reduce or otherwise
affect the obligation or liability of LTI, Sub and the Stockholders with respect
to any representations, warranties, covenants or agreements made herein or in
any exhibit, schedule or other certificate, instrument, agreement or document,
including the Schedules, executed and delivered in connection with this
Agreement. LTI and Sub will cooperate with the Buyer and its employees,
officers, accountants, attorneys, agents and other authorized representatives in
the preparation of any documents or other materials that may be required by any
Governmental Entity.
4.2 Conduct of the Business. From and after the date hereof until the
Closing, except as expressly authorized by this Agreement or as expressly
consented to in writing by the Buyer, each of LTI and Sub shall:
(a) operate the Business and the Transferred Assets only in the usual,
regular and ordinary manner with a view to maintaining the goodwill that
LTI and Sub now enjoy and, to the extent consistent with such operation,
will use all reasonable efforts to preserve intact its present business
organization, keep available the services of its employees and preserve its
relationship with its customers, suppliers, jobbers, distributors and other
Persons having business relations with it;
(b) use all reasonable efforts to maintain the Transferred Assets in a
state of repair, order and condition consistent with its usual past
practice;
(c) maintain its books of account and records relating to the Business
in the usual, regular and ordinary manner, in accordance with LTI's and
Sub's usual accounting practices applied on a consistent basis;
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(d) comply in all respects with all statutes, laws, orders and
regulations applicable to it and to the Business;
(e) not sell, assign, transfer, lease or otherwise dispose of any of
the Transferred Assets except for dispositions of Inventories for value in
the usual and ordinary course of the Business;
(f) not cause or permit LTI to declare, set aside or pay any dividend
(whether in cash, stock or property) with respect to any of LTI's capital
stock, receive any contribution to the capital of LTI or sell any capital
stock of LTI;
(g) preserve and maintain all rights that it now enjoys in and to the
Intellectual Property and not sell, assign, transfer, lease or otherwise
dispose of any of the Intellectual Property other than to the Buyer
pursuant to the terms of this Agreement;
(h) not mortgage, pledge or otherwise create a security interest in
any of the Transferred Assets or permit there to be created or exist any
Encumbrances thereon (other than Permitted Encumbrances) that would not be
released upon the transfer of the Transferred Assets to the Buyer pursuant
to this Agreement;
(i) not enter into any contract, commitment or lease in relation to
the Business or the Transferred Assets that is out of the ordinary course
of the Business;
(j) not amend or modify any of the Entitlements;
(k) not consent to the termination of any of the Entitlements or waive
any of LTI's or Sub's rights with respect thereto;
(l) not permit any Insurance Policy naming it as a beneficiary or a
loss payee relating to the Business or the Transferred Assets to be
canceled or terminated or any of the coverage thereunder to lapse unless
simultaneously with such termination or cancellation replacement policies
providing substantially the same coverage are in full force and effect;
(m) pay when due all accounts payable, all payments required by any of
the Entitlements and all Taxes other than Taxes that are being contested in
good faith and for which adequate reserves against the Transferred Assets
exist and which would not result in a Lien being imposed on any of the
Transferred Assets; and
(n) promptly notify the Buyer in writing of any change that shall have
occurred or that shall have been threatened (or any development that shall
have occurred or that shall have been threatened involving a prospective
change) in the Transferred Assets that could reasonably be expected to have
a material or adverse effect on the Business or the Transferred Assets
whether or not occurring in the ordinary course of Business.
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4.3 Negotiation with Others. From the date hereof until the Closing Date
or the termination of this Agreement pursuant to Section 9.1, none of LTI, Sub
or the Stockholders will, directly or indirectly, solicit, encourage or
negotiate with any Person not a party hereto or not affiliated with a party
hereto with respect to a merger, consolidation, asset or stock purchase or any
similar transaction with respect to LTI, Sub the Transferred Assets or the
Business.
4.4 Delivery of Business Documents. At Closing, LTI and Sub shall deliver
to the Buyer control of all Documents and Other Papers relating to the
Transferred Assets, the Assumed Liabilities and the current and proposed
operations of the Business, including, without limitation, all files relating to
the Accounts Receivable, the Assumed Liabilities, copies of all insurance
policies and all files relating thereto, computer disks reflecting any books or
records, documents or other papers, or other information or data relating to the
operation of the Business, the Transferred Assets or the Assumed Liabilities
stored on any electronic media, including computers.
4.5 Further Assurances. LTI and Sub shall execute, acknowledge and deliver
or cause to be executed, acknowledged and delivered to the Buyer such bills of
sale, assignments (including but not limited to assignments of leases), deeds
and other instruments of transfer, assignment and conveyance, in form and
substance reasonably satisfactory to counsel for the Buyer, as shall be
necessary to vest in the Buyer all the right, title and interest in and to the
Transferred Assets free and clear of all Encumbrances and shall use their best
efforts to cause to be taken such other action as the Buyer reasonably may
require to more effectively implement and carry into effect the transactions
contemplated by this Agreement.
4.6 Continuing Confidentiality of Intellectual Property.
(a) From and after the Closing, LTI, Sub and the Stockholders shall
(i) hold in confidence and will not directly or indirectly at any time reveal,
report, publish, disclose or transfer to any Person other than the Buyer or its
Affiliates any of the Intellectual Property that is not generally known to the
public or utilize any of the Intellectual Property for any purpose and (ii) not
for a period of three years solicit or hire any employees of LTI or Sub who are
subsequently employed by the Buyer or offered employment by the Buyer.
(b) LTI, Sub and the Stockholders acknowledge that all Documents and
Other Papers and objects containing or reflecting any Intellectual Property,
whether developed by LTI, Sub or by someone else for LTI or Sub, will after the
Closing become the exclusive property of the Buyer and be delivered to the
Buyer.
(c) Because of the unique nature of the Intellectual Property, LTI,
Sub and the Stockholders understand and agree that the breach or anticipated
breach of the obligations under this Section 4.6 will result in immediate and
irreparable harm and injury to the Buyer and its Affiliates, for which it will
not have an adequate remedy at law, and that the Buyer and its Affiliates and
their successors and assigns shall be entitled to relief in equity to enjoin
such breach or anticipated breach and to seek any and all other legal and
equitable remedies to which they may be entitled.
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4.7 Covenant Not to Compete With the Business. As an inducement for the
Buyer to acquire the Transferred Assets, each of LTI, Sub, Xx. Xxxxxx Xxx-Xxxx
Au and Mr. Xxxxx Xxxx agrees that, effective as of the Closing Date and for a
period of five years thereafter, none of LTI, Sub, Xx. Xxxxxx Xxx-Xxxx Au or Mr.
Xxxxx Xxxx nor any of their respective Affiliates shall, without the prior
written consent of the Buyer (except as an employee of the Buyer or its
Affiliates, if any Stockholder is subsequently employed by the Buyer or its
Affiliates), directly or indirectly, design, develop, market, produce,
manufacture, sell or provide services with respect to any seismic cable
connector products or related seismic data acquisition products in any
geographical area of North, Central or South America, or, except for the benefit
of Buyer and its Affiliates, assist any Person to do the same. Each of LTI, Sub,
Xx. Xxxxxx Xxx-Xxxx Au and Mr. Xxxxx Xxxx acknowledges that a remedy at law for
any breach or attempted breach of this Section 4.7 will be inadequate and
further agree that any breach of this Section 4.7 will result in irreparable
harm to the Business and the Buyer shall, in addition to any other remedy that
may be available to it, be entitled to specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach. Each of
LTI, Sub, Xx. Xxxxxx Xxx-Xxxx Au and Mr. Xxxxx Xxxx acknowledge that this
covenant not to compete is being provided as an inducement to the Buyer to
acquire the Business and the Transferred Assets and that this Section 4.7
contains reasonable limitations as to time, geographical area and scope of
activity to be restrained that do not impose a greater restraint than is
necessary to protect the goodwill or other business interest of the Buyer.
Whenever possible, each provision of this Section 4.7 shall be interpreted in
such a manner as to be effective and valid under applicable law but if any
provision of this Section 4.7 shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remaining provisions of this Section 4.7.
If any provision of this Section 4.7 shall, for any reason, be judged by any
court of competent jurisdiction to be invalid or unenforceable, such judgment
shall not affect, impair or invalidate the remainder of this Section 4.7 but
shall be confined in its operation to the provision of this Section 4.7 directly
involved in the controversy in which such judgment shall have been rendered. If
the provisions of this Section 4.7 should ever be deemed to exceed the time or
geographic limitations permitted by applicable laws, then such provision shall
be reformed to the maximum time or geographic limitations permitted by
applicable law.
4.8 Employee Matters.
(a) Unless otherwise agreed to in writing by the Buyer after the date
of this Agreement, LTI and Sub will terminate employment with each of their
employees effective on the Closing Date. The Seller shall be responsible and
liable for any and all severance obligations, imposed by contract, law or
otherwise, with respect to such employees.
(b) LTI and Sub acknowledge and agree that Buyer may, but has no
obligation whatsoever to, offer employment to any of the employees of LTI or
Sub. The parties hereto do not intend to create any third-party beneficiary
rights respecting any employee of LTI or Sub as a result of the provisions
hereof and specifically hereby negate any such intention.
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4.9 Name Change. Immediately after the Closing, LTI will change its name
and will coordinate such name change with the Buyer such that the Buyer may
change its name to "LTI, Inc." or a similar name if it so chooses.
ARTICLE 5
CONDITIONS TO THE BUYER'S AND OYOG'S OBLIGATIONS
The obligations of the Buyer and OYOG to consummate the transactions
contemplated by this Agreement and perform their respective obligations
hereunder will be subject to the satisfaction (or waiver by the Buyer and OYOG)
on or prior to the Closing of all of the following conditions:
5.1 Accuracy of Representations and Warranties. The representations and
warranties of LTI, Sub and the Stockholders set forth in this Agreement will be
true and correct in all respects as of the date when made and at and as of the
Closing.
5.2 Performance of Covenants and Agreements. LTI, Sub and the
Stockholders will have duly performed and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed by or complied with by them prior to or at the Closing.
5.3 No Litigation. No preliminary or permanent injunction or other order
of any court or other Governmental Entity shall be in effect nor shall there be
in effect any statute, rule, regulation or executive order promulgated or
enacted by any Governmental Entity that, in any such case, prevents the
consummation of the transactions contemplated by this Agreement. No suit,
action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or threatened by any Person other than the Buyer or any of
its Affiliates seeking to prevent the sale of the Transferred Assets or
asserting that the sale of all or a portion of the Transferred Assets would be
unlawful.
5.4 No Material Adverse Change. Since the date of this Agreement, there
shall have been no Material Adverse Change.
5.5 Closing Certificate. The Buyer and OYOG will have received a
certificate, dated as of the Closing Date, executed by LTI, Sub and each of the
Stockholders and satisfactory in form and substance to the Buyer and OYOG,
certifying as to the matters set forth in Sections 5.1, 5.2 and, to the best
knowledge of such Persons, 5.3.
5.6 Certified Resolutions. LTI and Sub shall have delivered to the Buyer
and OYOG certified copies of resolutions of the board of directors and the
stockholders of each of LTI and Sub approving this Agreement and the
transactions contemplated hereby.
5.7 Instruments of Transfer. LTI and Sub shall have executed, acknowledged
and delivered to the Buyer such bills of sale, assignments (including but not
limited to assignments of the
23
Entitlements), deeds and other instruments of transfer, assignment and
conveyance, as shall be necessary to vest in the Buyer all the right, title and
interest in and to the Transferred Assets.
5.8 Satisfactory Completion of Due Diligence. The Buyer shall have
completed its due diligence review of the Business, the Transferred Assets and
the Assumed Liabilities to its reasonable satisfaction, and shall not have
discovered thereby any facts or circumstances not previously known to it that,
if such facts and circumstances were to come about after the date of this
Agreement, would have constitute a Material Adverse Change.
ARTICLE 6
CONDITIONS TO LTI'S, SUB'S AND THE STOCKHOLDERS' OBLIGATIONS
The obligations of LTI, Sub and the Stockholders to consummate the
transactions contemplated by this Agreement and perform their respective
obligations hereunder will be subject to the satisfaction (or waiver by LTI, Sub
and the Stockholders) on or prior to the Closing of all of the following
conditions:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of the Buyer and OYOG set forth in this Agreement will be true and
correct in all respects as of the date when made and at and as of the Closing.
6.2 Performance of Covenants and Agreements. The Buyer and OYOG will have
duly performed and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed by or
complied with by them prior to or at the Closing.
6.3 No Litigation. No preliminary or permanent injunction or other order
of any court or other Governmental Entity shall be in effect nor shall there be
in effect any statute, rule, regulation or executive order promulgated or
enacted by any Governmental Entity that, in any such case, prevents the
consummation of the transactions contemplated by this Agreement. No suit,
action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or threatened by any Person other than LTI, Sub or the
Stockholders or any of their Affiliates seeking to prevent the sale of the
Transferred Assets or asserting that the sale of all or a portion of the
Transferred Assets would be unlawful.
6.4 Closing Certificate. LTI, Sub and the Stockholders will have received
a certificate, dated as of the Closing Date, executed by the Buyer and OYOG and
satisfactory in form and substance to the LTI, Sub and the Stockholders,
certifying as to the matters set forth in Sections 6.1, 6.2 and, to the best
knowledge of such Persons, 6.3.
6.5 Certified Resolutions. The Buyer and OYOG shall have delivered to LTI,
Sub and the Stockholders certified copies of resolutions of the board of
directors of each of the Buyer and OYOG approving this Agreement and the
transactions contemplated hereby.
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6.6 Employment Agreements. The Buyer and each of Xx. Xxxxxx Xxx-Xxxx Au
and Mr. Xxxxx Xxxx shall have entered into the Employment Agreements in
substantially the form attached as Exhibit A.
ARTICLE 7
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All statements of fact contained in any written statement (including
financial statements), certificate, instrument or document delivered by or on
behalf of any party pursuant to this Agreement will be deemed representations
and warranties of that party. The representations and warranties made and the
covenants and agreements entered into pursuant to this Agreement will survive
the Closing without limitation, except as provided in any covenant or agreement.
ARTICLE 8
INDEMNIFICATION AND REIMBURSEMENT
8.1 Seller Indemnities. From and after the Closing Date, LTI, Sub and the
Stockholders will absolutely and irrevocably indemnify, defend and hold harmless
the Buyer and OYOG and every Affiliate of OYOG (including the Buyer) and their
respective directors, stockholders, officers, employees, agents, consultants,
representatives, successors, transferees and assignees (collectively, the
"Parties to be Indemnified by Sellers") from, against and in respect of any and
all Claims that arise or result from or relate to the matters described in
clauses (a) through (f) in this Section 8.1 (herein collectively referred to as
the "Liabilities to be Indemnified by Sellers"); provided, that LTI, Sub and the
Stockholders will not be obligated to indemnify the Parties to be Indemnified by
Sellers pursuant to clauses (a) or (b) below (except for a breach of the
representation made in Section 2.9, which will not be subject to this
limitation) unless the aggregate Liabilities to be Indemnified by Seller under
such clauses exceed on a cumulative basis $125,000 (the "Threshold Amount"), and
then only to the extent of any such Liabilities to be Indemnified by Seller
sustained by the Parties to by Indemnified by Seller in excess of such Threshold
Amount; and provided, further, that LTI, Sub and the Stockholders will not be
obligated to pay in excess of an aggregate amount equal to the Purchase Price
for all Liabilities to be Indemnified by Sellers:
(a) The breach of any representation or warranty made by LTI, Sub or
the Stockholders contained in this Agreement or in any certificate, exhibit,
schedule or other document furnished or delivered to the Buyer or OYOG by LTI,
Sub or the Stockholders in connection with this Agreement;
(b) The failure of LTI, Sub or the Stockholders to perform any of
their respective covenants or agreements under or contained in this Agreement or
in any certificate, exhibit, schedule or other document furnished or delivered
to the Buyer or OYOG by LTI, Sub or the Stockholders in connection with this
Agreement;
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(c) Any Claim for Taxes relating to the Transferred Assets or the
Business and to a period ending on or before the Closing Date or an event
occurring on or before the Closing Date, including for any additional Taxes
assessed as a result of or arising from an audit or examination of Tax Returns
filed on or before the Closing Date or a recharacterization of any revenues,
deductions or expenses reported or claimed thereon; provided that indemnities
under this clause (c) will not be subject to the Threshold Amount;
(d) Any Environmental Liability arising from any event, condition,
activity, incident, action or omission existing or occurring before the Closing
Date relating in any way to the Transferred Assets or LTI or any of its
subsidiaries (including the ownership, operation or use of the Transferred
Assets and the conduct of LTI or its subsidiaries prior to the Closing Date);
(e) Any Retained Liability; and
(f) Any losses or costs of defending against any Claims that may be
made against a Party to be Indemnified by Seller by any Person claiming
violations of any local, state, federal or foreign laws relating to the
employment relationship, including wages, hours, concerted activity,
nondiscrimination, occupational health and safety and the payment and
withholding of Taxes, where those Claims arise out of circumstances relating to
LTI, Sub or the Business prior to the Closing Date;
IN EACH CASE, REGARDLESS OF BY WHOM ASSERTED, AND REGARDLESS OF WHETHER ANY SUCH
CAUSE OF ACTION, DEMAND OR CLAIM RESULTS SOLELY OR IN PART FROM THE ACTIVE,
PASSIVE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF ANY OF THE PARTIES TO BE
INDEMNIFIED BY SELLERS. For purposes of determining the right of any Party to
be Indemnified by Seller to indemnification for a misrepresentation or breach of
warranty made by LTI, Sub or the Stockholders in this Agreement, all such
representations and warranties that have been made subject to a materiality
qualification shall be deemed to have been made without that qualification.
8.2 Buyer Indemnities. From and after the Closing Date, the Buyer and
OYOG will absolutely and irrevocably indemnify, defend and hold harmless LTI,
Sub and the Stockholders and their respective directors, stockholders, officers,
employees, agents, consultants, representatives, successors, transferees and
assignees (collectively, the "Parties to be Indemnified by Buyer") from, against
and in respect of any and all Claims that arise or result from or relate to the
matters described in clauses (a) and (b) of this Section 8.2 (herein
collectively referred to as the "Liabilities to be Indemnified by Buyer");
provided, that the Buyer and OYOG will not be obligated to indemnify LTI, Sub
and the Stockholders for any matter that also constitutes a Liability to be
Indemnified by Sellers; and provided, further, that the Buyer and OYOG will not
be obligated to indemnify the Parties to be Indemnified by Buyer until the
Liabilities to be Indemnified by Buyer exceed on a cumulative basis the
Threshold Amount, and then only to the extent of any such Liabilities to be
Indemnified by Buyer sustained by the Parties to by Indemnified by Buyer in
excess of such Threshold Amount; and provided, further, that the Buyer and OYOG
will not be obligated to pay in excess of an amount equal to $1,250,000 for all
Liabilities to be Indemnified by Buyer hereunder;
26
(a) The breach of any representation or warranty made by the Buyer or
OYOG contained in this Agreement or in any certificate, exhibit, schedule or
other document furnished or delivered to LTI, Sub and the Stockholders by the
Buyer or OYOG in connection with this Agreement; and
(b) The failure of the Buyer or OYOG to perform any of their
respective covenants or agreements under or contained in this Agreement or in
any certificate, exhibit, schedule or other document furnished or delivered to
LTI, Sub and the Stockholders by the Buyer or OYOG in connection with this
Agreement;
IN EACH CASE, REGARDLESS OF BY WHOM ASSERTED, AND REGARDLESS OF WHETHER ANY SUCH
CAUSE OF ACTION, DEMAND OR CLAIM RESULTS SOLELY OR IN PART FROM THE ACTIVE,
PASSIVE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF ANY OF THE PARTIES TO BE
INDEMNIFIED BY BUYER. For purposes of determining the right of any Party to be
Indemnified by Buyer to indemnification for a misrepresentation or breach of
warranty made by the Buyer or OYOG in this Agreement, all such representations
and warranties that have been made subject to a materiality qualification shall
be deemed to have been made without that qualification.
8.3 Notice of Claim.
(a) For purposes of this Article 8, the term "Indemnifying Party" when
used in connection with a particular Claim will mean the party having an
obligation to indemnify the other party with respect to the Claim pursuant to
this Article 8, and the term "Indemnified Party" when used in connection with a
particular Claim will mean the party having the right to be indemnified with
respect to the Claim by the other party pursuant to this Article 8.
(b) Each party agrees that promptly after it becomes aware of facts
giving rise to a Claim by it for indemnification pursuant to this Article 8, the
party will provide notice thereof in writing to the other party (a "Claim
Notice") specifying the nature and specific basis for such Claim, and to the
extent feasible the estimated amount of damages attributable thereto, and a copy
of all papers served with respect to the Claim (if any). For purposes of this
Section 8.3, receipt by a party of written notice of any demand, assertion,
claim, action or proceeding (judicial, administrative or otherwise) by or from
any Person other than a party to this Agreement that gives rise to a Claim on
behalf of the party will constitute the discovery of facts giving rise to a
Claim by it and will require prompt notice of the receipt of such matter. The
failure of an Indemnified Party to send a Claim Notice will not relieve the
Indemnifying Party from liability hereunder with respect to the Claim except to
the extent, and only to the extent, the failure prejudiced the Indemnifying
Party.
8.4 Indemnification Procedures. All claims for indemnification under this
Agreement will be asserted and resolved as follows:
(a) First Party Claims. If any Indemnified Party should have a Claim
against any Indemnifying Party hereunder that does not involve a third party
claim asserted against an Indemnified Party that could give rise to a right of
indemnification under this Agreement ("Third Party Claim"),
27
the Indemnified Party will transmit to the Indemnifying Party a Claim Notice
with respect to the Claim. If the Indemnifying Party does not notify the
Indemnified Party within 30 days from its receipt of the Claim Notice (the
"Election Period") that the Indemnifying Party disputes the Claim, the Claim
specified by the Indemnifying Party in the Claim Notice will be deemed a
liability of the Indemnifying Party hereunder and will be paid as provided in
Section 8.4(c). If the Indemnifying Party has timely disputed the Claim within
the Election Period, as provided above, such dispute will be resolved by
arbitration as set forth in Section 11.11.
(b) Third Party Claims. If an Indemnified Party will have a Third
Party Claim asserted against it, the Indemnified Party will transmit to the
Indemnifying Party a Claim Notice relating to the Third Party Claim. During the
Election Period, an Indemnifying Party will notify an Indemnified Party (y)
whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article 8 with respect to the Third Party Claim and
(z) whether an Indemnifying Party desires, at the sole cost and expense of such
Indemnifying Party, to defend the Indemnified Party against the Third Party
Claim. If the Indemnifying Party does not notify the Indemnified Party within
the Election Period that the Indemnifying Party disputes its potential liability
Third Party Claim, the potential liability of the Third Party Claim specified by
the Indemnifying Party in the Claim Notice will be deemed a liability of the
Indemnifying Party hereunder and will be paid as provided in Section 8.4(c). If
the Indemnifying Party has timely disputed its potential liability under the
Third Party Claim within the Election Period, as provided above, such dispute
will be resolved by arbitration as set forth in Section 11.11.
(i) If an Indemnifying Party notifies an Indemnified Party within
the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Article 8 and that
the Indemnifying Party elects to assume the defense of the Third Party
Claim, then the Indemnifying Party will have the right to defend, at its
sole cost and expense, the Third Party Claim by all appropriate
proceedings, which proceedings will be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 8.4; provided that
such settlement will not impose any obligations upon the Indemnified Party
or deprive the Indemnified Party of any rights without its consent. The
Indemnifying Party will have full control of such defense and proceedings,
including, subject to the preceding sentence, any compromise or settlement
thereof. The Indemnified Party is hereby authorized, (at the sole cost and
expense of the Indemnifying Party but only if the Indemnified Party is
actually entitled to indemnification hereunder or if the Indemnifying Party
assumes the defense with respect to the Third Party Claim), to file, during
the Election Period, any motion, answer or other pleadings that the
Indemnified Party will deem necessary or appropriate to protect its
interest or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party (it being understood and agreed that if an Indemnified
Party takes any such action that is prejudicial and conclusively causes a
final adjudication adverse to the Indemnifying Party, the Indemnifying
Party will be relieved of its obligations hereunder with respect to the
Third Party Claim to the extent so adjudicated). 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 Claims, including by making
28
of any related counterclaim against the Person asserting the Third Party
Claim or any cross-complaint against any Person. The Indemnified Party
will have the right to participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 8.4, and will bear its own costs and expenses with
respect to any such participation.
(ii If an Indemnifying Party timely disputes its potential
liability for the Third Party Claim within the Election Period, or if the
Indemnifying Party fails to notify an Indemnified Party within the Election
Period that the Indemnifying Party elects to defend the Indemnified Party
pursuant to Section 8.4(b) (or notifies the Indemnified Party that it
elects not to defend the Indemnified Party), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 8.4(b) but fails
to diligently and promptly prosecute or settle 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 (but only if the
Indemnified Party is actually entitled to indemnification hereunder or if
the Indemnifying Party assumes the defense with respect to the Third Party
Claim), the Third Party Claim by such proceedings deemed reasonably
appropriate by the Indemnified Party and its counsel. The Indemnified Party
will have full control of such defense and proceedings, including any
compromise or settlement of such Third Party Claim; provided, that if the
Indemnifying Party agrees to indemnify the Indemnified Party under this
Article 8, the Indemnified Party will not enter into any compromise or
settlement of such Third Party Claim without the Indemnifying Party's
consent, which will not be unreasonably withheld or delayed. If requested
by the Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, cooperate with the Indemnified Party and
its counsel in contesting any Third Party Claim that the Indemnified Party
is contesting, or, if appropriate and related to the Third Party Claim in
questions, in making any counterclaim against the Person asserting the
Third Party Claim or any cross-complaint against any Person.
Notwithstanding the foregoing in this Section 8.4(b), if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect
that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article 8 and if such dispute is resolved in
favor of the Indemnifying Party pursuant to Section 11.11, the Indemnifying
Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Article 8 or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party will reimburse the Indemnifying Party in
full for all reasonable costs and expenses of the Indemnifying Party in
connection with the Third Party Claims, excluding however any litigation
with respect to its indemnify obligation hereunder. The Indemnifying Party
will have the right to participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
8.4, and the Indemnifying Party will bear its own costs and expenses with
respect to any such participation.
(c) Payments. Payments of all amounts owing by an Indemnifying Party
as a result of a Third Party Claim will be made within five Business Days after
the earlier of (i) the settlement of the Third Party Claim and (ii) the
expiration of the period of appeal of a final adjudication of the Third Party
Claim. Payments of all amounts owing by an Indemnifying Party other than as a
result
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of a Third Party Claim will be made within five Business Days after the
later of (y) 30 days after the expiration of the Election Period or (z) if
contested through dispute resolution proceedings, the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Notwithstanding the above, if the
Indemnifying Party has not contested its indemnity obligations hereunder and has
not elected to assume the defense of a Third Party Claim, the Indemnifying Party
will reimburse (promptly after the receipt of each invoice therefor) the
Indemnified Party for the reasonable costs and expenses incurred by the
Indemnified Party in contesting the Third Party Claim together with reasonable
support for such expenditures. If LTI, Sub or the Stockholders become liable to
any Party to be Indemnified by Seller pursuant to this Article 8, the Buyer may
set off all or part of such liability against its obligation to pay the Holdback
Cash Consideration. If any Party to be Indemnified by Seller has filed a Claim
Notice in good faith before the Buyer has paid the Holdback Cash Consideration,
then the Buyer may postpone payment of the Holdback Cash Consideration until
such claim is resolved and liquidated.
8.5 Subrogation Rights. If the Indemnified Party is one of the Parties to
be Indemnified by Buyer and the Indemnified Party has a right against a Person
(other than one of the other Parties to be Indemnified by Buyer) with respect to
any damages or other amounts paid to the Indemnified Party by the Buyer or OYOG,
then the Buyer and OYOG will, to the extent of such payment, be subrogated to
the right of such Indemnified Party. If the Indemnified Party is one of the
Parties to be Indemnified by Seller and the Indemnified Party has a right
against a Person (other than one of the other Parties to be Indemnified by
Seller) with respect to any damages or other amounts paid to such Indemnified
Party by LTI, Sub or the Stockholders, then LTI, Sub and the Stockholders will,
to the extent of such payment, be subrogated to the right of such Indemnified
Party.
8.6 Interest. In determining the amount of any loss, liability or expense
for which any party is entitled to indemnification under this Article 8, the
gross amount thereof will be increased by (a) to the extent such payment is
based on amounts paid by the Indemnified Party, interest on such amount at the
rate quoted from time to time on London Interbank Market for 30-day borrowings,
plus 1.5% from the date such payment is made until payment is made as required
hereunder and (b) to the extent such payment is based on losses incurred by the
Indemnified Party, interest on such amount at the rate quoted from time to time
on London Interbank Market for 30-day borrowings, plus 1.5% from the date of
such loss until payment is made as required hereunder.
8.7 Independent Indemnities. The parties acknowledge and agree that each
of the indemnities under Section 8.1 and each of the indemnities under
Section 8.2 may be relied upon independently.
8.8 Investigation and Due Diligence. No investigation, examination,
audit, inspection or other due diligence prior to the Closing will affect the
parties' respective rights to indemnity pursuant to this Agreement; provided,
that the foregoing is not intended to affect the representations, warranties and
other agreements.
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ARTICLE 9
TERMINATION
9.1 Termination. The obligation to close the transactions contemplated by
this Agreement may be terminated by:
(a) mutual agreement of the parties hereto;
(b) the Buyer and OYOG, if a material default shall be made in the
observance or in the due and timely performance by any of LTI, Sub or the
Stockholders of any agreements and covenants of LTI, Sub or the Stockholders
contained herein, or if there shall have been a breach by any of LTI, Sub or the
Stockholders of any of the warranties and representations of LTI, Sub or the
Stockholders contained herein, and such default or breach has not been cured or
has not been waived;
(c) the Buyer and OYOG, if, in conducting its due diligence review of
LTI, Sub and the Transferred Assets and Assumed Liabilities, the Buyer and OYOG
determine in good faith that the consolidated net equity of LTI, after taking
into account any liabilities discovered in such due diligence review, is less
than $1,000,000;
(d) LTI, Sub or the Stockholders, if a material default shall be made
by the Buyer and OYOG in the observance or in the due and timely performance by
the Buyer or OYOG of any agreements and covenants of the Buyer and OYOG
contained herein, or if there shall have been a breach by the Buyer or OYOG of
any of the warranties and representations of the Buyer and OYOG contained
herein, and such default or breach has not been cured or has not been waived; or
(e) the Buyer and OYOG or LTI, Sub and the Stockholders (provided the
terminating parties have not materially breached any of their agreements,
covenants or representations and warranties) if the Closing shall not have
occurred on or before February 14, 1999.
9.2 Liability Upon Termination. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of Section 9.1, then this Agreement shall be void and there shall not
be any liability or obligation with respect to the terminated provisions of this
Agreement on the part of any of the parties hereto except and to the extent such
termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder and except that the
termination of this Agreement shall not relieve any party of its obligations
under Article 8 (but only to the extent it applies to breaches of the warranties
made in Sections 2.15 and 3.5) and Sections 11.12 and 11.3.
9.3 Notice of Termination. The parties hereto may exercise their
respective rights of termination under Section 9.1 only by delivering written
notice to that effect to the other party or parties, and such notice is received
on or before the Closing Date.
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ARTICLE 10
DEFINITIONS
Capitalized terms used in this Agreement will have the meanings given to
them in this Article 10 unless defined elsewhere in this Agreement.
10.1 "AAA" will have the meaning such term is given in Section 11.11(b).
10.2 "Accounts Receivable" means all accounts receivable of LTI or Sub.
10.3 "Acquisition" will have the meaning such term is given in the
recitals to this Agreement.
10.4 "Affiliate" means, with respect to any Person, any Person that,
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified. With
respect to a natural person, the term "Affiliate" includes such person's
immediate family.
10.5 "Agreement" will have the meaning such term is given in the preamble
to this Agreement.
10.6 "Assumed Liabilities" will have the meaning such term is given in
Section 1.4(c).
10.7 "Business" means the business and operations of LTI and Sub.
10.8 "Business Day" means any day other than Saturday, Sunday or other day
on which federally chartered commercial banks in Houston, Texas are authorized
or required by law to close.
10.9 "Buyer" will have the meaning such term is given in the preamble to
this Agreement.
10.10 "Cash Consideration" will have the meaning such term is given in
Section 1.4(a).
10.11 "CERCLA" means the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
10.12 "Claim" means any and all judgments, claims, causes of action,
demands, lawsuits, suits, proceedings, governmental investigations or audits,
losses, assessments, Encumbrances, impositions, fines, penalties, administrative
orders, deficiencies, levies, duties, obligations, costs, expenses, liabilities,
actual damages (and, only with respect to Third Party Claims, consequential and
punitive damages), including in each case, interest, penalties, reasonable
attorneys' fees, disbursements and reasonable costs of investigations and
litigation, including a reasonable allocation of the time spent by management of
LTI or OYOG in investigating the facts and circumstances relating to the Claim
or responding to an audit or investigation.
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10.13 "Claim Notice" will have the meaning such term is given in Section
8.3(b).
10.14 "Closing" will have the meaning such term is given in Section 1.3.
10.15 "Closing Cash Consideration" will have the meaning such term is
given in Section 1.4(a).
10.16 "Closing Date" will have the meaning such term is given in Section
1.3.
10.17 "Closing Date Balance Sheet" will have the meaning such term is
given in Section 1.5(b).
10.18 "Closing Date Net Equity" will have the meaning such term is given
in Section 1.5(b).
10.19 "Commission" means the United States Securities and Exchange
Commission.
10.20 "Debt Obligations" means any contract, agreement, indenture, note or
other instrument relating to the borrowing of money or any guarantee or other
contingent liability in respect of any indebtedness or obligation of any Person,
including, without limitation, the carry value of all capital leases and all
non-current liabilities, including deferred income taxes (other than the
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business).
10.21 "Documents and Other Papers" means and includes any document,
agreement, instrument, certificate, writing, notice, consent, affidavit, letter,
telegram, telex, statement, file, computer disk, microfiche or other document in
electronic format, schedule, exhibit or any other paper or record whatsoever.
10.22 "Election Period" will have the meaning such term is given in Section
8.4(a).
10.23 "Encumbrance" means any security interest, mortgage, pledge, trust,
claim, lien, charge, option, defect, restriction, encumbrance or other right or
interest of any third Person of any nature whatsoever.
10.24 "Entitlements" means the benefit of all unfilled or outstanding
purchase orders, sales or service contracts, other commitments, contracts,
engagements and leases to which LTI or Sub is entitled and which relate to the
Business.
10.25 "Environmental Laws" means any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Entity
pertaining to the environment heretofore or currently in effect in any and all
jurisdictions in which LTI or Sub is conducting or at any time has conducted
business, or where any of the Transferred Assets are located, or where any
hazardous substances generated by or disposed of by LTI or any of its
subsidiaries are located. "Environmental Laws" will include, but not be limited
to, the Clean Air Act, as amended, CERCLA, the Federal Water Pollution Control
Act, as amended, RCRA, the Safe Drinking Water Act, as amended, the
33
Toxic Substances Control Act, as amended, and all other laws, statutes,
ordinances, rules, regulations, orders and determinations of any Governmental
Entity relating to (a) the control of any potential pollutant or protection of
the air, water or land, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation and (c) exposure to hazardous,
toxic or other harmful substances. The terms "hazardous substance", "release"
and "threatened release" have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that, to the extent the laws of the state in which any
Assets are or were located currently provide for a meaning for "hazardous
substance", "release", "solid waste" or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning will apply.
10.26 "Environmental Liabilities" means any and all Claims (including any
remedial, removal, response, abatement, clean-up, investigative and/or
monitoring costs) incurred or imposed (a) pursuant to any agreement, order,
notice of responsibility, directive (including directives embodied in
Environmental Laws), injunctions, judgments or similar documents (including
settlements) arising out of, in connection with, or under Environmental Laws,
(b) pursuant to any claim by a Governmental Entity or other Person for personal
injury, property damage, damage to natural resources, remediation, or payment or
reimbursement of response costs incurred or expended by such Governmental Entity
or Person pursuant to common law or statute and related to the use or release of
materials or (c) resulting from or arising out of conditions with respect to
which obligations may be imposed under Environmental Laws.
10.27 "Equipment" means all tools, machinery, transportation equipment,
tools, furnishings and fixtures owned, leased or subject to a contract of
purchase and sale, or lease commitment, that is used in the Business, and any
other item that is "equipment" as to LTI or Sub within the meaning of Section
9.109(2) of the Texas Business and Commerce Code.
10.28 "Excluded Assets" will have the meaning such term is given in Section
1.2.
10.29 "Financial Statements" will have the meaning such term is given in
Section 2.4.
10.30 "GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
10.31 "Governmental Entity" means the United States of America, any state,
province, territory, county, city, municipality and any subdivision thereof, any
court, administrative or regulatory agency, commission, department or body or
other governmental authority or instrumentality or any entity or Person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
10.32 "Holdback Cash Consideration" will have the meaning such term is
given in Section 1.4(a).
10.33 "Indemnified Party" will have the meaning such term is given in
Section 8.3(a).
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10.34 "Indemnifying Party" will have the meaning such term is given in
Section 8.3(a).
10.35 "Insurance Policies" will have the meaning such term is given in
Section 2.13.
10.36 "Intellectual Property" means all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights (including the name "LTI"),
service marks, service xxxx rights, copyrights, technology, know how, trade
secrets, designs, plans, manuals, processes and other proprietary intellectual
property rights and computer programs, and all registrations for, and
applications for registration of, any of the foregoing used or useful in the
Business.
10.37 "Inventory" means all inventory of finished goods, tooling inventory,
works in progress and raw materials relating to the Business, wherever situated,
and any other item that is "inventory" as to LTI or Sub within the meaning of
Section 9.109(4) of the Texas Business and Commerce Code.
10.38 "Liabilities to be Indemnified by Buyer" will have the meaning such
term is given in Section 8.2.
10.39 "Liabilities to be Indemnified by Seller" will have the meaning such
term is given in Section 8.1.
10.40 "LTI" will have the meaning such term is given in the preamble to
this Agreement.
10.41 An event, occurrence, fact or matter will be deemed to be "material",
if such event, occurrence, fact or matter, could reasonably be expected to have
a Material Adverse Effect or that would constitute a criminal violation of law
involving a felony.
10.42 "Material Adverse Change" means an event, occurrence, or change in
facts or circumstances, or any combination of events, occurrences or changes in
facts or circumstances, that, individually or in the aggregate, result in or
could, with the passage of time, reasonably be expected to result in a Material
Adverse Effect.
10.43 "Material Adverse Effect" means a decrease in the book value of the
Transferred Assets and/or and increase the Assumed Liabilities by an amount of
$250,000 or more.
10.44 "October Balance Sheet" means the consolidated balance sheet of LTI
attached hereto as Schedule 1.1(a).
10.45 "OYOG" will have the meaning such term is given in the preamble to
this Agreement.
10.46 "OYOG Market Price" shall be an amount equal to the average (mean) of
the closing prices of the OYOG Stock, as reported by The Nasdaq Stock Market,
for the ten consecutive trading days ending two Business Days before the Closing
Date.
35
10.47 "OYOG Stock" will have the meaning such term is given in Section
1.4(b).
10.48 "Parties to be Indemnified by Buyer" will have the meaning such term
is given in Section 8.2.
10.49 "Parties to be Indemnified by Seller" will have the meaning such term
is given in Section 8.1.
10.50 "Permitted Encumbrances" means (a) Encumbrances for current taxes and
assessments not yet past due, (b) mechanics and materialmen Encumbrances for
construction in progress to the extent not perfected by filing, recording,
giving of notice or other appropriate action in the relevant jurisdiction, (c)
workmen, repairmen, warehousemen, carriers, lessors and operators Encumbrances
arising in the ordinary course of business to the extent not perfected by
filing, recording, giving of notice or other appropriate action in the relevant
jurisdiction (d), with respect to Real Property, minor easements and other minor
imperfections of title that do not impair the value of such Real Property and
(e) those Encumbrances set forth on Schedule 2.6(a).
10.51 "Person" means any individual, corporation, association, partnership,
joint venture, trust, estate or unincorporated organization or Governmental
Entity.
10.52 "Pre-Closing Obligations" will mean all liabilities, debts and
obligations of LTI or Sub (including indemnification and other contingent
obligations) relating to (i) acts, events or omissions by any Person or
circumstances existing at or prior to the Closing, (ii) goods or services
provided to or for the benefit of LTI or Sub or any of their Affiliates prior to
the Closing (other than accounts payable specified reflected in the October
Balance Sheet, and then only up to such amount), (iii) goods or services
manufactured or provided by or on behalf of LTI or Sub or any of their
Affiliates or licensees prior to the Closing, (iv) any pending or threatened
litigation, claims or disputes made or threatened prior to the Closing, (v) any
Retained Liabilities, (vi) the conduct of the Business, the ownership or
operation of the Transferred Assets or any benefit realized by LTI or Sub prior
to the Closing, (vii) any Excluded Assets, (viii) Debt Obligations of LTI or Sub
(other than Debt Obligations specified by amount and stated in the October
Balance Sheet, and then only up to such amount) (ix) the employees of LTI or Sub
under any contracts, agreements, arrangements or understandings with such
employees entered into or existing at or prior to the Closing and all other
obligations of LTI or Sub or any of their respective Affiliates with respect to
their employees at or prior to the Closing, (x) any obligations under any
contracts or agreements that were required to be listed on Schedule 2.14 but
were not, (xi) violations of Environmental Laws, (xi) use of the Proprietary
Information, (xii) Taxes and (xiii) any liabilities that were not reflected on
the Financial Statements.
10.53 "Purchase Price" will have the meaning such term is given in Section
1.4.
10.54 "Real Property" means any real property, or any interests therein,
leasehold or otherwise, used or useful in the Business, wherever situated.
10.55 "Retained Liabilities" will have the meaning such term is given in
Section 1.6(e).
36
10.56 "Review Period" will have the meaning such term is given in Section
1.5(c)(i).
10.57 "RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
10.58 "SEC Documents" will have the meaning such term is given in Section
3.6.
10.59 "Securities" will have the meaning such term is given in Section
2.22(a).
10.60 "Securities Act" means the Securities Exchange Act of 1933.
10.61 "Securities Laws" will have the meaning such term is given in Section
2.22(a).
10.62 "Stockholders" will have the meaning such term is given in the
preamble to this Agreement.
10.63 "Sub" will have the meaning such term is given in the preamble to
this Agreement.
10.64 "subsidiary" means, with respect to any Person, any past or present
subsidiary of such Person, incorporated or otherwise.
10.65 "Taxes" will have the meaning such term is given in Section 2.18.
10.66 "Tax Returns" will have the meaning such term is given in Section
2.18.
10.67 "Third Party Claim" will have the meaning such term is given in
Section 8.4(a).
10.68 "Threshold Amount" will have the meaning such term is given in
Section 8.1.
10.69 "Transferred Assets" will have the meaning such term is given in
Section 1.1(a).
10.70 "Waste Materials" means any toxic or hazardous materials or
substances, or solid wastes, including asbestos, buried contaminants, chemicals,
flammable or explosive materials, radioactive materials, petroleum and petroleum
products, and any other chemical, pollutant, contaminant, substance or waste
that is regulated by any Governmental Entity under any Environmental Law.
"Waste Materials" does not include useful products that are stored or maintained
in authorized containers.
ARTICLE 11
MISCELLANEOUS
11.1 Entire Agreement. This Agreement constitutes the sole understanding
of the parties with respect to the matters provided for herein and supersede any
previous agreements and understandings between the parties with respect to the
subject matter hereof. No amendment,
37
modification or alteration of the terms or provisions of this Agreement will be
binding unless the same will be in writing and duly executed by the parties
hereto.
11.2 Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon LTI, Sub and the Stockholders and the Buyer and OYOG and
their respective successors and permitted assigns. Neither this Agreement nor
any of the rights, interest or obligations hereunder will be assigned by any of
the parties hereto without the prior written consent of the other parties
hereto; provided that the Buyer may assign its rights and obligations hereunder
to any Affiliate of OYOG without such consent.
11.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, other than as expressly provided for herein, each of
the parties hereto will pay the fees and expenses of its respective counsel,
accountants and other experts, and all other expenses incurred by such party
incident to the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated hereby.
11.4 Invalidity. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic and 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 will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will for all purposes be deemed to be an original
and all of which will constitute the same instrument.
11.6 Headings. The headings of the Sections and paragraphs of this
Agreement and of the Schedules hereto are included for convenience only and will
not be deemed to constitute part of this Agreement or to affect the construction
or interpretation hereof or thereof.
11.7 Construction and References. Words used in this Agreement, regardless
of the number or gender specifically used, will be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context will require. Unless otherwise specified, all
references in this Agreement to Sections, paragraphs or clauses are deemed
references to the corresponding Sections, paragraphs or clauses in this
Agreement, and all references in this Agreement to Schedules or Exhibits are
references to the corresponding Schedules and Exhibits attached to this
Agreement. Unless otherwise specified, the words "including" and "include", and
similar words, as used in this Agreement are not to be construed as limiting.
11.8 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any
38
of the provisions of this Agreement will be deemed to or will constitute a
waiver of any other provisions hereof (whether or not similar).
11.9 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party will be in writing and
delivered personally, by facsimile (with receipt confirmed) or by registered or
certified mail, postage prepaid:
if to LTI or Sub, to:
LTI, Inc.
00000 Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xx
Facsimile: _________________
Confirm: (000) 000 0000
if to any of the Stockholders, to the address of facsimile number
indicated on the signature page hereto;
if to the Buyer or OYOG, to:
OYO Geospace Corporation
00000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx, President
Facsimile: (000) 000-0000
Confirm: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Still
Facsimile: (000) 000-0000
Confirm: (000) 000-0000
or at such other address for a party as will be specified by like notice. Any
notice which is delivered personally in the manner provided herein will be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided will be conclusively presumed
to have been duly given to the party to which it is addressed at the close of
business, local time of the recipient, on the third day after the day it is so
placed in the mail. Any notice which is sent by
39
facsimile will be deemed to have been duly given to the party to which it is
addressed upon telephonic confirmation of the same as provided herein. A copy of
any notices delivered by facsimile will promptly be mailed in the manner herein
provided to the party to which such notice was given.
11.10 Governing Law; Interpretation. THIS AGREEMENT WILL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO CONFLICTS OF LAW RULES.
11.11 Resolution of Disputes.
(a) Negotiation. Except for disputes relating to Section 1.9(c),
which disputes will be resolved pursuant to Section 1.9(c), the parties will
attempt in good faith to resolve any dispute arising out of or relating to this
Agreement promptly by negotiations between executives or other persons who have
authority to settle the controversy. Any party may give the other disputing
party written notice of any dispute not resolved in the normal course of
business. Within five days after the effective date of that notice, executives
of the disputing parties will agree upon a mutually acceptable time and place to
meet and will meet at that time and place, and thereafter as often as they
reasonably deem necessary, to exchange relevant information and to attempt to
resolve the dispute. The first of those meetings will take place within 30 days
of the effective date of the disputing party's notice. If the matter has not
been resolved within 60 days of the disputing party's notice, or if the parties
fail to agree on a time and place for an initial meeting within five days of
that notice, any party may initiate arbitration of the controversy or claim as
provided hereinafter. If a negotiator intends to be accompanied at a meeting by
an attorney, the other negotiators will be given at least three Business Days'
notice of that intention and may also be accompanied by an attorney. All
negotiations pursuant to this Section 11.11 will be treated as compromise and
settlement negotiations for the purposes of applicable rules of evidence and
procedure.
(b) Arbitration. Any dispute arising out of, relating to or in any
way touching upon this Agreement or the breach, termination or validity hereof,
that has not been resolved by non-binding procedures as provided in Section
11.11(a) within 60 days of the initiation of that procedure, will be finally
settled by arbitration conducted expeditiously in accordance with the American
Arbitration Association ("AAA") arbitration rules for commercial disputes, as in
effect on the date hereof (the "Rules"); provided that if one party has
requested the other to participate in a non-binding procedure and the other has
failed to participate, the requesting party may initiate arbitration before the
expiration of the period. With respect to an arbitral proceeding, the parties
agree as follows:
(i) The arbitration will be conducted by one independent and
impartial arbitrators, who will not be an officer, director or employee of
any party hereto or its Affiliates. The Seller and the Buyer will jointly
choose the arbitrator. If the parties cannot agree on an arbitrator, they
will request that one be appointed in accordance with the Rules.
(ii) The parties acknowledge that this Agreement affects
interstate commerce; thus the arbitration will be governed by the United
States Arbitration Act and any judgment upon the award decided upon by the
arbitrators may be entered by any court having jurisdiction thereof.
40
(iii) Damages recoverable by any party are limited to
compensatory damages. Each party hereby irrevocably waives for the purposes
of this Agreement any damages in excess of compensatory damages, including
punitive, exemplary, consequential and special damages and lost profits.
The arbitrators will be empowered to award only compensatory damages.
(iv) Any arbitration conducted pursuant to this Section 11.11(b)
will be held at a mutually acceptable location in the City of Houston, the
State of Texas.
(v) Unless the parties subject to the arbitration otherwise
agree, no dispute among them will be included in the arbitration unless it
arises out of, relates to, or in any way touching upon, this Agreement or
the breach, termination or validity hereof. This agreement to arbitrate,
however, includes each party's willingness and desire to arbitrate matters
that arise out of, relate to, or in any way touch upon this Agreement or
the breach, termination or validity hereof, including claims or actions
sounding or cast in terms of tort law or tortious conduct.
(vi) The arbitrators may make interim awards and may award
equitable and declaratory relief.
(vii) The costs and expenses of the arbitration will be allocated
equally between the parties, provided, that each party's own attorney's
fees will be borne by the party incurring the same.
(viii) In resolving any dispute, the arbitrators will apply the
provisions of this Agreement, without varying therefrom in any respect.
The arbitrators will not have the power to add to, modify, change or
terminate this Agreement.
(ix) It will not be inconsistent with this Section 11.11 for any
party to seek from any court of competent jurisdiction interim relief in
aid of arbitration or to protect the rights of either party pending the
establishment of the arbitral tribunal.
11.12 Confidentiality. Each party hereto agrees to hold in confidence and
not to disclose to others for any reason whatsoever, any non-public information
received by it or its representatives from the other party hereto in connection
with the transactions contemplated by this Agreement except (i) as required by
law; (ii) for disclosure to officers, directors, employees and representatives
of such party as necessary in connection with the transactions contemplated
hereby or as necessary to the operation of such party's business; and (iii) for
information that becomes publicly available other than through such party. If
the transactions contemplated by this Agreement are not consummated, each party
hereto will return to the other party hereto all non-public documents and other
material obtained from the such other party hereto, and all copies, summaries
and extracts thereof, or certify to such other party hereto that such
information has been destroyed.
41
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed on its behalf as of the date first above written.
LTI, INC.
by: /s/ XXXXXX XXX-XXXX AU
------------------------------
Xxxxxx Xxx-Xxxx Au, CEO
LTI WIRE SERVICES, INC.
by: /s/ XXXXXX XXX-XXXX AU
------------------------------
Xxxxxx Xxx-Xxxx Au, President
/s/ XXXXXX XXX-XXXX AU
-------------------------------
XXXXXX XXX-XXXX AU
/s/ XXXX-XXXXX AU
-------------------------------
XXXX-XXXXX AU
/s/ XXXXX XXXX
-------------------------------
XXXXX XXXX
/s/ XXXXX XXXXXXXX
-------------------------------
XXXXX XXXXXXXX
HOUSTON GEOPHYSICAL PRODUCTS, INC.
by: /s/ XXXXXX X. XXXXXXXX
-------------------------------
Xxxxxx X. XxXxxxxx,
Chief Financial Officer
OYO GEOSPACE CORPORATION
by: /s/ XXXX X. XXXXX
-------------------------------
Xxxx X. Xxxxx, Chairman, President
and Chief Executive Officer
42
As permitted by Item 601(b)(2) of Regulation S-K, the Company has not filed any
schedules or exhibits with this Exhibit No. 2.2. A list and brief description of
the omitted schedules and exhibits appears at the end of the table of contents
to this document. The Company agrees to furnish supplementally a copy of any of
such omitted schedules and exhibits to the Commission upon request.
43
================================================================================
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
by and among
LTI, Inc. ("LTI"),
LTI Wire Services, Inc. ("Sub"),
Xxxxxx Xxx-Xxxx Au,
Xxxx-Xxxxx Au,
Xxxxx Xxxx, and
Xxxxx XxXxxxxx
(collectively, the "Stockholders"),
and
Houston Geophysical Products, Inc. (the "Buyer")
and
OYO Geospace Corporation ("OYOG")
Dated November 30, 1998
================================================================================
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 to Asset Purchase Agreement (this "Amendment") is
dated November 30, 1998, and is by and among LTI, Inc., a Texas corporation
("LTI"), LTI Wire Services, Inc., an Alberta corporation ("Sub"), Xxxxxx Xxx-
Xxxx Au, Xxxx-Xxxxx Au, Xxxxx Xxxx and Xxxxx XxXxxxxx (collectively, the
"Stockholders"), and Houston Geophysical Products, Inc., a Texas corporation
(the "Buyer") and OYO Geospace Corporation, a Delaware corporation ("OYOG").
W I T N E S S E T H:
Whereas the parties have entered into an Asset Purchase Agreement dated
November 17, 1998 (the "Agreement"); and
Whereas the parties wish to amend the Agreement as set forth herein to
exclude from such agreement certain real property and to agree to a subsequent
purchase of such real property;
Now, therefore, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that the Agreement is hereby amended as
follows. All provisions of the Agreement not amended hereby shall continue in
full force and effect.
1. Section 1.1(a)(i) of the Agreement is deleted.
2. Item 5 of Schedule 1.2 to the Agreement is amended in its entirety to read
as follows:
"5. All Real Property owned by LTI and Sub, including the Real
Property located at 00000 Xxxxx Xxxx Xxxx and the Real Property
located on Neeshaw Drive."
3. The reference in Section 1.3 to "December 31, 1998" is amended to read
"November 30, 1998".
4. Section 1.4(a) is amended in its entirety to read as follows:
"(a)(i) Pay to LTI and Sub at the Closing an aggregate of
$1,000,000 in United States dollars (the "Closing Cash Consideration") in
immediately available funds by wire transfer to a bank account or accounts
to be designated by LTI;
"(ii) Pay to LTI and Sub 60 calender days following the
Closing Date (subject to delay or adjustment pursuant to Section 1.5
1
and/or Section 8.4(c)) an aggregate of $750,000 in United States dollars
(the "Holdback Cash Consideration", and, together with the Closing Cash
Consideration, the "Cash Consideration") in immediately available funds by
wire transfer to a bank account or accounts to be designated by LTI;"
5. Section 4.9 is amended to read in its entirety as follows:
4.9 Name Change. Immediately after the Closing, LTI will change its name
and will coordinate such name change with Buyer such that the Buyer may
change its name to "LTI, Inc." or a similar name if it so chooses.
Immediately after the Closing, Sub will change its name and will coordinate
such name change with Buyer such that Buyer or an Affiliate of Buyer may
change its name to "LTI Wire Services, Inc." or a similar name if it so
chooses.
6. A new Section 5.9 is added as follows:
5.9 Assignment of Patent Application. Xxxxx Xxxx and Xxxxxx Xx shall have
executed, acknowledged and delivered to Buyer a Patent Assignment relating
to the Multiple-Level Waterproof Electrical Connector in a form
satisfactory to Buyer.
7. Section 9.1(e) is amended is amended to read in its entirety as follows:
"(e) the Buyer and OYOG or LTI, Sub and the Stockholders (provided
the terminating parties have not materially breached any of their
agreements, covenants or representations and warranties) if the Second
Closing shall not have occurred on or before January 28, 1999.
8. A new Article 12 is added as follows:
ARTICLE 12
PURCHASE OF REAL PROPERTY
12.1 Purchase of Retained Properties. Following the Closing, the Buyer may
continue its due diligence review of the tracts of Real Property located at
00000 Xxxxx Xxxx Xxxx and the Real Property located on Neeshaw Drive (together,
the "Retained Properties"). It is understood that the Retained Properties are
excluded from the Transferred Assets except as provided below. The parties agree
that the Buyer will Purchase the Retained Properties subject to the conditions
and on the terms set forth in this Article 12.
12.2 Second Closing. Subject to the conditions set forth in this
Agreement, the closing of the purchase of the Retained Properties (the "Second
Closing") will begin at the offices of the Buyer, 0000 X. Xxxxxxx, Xxxxxxx,
Xxxxx, at 9:00 a.m. on December 31, 1998, or at such other time, date or place
as the parties hereto mutually agree upon in writing (the "Second Closing
Date"), and will
2
be effective as of 11:59 p.m. on the Closing Date. Failure to consummate the
transactions contemplated hereby on such date will not result in a termination
of this Agreement or relieve any party hereto of any obligation hereunder. Title
to, ownership of, control over and risk of loss of the Retained Properties will
pass to the Buyer at the Second Closing.
12.3 Purchase Price for Retained Properties. In consideration of the
transfer to the Buyer of the Retained Properties, the Buyer will pay to LTI at
the Second Closing an aggregate of $10.00 in United States dollars (the "Second
Closing Consideration") in immediately available funds by wire transfer to a
bank account or accounts to be designated by LTI.
12.4 Inclusion of Retained Properties in Transferred Assets. If the Second
Closing occurs, then for all purposes thereafter (including for purposes of the
representations and warranties of this Agreement and for purposes of calculating
the Closing Date Net Equity pursuant to Section 1.5), the Retained Properties
shall be considered to be included in the Transferred Assets.
12.5 Conditions of the Second Closing. The Buyer's obligation to consummate
the Second Closing and purchase the Retained Properties will be subject to the
satisfaction (or waiver by the Buyer) on or prior to the Second Closing of all
of the following conditions:
a. Accuracy of Certain Representations and Warranties. The
representations and warranties of LTI, Sub and the Stockholders set forth
in Sections 2.1, 2.2, 2.3, 2.6(c) (but only with respect to the Retained
Properties), 2.12 (but only with respect to the Retained Properties), 2.15,
2.16 ans 2.21 of this Agreement will be true and correct in all respects as
of the date when made and at and as of the Second Closing.
b. Performance of Covenants and Agreements. LTI, Sub and the Stockholders
will have duly performed and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed by or complied with by them prior to or at the Second Closing.
c. No Litigation. No preliminary or permanent injunction or other order
of any court or other Governmental Entity shall be in effect nor shall
there be in effect any statute, rule, regulation or executive order
promulgated or enacted by any Governmental Entity that, in any such case,
prevents the consummation of the transactions contemplated by this
Agreement. No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced or threatened by any Person
other than the Buyer or any of its Affiliates seeking to prevent the sale
of the Retained Properties or asserting that the sale of all or a portion
of the Retained Properties would be unlawful.
d. No Material Adverse Change. Since the date of this Agreement, there
shall have been no Material Adverse Change in the Retained Properties.
e. Second Closing Certificate. The Buyer will have received a certificate,
dated as of the Second Closing Date, executed by LTI, Sub and each of the
Stockholders and satisfactory
3
in form and substance to the Buyer, certifying as to the matters set forth
in clauses a, b and, to the best knowledge of such Persons, c of this
Section.
f. Deeds. LTI shall have executed, acknowledged and delivered to the Buyer
general warranty deeds in form and substance satisfactory to Buyer as shall
be necessary to vest in the Buyer all the right, title and interest in and
to the Retained Properties.
g. Title Insurance. LTI shall have provided the Buyer with adequate title
insurance regarding the Retained Properties.
h. Satisfactory Completion of Environmental Due Diligence. The Buyer shall
have completed its environmental due diligence review of the Retained
Properties to its reasonable satisfaction, and shall not have discovered
thereby any facts or circumstances that could reasonably be expected to
result in any Environmental Liabilities.
[Signatures on following page]
4
IN WITNESS WHEREOF, each of the parties hereto have caused this Amendment to
be executed on its behalf as of the date first above written.
LTI, INC.
by: /s/ XXXXXX XXX-XXXX AU
-----------------------------------------
Xxxxxx Xxx-Xxxx Au, CEO
LTI WIRE SERVICES, INC.
by: /s/ XXXXXX XXX-XXXX AU
-----------------------------------------
Xxxxxx Xxx-Xxxx Au, President
/s/ XXXXXX XXX-XXXX AU
-----------------------------------------
XXXXXX XXX-XXXX AU
/s/ XXXX-XXXXX AU
-----------------------------------------
XXXX-XXXXX AU
/s/ XXXXX XXXX
-----------------------------------------
XXXXX XXXX
/s/ XXXXX XXXXXXXX
-----------------------------------------
XXXXX XXXXXXXX
HOUSTON GEOPHYSICAL PRODUCTS, INC.
by: /s/ XXXXXX X. XXXXXXXX
-----------------------------------------
Xxxxxx X. XxXxxxxx, Chief Financial Officer
OYO GEOSPACE CORPORATION
by: /s/ XXXX X. XXXXX
-----------------------------------------
Xxxx X. Xxxxx, Chairman, President
and Chief Executive Officer
5
