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EXHIBIT 10.15
CONSENT AND VOTING AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXX INDUSTRIES, INC.,
NABORS ACQUISITION CORP. 96
AND
ADCOR-XXXXXXX DRILLING COMPANY
AND THE
STOCKHOLDERS AND OPTION HOLDERS THEREOF
LISTED ON THE SIGNATURE PAGE HERETO
Dated as of December 20, 1996
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Effective Time . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Effect of the Merger . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Certificate of Incorporation; By-Laws . . . . . . . . 2
SECTION 1.05. Directors and Officers . . . . . . . . . . . . . . . . 2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES . . . . . . 3
SECTION 2.01. Conversion of Securities . . . . . . . . . . . . . . . 3
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . . . 4
SECTION 2.03. Stock Transfer Books . . . . . . . . . . . . . . . . . 6
SECTION 2.04. Dissenting Shares . . . . . . . . . . . . . . . . . . 6
SECTION 2.05. Stock Options; Payment Rights . . . . . . . . . . . . 6
ARTICLE II A VOTING RIGHTS AND PROXY . . . . . . . . . . . . . . . . . . . 7
SECTION 2.01A. Consent and Voting Agreement . . . . . . . . . . . . . 7
SECTION 2.02X. Xxxxx of Proxy . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 8
SECTION 3.01. Organization and Qualification; Subsidiaries . . . . . 8
SECTION 3.02. Certificate of Incorporation and By-Laws . . . . . . . 8
SECTION 3.03. Capitalization . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.04. Authority . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.05. No Conflict; Required Filings and Consent . . . . . . 9
SECTION 3.06. Permits; Compliance . . . . . . . . . . . . . . . . . 10
SECTION 3.07. Financial Statements . . . . . . . . . . . . . . . . . 10
SECTION 3.08. No Undisclosed Liabilities . . . . . . . . . . . . . . 11
SECTION 3.09. Absence of Certain Changes or Events . . . . . . . . . 11
SECTION 3.10. Absence of Litigation . . . . . . . . . . . . . . . . 11
SECTION 3.11. Vote Required . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.12. Brokers . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.13. Company Action . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.14. Tax Matters . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.15. Real Property . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.16. Intellectual Property . . . . . . . . . . . . . . . . 15
SECTION 3.17. Tangible Assets . . . . . . . . . . . . . . . . . . . 17
SECTION 3.18. Drill Pipe and Drill Collars . . . . . . . . . . . . . 17
SECTION 3.19. Contracts . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.20. Notes and Accounts Receivable . . . . . . . . . . . . 18
SECTION 3.21. Powers of Attorney . . . . . . . . . . . . . . . . . . 19
SECTION 3.22. Insurance . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.23. Employees . . . . . . . . . . . . . . . . . . . . . . 20
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SECTION 3.24. Employee Benefits . . . . . . . . . . . . . . . . . . 19
SECTION 3.25. Guaranties . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.26. Environment, Health & Safety . . . . . . . . . . . . . 21
SECTION 3.27. Certain Business Relationships with the Company . . . 21
SECTION 3.28. Delivery of Information . . . . . . . . . . . . . . . 22
SECTION 3.29 Limitation on Representations and Warranties . . . . . 22
ARTICLE III A REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER AND
OPTIONHOLDER 22
SECTION 3.01A. Authorization of Transaction . . . . . . . . . . . . . 22
SECTION 3.02A. Noncontravention . . . . . . . . . . . . . . . . . . . 23
SECTION 3.03A. Brokers' Fees . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.04A. Company Shares . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.05A. Accredited Investor . . . . . . . . . . . . . . . . . 23
SECTION 3.06A. Investment Intention . . . . . . . . . . . . . . . . . 24
SECTION 3.07A. Receipt of Information . . . . . . . . . . . . . . . . 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
AND PARENT SUB . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.01. Organization and Qualification . . . . . . . . . . . . 24
SECTION 4.02. Certificates of Incorporation and By-Laws . . . . . . 24
SECTION 4.03. Parent Common Stock; Capitalization . . . . . . . . . 24
SECTION 4.04. Authority . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.05. No Conflict; Required Filings and Consents . . . . . . 25
SECTION 4.06. Limitation on Representations and Warranties . . . . . 25
SECTION 4.07. Reports; Financial Statements . . . . . . . . . . . . 26
SECTION 4.08. Absence of Certain Changes or Events . . . . . . . . . 27
SECTION 4.09. Ownership of Parent Sub; No Prior Activities . . . . . 26
SECTION 4.10. Brokers . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.11. Absence of Litigation . . . . . . . . . . . . . . . . 27
SECTION 4.12. Tax Matters . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.01. Affirmative Covenants of the Company . . . . . . . . . 28
SECTION 5.02. Negative Covenants of the Company . . . . . . . . . . 27
SECTION 5.03. Negative Covenants of Parent . . . . . . . . . . . . . 30
SECTION 5.04. Access and Information . . . . . . . . . . . . . . . . 31
SECTION 5.05. Escrow Agreement . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . 32
SECTION 6.01. Appropriate Action; Consents; Filings . . . . . . . . 32
SECTION 6.02. Tax Treatment; Pooling of Interests; Affiliates . . . 33
SECTION 6.03. Public Announcements . . . . . . . . . . . . . . . . . 33
SECTION 6.04. Obligations of Parent Sub . . . . . . . . . . . . . . 33
SECTION 6.05. Employee Matters . . . . . . . . . . . . . . . . . . . 33
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SECTION 6.06. Registration Rights . . . . . . . . . . . . . . . . . 34
SECTION 6.07. Delivery of SEC Filing . . . . . . . . . . . . . . . . 36
SECTION 6.08. Termination of Stockholders' Agreement . . . . . . . . 36
SECTION 6.09. Best Efforts . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.10. Indemnification of Directors and Officers . . . . . . 37
SECTION 6.11. Post Closing Balance Sheet, Adjustments and
Procedures . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.01. Conditions to Obligations of Each Party Under
This Agreement . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.02. Additional Conditions to Obligations of Parent . . . . 39
SECTION 7.03. Additional Conditions to Obligations of the Company . . 40
ARTICLE VIII TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION . . . . . 40
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.02. Investigation . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.05. Fees, Expenses and Other Payments . . . . . . . . . . 42
SECTION 8.06. Indemnification, Hold Back and Escrow . . . . . . . . 42
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.01. Effectiveness or Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . . 46
SECTION 9.04. Headings . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.05. Severability . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.06. Entire Agreement . . . . . . . . . . . . . . . . . . . 53
SECTION 9.07. Assignment . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.08. Parties in Interest . . . . . . . . . . . . . . . . . 52
SECTION 9.09. Failure or Indulgence Not Waiver; Remedies
Cumulative . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.11. Jurisdiction . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.12. Counterparts . . . . . . . . . . . . . . . . . . . . . 54
EXHIBIT 2.01A Written Consent of the Stockholders of ADCOR-Xxxxxxx
Drilling Company
EXHIBIT 5.05 Form of Escrow Agreement
EXHIBIT 7.02(g) Legal Opinion of Counsel to the Company
EXHIBIT 7.03(d) Legal Opinion of Counsel to Parent
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INDEX TO SCHEDULES
SCHEDULE
NUMBER DESCRIPTION
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2.05 Stock Option Shares
3.01 Subsidiaries
3.02 Officers and Directors and Certificates of Incorporation and By-Laws
3.03(a) Stockholders and Stock Options
3.03(b) Encumbrances on Subsidiary Shares
3.05 Filings and Consent
3.07 Financial Statements
3.08 Liabilities
3.09 Certain Changes or Events of the Company
3.10 Litigation Matters
3.12 Brokers
3.14(c) Tax Returns
3.14(f) Gains and Losses
3.15(a) Real Property and Tenants
3.15(b) Real Property Leased or Subleased
3.16(c) Intellectual Property Owned
3.16(d) Intellectual Property Licensed, Sublicensed, Agreements or Permission
3.17 Major Components of Active and Stacked Rigs
3.19 Contracts
3.22 Insurance Policies
3.24 Employee Benefit Plans
3.26 Environmental Matters
3.27 Certain Business Relationships with the Company
5.02 Negative Covenants
7.02(d) Contracts or Agreements Requiring Consents or Waivers
The schedules and exhibits have been omitted. The Company agrees to furnish to
the Securities and Exchange Commission supplementally a copy of any omitted
schedule or exhibit.
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CONSENT AND VOTING AGREEMENT AND PLAN OF MERGER, dated as of
December 20, 1996 (this "Agreement"), by and among XXXXXX INDUSTRIES, INC., a
Delaware corporation ("Parent"), NABORS ACQUISITION CORP. 96, a Delaware
corporation and a wholly owned subsidiary of Parent ("Parent Sub"), ADCOR-
XXXXXXX DRILLING COMPANY, a Delaware corporation (the "Company"), all of the
stockholders of the Company listed on the signature page hereto (the
"Stockholders") and all of the holders of options to purchase stock of the
Company listed on the signature page hereto (the "Optionholders").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), the Parent Sub will merge with and into the Company
(the "Merger");
WHEREAS, the Board of Directors of the Company has determined
that the Merger is in the best interests of the Company and the holders of
Company Common Stock (as defined in Section 2.01(a)), has approved and adopted
this Agreement and the transactions contemplated hereby, and has recommended
approval and adoption of this Agreement by the stockholders of the Company;
WHEREAS, the Stockholders hold one hundred percent (100%) of the
outstanding voting power of the Company, have irrevocably consented to the
entering into of this Agreement and the consummation of the Merger and have
irrevocably agreed to vote in favor of the Merger at a meeting of Stockholders
(to the extent necessary), and such consent and agreement is an essential
condition and inducement to Parent to enter into this Agreement;
WHEREAS, the Executive Committee of the Board of Directors of
Parent has determined that the Merger is in the best interests of Parent and
has approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a "plan of reorganization" for the
purposes of section 368 of the Code;
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling of interests"; and
WHEREAS, certain capitalized terms used in this Agreement are
defined in Section 9.03;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law, at
the Effective Time (as defined in Section 1.02), Parent Sub shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Parent Sub shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The name of
the Surviving Corporation shall be Nabors Acquisition Corp. 96.
SECTION 1.02. Effective Time. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, Delaware Law (the date and time of
such filing, or such later time as may be agreed to in writing by Parent,
Parent Sub and the Company and specified in the Certificate of Merger, being
the "Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Parent Sub and the
Company shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Parent Sub and the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; By-Laws. At the
Effective Time, the Certificate of Incorporation of Parent Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and the By-Laws of Parent Sub shall
be the By-Laws of the Surviving Corporation.
SECTION 1.05. Directors and Officers. The directors of Parent
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation, and the
officers of Parent Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. (a) At the Effective
Time, by virtue of the Merger and without any action on the part of Parent Sub,
the Company or the holders of any of the following securities: (i) each share
of common stock, $.01 par value per share, of the Company ("Company Common
Stock") issued and outstanding immediately prior to the Effective Time)
excluding any treasury shares held by the Company, shares held by Parent and
Dissenting Shares (as defined in Section 2.04), if any, shall be converted into
the right to receive (the "Exchange Ratio") 118.7458 fully paid, nonassessable
shares of common stock, par value $.10 per share, of Parent ("Parent Common
Stock"); subject to adjustment as set forth in Section 2.01(b), Section 3.12,
and Section 6.05 hereof, and subject to pro rata withholding of shares to be
held in escrow pursuant to Section 5.05 hereof; (ii) the outstanding Stock
Options shall be converted into the right to receive shares of Parent Common
Stock as contemplated by Section 2.05; and (iii) each share of common stock of
Parent Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation. Notwithstanding anything to the
contrary, in no event shall more than 3,400,000 shares of Parent Common Stock
be issued in the Merger, including all shares to be held in escrow.
(b) If between the date of this Agreement and the Effective
Time the outstanding shares of Parent Common Stock or Company Common Stock
shall have been changed into a different number of shares of a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange Ratio
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(c) All such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent only the right to receive the Merger Consideration (as
defined in Section 2.02(b)). The holders of such certificates previously
evidencing such shares of Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares
of Company Common Stock, except as otherwise provided herein or by law. Such
certificates previously evidencing shares of Company Common Stock shall be
exchanged for certificates evidencing whole shares of Parent Common Stock
issued in consideration therefor in accordance with the allocation procedures
of this Section 2.01 and upon the surrender of such certificates in accordance
with the provisions of Section 2.02. No fractional shares of Parent Common
Stock shall be issued, and, in lieu thereof, a cash payment shall be made
pursuant to Section 2.02(e).
(d) Each share of Company Common Stock held in the treasury of
the Company and each share of Company Common Stock owned by Parent or any
direct or indirect wholly-owned subsidiary of Parent or of the Company
immediately prior to the Effective Time
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shall be canceled and extinguished without any conversion thereof and no
payment shall be made with respect thereto.
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall
deposit, or shall cause to be deposited, with First Chicago Trust Company or
such other bank or trust company designated by Parent and reasonably
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with this
Article II through the Exchange Agent (i) certificates evidencing such number
of whole shares of Parent Common Stock equal to the Exchange Ratio multiplied
by the number of shares of Company Common Stock outstanding and such number of
shares of Parent Common Stock issuable pursuant to Section 2.05 and (ii) cash
in consideration of fractional shares as provided in Section 2.02(e) (such
Parent Common Stock and cash being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions,
deliver the Parent Common Stock (except that ten percent (10%) of such Parent
Common Stock shall be delivered to an escrow agent, pursuant to Sections 5.05
and 8.06 hereof) and cash out of the Exchange Fund. Except as contemplated by
Section 2.02(f) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, Parent will instruct the Exchange Agent to mail to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time evidenced outstanding shares of Company Common Stock
(other than Dissenting Shares) (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
evidencing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) certificates evidencing that number of whole
shares of Parent Common Stock which such holder has the right to receive in
respect of the shares of Company Common Stock formerly evidenced by such
Certificate in accordance with Section 2.01, less that holder's pro rata
portion of the shares (rounded to the nearest whole share) to be held in escrow
pursuant to Sections 5.05 and 8.06 hereof and (B) cash in lieu of fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.02(e) (such shares of Parent Common Stock and cash, if any, being
collectively, the "Merger Consideration"), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
of Company Common Stock which is not registered in the transfer records of the
Company, a certificate evidencing the proper number of shares of Parent Common
Stock may be issued in accordance with this Article II to a transferee if the
Certificate evidencing such shares of Company Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as
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contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive, upon such
surrender, the Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock evidenced thereby, and no
other part of the Merger Consideration shall be paid to any such holder, until
the holder of such Certificate shall surrender such Certificate, at which time,
subject to the effect of applicable laws, there shall be issued to the holder
(i) certificates evidencing whole shares of Parent Common Stock issued in
exchange therefor, and the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions (without interest
thereon), with a record date after the Effective Time but prior to surrender
and a payment date occurring after surrender, payable with respect to such
whole shares of Parent Common Stock. No interest shall be paid on the Merger
Consideration.
(d) No Further Rights in Company Common Stock. All shares of
Parent Common Stock issued and cash paid upon conversion of the shares of
Company Common Stock in accordance with the terms hereof shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to such
shares of Company Common Stock.
(e) No Fractional Shares. (i) No certificates or scrip
evidencing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
Parent.
(ii) Each holder of a Certificate having a fractional
interest arising upon the conversion of such Certificate shall, at the time of
surrender of the Certificate, be paid by the Exchange Agent an amount in cash
equal to the value of such fractional interest based on a price per share of
Parent Common Stock of $18.75.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Stock for two
years after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the Merger Consideration to
which they are entitled.
(g) No Liability. Neither Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any shares of Parent Common Stock, cash, or dividends or distributions with
respect thereto delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
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SECTION 2.03. Stock Transfer Books. On the date hereof, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company. On or after the Effective Time, any
Certificates presented to the Exchange Agent for any reason shall be converted
into the Merger Consideration.
SECTION 2.04. Dissenting Shares. If required under Delaware Law,
notwithstanding any other provisions of this Agreement to the contrary, shares
of Company Common Stock that are outstanding immediately prior to the Effective
Time and which are held by stockholders who shall have not voted in favor of
the Merger or consented thereto in writing and who shall have demanded
properly, in writing, appraisal for such shares in accordance with Section 262
of Delaware Law (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of
such shares of Company Common Stock held by them in accordance with the
provisions of Section 262 of Delaware Law, except that all Dissenting Shares
held by stockholders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such shares of Company
Common Stock under Section 262 of Delaware Law shall thereupon be deemed to
have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration, upon surrender, in the manner provided in Section 2.02, of the
certificate or certificates that formerly evidenced such shares of Company
Common Stock. Any payments required to be made to the holders of any
Dissenting Shares shall be funded by Parent or the Surviving Corporation.
SECTION 2.05. Stock Options; Payment Rights. The Parent shall
issue to each Optionholder the number of shares of Parent Common Stock set
forth on Schedule 2.05, subject to reduction in the corresponding amount as any
adjustment to the Exchange Ratio, in full satisfaction of all of such holder's
rights in respect of his or her Stock Options. Any tax withholdings in respect
of such Stock Options may be borrowed by the Optionholder from the Company at
an effective interest rate of 8.25% per annum, subject to the reasonable
approval of the terms and conditions of such loan by Parent. Each Optionholder
hereby waives and relinquishes, as of the Effective Time, any and all rights
pursuant to his or her option agreement(s) concerning the purchase of shares of
Company Common Stock, and acknowledges that all Stock Options owned by such
Optionholder shall be automatically converted, as of the Effective Time, into
the right to receive the number of shares of Parent Common Stock set forth for
such Optionholder on Schedule 2.05, subject to (i) payment by such Optionholder
of any tax or other withholding required by applicable law, (ii) reduction in
the corresponding amount of the Exchange Ratio, and (iii) withholding of ten
percent (10%) of such shares and deposit thereof in the Escrow Account. Each
Optionholder agrees to not exercise his or her Stock Options, unless this
Agreement has been terminated in accordance with its terms.
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ARTICLE II A
VOTING RIGHTS AND PROXY
SECTION 2.01A. Consent and Voting Agreement. Each Stockholder
hereby irrevocably consents to the entering into of this Agreement and to the
consummation of the Merger and shall contemporaneously herewith execute the
written consent attached hereto as Exhibit 2.01A (the "Consent"), and, as long
as this Agreement has not previously been terminated, further irrevocably
agrees to vote all Company Common Stock as to which the Stockholder is entitled
to vote at a meeting of the stockholders of the Company if any meeting is so
held, or by written consent without a meeting as follows: (i) in favor of
approval and adoption of this Agreement and the transactions contemplated
hereby; (ii) against any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under this Agreement; (iii) against any
action or agreement (other than this Agreement or the transactions contemplated
by this Agreement or the termination of this Agreement in accordance with its
terms), that would, directly or indirectly, impede, interfere with, delay,
postpone or attempt to discourage the Merger, including without limitation: (A)
any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company and its subsidiaries; (B) a
sale or transfer of a material amount of assets of the Company and its
subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (C) any change in the management or board of
directors of the Company or any Competing Transaction (as hereinafter defined),
except as otherwise agreed to in writing by Parent; (D) any material change in
the present capitalization or dividend policy of the Company; or (E) any other
material change in the Company's corporate structure or business.
SECTION 2.02X. Xxxxx of Proxy. Each Stockholder hereby
irrevocably appoints each of the Chief Executive Officer and the President of
Parent, each with full power of substitution (such individual and his
substitutes being referred to herein as the "Proxy"), as attorneys and proxies
to vote all Company Common Stock on all matters referred to in Section 2.01A as
to which such Stockholder is entitled to vote at a meeting of the stockholders
of the Company or to which they are entitled to express consent or dissent to
corporate action in writing without a meeting, in the Proxy's absolute, sole
and binding discretion. Each Stockholder agrees to refrain from taking any
action contrary to or in any manner inconsistent with the terms of this
Agreement. Each Stockholder agrees that this grant of proxy is irrevocable and
coupled with an interest and agrees that the person designated as Proxy
pursuant hereto may, at any time, name any other person as his substituted
Proxy to act pursuant hereto, either as to a specific matter or as to all
matters. Each Stockholder hereby revokes any proxy previously granted by him
or her with respect to voting his or her shares of Company Common Stock. In
discharging its powers under this Agreement, the Proxy may rely upon advice of
counsel to Parent, and any vote made or action taken by the Proxy in reliance
upon such advice of counsel shall be deemed to have been made in good faith by
the Proxy. This grant of proxy shall terminate upon the earlier of (i) one
year from the date of this Agreement or (ii) the termination of this Agreement
pursuant to Article VIII hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Parent
Sub as follows:
SECTION 3.01. Organization and Qualification; Subsidiaries.
Each of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has all requisite corporate or other power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary. Schedule 3.01 contains a true and compete list of all the Company's
directly or indirectly owned subsidiaries, (i) the officers and directors of
each subsidiary, (ii) the jurisdiction of organization of each subsidiary, and
(iii) the percentage of each subsidiary's outstanding capital stock or other
equity interests owned by the Company or another subsidiary of the Company.
SECTION 3.02. Certificate of Incorporation and By-Laws.
Schedule 3.02 contains (i) a list of the officers and directors of the Company
and (ii) complete and correct copies of the Certificate of Incorporation and
the By-Laws or the equivalent organizational documents, in each case as amended
or restated, of the Company and each of the entities listed on Schedule 3.01.
Neither the Company nor any of the entities listed on Schedule 3.01 is in
violation of any of the provisions of its respective Certificate of
Incorporation or By-Laws or equivalent organizational documents.
SECTION 3.03. Capitalization. (a) The authorized capital stock
of the Company consists of 35,000 shares of Company Common Stock. As of
October 31, 1996 (i) 27,016 shares of Company Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, the
Company's Certificate of Incorporation or By-Laws or any agreement to which the
Company is a party or bound, (ii) no shares of Company Common Stock were held
in treasury of the Company and (iii) 2,429 shares of Company Common Stock were
reserved for issuance in connection with the exercise of stock options granted
by the Company ("Stock Options"), and there have been no changes in such
numbers of shares. Schedule 3.03(a) sets forth the name and address of each
holder of Company Common Stock and the number of such securities held by such
holder. Each holder of Company Common Stock is an "accredited investor" as
that term is defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or either alone or with its purchaser
representative has such knowledge and experience in financial and business
matters that it is capable of evaluating merits and risks of an investment in
Parent Common Stock,. There are no bonds, debentures, notes or other
indebtedness, issued or outstanding, having the right to vote on any matters on
which the Company's stockholders may vote. As of October 31, 1996, except for
the Stock Options, there are no options, warrants, calls or other rights
(including registration rights), agreements,
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arrangements or commitments presently outstanding obligating the Company to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating the Company to grant, extend or enter into any such option, warrant,
call or other such right, agreement, arrangement or commitment, and there have
been no changes in such numbers. Schedule 3.03(a) (i) sets forth a true and
complete list of all Stock Options, showing for each option holder the number
of Stock Options held and the exercise price(s) thereof, and (ii) contains
complete and correct copies of all agreements pursuant to which Stock Options
have been granted.
(b) All the outstanding shares of capital stock, or other
equity interests in, each subsidiary of the Company are duly authorized,
validly issued, fully paid and nonassessable and except as set forth in
Schedule 3.03(b), such shares or other equity interests are owned solely by the
Company free and clear of any security interests, liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever ("Encumbrances"). Except as set forth on Schedule 3.03(b),
there are no options, warrants, calls or other rights (including registration
rights), agreements, arrangements or commitments of any character to which the
Company or any of its subsidiaries is a party relating to the issued or
unissued capital stock of, or other equity interests in, any of the
subsidiaries of the Company. The Company does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity.
SECTION 3.04. Authority. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action (including, with respect to the Merger, the approval and
adoption of this Agreement by the Stockholders (who hold one hundred percent
(100%) of the outstanding shares of Company Common Stock)) and no other
corporate proceeding on the part of the Company is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Stockholders, Parent
and Parent Sub, constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consent. (a)
Except as set forth in Schedule 3.05, the execution and delivery of this
Agreement by the Company does not, and the performance of this Agreement by the
Company will not (i) conflict with or violate the Certificate of Incorporation
or By-Laws, or the equivalent organizational documents, in each case as amended
or restated, of the Company or any of its subsidiaries, (ii) conflict with or
violate any federal, state, foreign or local law, statute, ordinance, rule,
regulation, order, judgment or decree (collectively, "Laws") in effect as of
the date of this Agreement and applicable to the Company or any of its
subsidiaries or by which any of their respective properties is bound or subject
to, or (iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of an Encumbrance on, any
of the properties or assets of the Company or
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any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or subject to.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will
not, require the Company to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any governmental or
regulatory authority, domestic or foreign ("Governmental Entities") based on
laws, rules, regulations and other requirements of Governmental Entities in
effect as of the date of this Agreement, except for applicable requirements, if
any, of the state securities or blue sky laws ("Blue Sky Laws") and the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and the filing and recordation of appropriate merger documents as required by
Delaware Law.
SECTION 3.06. Permits; Compliance. Each of the Company and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action, proceeding or investigation pending or
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its subsidiaries is in conflict with, or in
default or violation of (a) any Law applicable to the Company or any of its
subsidiaries or which any of their respective properties is bound by or subject
to or (b) any of the Company Permits. Since December 31, 1995, neither the
Company nor any of its subsidiaries has received from any Governmental Entity
any written notification with respect to possible conflicts, defaults or
violations of Laws.
SECTION 3.07. Financial Statements. Schedule 3.07 contains
true, correct and complete copies of (i) the audited Consolidated Balance Sheet
of the Company as of December 31, 1995 (the "Balance Sheet"), and as of
December 31, 1994 and 1993, and the related Consolidated Statements of
Operations, Consolidated Statements of Cash Flows and Consolidated Statements
of Shareholders Equity for the fiscal years then ended, and the notes and
schedules thereto, together with the report thereon of Xxxxxx Xxxxxxxx &
Company (collectively, the "Financial Statements") and (ii) the unaudited
balance sheet of the Company as of September 30, 1996 (the "Interim Balance
Sheet") and the related unaudited Consolidated Statement of Operations,
Consolidated Statement of Cash Flows, and Consolidated Statement of
Shareholders Equity of the Company for the nine months ended September 30,
1996, excluding any adjustments and notes which would be included in a year-end
financial statement (collectively, the "Interim Financial Statements"). For
purposes of this Agreement and except with respect to the representations and
warranties made in this Section 3.07, references to the Balance Sheet and the
Interim Balance Sheet shall not include any notes and schedules in the
Financial Statements and the Interim Financial Statements, respectively. The
Financial Statements and the Interim Financial Statements are attached hereto
as Schedule 3.07 and have been prepared from books and records of the Company
and its subsidiaries in accordance with generally accepted accounting
principles applied on a basis consistent with preceding years and
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throughout the periods involved (except as otherwise noted therein). The
Financial Statements and the Interim Financial Statements fairly present the
consolidated financial condition, results of operations and changes in cash
flows of the Company and its subsidiaries as at the dates thereof and for the
periods indicated in the statements of earnings, operations and cash flows,
except, in the case of the Interim Financial Statements, for the absence of
notes thereto and subject to normal year-end adjustments. The Company has
common stockholders' equity of at least $21,244,000.
SECTION 3.08. No Undisclosed Liabilities. Except as set forth
on Schedule 3.08, there are no liabilities or other obligations of the Company
or any subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise ("Liabilities"), and there is
no existing condition, situation or set of circumstances which could reasonably
be expected to result in such a Liability, other than (a) Liabilities fully
reflected or reserved against on the face of the Interim Balance Sheet as
adjusted for Liabilities incurred in the Ordinary Course of Business since
September 30, 1996 through the Effective Time; and (b) Liabilities under this
Agreement and fees and expenses related hereto.
SECTION 3.09. Absence of Certain Changes or Events. Except as
disclosed in Schedule 3.09, since December 31, 1995, the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been:
(i) any damage, destruction or loss (not covered by insurance) with respect to
any asset of the Company or any of its subsidiaries involving cost or loss (not
covered by insurance) in excess of $25,000; (ii) any change by the Company or
its subsidiaries in their accounting methods, principles or practices; (iii)
except for dividends by a subsidiary of the Company paid to the Company or
another subsidiary of the Company, any declaration, setting aside or payment of
any dividends or distributions in respect of shares of Company Common Stock or
the shares of stock of, or other equity interests in, any subsidiary of the
Company or any redemption, purchase or other acquisition of any of the
Company's securities or any of the securities of any subsidiary of the Company;
or (iv) a Company Material Adverse Effect. Further, since December 31, 1995,
except as previously disclosed to Parent in writing, there has not been any
increase in the benefits under, or the establishment or amendment of, any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other Employee Benefit Plan, or any increase in the
compensation payable or to become payable to directors, officers or employees
of the Company or its subsidiaries for (A) increases prior to September 30,
1996 in salaries or wages payable or to become payable in the Ordinary Course
of Business and consistent with past practice, (B) bonuses payable after
September 30, 1996, not to exceed $200,000 in the aggregate, and (C)
termination payments agreed to by the Parent payable after September 30, 1996.
SECTION 3.10. Absence of Litigation. Except as set forth on
Schedule 3.10 hereto, (a) there is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or
threatened against the Company or any of its subsidiaries or any properties or
rights of the
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Company or any of its subsidiaries, and (b) neither the Company nor any of its
subsidiaries is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with or continuing investigation
by, any Governmental Entity, or any judgment, order, writ, injunction, decree
or award of any Governmental Entity or arbitrator. In respect of the matters
relating to or arising in connection with the actions set forth in Schedule
3.10, there is no fact, event, condition, circumstance or other matter which
either has, or is reasonably likely to have resulted in, an event or
determination having a Company Material Adverse Effect.
SECTION 3.11. Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is the
only vote of the holders of any class or series of Company capital stock
necessary to approve the Merger. The Stockholders, by executing this
Agreement, have irrevocably consented to the Merger and have irrevocably agreed
to vote in favor of the Merger and have granted an irrevocable proxy to such
effect. Such action by the Stockholders is sufficient to constitute stockholder
approval of the Merger.
SECTION 3.12. Brokers. Except as set forth on Schedule 3.12, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
The Exchange Ratio shall be reduced to reflect the payment of such fees by the
Company, assuming a price per share of Parent Common Stock of $18.75.
SECTION 3.13. Company Action. The Board of Directors of the
Company (at a meeting duly called and held) has (a) determined that the Merger
is in the best interests of the Company and its stockholders, (b) approved the
Merger in accordance with the provisions of Delaware Law, and (c) recommended
the approval of this Agreement and the Merger by the holders of the Company
Common Stock.
SECTION 3.14. Tax Matters. (a) Neither the Company nor any
of its subsidiaries has taken or agreed to take any action that would prevent
the Merger from constituting a reorganization qualifying under the provisions
of Section 368(a) of the Code. The Company has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax Liability
of the Company claimed or raised by any governmental authority. Schedule 3.14
lists all federal, state, local, and foreign income Tax Returns filed with
respect to the Company for taxable periods ended on or
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after January 1, 1993, which indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Company has delivered to the Parent correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since January 1,
1993.
(d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. The Company has not made any payments, or
is not obligated to make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will
not be deductible under Code Sec. 280G. The Company has not been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
The Company is not a party to any Tax allocation or sharing agreement. The
Company (A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
the Company) and (B) has no Liability for the Taxes of any Person (other than
the Company) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor by contract, or
otherwise.
(f) Schedule 3.14(f) sets forth the following information with
respect to the Company as of the most recent practicable date: (A) the tax
basis of the Company in its assets; (B) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Company; and (C) the amount of
any intercompany items or any deferred gain or loss allocable to the Company
with respect to any intercompany transaction.
(g) The unpaid Taxes of the Company (A) do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Interim Balance Sheet (rather than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the passage of time
through the Effective Time in accordance with the past custom and practice of
the Company in filing their Tax Returns.
SECTION 3.15 Real Property.
(a) Schedule 3.15(a) lists and describes briefly all real
property that the Company owns. With respect to each such parcel of owned real
property:
(i) the identified owner has good and marketable title
to the parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for installments of special
assessments not yet delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy, or value, or the
marketability of title (indefeasible title in Texas), of the property subject
thereto;
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(ii) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions relating to the property or
other matters affecting materially and adversely the current use, occupancy, or
value thereof;
(iii) the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels of
land, are not in violation of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on any easement which may
burden the land, and the land does not serve any adjoining property for any
purpose inconsistent with the use of the land, and the property is not located
within any flood plain or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been obtained;
(iv) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations;
(v) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the parcel of real
property;
(vi) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion thereof or
interest therein;
(vii) there are no parties (other than the Company) in
possession of the parcel of real property, other than tenants under any leases
disclosed in Schedule 3.15(a) who are in possession of space to which they are
entitled; and
(viii) all facilities located on the parcel of real
property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant easements
benefiting the parcel of real property.
(b) Schedule 3.15(b) lists and describes briefly all real
property leased or subleased to the Company. The Company has delivered to the
Parent correct and complete copies of the leases and subleases listed in
Schedule 3.15(b). With respect to each lease and sublease listed in Schedule
3.15(b):
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(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the lease or sublease has repudiated
any provision thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(vi) The Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(vii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations; and
(viii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities.
SECTION 3.16 Intellectual Property.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Company as presently
conducted. Each item of Intellectual Property owned or used by the Company is
owned or available for use by the Company on identical terms and conditions
immediately subsequent to the Effective Time. The Company has taken all
reasonably necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(b) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of the Company has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party). To the Company's
knowledge, no third party has interfered with, infringed upon,
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misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Company.
(c) Schedule 3.16(c) identifies each patent or registration
which has been issued to the Company or any affiliate with respect to any of
its Intellectual Property, identifies each pending patent application or
application for registration which the Company or any affiliate has made with
respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which the Company or any affiliate has granted
to any third party with respect to any of its Intellectual Property (together
with any exceptions). The Company has delivered to the Parent correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date). Schedule 3.16(c) also
identifies each trade name or unregistered trademark used by the Company or any
affiliate in connection with any of its businesses. With respect to each item
of Intellectual Property required to be identified in Schedule 3.16(c):
(i) the Company possesses all right, title, and
interest in and to the item, free and clear of any Security Interest, license,
or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item; and
(iv) the Company has never agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 3.16(d) identifies each item of Intellectual
Property that any third party owns and that the Company or any affiliate uses
pursuant to license, sublicense, agreement, or permission, other than
shrinkwrap licenses for personal computer software. The Company has delivered
to the Parent correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Schedule 3.16(d):
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect;
(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Effective Time;
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(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i) through (iv) above
are true and correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or threatened
which challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission.
SECTION 3.17. Tangible Assets. Except as set forth on Schedule
3.17, the Company owns and has good and marketable title to the rigs, spares,
drill pipes and other related equipment used in its business, including but not
limited to those Assets listed on Schedule 3.17. Schedule 3.17 lists all the
major components of all the active and stacked rigs and their location. Each
active rig included on Schedule 3.17 has been maintained in accordance with
normal industry practice, subject to normal wear and tear. The value of the
drill pipes listed on Schedule 3.17 reflected on the Interim Balance Sheet is
not overstated.
SECTION 3.18. Drill Collars. The Company owns and has good and
marketable title to drill collars reflected on the Interim Balance Sheet. The
value of the drill collars reflected on the Interim Balance Sheet is not
overstated.
SECTION 3.19. Contracts. Schedule 3.19 lists the following
contracts and other agreements to which the Company is a party as of the date
hereof:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments
in excess of $25,000 per annum or a term of more than one (1) year;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which has a term more than six months, or involves consideration
in excess of $25,000.
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(c) any partnership or joint venture agreement;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000, or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any agreement with any of the Stockholders and their
Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement (including any Employee Benefit Plan) for the benefit of its
current or former directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $25,000, or providing severance benefits;
(j) all drilling contracts and amendments thereto for the
employment of drilling rigs as of the Effective Time;
(k) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Company; or
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
The Company has delivered to the Parent a correct and complete copy of each
written agreement listed in Schedule 3.19 and a written summary setting forth
the terms and conditions of each oral agreement referred to in Schedule 3.19.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement.
SECTION 3.20. Notes and Accounts Receivable. All notes and
accounts receivable of the Company are reflected properly on the Company's
books and records and are valid receivables subject to no setoffs or
counterclaims.
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SECTION 3.21. Powers of Attorney. There are no outstanding
powers of attorney executed on behalf of the Company.
SECTION 3.22. Insurance. Schedule 3.22 sets forth the following
information with respect to each current insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage (including the amount that each rig listed on Schedule 3.17 has been
insured for); and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy, and (D) no party to the policy has
repudiated any provision thereof. The Company has been covered during the past
three (3) years by insurance in scope and amount customary and reasonable for
the businesses in which it has engaged during the aforementioned period.
Schedule 3.22 describes any self-insurance arrangements affecting the Company.
SECTION 3.23. Employees. The Company has delivered to Parent a
true and complete list of all employees of the Company and its subsidiaries,
their positions, locations, salaries or hourly wages and severance
arrangements, each as of the date hereof. The Company is not a party to or not
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor practice.
There is no organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company.
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SECTION 3.24. Employee Benefits.
(a) Except as set forth on Schedule 3.24, with respect to all
employees, former employees, directors and independent contractors of the
Company and its subsidiaries and their dependents and beneficiaries, neither
the Company, its subsidiaries nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under or with respect to any Employee
Benefit Plan. The plans, programs and arrangements set forth on Schedule 3.24
are herein referred to as the "Company Employee Benefit Plans." Each Company
Employee Benefit Plan (and each related trust, insurance contract or other
funding arrangement) complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code, other applicable laws and
governing documents and agreements. With respect to each Company Employee
Benefit Plan, there has been no act or omission by the Company or any of its
subsidiaries or ERISA Affiliates that would impair the right or ability of the
Company or any of its subsidiaries or ERISA Affiliates to unilaterally amend in
whole or part or terminate such Company Employee Benefit Plan at any time,
subject to the terms of any insurance contract or other contractual
arrangements with third parties, and the Company has delivered to the Buyer
true and complete copies of: (i) the plan documents, including any related
trust agreements, insurance contracts or other funding arrangements, or a
written summary of the terms and conditions of the plan if there is no written
plan document; (ii) the most recent IRS Form 5500; (iii) the most recent
financial statement and, if applicable, actuarial valuation; (iv) all
correspondence with the Internal Revenue Service, the Department of Labor and
other governmental agencies with respect to the past three plan years other
than IRS Form 5500 filings; and (v) the most recent summary plan description.
(b) Neither the Company nor any of its subsidiaries and none
of their respective directors, officers or employees has any material Liability
with respect to any Company Employee Benefit Plan for failure to comply with
ERISA, the Code, any other applicable laws or any governing documents or
agreements.
(c) No Company Employee Benefit Plan is an Employee Pension
Benefit Plan, and no Company Employee Benefit Plan has any material unfunded
Liability. With respect to the Company Employee Benefit Plans, all applicable
contributions and premium payments for all periods ending prior to the
Effective Time (including periods from the first day of the then current plan
year to the Effective Time) shall be made prior to the Effective Time in
accordance with past practice.
(d) None of the Company, any of its subsidiaries or any ERISA
Affiliate maintains, maintained, contributes to, or has any Liability
(including, but not limited to, current or potential withdrawal Liability) with
respect to any Multiemployer Plan or Employee Pension Benefit Plan.
(e) With respect to all employees and former employees of the
Company and its subsidiaries, none of the Company, any of its subsidiaries or
any ERISA Affiliate presently maintains, contributes to or has any Liability
under any funded or unfunded medical, health or life insurance plan or
arrangement for present or future retirees or present or future terminated
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employees except as required by the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, or state continuation coverage laws. There has been
no act or acts which would result in a disallowance of a deduction or the
imposition of a tax pursuant to Section 4980B, or any predecessor provision, of
the Code or any related regulations. No event has occurred with respect to
which the Company or any of its subsidiaries or affiliates could be liable for
a material tax imposed by any of Sections 4972, 4976, 4977, 4979 or 4980 of the
Code, or for a material civil penalty under Section 502(c) of ERISA.
(f) There is no pending or to the knowledge of the Company
threatened legal action, proceeding, audit, examination or investigation
against or involving any Company Employee Benefit Plan maintained by the
Company or any ERISA Affiliate (other than routine claims for benefits). To
the knowledge of the Company there is no basis for, and there are no facts
which could give rise to, any such condition, legal action, proceeding or
investigation. Any bonding required with respect to the Company Employee
Benefit Plans in accordance with applicable provisions of ERISA has been
obtained and is in full force and effect.
SECTION 3.25. Guaranties. The Company is not a guarantor or
otherwise is liable for any Liability or obligation (including indebtedness) of
any other Person.
SECTION 3.26. Environment, Health, and Safety. (a) Except as
set forth on Schedule 3.26, the Company has complied with all Environmental,
Health, and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply. Without
limiting the generality of the preceding sentence, the Company has obtained and
been in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has complied
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all Environmental, Health, and Safety Laws.
(b) Except as set forth on Schedule 3.26, the Company has no
Liability (and the Company has not handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property or
facility in any manner that could form the basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company giving rise to any Liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under
any Environmental, Health, and Safety Law.
(c) All properties owned or leased and equipment used in the
business of the Company, its subsidiaries, and their respective predecessors
and Affiliates have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
SECTION 3.27. Certain Business Relationships with the Company.
Except as described in Schedule 3.27, none of the Stockholders and their
Affiliates has been involved in
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any business arrangement or relationship with the Company within the past 12
months, and none of the Stockholders and their Affiliates owns any asset,
tangible or intangible, which is used in the business of the Company.
SECTION 3.28. Delivery of Information. Each holder of capital
stock of the Company, and each holder of Stock Options, has received a copy of
the following documents relating to Parent: (i) Annual Report on Form 10-K for
the year ended September 30, 1995; (ii) Quarterly Reports on Form 10-Q for the
quarters ended December 30, 1995, March 31, 1996, and June 30, 1996; (iii)
Current Report on Form 8-K dated May 21, 1996; (iv) Proxy Statement relating to
the 1996 Annual Meeting of Shareholders; and (v) 1996 Annual Report to
Shareholders.
SECTION 3.29. Limitation on Representations and Warranties. (a)
Except as and to the extent expressly set forth in this Article III, included
on any Schedule hereto or included in any writing delivered by the Company to
Parent concurrently herewith or subsequent hereto expressly pursuant to this
Agreement, the Company makes no other representation or warranty and disclaims
all liability and responsibility for any representation, warranty, statement or
information (financial or otherwise) made or communicated (orally or in
writing) to Parent or any of its employees, agents, consultants or
representatives.
(b) The Company makes no representation or warranty to Parent
regarding the probable success or profitability of the Company.
ARTICLE III A
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
AND OPTIONHOLDER
Each Stockholder and Optionholder represents and warrants
severally, but not jointly, to Parent and Parent Sub as follows:
SECTION 3.01A. Authorization of Transaction. Such
Stockholder or Optionholder has full power and authority to execute and deliver
this Agreement and the Consent and to perform its obligations hereunder and
thereunder. This Agreement constitutes the valid and legally binding obligation
of each Stockholder or Optionholder, enforceable in accordance with its terms
and conditions. Such Stockholder or Optionholder, if a natural person, is over
21 years of age and has not had a legal representative appointed by a court of
law or otherwise act in his or her behalf or with respect to any of his or her
property. If such Stockholder is not a natural person: such Stockholder is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization; the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate or other action; no other corporate or other proceeding on
the part of such Stockholder is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby; and this Agreement has been
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duly delivered by such Stockholder. Such Stockholder or Optionholder need not
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Entity in order to consummate the transactions
contemplated by this Agreement.
SECTION 3.02A. Noncontravention. Neither the execution and
the delivery of this Agreement and the Consent, nor the consummation of the
transactions contemplated hereby and thereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which such Stockholder or Optionholder is subject or the certificate
of incorporation and bylaws or other organizational documents of such
Stockholder or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
such Stockholder or Optionholder is a party, by which it is bound or to which
any of its assets is subject.
SECTION 3.03A. Brokers' Fees. Except as set forth on
Schedule 3.12, such Stockholder or Optionholder has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
SECTION 3.04A. Company Shares. (a) Such Stockholder holds
of record and owns beneficially the number of shares of Company Common Stock
set forth next to its name on the signature page hereto, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws and the restrictions in that certain Stockholders'
Agreement (as defined herein) which is to be terminated pursuant to Section
6.09), Security Interests, options, warrants, purchase rights, contracts,
commitments and equities. Such Stockholder is not a party to any option,
warrant, purchase right, or other contract or commitment that could require
such Stockholder to sell, transfer, or otherwise dispose of any capital stock
of the Company or any of its subsidiaries (other than this Agreement). Such
Stockholder is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of the Company
(other than this Agreement).
(b) Such Optionholder holds Stock Options for the purchase of
the number of shares, and on the terms and conditions, set forth on Schedule
3.03(a), and has not pledged or granted any interest in such Stock Options to
any other Person.
SECTION 3.05A. Accredited Investor. Such Stockholder or
Optionholder, and each owner of an equity interest in such Stockholder or
Optionholder, is an "accredited investor" as that term is defined in Regulation
D of the Securities Act and/or such Stockholder or Optionholder or its
purchaser representative is a sophisticated investor by virtue of his
education, training and/or numerous prior investments made on his or her behalf
or through entities which he or she, alone or with others, controls. Such
Stockholder or Optionholder or its purchaser representative is knowledgeable
and experienced in financial and business matters, and is capable of evaluating
the merits and risks of an investment and of making an informed business
decision.
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SECTION 3.06A. Investment Intention. Such Stockholder or
Optionholder presently does not intend to dispose of Parent Common Stock to be
issued in the Merger (except pursuant to sales under the Shelf Registration
Statement, or as otherwise permitted under the Securities Act).
SECTION 3.07A. Receipt of Information. Such Stockholder or
Optionholder has received a copy of each of the following documents relating to
Parent: (i) Annual Report on Form 10-K for the year ended September 30, 1995;
(ii) Quarterly Reports on Form 10-Q for the quarters ended December 30, 1995,
March 31, 1996, and June 30, 1996; (iii) Current Report on Form 8-K dated May
21, 1996; (iv) Proxy Statement relating to the 1996 Annual Meeting of
Shareholders; and (v) the 1996 Annual Report to Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Parent and Parent Sub hereby jointly and severally represent and
warrant to the Company and each Stockholder that:
SECTION 4.01. Organization and Qualification. Each of Parent,
Parent Sub and Parent's subsidiaries is a corporation, or with respect to Peak
Oilfield Services Company, an Alaska partnership, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now
being conducted, and Parent is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary.
SECTION 4.02. Certificates of Incorporation and By-Laws. Parent
has heretofore furnished to the Company a complete and correct copy of the
Certificates of Incorporation and the By-Laws, as amended or restated, of each
of Parent and Parent Sub. Neither Parent nor Parent Sub is in violation of any
of the provisions of its Certificate of Incorporation or By-Laws.
SECTION 4.03. Parent Common Stock; Capitalization. (a) The
shares of Parent Common Stock to be issued pursuant to the Merger (i) will be
duly authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights created by statute, Parent's Certificate of Incorporation
or By-Laws or any agreement to which Parent is a party or is bound and (ii)
will, when sold in accordance with the Shelf Registration Statement, be
registered under the Securities Act and registered or exempt from registration
under applicable Blue Sky Laws, and listed on the American Stock Exchange.
(b) The authorized capital stock of the Parent consists of
200,000,000 shares of Parent Common Stock, 8,000,000 shares of Class B Stock,
par value $.10 per share (the
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"Parent Class B Stock"), and 10,000,000 shares of preferred stock, par value
$.10 per share (the "Parent Preferred Stock"). As of November 30, 1996 (i)
91,374,156 shares of Parent Common Stock were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable, (ii)
no shares of Parent Class B Stock or Parent Preferred Stock were outstanding,
(iii) 488,980 shares of Parent Common Stock were held in treasury of the Parent
and (iv) 13,801,483 shares of Parent Common Stock were reserved for issuance
pursuant to option and employee benefit plans and in connection with the
exercise of outstanding warrants.
SECTION 4.04. Authority. Parent and Parent Sub each has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceeding
on the part of Parent or Parent Sub is necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Parent Sub and, assuming the due
authorization, execution and delivery thereof by the Stockholders and the
Company, constitutes the legal, valid and binding obligations of Parent
enforceable in accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Parent and Parent Sub does not,
and the performance of this Agreement by Parent and Parent Sub will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws, as
amended or restated, of Parent, Parent Sub or any of Parent's subsidiaries,
(ii) conflict with or violate any Laws in effect as of the date of this
Agreement applicable to Parent, Parent Sub or any of Parent's subsidiaries or
by which any of their respective properties is bound, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or encumbrance on, any of the
properties or assets of Parent, Parent Sub or any of Parent's subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent,
Parent Sub or any of Parent's subsidiaries is a party or by which Parent,
Parent Sub or any of Parent's subsidiaries or any of their respective
properties is bound by or subject to, except for breaches, defaults, events,
rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that would not have a Parent Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and
Parent Sub does not, and the performance of this Agreement by Parent and Parent
Sub will not, require Parent or Parent Sub to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to, any
Governmental Entities, except (i) for applicable requirements, if any, of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), Blue Sky Laws, the American Stock Exchange and the HSR Act and the
filing and recordation of appropriate merger documents as required by Delaware
Law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent Parent or Parent Sub
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from performing its obligations under this Agreement.
SECTION 4.06. Limitation on Representations and Warranties. (a)
Except as and to the extent expressly set forth in this Article IV, included on
any Schedule hereto or included in any writing delivered by Parent to the
Company concurrently herewith or subsequent hereto expressly pursuant to this
Agreement, Parent makes no other representation or warranty and disclaims all
liability and responsibility for any representation, warranty, statement or
information (financial or otherwise) made or communicated (orally or in
writing) to the Company or any of its stockholders, employees, agents,
consultants or representatives.
(b) Parent makes no representation or warranty to the Company
or its stockholders regarding the probable success or profitability of Parent.
SECTION 4.07. Reports; Financial Statements. (a) Since October
1, 1995, Parent and its subsidiaries have filed all forms, reports, statements
and other documents required to be filed with the SEC, including, without
limitation (1) all Annual Reports on Form 10-K, (2) all Quarterly Reports on
Form 10-Q, (3) all proxy statements relating to meetings of stockholders
(whether annual or special), and (4) all Current Reports on Form 8-K,
(collectively, the "Parent SEC Reports"). The Parent SEC Reports, including
all Parent SEC Reports filed after the date of this Agreement and prior to the
Effective Time were or will be prepared in all material respects in accordance
with the requirements of applicable Law (including, the Securities Act and
Exchange Act, as the case may be, and the rules and regulations of the
Securities and Exchange Commission (the "SEC") thereunder applicable to such
Parent SEC Reports). As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Parent SEC Reports
filed prior to, on or after the date of this Agreement (i) have been or will be
prepared in accordance with, and complied or will comply as to form with, the
published rules and regulations of the SEC and generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as otherwise noted therein) and (ii) fairly present or will fairly
present the consolidated financial position of Parent and its subsidiaries as
of the respective dates thereof and the consolidated results of their
operations and their cash flows for the periods indicated, except that any
unaudited interim financial statements were or will be subject to normal and
recurring year-end adjustments.
SECTION 4.08. Absence of Certain Changes or Events. Except as
and to the extent disclosed in the Parent SEC Reports filed prior to the date
of this Agreement or as contemplated in this Agreement, since September 30,
1995, there has not been (a) a Parent Material Adverse Effect or (b) any
significant change by Parent or its subsidiaries in their accounting methods,
principles or practices.
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SECTION 4.09. Ownership of Parent Sub; No Prior Activities. (a)
Parent Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement. All of the outstanding capital stock of Parent
Sub is owned directly by Parent.
(b) Except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Parent Sub has not
and will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
or any type or kind whatsoever or entered into any agreements or arrangements
with any person.
SECTION 4.10. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Parent Sub.
SECTION 4.11. Absence of Litigation. There is no claim, action,
suit, litigation, proceeding, arbitration or investigation of any kind, at law
or in equity (including actions or proceedings seeking injunctive relief),
pending or threatened against the Parent or any of its subsidiaries or any
properties or rights of the Parent or any of its subsidiaries, in respect of
which there is any fact, event, condition, circumstance or other matter which
either has, or is reasonably likely to have resulted in, an event or
determination having a Parent Material Adverse Effect.
SECTION 4.12. Tax Matters. Neither Parent nor Parent Sub has
taken or agreed to take any action that would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
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ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company. The Company
hereby covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
the Company will and will cause its subsidiaries to: (1) (a) operate only in
the Ordinary Course of Business consistent with past practices; and (b) provide
to Parent a monthly statement of profit and loss and other accounting
statements prepared in the Ordinary Course of Business and (2) use its best
efforts to (a) preserve, in all material respects and consistent with past
custom and practice, its business and properties, including its present
operations, physical facilities, working conditions and relationships with
Persons having significant business relations with it, including without
limitation, suppliers and customers; (b) maintain and keep its properties and
assets in as good repair and condition as at present, ordinary wear and tear
excepted; and (c) keep in full force and effect insurance and bonds comparable
in amount and scope of coverage to that currency maintained.
SECTION 5.02. Negative Covenants of the Company. Except as
expressly contemplated by this Agreement or as previously disclosed to Parent
in writing or Schedule 5.02, or otherwise consented to in writing by Parent,
from the date of this Agreement until the Effective Time, the Company will not,
directly or indirectly through a subsidiary or otherwise (and the Stockholders
will not and will not cause the Company to), and will not permit any of its
subsidiaries to directly or indirectly, do any of the following:
(a) (i) increase the compensation payable to, or to become
payable to, any employee, director or executive officer; (ii) grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or employee; (iii) establish, adopt,
enter into, amend, modify or terminate any Employee Benefit Plan or arrangement
except as may be required by applicable Law; or (iv) hire any salaried
employees or pay any bonuses except bonuses of up to $200,000 in the aggregate
(as previously disclosed to Parent in writing) of which $50,000 was accrued on
the face of the Interim Balance Sheet.
(b) declare or pay any dividend on or make any other
distribution in respect of, outstanding shares of capital stock, except for
dividends by a subsidiary of the Company to the Company;
(c) (i) redeem, purchase or otherwise acquire any shares of
its or any of its subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its subsidiaries'
capital stock (other than any such acquisition directly from any wholly owned
subsidiary of the Company in exchange for capital contributions or loans to
such subsidiary), or any options, warrants or conversion or other rights to
acquire any shares of its or its subsidiaries capital stock or any such
securities or obligations (except in connection with the exercise of
outstanding Stock Options referred to in Section 3.03(a) in accordance with
their terms); (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of
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its or its respective subsidiaries' capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its or its respective subsidiaries' capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize
or propose the issuance, delivery, award, grant or sale (including the grant of
any security interests, liens, claims, pledges, limitations in voting rights,
charges or other encumbrances) of, any shares of any class of its or its
subsidiaries' capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any other shares, or any
rights, warrants or options to acquire, any such shares (except for the
issuance of shares upon the exercise of outstanding Stock Options in accordance
with their terms); (ii) amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof; or (iii) take any action to accelerate the
vesting of any of the Stock Options;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in, all or a portion of the assets of,
or by any other manner, any corporation, partnership, association or other
business, organization or division (other than a wholly owned subsidiary)
thereof, or otherwise acquire or agree to acquire any assets of any other
person (other than the purchase of assets from suppliers or vendors in the
ordinary course of business and consistent with past practice) which are
material, individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole;
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its material assets or any material
assets of any of its subsidiaries;
(g) initiate, solicit or encourage (including by way of
furnishing information or assistance), respond to, or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Competing Transaction, or enter into
discussions or negotiate with any person or entity in furtherance of such
inquiries to obtain a Competing Transaction, or enter into an agreement with
respect to any Competing Transaction or agree to or endorse any Competing
Transaction, or authorize or permit any of the officers, directors or employees
of the Company or any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by the Company
or any of the Company's subsidiaries to take any such action, and the Company
shall promptly notify Parent of all relevant terms of any such inquiries and
proposals received by the Company or any of its subsidiaries or by any such
officer, director, investment banker, financial advisor or attorney, and if
such inquiry or proposal is in writing, the Company shall deliver or cause to
be delivered to Parent a copy of such inquiry or proposal. For purposes of
this Agreement, "Competing Transaction" shall mean any of the following
involving the Company, any of its subsidiaries or any affiliate of the Company:
(i) any merger, consolidation, share exchange, business combination, or other
similar transaction (other than the transactions contemplated by this
Agreement); (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 25% or more of the assets of the Company and its subsidiaries,
taken as a
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whole, in a single transaction or series of transactions; (iii) any offer
(whether cash or securities) for 25% or more of the outstanding shares of
capital stock of the Company; or (iv) any public announcement of a proposal,
plan or intention to do any of the foregoing;
(h) propose or adopt any amendments to its Certificate of
Incorporation or its By-Laws;
(i) (A) change any of its methods of accounting in effect
at December 31, 1995, or (B) make or rescind any material election relating to
taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes (except
where the amount of such settlements or controversies, individually or in the
aggregate, does not exceed $25,000), or change in any material respect any of
its methods of reporting income or deductions for federal income tax purposes
from those employed in the preparation of the federal income tax return for the
taxable year ended December 31, 1995, except, in the case of clause (A) or
clause (B), as may be required by Law or generally accepted accounting
principles;
(j) enter into any Contract outside the Ordinary Course of
Business;
(k) create, or permit the creation of, any Lien upon any
Assets outside the Ordinary Course of Business;
(l) enter into any employment contract or collective
bargaining agreement, or modify the terms of any existing such contract or
agreement;
(m) sell, lease, transfer or assign any Assets with a Fair
Market Value of $25,000 or more, or Assets with an aggregate Fair Market Value
of $100,000 or more, in each case tangible or intangible;
(n) make any capital expenditures other than in the Ordinary
Course of Business, or make any capital expenditures in the aggregate in excess
of $50,000;
(o) enter any new bids for daywork or footage drilling
Contracts (with a term reasonably expected to be more than 120 days), or
turnkey contracts without Parent's consent, which shall not be unreasonably
withheld;
(p) amend, or renew, or enter into any Contract involving
operations outside of the United States; or
(q) take or agree to take any action that would or is
reasonably likely to result in any of Company's representations and warranties
set forth in this Agreement being untrue or in any of the conditions to the
Merger not being satisfied.
SECTION 5.03. Negative Covenants of Parent. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the
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date of this Agreement until the Effective Time, Parent will not do any of the
following:
(a) amend any of the material terms or provisions of the
Parent Common Stock;
(b) knowingly take any action which would result in a failure
to maintain the trading of Parent Common Stock on the American Stock Exchange;
(c) declare or pay any dividends or other distribution
(whether in cash, stock or other property) on outstanding shares of capital
stock;
(d) take or agree to take any action that would or is
reasonably likely to result in any of Parent's representations and warranties
set forth in this Agreement being untrue or in any of the conditions to the
Merger not being satisfied; or
(e) agree in writing or otherwise to do any of the foregoing.
SECTION 5.04. Access and Information. (a) Subject to
confidentiality agreements to which the Company or any of its subsidiaries is a
party, the Company shall and shall cause its subsidiaries to (i) afford to
Parent and its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives (collectively, the "Representatives")
access at reasonable times upon prior notice to its officers, employees,
agents, properties, offices and other facilities and its subsidiaries and to
the books and records thereof and (ii) furnish promptly to Parent and its
Representatives such information concerning its business, properties,
contracts, records and personnel (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by such other party. Parent shall in good faith undertake and
complete its due diligence investigation by December 24, 1996.
(b) Subject to confidentiality agreements to which the Parent
or any of its subsidiaries is a party, the Parent shall and shall cause its
subsidiaries to, for the sole purpose of performing due diligence related to
the transactions contemplated herein, (i) afford to the Company and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, the "Company Representatives") access
at reasonable times upon prior notice to its officers, employees, agents,
properties, offices and other facilities and its subsidiaries and to the books
and records thereof and (ii) furnish promptly to the Company and the Company
Representatives such information concerning its business, properties,
contracts, records and personnel (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by such other party. The Company shall in good faith undertake
and complete its due diligence investigation by December 24, 1996.
SECTION. 5.05. Escrow Agreement. At or before the Effective
Time, Xxxx X. Xxxxxxx, Xx. (the "Shareholders' Representative"), as
representative and attorney-in-fact for the Stockholders and Optionholders,
Parent, and a third party, acceptable to Parent and the
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Shareholders' Representative, as escrow agent, shall execute and deliver the
Escrow Agreement, substantially in the form of Exhibit 5.05 hereof (the "Escrow
Agreement"). Each Stockholder and each Optionholder hereby authorizes and
appoints the Shareholders' Representative to serve as its attorney-in-fact to
execute the Escrow Agreement, and agrees to be bound by the provisions thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Appropriate Action; Consents; Filings. (a) The
Company and Parent shall each use its best efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement, (ii) obtain
from any Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent
or the Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, including, without limitation, the
Merger, (iii) make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Merger required
under (A) Delaware Law (including holding a stockholders meeting and/or sending
notice of merger and appraisal rights) and the federal securities laws and the
rules and regulations thereunder, if any, and any other applicable federal or
state securities laws, (B) the HSR Act and (C) any other applicable Law;
provided that Parent and the Company shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the nonfiling party and its advisors prior to filing and,
if requested, accepting all reasonable additions, deletions or changes
suggested in connection therewith. The Company and Parent shall furnish all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable Law in connection with the
transactions contemplated by this Agreement.
(b) (i) Each of the Company and Parent shall give (or shall
cause their respective subsidiaries to give) any notices to third parties, and
use, and cause their respective subsidiaries to use, its best efforts to obtain
any third party consents (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or required to be
disclosed in the Schedules contained herein, (C) otherwise required under any
contracts, licenses, leases or other agreements in connection with the
consummation of the transactions contemplated herein or (D) required to prevent
a Company Material Adverse Effect from occurring prior to or after the
Effective Time or a Parent Material Adverse Effect from occurring prior to or
after the Effective Time.
(ii) In the event that any party shall fail to obtain
any third party consent described in subsection (b) (i) above, such party shall
use its best efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon the Company and
Parent, their respective subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the Effective
Time, from the
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failure to obtain such consent.
SECTION 6.02. Tax Treatment; Pooling of Interests; Affiliates.
The Company and Parent shall use their best efforts, and shall cause their
Affiliates to use their best efforts to cause the Merger to qualify, and will
not take any actions which would prevent the Merger from qualifying, as a
reorganization under the provisions of section 368(a) of the Code. The
Company, Parent, the Stockholders, and the Optionholders shall, and shall cause
each of their Affiliates to, use their best efforts not to take any action
(regardless of whether such action would otherwise be permitted or not
prohibited hereunder) that will prevent Parent from accounting for the Merger
as a pooling of interests. Each Stockholder and Optionholder agrees and
undertakes that from the date hereof until such time as financial results
(including combined sales and net income) covering at least 30 days of post-
merger operations have been published (the date on which such financial results
are published shall be the "Financial Result Date"), such Stockholder or
Optionholder will not sell or in any other way alter his or her risk relative
to any Company Common Stock or Parent Common Stock received in the Merger
(within the meaning of the Codification of Financial Reporting Policies 201.01
(reprinted in 7 Fed. Sec. L. Rep. (CCH) 72,951)). Each Stockholder and
Optionholder understands that the Parent will advise it when the Financial
Result Date shall have occurred. Each Stockholder and Optionholder undertakes
to inform the Company and the Parent of any transactions involving Company
Common Stock or Parent Common Stock that he may wish to consummate during any
time prior to the Financial Result Date and will not consummate such
transaction unless the Parent shall consent thereto in writing. Parent
undertakes to file with the SEC on Form 8-K or to otherwise publicly release
financial statements reflecting the first month of combined operations of
Parent and Surviving Corporation within thirty (30) days of the end of the
period reported.
SECTION 6.03. Public Announcements. Unless otherwise required
by applicable Law (and in that event only if time does not permit), Parent and
the Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the Merger and shall not
issue any such press release or make any such public statement prior to such
consultation.
SECTION 6.04. Obligations of Parent Sub. Parent shall take all
action necessary to cause Parent Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
SECTION 6.05 Employee Matters. The Stockholders shall be
responsible for (i) all severance costs relating to Xxxx X. Xxxxxxx, Xx. the
current Chairman, President and Chief Executive Officer of the Company and (ii)
one-half of all severance expenses related to Company's Houston office
personnel as previously disclosed in writing to Parent who are terminated by
Parent at the Effective Time ((i) and (ii) collectively referred to as the
"Severance Amount"). The Surviving Corporation shall be responsible for all
other severance obligations. Such responsibility of the Stockholders and
Optionholders shall be taken into account by reducing the Exchange Ratio by an
amount equal to (1) the quotient of (i) the Severance Amount (ii) divided by
$18.75 and (2) further divided by the total number of shares of Company Common
Stock outstanding immediately prior to the Merger (including shares to be
issuable in
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respect of any outstanding Stock Options).
SECTION 6.06. Registration Rights. (a) Parent shall file with
the SEC as soon as practicable after the Effective Time a Shelf Registration
Statement on Form S-3 (or other applicable form) covering the continuous sale
pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement"), in the manner specified therein (provided that such manner shall
not include an underwritten public offering), of the shares of Parent Common
Stock issued in the Merger (the "Registration Shares"). Parent shall use its
best efforts to cause the Shelf Registration Statement to be declared effective
by the SEC no later than the Financial Result Date (as defined herein) and to
remain effective until the earlier of such time as all shares of Parent Common
Stock issued in the Merger are sold pursuant to the Shelf Registration
Statement or two years from the Effective Time (the "Effective Period");
provided that in the event that Parent determines in good faith that, because
it has under consideration a significant (as defined under Regulation S-X of
the SEC) acquisition or disposition or other material transaction that has not
been publicly disclosed or that it is in the process of preparing for filing
with the SEC a Report on Form 8-K or other form, the Shelf Registration
Statement may contain a material misstatement or omission, the Parent may cause
the Shelf Registration Statement to not be used for an aggregate period not to
exceed forty-five (45) days in any twelve-month period. Notwithstanding
anything to the contrary, at any time that a Stockholder or Optionholder wishes
to sell Registered Shares pursuant to the Shelf Registration Statement, it
shall give written notice to Parent no less than one (1) Business Day prior to
the intended transaction, and Parent shall use its best efforts to advise such
Stockholder or Optionholder as promptly as practicable, but in no event in more
than one (1) Business Day, whether the transaction may proceed, and such
Stockholder or Optionholder shall not consummate any transaction or deliver a
Prospectus in the event that Parent shall so notify such Stockholder or
Optionholder, which notice shall include the number of Business Days that the
Shelf Registration Statement may not be used.
(b) Parent shall use its best efforts to cause the shares of
Parent Common Stock issued in the Merger to be approved for listing on the
American Stock Exchange (the "AMEX") or other national securities exchange in
which Parent Common Stock is principally traded as soon as practicable after
the Effective Time, but no later than the Financial Result Date. Parent will
also use its best efforts to register or qualify such shares under such other
securities or blue sky laws of the United States and keep such registration or
qualification in effect for the Effective Period, and do any and all other acts
and things which may be reasonably necessary or advisable to enable the
Stockholders and Optionholders to have the right to sell or otherwise dispose
of the Registration Shares in such jurisdictions.
(c) In connection with any registration of the Registration
Shares pursuant to this Agreement, each Stockholder and Optionholder shall
furnish the Parent with such information concerning such Stockholder or
Optionholder as the Parent may reasonably request for use in the preparation of
the Shelf Registration Statement or any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto ("Prospectus"), and shall cooperate fully in the preparation
and filing of a Shelf Registration Statement. Each Stockholder and
Optionholder hereby agrees to severally, but not jointly, indemnify Parent, its
officers and directors, and each person, if any, who controls Parent within
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the meaning of Section 15 of the Securities Act, against any losses, claims,
damages and liabilities, joint or several, to which Parent or any such officer
or director or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue (or alleged untrue) statement of any
material fact contained in, or any material fact omitted from (or allegedly
omitted from) the Shelf Registration Statement or Prospectus covering the
Registration Shares, if such statement or omission was made in reliance upon
and in conformity with written information furnished to Parent by such
Stockholder expressly for use in the Shelf Registration Statement or Prospectus
covering the Registration Shares.
(d) Parent will, prior to filing the Shelf Registration
Statement, furnish to counsel selected by the holders of a majority of the
Registration Shares a copy of the draft of such document which is proposed to
be filed, which document will be subject to the review of such counsel. Parent
will promptly notify such counsel of any stop order issued or threatened by the
Commission with respect to the Shelf Registration Statement and will take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered. Parent will notify such counsel and each holder of
Registration Shares, during the effectiveness of the Shelf Registration
Statement, of the occurrence of an event, if such occurrence would require the
preparation of a supplement or amendment to the prospectus contained in the
Shelf Registration Statement in order for such prospectus to not (i) contain an
untrue statement of a material fact or (ii) omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading. Parent will provide such counsel with a copy of any such
supplement or amendment. Stockholders and Optionholders shall advise Parent of
any proposed change in the manner of distribution.
(e) Parent hereby indemnifies and holds harmless each
Stockholder and Optionholder, each of its officers and directors, partners and
each person deemed to be an "underwriter" under the Securities Act, if any, and
each person controlling such Stockholder within the meaning of Section 15 of
the Securities Act against any losses, claims, damages or liabilities
severally, but not jointly, to which the Stockholder or any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue (or alleged untrue) statement of any material fact contained in the
Shelf Registration Statement or any Prospectus covering the Registration Shares
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except insofar as
such untrue (or alleged untrue) statement or omission (or alleged omission)
shall have been based upon information furnished to Parent by the Stockholder
or such other individuals, and Parent will reimburse the Stockholder for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such claim, loss, damage, liability, action or
proceedings; provided, however, that none of the foregoing shall affect, in any
manner whatsoever, any of the representations, warranties, undertakings,
covenants, agreements and obligations of each Stockholder or Optionholder, and
the Company under this Agreement.
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(f) In circumstances in which any indemnity provided by the
preceding paragraphs of this Section 6.06 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
then each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect (i) the relative fault of the indemnifying party or
parties on the one hand and the indemnified party or parties on the other hand
in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) and (ii) any other relevant
equitable considerations. The relevant fault of the parties shall be
determined by reference to, among other things, whether the statement or
omission or alleged statement or omission relates to information supplied by
Parent or by any Stockholder and Optionholder, the parties' relative intents,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in
the circumstances.
(g) Notwithstanding the foregoing provisions of this Section
6.06, the liability of each Stockholder or Optionholder under this Section 6.06
shall be limited in an amount equal to the net proceeds of the Registrable
Shares sold by such Stockholder or Optionholder.
(h) Any Stockholder or Optionholder may transfer Parent Common
Stock as a distribution to its equity owners or as a bona fide gift, and such
transferee may sell such Parent Common Stock pursuant to the Shelf Registration
Statement, provided that such transferee shall agree in writing to be bound by
the provisions of this Section 6.06.
SECTION 6.07. Delivery of SEC Filings. Parent shall promptly
deliver to the Company or to the Company's counsel a copy of all of Parent's
filings with the SEC, from the date hereof to the Effective Time, on Forms 8-K,
10-Q or 10-K or any other document which the Parent deems to be appropriate for
provision to the holders of stock and options in the Company. Upon delivery of
any such document by Parent to the Company, the Company shall promptly deliver
to each holder of capital stock of the Company and each holder of Stock Options
a copy of such document, including all exhibits thereto, and an officer of the
Company shall promptly provide to Parent an affidavit of delivery of such
copies.
SECTION 6.08. Termination of Stockholders' Agreement. The
Stockholders agree to and approve of the termination, effective as of
immediately before the Effective Time, of that certain Stockholders Agreement
dated as of September 20, 1990, among the Company (formerly known as ADCOR
Acquisitions, Inc.) and the stockholders and spouses named therein (as so
executed and as adopted by other parties from time to time, the "Stockholders'
Agreement"). The Stockholders represent that they are the holders of at least
the Required Voting Percentage (as defined in the Stockholders' Agreement).
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SECTION 6.09. Best Efforts. The parties hereto shall use their
best efforts to consummate the Merger and the other transactions contemplated
hereby as soon as practicable. The parties agree to execute such amendments to
this Agreement and the Escrow Agreement as may be necessary to enable the
Merger to qualify for pooling of interests accounting treatment; provided that
such amendments do not adversely affect such party.
SECTION 6.10. Indemnification of Directors and Officers. The
Parent agrees that the Surviving Corporation will indemnify Xxxx X. Xxxxxxx,
Xx., Xxxx X. Xxxxxx and Xxxxx Xxxxxxx in respect of liabilities incurred by
them in connection with Texas Workers' Compensation Facility vs. Xxxxxxx
Drilling Company et al. (Cause No. 96-09211, Xxxxxx County, Texas), or any suit
or claim arising out of the same nucleus of facts, if and to the extent that
they would be entitled to indemnification pursuant to Article VI of the Bylaws
of the Company, as adopted on August 28, 1990.
SECTION 6.11. Closing Balance Sheet, Adjustments and Procedures.
(a) After sixty (60) calendar days and on or before ninety (90) calendar days
following the Effective Time, Parent will prepare and deliver to the
Shareholders' Representative, as representative of and on behalf of all of the
Stockholders and Optionholders, a balance sheet of the Company on and as of the
Effective Time (the "Closing Balance Sheet"). Parent shall make available to
the Shareholders' Representative all information which shall be in the
possession of Parent or the Surviving Corporation and which may be reasonably
required by the Shareholders' Representative for the Shareholders'
Representative to verify whether such Closing Balance Sheet is correct. Within
thirty (30) calendar days following delivery of the Closing Balance Sheet, the
Shareholders' Representative shall notify Parent whether he agrees with the
Closing Balance Sheet; provided, however, that, in the event that the
Shareholders' Representative shall fail to so notify Parent within such 30-day
period, the Shareholders' Representative shall be deemed to have agreed with
the Closing Balance Sheet. In the event that the Shareholders' Representative
disagrees with the Closing Balance Sheet, the Shareholders' Representative
shall provide Parent with a written notice specifying the basis for the
Shareholders' Representative's disagreement, and the Shareholders'
Representative and Parent shall work in good faith to reach agreement on the
composition of the Closing Balance Sheet, but, in the event that they shall not
agree within thirty (30) calendar days following the date of such written
notice, the matter will be referred to one of the "Big Six" independent public
accounting firms, other than Xxxxxx Xxxxxxxx or Coopers & Xxxxxxx, as the
Shareholders' Representative and Parent shall mutually agree. The fees and
disbursements of such accounting firm shall be borne equally by Parent and the
Stockholders and Optionholders. Such accounting firm shall examine the records
of the Company, and, within thirty (30) calendar days following the date upon
which such matter shall be referred to such accounting firm, such accounting
firm shall determine the disposition of any dispute with respect to the Closing
Balance Sheet (the date on which the determination is made, whether by the
accounting firm or by agreement of the parties, is referred to as the "Final
Determination Date"). Any such determination shall be final and binding on the
parties, and may be enforced by appropriate judicial or other proceedings.
(b) In the event that the common stockholders' equity as
reflected on the Closing Balance Sheet (the "Net Book Value") is less than
$21,244,000, then the amount of such
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difference shall be divided by $18.75 and the result obtained thereby (rounded
to the nearest whole share) shall be the number of shares of Parent Common
Stock that within two (2) Business Days of the Final Determination Date shall
be returned by the Stockholders and the Optionholders to Parent. Any shares of
Parent Common Stock required to be returned to Parent shall be released from
the Escrow Account. The number of such shares so returned shall be allocated
to the Stockholders and Optionholders, pro rata, based on each Stockholder's or
Optionholder's interest in shares of Parent Common Stock to be issued pursuant
to the consummation of the Merger. The Stockholders' and Optionholders'
obligation to return shares of Parent Common Stock shall be several and not
joint. In the event that the Net Book Value is greater than $21,244,000, there
shall be no return of shares required under this section.
(c) The Closing Balance Sheet shall be prepared in accordance
with GAAP applied in a manner consistent with the Company's historical
accounting policies and practices except that: (i) the Closing Balance Sheet
shall reflect as severance liabilities an amount equal to the Severance Amount
(to the extent not previously reflected in the Exchange Ratio pursuant to
Section 6.05(d)); (ii) the fixed assets shall be valued at the net book value
immediately prior to the Effective Time as carried on the Company's books,
without adjustment by Parent or the Company, from and after the Effective Time;
and (iii) all insurance claims, accounts receivable or other receivables that
are not collected prior to the date of delivery of the Closing Balance Sheet
shall be fully reserved for on the Closing Balance Sheet.
(d) Notwithstanding subsection (c) hereof, if (1) the items
reserved for pursuant to item (iii) of subsection (c) shall exceed the
corresponding reservation on the Interim Financial Statements, (2) there shall
be a deficiency in Net Book Value pursuant to subsection (b), and (3) any
collection of such items subsequent to delivery of the Closing Balance Sheet
occurs prior to the return of shares by the Stockholders and Optionholders
pursuant to subsection (b), then any deficiency in Net Book Value shall be
reduced by the amount of such collection.
(e) Upon any return of shares by the Stockholders and
Optionholders pursuant to subsection (b) hereof, if the items reserved for
pursuant to item (iii) of subsection (c) hereof shall exceed the corresponding
reservation on the Interim Financial Statements, then Parent shall assign to
the Stockholders and Optionees or their designee the right to collect a
quantity of such items which does not exceed the lesser of (1) the amount of
the deficiency in Net Book Value or (2) the amount, if any, by which the
reservation for such items pursuant to item (iii) of subsection (c) hereof
exceeds the corresponding reservation on the Interim Financial Statements.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under This
Agreement. The respective obligations of each party to effect the Merger and
the other transactions contemplated herein shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the
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extent permitted by applicable Law:
(a) No Order. No Governmental Entity or federal or state
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which
is in effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(b) HSR Act. The applicable waiting period under the HSR Act
shall have expired or been terminated.
(c) Consents and Approvals. All material consents, approvals
and authorizations legally required to be obtained to consummate the Merger
shall have been obtained from all required Governmental Entities.
SECTION 7.02. Additional Conditions to Obligations of Parent.
The obligations of Parent to effect the Merger and the other transactions
contemplated herein are also subject to the following conditions, each of which
may be waived, in whole or in part, to the extent permitted by applicable Law,
by Parent:
(a) Representations and Warranties. (i) Each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct when made and on and as of the Effective Time, as if made
on and as of such date, except where failure to be so true and correct would
not have a Company Material Adverse Effect, individually or in the aggregate,
and except that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date, except
where the failure to be so true and correct would not have a Company Material
Adverse Effect. Parent shall have received a certificate of the President of
the Company to such effect; and (ii) each of the representations and warranties
of the Stockholders and Optionholders contained in this Agreement shall be true
and correct when made and on and as of the Effective Time, as if made on and as
of such date, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Effective Time. Parent shall have received a certificate of the
President or Chief Financial Officer of the Company to that effect.
(c) Pooling. The Merger shall qualify for pooling of
interests accounting treatment.
(d) Third Party Consents and Waivers. The Company shall have
obtained consents and waivers, in form and substance reasonably satisfactory to
Parent, in respect of the contracts or agreements set forth on Schedule
7.02(d). For purposes of this section, material
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contracts shall include, but not be limited to, the Partnership Agreements to
which the Company or any of its subsidiaries is a party and any documents
related thereto.
(e) Company Material Adverse Effect. The Company shall not
have suffered a Company Material Adverse Effect.
(f) Legal Opinion. Parent shall have received the legal
opinion of Xxxxx & Xxxxx, L.L.P., covering the matters set forth on Exhibit
7.02(g) hereto.
SECTION 7.03. Additional Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger and the other
transactions contemplated in this Agreement is also subject to the following
conditions, each of which may be waived, in whole or in part, to the extent
permitted by applicable Law, by the Company:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Parent Sub contained in this
Agreement shall be true and correct when made and on and as of the Effective
Time as if made on and as of such date, except where the failure to be so true
and correct would not have a Parent Material Adverse Effect, and except that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, except where the
failure to be so true and correct would not have a Parent Material Adverse
Effect. Solely for purposes of this Section and in determining compliance with
the condition(s) set forth herein, any representation and warranty made by the
Parent in this Agreement shall be read and interpreted as if the qualification
stated therein with respect to materiality or Parent Material Adverse Effect
were not contained therein. The Company shall have received a certificate of
the President of Parent to such effect.
(b) Agreements and Covenants. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the President
of Parent to that effect.
(c) Parent Material Adverse Effect. The Parent shall not have
suffered a Parent Material Adverse Effect.
(d) Legal Opinion. The Company shall have received the legal
opinion of Xxxxx & XxXxxxxx, covering the matters set forth on Exhibit 7.03(d).
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
SECTION 8.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time:
(i) by mutual consent of Parent and the Company;
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(ii) by Parent, upon a material breach of any covenant
or agreement on the part of the Company set forth in this Agreement;
(iii) by the Company, upon a material breach of any
covenant or agreement on the part of Parent or Parent Sub set forth in this
Agreement;
(iv) by either Parent or Company, if there shall be any
order of a Governmental Entity which is final and nonappealable preventing the
consummation of the Merger;
(v) on or before 5:00 p.m., Houston time, on December
24, 1996, by Parent, in the event, as a result of its due diligence
investigation, Parent shall have determined, in its good faith judgment, that
(i) the results of the Company's recent operations are not supportable or (ii)
that there exist conditions which are materially adverse to the business or
assets of the Company which had not been communicated to Parent as of November
25, 1996; and
(vi) by either Parent or the Company, if the Merger
shall not have been consummated before April 30, 1997 (unless the failure to
consummate the Merger by such date shall be due to the action or failure to act
of the party seeking to terminate this Agreement).
SECTION 8.02. Investigation. Notwithstanding any of the
foregoing, the right of any party hereto to terminate this Agreement pursuant
to Section 8.01 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 8.03. Amendment. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto (in the case of
the Stockholders and the Optionholders, by a number of Stockholders and/or
Optionholders who are entitled to receive or have received, in the aggregate,
two thirds of the shares of Parent Common Stock to be issued at the Effective
Time if prior to the Effective Time, or a majority of the shares of Parent
Common Stock issued if subsequent to the Effective Time).
SECTION 8.04. Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance by the other
party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby (in the case of the
Stockholders and the Optionholders, by a number of Stockholders and/or
Optionholders who are entitled to receive or have received, in the aggregate,
two thirds of the shares of Parent Common Stock to be issued at the Effective
Time if prior to the Effective Time, or a majority of the shares of Parent
Common Stock issued if subsequent to the Effective Time).
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SECTION 8.05. Fees, Expenses and Other Payments. Each party
shall bear its own costs and expenses in connection with this Agreement and the
transactions contemplated hereby; provided however that certain severance costs
shall be allocated as set forth in Section 6.05.
SECTION 8.06 Indemnification, Hold Back and Escrow.
(a) Each Stockholder and Optionholder of the Company
severally, but not jointly, shall indemnify and defend the Parent and hold it
harmless, to the extent provided hereby (but only by means of deduction from
the Escrow Account as set forth herein, except as otherwise provided in
subsection (g) of this Section 8.06, if applicable), from and against any and
all losses, damages, liabilities, claims, demands, judgments, settlements,
costs and expenses of any nature whatsoever (including reasonable attorneys'
fees) (collectively, "Loss") resulting from or arising out of any of (i) the
breach of any representation or warranty or agreement of the Company or a
Stockholder or Optionholder contained herein; or (ii) Liabilities of the
Company, whether or not addressed by a representation or warranty, which were
created, incurred or arose from facts, events, conditions or circumstances
existing on or before the Effective Time, to the extent that, but only to the
extent that, Liabilities were (A) not reflected or reserved against on the face
of Interim Balance Sheet as adjusted for Liabilities incurred in the Ordinary
Course of Business since September 30, 1996 (provided that the items listed on
Schedule 3.08 shall be deemed to be incurred in the Ordinary Course of
Business) or, once agreement is reached on a Closing Balance Sheet as provided
in Section 6.07, for Liabilities not reflected on the face of the Closing
Balance Sheet, or (B) Liabilities for fees and expenses related to this
Agreement (to the extent, but only to the extent, that such fees and expenses
were not reflected in adjustments to the Exchange Ratio pursuant to Section
2.01(a)). No claim for indemnification pursuant to this Section 8.06(a) may be
made subsequent to the date one (1) year after the Effective Time or in respect
of a Loss in respect of accounts receivable or for which the Parent has
otherwise been previously reimbursed by the Stockholders and Optionholders.
(b) (i) If any third party shall notify Parent with respect
to any third party claim (a "Third Party Claim") that may give rise to a Loss,
then Parent shall promptly notify the Shareholders' Representative thereof in
writing; provided, however, that no delay on the part of Parent in notifying
the Shareholders' Representative shall relieve the Stockholders or
Optionholders from any obligation hereunder unless (and then solely to the
extent) such Stockholders or Optionholders thereby are prejudiced.
(ii) The Stockholders and Optionholders will have the
right to defend the Parent against the Third Party Claim with counsel of their
choice reasonably satisfactory to Parent so long as (A) the Stockholders and
Optionholders so notify the Parent in writing within fifteen (15) days,
acknowledging that such claim is in respect of a Loss described in Section
8.06(a); (B) the amount of value in the Escrow Account (as defined in the
Escrow Agreement) exceeds the sum of the damages asserted in the Third Party
Claim and a reasonable estimate of the Stockholder's costs and expenses
(including attorneys' fees) of defending the Third Party Claim; (C) the Third
Party Claim involves only money damages and does not seek an injunction
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or other equitable relief; (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment of the
Parent, likely to establish a precedential custom or practice materially
adverse to the continuing business interests of the Parent; and (E) the
Stockholders and Optionholders conduct the defense of the Third Party Claim
actively and diligently. In the event of any such defense, the Stockholders
and Optionholders shall be reimbursed from the Escrow Account promptly and
periodically for the costs of such defense (including reasonable attorneys'
fees and expenses).
(iii) So long as the Stockholders and Optionholders are
conducting the defense of the Third Party Claim in accordance with Section
8.06(b)(ii), (A) the Parent may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the Parent
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Shareholders' Representative (which consent will not be withheld unreasonably);
and (C) the Stockholders and Optionholders will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Parent (which consent will not be
withheld unreasonably).
(iv) In the event any of the conditions in Section
8.06(b)(ii) is or becomes unsatisfied, however, (A) the Parent may defend
against the Third Party Claim in any manner it reasonably may deem appropriate;
provided, however, that the Parent shall not consent to the entry of any
judgment or enter into any settlement or agreement to settle a Third Party
Claim without the prior written consent of the Shareholders' Representative,
which consent shall not be unreasonably withheld; (B) the Parent shall be
reimbursed from the Escrow Account promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses); and (C) the Stockholders and Optionholders will remain
responsible for any Loss the Parent actually suffers resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Section 8.06.
(c) (i) Each Stockholder and each Optionholder of the
Company hereby agrees that Parent shall hold back and place into escrow
pursuant to the Escrow Agreement (the "Escrow Account"), an aggregate of
$6,375,000 in deemed value ("Indemnification Amount"), to secure the indemnity
obligations provided for herein. Initially, at the Effective Time, the
Indemnification Amount shall be represented by ten percent (10%), rounded to
the nearest whole share, of the total number of shares of Parent Common Stock
to be received by each Stockholder and each Optionholder. Each Stockholder and
each Optionholder may, commencing on the later of (i) the date on which the
Shelf Registration Statement is declared effective by the SEC and (ii) the
Financial Result Date, cause all (but not less than all) of its shares of
Parent Common Stock held in the Escrow Account to be sold in accordance with
the method of distribution set forth in the Shelf Registration Statement;
provided that such Stockholder or Optionholder shall deposit in the Escrow
Account no later than the Business Day after the settlement date of such sale
an amount of cash equal to the proceeds of such sale, and further provided that
such proceeds are greater than $18.75 per share of Parent Common Stock. The
Stockholders and Optionholders shall not be required to indemnify Parent unless
the aggregate of all amounts for which
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indemnity would otherwise be due exceeds $100,000 (the "Threshold Amount"), in
which case the Stockholders and Optionholders shall be responsible for the full
amount of such Liability excluding the Threshold Amount. The Assets in Escrow
shall be referred to as the "Escrow Assets."
(ii) At any time Parent shall have a claim for
indemnification, Parent shall submit such claim to the Shareholders'
Representative and within thirty (30) calendar days thereof the Shareholders'
Representative shall notify Parent, in writing, whether he agrees with such
claim; provided, however, that in the event that the Shareholders'
Representative shall fail to so notify Parent, the Shareholders' Representative
shall be deemed to have agreed to the release of securities or cash from the
Escrow Account. In the event that the Shareholders' Representative notifies
Parent that he disagrees with such claim, the Shareholders' Representative
shall provide Parent with a written notice specifying the basis for such
disagreement and, if the Shareholders' Representative and Parent shall be
unable to reach agreement within thirty (30) days, the matter will be submitted
to arbitration pursuant to the rules of the American Arbitration Association in
Houston, Texas, before a panel of three (3) arbitrators, the cost of which
shall be borne equally by the Stockholders and Optionholders, on one hand, and
Parent on the other. Any determination by the arbitrators shall be final and
binding on the parties.
(iii) For purposes of calculating quantities of shares to
be paid to the Parent pursuant to this Section 8.06, each share of Parent
Common Stock shall be valued at $18.75 per share, and payments in cash
deposited pursuant to Subsection 8.06(c)(i) shall be made in an amount equal to
the product of number of shares due to be paid multiplied by the proceeds
received per share. Any and all distributions to and from the Escrow Account
shall be allocated among the Stockholders and Optionholders, pro rata, based on
each Stockholder's or Optionholder's interest in shares of Parent Common Stock
to be issued pursuant to the consummation of the Merger (or cash substituted
therefore), as separate subaccounts for each holder. In no event shall the
Stockholders and Optionholders be required to indemnify Parent from Assets
other than the Escrow Assets in the Escrow Account, including the cash required
to be placed in the Escrow Account pursuant to Subsection 8.06(c)(i), if
applicable, except as otherwise provided in subsection (g) of this Section
8.06, if applicable. In the event that the Merger is consummated, these
indemnification provisions shall be Parent's sole remedy for the matters
covered in this Section.
(d) For the purposes of this Section 8.06, Stockholders and
Optionholders holding a majority of the Parent Common Stock in the Escrow
Account may, by written notice signed by them and delivered to Parent, appoint
any other individual to act in the place and stead of the Shareholders'
Representative. In the event of the death, incapacity or resignation of the
Shareholders' Representative, if no such replacement is appointed within thirty
(30) days, Parent may designate an interim replacement to serve until such
appointment.
(e) The remedy provided for in this Section 8.06 shall be the
only remedy available to Parent or Parent Sub following the Effective Time with
respect to claims for Losses described in Section 8.06(a).
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(f) In connection with this Agreement and the Escrow Agreement
and the transactions contemplated hereby and thereby, respectively, the Company
and the Stockholders and Optionholders agree that the Stockholders'
Representative shall not be liable for any error of judgment or for any act
done or omitted by the Stockholders' Representative in good faith or for any
mistake in fact or law, except its own willful misconduct or gross negligence.
(g) Notwithstanding anything to the contrary, in the event
that (i) shares of Parent Common Stock are released from the Escrow Account as
a result of the Net Book Value being less than $21,244,000 as contemplated by
Section 6.11 and (ii) the Escrow Assets are reduced to zero as a result of
indemnification claims made by Parent, each Stockholder and Optionholder shall
be, severally, but not jointly, obligated to return to Parent (i) its pro rata
share of the number of such shares of Parent Common Stock that were released
from the Escrow Account to Parent in respect of any Net Book Value Adjustment
pursuant to Section 6.11, or (ii) an amount of cash equal to the product of (x)
the number of shares of Parent Common Stock in (i) above, and (y) $18.75 per
share.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and
Agreements. (a) Except as set forth in Section 9.01(b), the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this
Agreement shall terminate on the first anniversary of the Effective Time,
except that the representations, warranties and agreements set forth in Section
3.03, and Article III A, and Section 6.06, Section 6.07 and Article VIII and
Article IX shall not so terminate.
SECTION 9.02. Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date delivered, mailed or transmitted, and
shall be effective upon receipt, if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to the
telecopier number specified below:
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(a) If to Parent or Parent Sub:
Xxxxxx Industries, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxx & XxXxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
(b) If to the Company:
ADCOR-Xxxxxxx Drilling Company
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, Xx.
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxx, L.L.P.
Xxx Xxxxx Xxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: J. Xxxxx Xxxxxxxx, Jr., Esq.
Telecopier No.: (000) 000-0000
SECTION 9.03. Certain Definitions. For purposes of this
Agreement, the term:
"Affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
"Affiliated Group" means any affiliated group within the meaning
of Code Sec. 1504 or any similar group defined under a similar provision of
state, local or foreign law;
"Agreement" as defined in the Preamble;
"AMEX" as defined in Section 6.06(b);
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"Assets" means any and all properties and assets (real, personal
or mixed, tangible or intangible) of any person;
"Balance Sheet" as defined in Section 3.07;
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence;
"Blue Sky Laws" as defined in Section 3.05(b);
"Business Day" means any day other than a day on which banks in
the State of Texas are authorized or obligated to be closed;
"Certificate of Merger" as defined in Section 1.02;
"Certificates" as defined in Section 2.02(a);
"Code" means the Internal Revenue Code of 1986, as amended;
"Company" as defined in the Preamble;
"Company Common Stock" as defined in Section 2.01(a);
"Company Employee Benefit Plan" as defined in Section 3.24;
"Company Material Adverse Effect" means any change or effect
that, individually or when taken together with all other such changes or
effects, is or is reasonably likely to be materially adverse to the business,
properties, assets, condition (financial or otherwise), liabilities, operations
or prospects of the Company and its subsidiaries taken as a whole, at the time
of such change or effect. A Company Material Adverse Effect shall be deemed to
exist if there shall occur any event which causes or may reasonably be expected
to cause or result in estimable monetary loss which, individually or when
aggregated with all other events, exceeds $2,000,000;
"Company Permits" as defined in Section 3.06;
"Company Stock Options" as defined in Section 2.05;
"Competing Transaction" as defined in Section 5.02(g);
"Contract" of any Person means any contract, agreement or
instrument of any type whatsoever (i) to which such Person is a party and by
which such Person either has made a
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binding undertaking to perform an obligation or is entitled to any property or
right, or (ii) by which any of the assets of such Person is bound;
"Control" (including the terms "controlled", "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise;
"Delaware Law" as defined in the Preamble;
"Dissenting Shares" as defined in Section 2.04;
"Effective Period" as defined in Section 6.06(a);
"Effective Time" as defined in Section 1.02;
"Employee Benefit Plan" means (a) any bonus, incentive
compensation, profit sharing, retirement, pension, group insurance, death
benefit, group health, medical expense reimbursement, workers' compensation,
dependent care, flexible benefits or cafeteria, stock option, stock purchase,
stock appreciation rights, savings, deferred compensation, consulting,
severance pay or termination pay, vacation pay, life insurance, disability,
welfare or other employee benefit or fringe benefit plan, program or
arrangement; or (b) any plan, program or arrangement which is an Employee
Pension Benefit Plan, Employee Welfare Benefit Plan or Multiemployer Plan.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2);
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1);
"Encumbrances" as defined in Section 3.03(b);
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes;
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended;
"ERISA Affiliate" means each person (as defined in Section 3(9)
of ERISA) that together with the Company or any of its subsidiaries (or any
person whose liabilities the Company or any of its subsidiaries has assumed or
is otherwise subject to) would be considered or has been a single employer
under Section 4001(b) of ERISA or would be considered or has been a member of
the same "controlled group", under common control, a member of the same
affiliated service group or otherwise a single employer within the meaning of
Section 414(b), (c), (m) and (o) of the Code (provided, however, that when the
subject of the provision is a Multiemployer Plan only subsections (b) and (c)
of Section 414 of the Code shall be taken into account).
"Exchange Agent" as defined in Section 2.02(a);
"Exchange Ratio" as defined in Section 2.01(a);
"Extremely Hazardous Substance" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended;
"Fair Market Value" of any Asset means the value that would be
obtained in an arm's length transaction between an informed and willing buyer
and an informed and willing seller;
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21);
"Financial Result Date" as defined in Section 6.02;
"Financial Statements" as defined in Section 3.07;
"GAAP" means United States generally accepted accounting
principles as in effect from time to time;
"Government Entities" as defined in Section 3.05(b);
"HSR Act" as defined in Section 3.05(b);
"Indemnification Amount" as defined in Section 8.06(c);
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill
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associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever form
or medium);
"Interim Balance Sheet" as defined in Section 3.07;
"Interim Financial Statements" as defined in Section 3.07;
"Knowledge" or "Known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may be,
has actual knowledge of such matter;
"Laws" as defined in Section 3.05(a);
"Liabilities" as defined in Section 3.08;
"Lien" means any lien, charge, encumbrance, mortgage, conditional
sale agreement, title retention agreement, financing lease, pledge or security
interest of any kind or type and whether arising by Contract or under Law;
"Loss" as defined in Section 8.06(a);
"Merger" as defined in the Preamble;
"Merger Consideration" as defined in Section 2.02(a);
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37);
"Optionholders" as defined in the Preamble;
"Ordinary Course of Business" with respect to any entity, means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency) of that entity;
"Parent" as defined in the Preamble;
"Parent Common Stock" as defined in Section 2.01(a);
"Parent Material Adverse Effect" shall mean any change or effect
that,
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individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
assets, condition (financial or otherwise), liabilities, operations or
prospects of Parent and its subsidiaries, taken as a whole at the time of such
change or effect. A Parent Material Adverse Effect shall be deemed to exist if
there shall occur any event which causes or may reasonably be expected to cause
or result in estimable monetary loss which, individually or when aggregated
with all other events, exceeds $60,000,000;
"Parent Preferred Stock" as defined in Section 4.03;
"Parent SEC Reports" as defined in Section 4.07;
"Parent SEC Reports" as defined in Section 4.07;
"Parent Sub" as defined in the Preamble;
"PBGC" means the Pension Benefit Guaranty Corporation;
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof);
"Prohibited Transaction" has the meaning set forth in ERISA Sec.
406 and Code Sec. 4975;
"Prospectus" as defined in Section 6.06(c);
"Proxy" as defined in Section 2.02A;
"Registration Shares" as defined in Section 6.06(a);
"Reportable Event" has the meaning set forth in ERISA Sec. 4043;
"Representatives" as defined in Section 5.04;
"SEC" as defined in Section 4.07;
"Securities Act " means the Securities Act of 1933, as amended;
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended;
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments
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under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money;
"Shelf Registration Form" as defined in Section 6.06(a);
"Significant Subsidiary" or "Significant Subsidiaries" means any
subsidiary of the Company or Parent, as the case may be, that would constitute
a Significant Subsidiary of such party within the meaning of Rule 1-02 of
Regulation S-X of the SEC;
"Stock Options" as defined in Section 3.03(a);
"Stockholder" as defined in the Preamble;
"Subsidiary" or "Subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation, partnership,
joint venture or other legal entity of which the Company, Parent, the Surviving
Corporation or such other person, as the case may be (either alone or through
or together with any other subsidiary), owns, directly or indirectly, 50% or
more of the capital stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity;
"Surviving Corporation" as defined in Section 1.01;
"Tax" or "Taxes" shall mean any and all taxes, charges, fees or
levies, payable to any federal, state, local or foreign taxing authority or
agency, including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license,
payroll, withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise, stamp,
windfall profits, transfer and capital gains taxes, (ii) custom duties,
imposts, charges, levies or other similar assessments of any kind, and (iii)
interest, penalties and additions to tax imposed with respect thereto;
"Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof; and
"Third Party Claim" as defined in Section 8.06.
SECTION 9.04. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of
this Agreement is determined to be invalid, illegal or incapable of being
enforced by any rule of law or public
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policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
SECTION 9.06. Entire Agreement. This Agreement (together with
the Exhibits) constitutes the entire agreement of the parties and supersedes
all prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not be assigned
by operation of law or otherwise except Parent Sub may, without the Company's
approval, assign its interests to a wholly owned subsidiary of Parent.
SECTION 9.08. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 9.09. Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of any party hereto in the exercise
of any right hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are in addition to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW.
SECTION 9.11. JURISDICTION. EXCEPT WITH RESPECT TO MATTERS THAT
THE PARTIES HERETO HAVE AGREED TO SUBMIT TO BINDING ARBITRATIONS, EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES
DISTRICT COURT LOCATED IN THE STATE OF DELAWARE OR ANY COURT OF THE STATE OF
DELAWARE, ANY ACTION, SUIT OR PROCEEDING ARISING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE BROUGHT
ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS OR
ANY OTHER OBJECTION TO VENUE THEREIN); PROVIDED, HOWEVER, THAT SUCH CONSENT TO
JURISDICTION IS SOLELY FOR THE PURPOSE REFERRED TO IN THIS SECTION 9.11 AND
SHALL NOT
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BE DEEMED TO BE A GENERAL SUBMISSION TO THE JURISDICTION OF SAID COURTS OR IN
THE STATE OF DELAWARE OTHER THAN FOR SUCH PURPOSE.
SECTION 9.12. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused
this Agreement to be executed as of the date first written above by their
respective officer thereunto duly authorized.
XXXXXX INDUSTRIES, INC.
By:
-----------------------------------------
Name:
Title:
NABORS ACQUISITION CORP. 96
By:
-----------------------------------------
Name:
Title:
ADCOR-XXXXXXX DRILLING COMPANY
By:
-----------------------------------------
Name:
Title:
STOCKHOLDERS OF ADCOR-XXXXXXX DRILLING
COMPANY
------------------------------------------
[Name]
shares
-------
------------------------------------------
[Name]
shares
-------
I, ______________, am the spouse of _________ and hereby agree
and acknowledge that I will be bound by the terms, provisions, representations
and warranties of this Agreement as a Stockholder with respect to any shares of
stock of the Company beneficially owned by me.
------------------------------------------
[Name]
OPTIONHOLDERS OF ADCOR-XXXXXXX
DRILLING COMPANY
------------------------------------------
[Name]
