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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT ("Agreement") is made and entered into as of
the 14th day of March 2000, by and between XXXXX XXXXXXX (SR.), EMMA XX XXXXXXX,
XXXX XXXXXXX, XXXXXX XXXXXX, and XXXXX X. XXXXXXX, XX. (the "Stock Sellers"),
GOLD STAR SERVICE COMPANY, INC., a New Mexico corporation (the "Company"), GOLD
STAR SWD, LTD. CO., a New Mexico limited liability company ("GSSWD"), and SIERRA
WELL SERVICE, INC., a Delaware corporation ("Purchaser").
RECITALS:
A. The Company is based out of Eunice, New Mexico, and is principally
engaged in the well servicing and transportation businesses in West Texas and
Southeastern New Mexico (the "Businesses").
B. The Stock Sellers own all of the issued and outstanding capital
stock of the Company (the "Stock").
C. GSSWD is an affiliate of the Company and owns and operates a salt
water disposal well, a brine station, and related assets in Lea County, New
Mexico, as hereinafter more particularly described.
D. Purchaser desires to acquire all of the Stock and all of the assets
of GSSWD, and the Stock Sellers and GSSWD are respectively willing to sell the
same to Purchaser, upon and subject to the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, and covenants which are hereinafter set forth, and
other good and valuable consideration, the legal sufficiency of which are hereby
acknowledged, the parties hereto have agreed and do hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.01 THE TRANSACTIONS. Subject to all of the terms and
conditions of this Agreement, the Stock Sellers and GSSWD hereby agree to sell,
transfer, and deliver, and Purchaser hereby agrees to purchase, pay for, and
accept, at the Closing (hereinafter defined), all of the Stock and all of the
assets of GSSWD as of Closing, whether tangible or intangible (the "GSSWD
Assets"), including, without limitation, all rights of GSSWD in the salt water
disposal well, the brine station and the related facilities and equipment that
are more particularly described on EXHIBIT A attached hereto and made a part
hereof (the "Disposal and Brine Facilities").
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Section 1.02 PRE-CLOSING DISTRIBUTION OF CERTAIN ASSETS. At or prior to
Closing, the Company shall distribute to the Stock Sellers, without
representation, warranty, or recourse by or upon the Company, and without
adverse tax effect upon the Company, all of its right, title and interest in and
to the assets listed on attached SCHEDULE 1.02 (collectively, the "Excluded
Assets"). In connection with such distribution, upon Closing, the Stock Sellers
agree to indemnify and hold the Company and Purchaser harmless from and against
any and all claims, demands, causes of action, liabilities, losses, and/or
expenses (including, without limitation, reasonable attorneys' fees and other
expenses of litigation) arising from or in connection with the acquisition,
ownership, operation, use, or distribution of the Excluded Assets, regardless of
whether arising prior or subsequent to the distribution thereof to the Stock
Sellers, specifically including, without limitation, any adverse tax
consequences occasioned to or suffered by the Company or Purchaser as a
consequence of the distribution of the Excluded Assets to the Stock Sellers
pursuant to this Section 1.02.
Section 1.03 PURCHASE PRICE. Subject to adjustment as hereinafter
provided in this Agreement, the total purchase price ("Purchase Price") for the
Stock and the GSSWD Tangible Assets (exclusive of the $50,000 total compensation
payable by Purchaser for certain covenants of non-competition and
non-interference pursuant to Section 8.02(e)) is a sum equal to (A)
$1,800,000.00, plus or minus (B) the "net financial assets" (as defined below)
of the Company and its subsidiaries and GSSWD as of the Closing Date ("NFA"),
and (C) minus, to the extent not reflected as a liability on the Audited Balance
Sheet (hereinafter defined), all amounts necessary to fully retire any vehicle
lease obligations of the Company and its subsidiaries and GSSWD as of the
Closing Date, payable by Purchaser to the Stock Sellers and GSSWD as follows:
(1) Purchaser shall pay to the Stock Sellers in
immediately available funds at the Closing a sum
equal to (a) $1,075,000.00, plus or minus (b) fifty
percent (50%) of NFA allocable to the Company and its
subsidiaries, as preliminarily estimated and finally
adjusted pursuant to Section 5.09, minus, to the
extent not reflected as a liability on the Audited
Balance Sheet (hereinafter defined), minus (c) all
amounts necessary to fully retire any vehicle lease
obligations of the Company and its subsidiaries as of
the Closing Date;
(2) Purchaser shall execute and deliver to the Stock
Sellers at Closing its promissory note (the "Note")
in the original principal amount of $600,000.00,
bearing interest at a floating rate equal to the
prime rate of interest quoted in the Wall Street
Journal published on the Friday most immediately
preceding the applicable quarterly adjustment date,
and payable to the order of the Stock Sellers on or
before one year from date, said Note to be
substantially identical in form and substance to that
attached hereto as EXHIBIT B, to be convertible into
equity in Sierra under certain circumstances as
therein specified, and to be secured by a security
interest upon the vehicles and other rolling stock of
the Company as of Closing that is junior in priority
to any liens upon such assets as of the Closing, as
created by security agreement
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ACQUISITION AGREEMENT PAGE 2
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substantially identical in form and substance to that
attached hereto as EXHIBIT C (the "Security
Agreement");
(3) Purchaser shall pay to GSSWD in immediately available
funds at the Closing a sum equal to (a) $125,000.00,
plus or minus (b) any NFA allocable to the GSSWD, as
preliminarily estimated and finally adjusted pursuant
to Section 5.09; and
(4) Purchaser shall pay the balance, if any, of the
Purchase Price to the Stock Sellers in immediately
available funds pursuant to and at the conclusion of
the post-Closing accounting procedures set forth in
Section 5.09 below.
As used in this Agreement, "net financial assets" means the monetary
difference between the account group "Total Current Assets" and the account
group "Total Liabilities" (excluding "Deferred Income Taxes") as such account
groups are shown on the Audited Balance Sheet and then adjusted or converted as
of the Closing Date pursuant to Section 5.09 [i.e. (TCA) -(TL-DIT) = net
financial assets].
Notwithstanding the foregoing, as among the Stock Sellers, that portion
of the Purchase Price attributable to the Stock shall be paid and payable to and
among the Stock Sellers, in accordance with their respective interests in the
Stock as shown on attached SCHEDULE 2.11, as the Stock Sellers shall jointly
direct Purchaser in writing at Closing under this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE STOCK SELLERS, THE COMPANY, AND GSSWD
The Stock Sellers, the Company, and GSSWD hereby jointly and severally
represent and warrant to Purchaser as of the date of this Agreement and as of
the Closing Date as follows:
Section 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company
and its subsidiary, Xxxxx Xxxxxxxx, Inc., a New Mexico corporation ("Xxxxx"),
are corporations duly organized, validly existing, and in good standing under
the laws of New Mexico and have the requisite power and authority to own, lease,
and operate its assets and to carry on its business as now being conducted.
GSSWD is a limited liability company duly organized, validly existing, and in
good standing under the laws of New Mexico and has the requisite power and
authority to own, lease, and operate its assets and to carry on its business as
now being conducted. The Company, Xxxxx, and GSSWD have not received any notice
of proceedings relating to the revocation or modification of any such
authorizations. The Company, Xxxxx, and GSSWD are duly qualified or licensed to
do business and are in good standing in each jurisdiction where the character of
the assets owned, leased, or operated by them or the nature of their activities
makes such qualification or
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ACQUISITION AGREEMENT PAGE 3
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licensing necessary. Xxxxx is a wholly owned subsidiary of the Company. The
Company does not have any other subsidiaries. GSSWD does not have any
subsidiaries. Except for the equity ownership of the Company in Xxxxx, none of
the Company, Xxxxx, or GSSWD directly or indirectly owns any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, or other
business association or entity.
Section 2.02 GOVERNING DOCUMENTS. The articles of incorporation and the
bylaws of the Company and Xxxxx and the articles of organization and operating
agreement of GSSWD, true and correct copies of which have been furnished to
Purchaser, are in full force and effect and have not been modified, amended, or
rescinded. The Company, Xxxxx, and GSSWD are not in violation of their
respective articles of incorporation or organization or bylaws or operating
agreement.
Section 2.03 CAPITALIZATION OF THE COMPANY AND XXXXX. The authorized
capital stock of the Company consists of 50,000 shares of common stock, par
value $1.00 per share. As of the date hereof, 1,000 shares of common stock of
the Company are issued and outstanding, all of which are validly issued, fully
paid, and nonassessable (and collectively constitute the Stock). The authorized
capital stock of Xxxxx consists of 10,000 shares of common stock, no par value.
As of the date hereof, 2,500 shares of common stock of Xxxxx are issued and
outstanding, all of which are validly issued, fully paid, and nonassessable and
are owned by the Company. There are no options, warrants, or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or Xxxxx or obligating the Company or
Xxxxx to issue or sell any shares of capital stock of, or other equity interests
in, the Company or Xxxxx. There are no obligations, contingent or otherwise, of
the Company or Xxxxx to repurchase, redeem, or otherwise acquire any shares of
their stock or to provide funds to or make any investment (in the form of a
loan, capital contribution, or otherwise) in any other person or entity.
Section 2.04 AUTHORITY RELATIVE TO THIS AGREEMENT. The Stock Sellers,
the Company, and GSSWD have full power and authority to execute and deliver this
Agreement and to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Stock Sellers, the Company, and GSSWD and their
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action and no other proceedings on the part of the
Stock Sellers, the Company, Xxxxx, or GSSWD are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by the Stock Sellers, the Company,
and GSSWD and constitutes the legal, valid, and binding obligations of the Stock
Sellers, the Company, and GSSWD, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or limiting creditors' rights or by legal
principles of general applicability governing availability of equitable
remedies.
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ACQUISITION AGREEMENT PAGE 4
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Section 2.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Stock
Sellers, the Company, and GSSWD do not, and the performance of this Agreement by
the Stock Sellers, the Company, and GSSWD will not (i) conflict with or violate
the articles of incorporation, articles of organization, bylaws, operating
agreement, or other governing documents of the Company, Xxxxx, or GSSWD, (ii)
conflict with or violate any laws, statutes, rules, regulations, or
pronouncements of any court, tribunal, or governmental agency, whether federal,
state, or local, (collectively, "Laws") applicable to the Stock Sellers, the
Company, Xxxxx, or GSSWD or by which they or their respective assets are bound
or affected, or (iii) result in any material breach of or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the assets of the Stock Sellers, the Company, Xxxxx, or
GSSWD pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, or other instrument or obligation to which
the Stock Sellers, the Company, Xxxxx, or GSSWD is a party or by which any of
them or their respective assets are bound or affected.
(b) The execution and delivery of this Agreement by the Stock
Sellers, the Company, and GSSWD do not, and the performance of this Agreement by
the Stock Sellers, the Company, and GSSWD will not, require any consent,
approval, authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign.
Section 2.06 COMPLIANCE; PERMITS. The Company, Xxxxx, and GSSWD are not
in conflict with, or in default under or violation of, (i) any federal, state,
or local laws applicable to the Company, Xxxxx, or GSSWD or by which the
Company, Xxxxx, or GSSWD or any of the assets of the Company, Xxxxx, or GSSWD
are bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company, Xxxxx, or GSSWD is a party or by which the Company or its
assets or Xxxxx or its assets or GSSWD or its assets are bound or affected. The
Company, Xxxxx, and GSSWD possess all permits, licenses, leases, agreements, and
authorizations of governmental authorities and any other applicable persons or
entities necessary to or for the operation of its assets, properties, and
business, all of which permits, licenses, leases, agreements, and authorizations
are in full force and effect.
Section 2.07 REPORTS AND FINANCIAL STATEMENTS OF THE COMPANY. The
combined balance sheet of the Company and GSSWD for the period ending as of
December 31, 1999 (the "Audited Balance Sheet") and the combined statement of
earnings, statement of changes in equity, and statement of changes in cash flows
of the Company and GSSWD for the period ending as of December 31, 1999, copies
of all of which are attached hereto as EXHIBIT D (collectively, the "Financial
Statements"), are true and complete in all material respects, fairly represent
the financial position and results of operations of the Company, Xxxxx, and
GSSWD as of and for the periods shown, and were prepared in accordance with
generally accepted accounting principles. None of the Financial Statements
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein not misleading.
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ACQUISITION AGREEMENT PAGE 5
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Except as and to the extent of (i) liabilities reflected or reserved
against in the Audited Balance Sheet and (ii) liabilities which have arisen
since the date of the Audited Balance Sheet in the ordinary course of business
and which have been fully disclosed to Purchaser in writing, the Company, Xxxxx,
and GSSWD do not have any liabilities or obligations (whether accrued, absolute
or contingent), and including without limitation, any liabilities resulting from
failure to comply with any laws or any federal, state, or local tax liabilities
due or to become due whether (a) incurred in respect of or measured by income
for any financial statement or balance sheet period, or (b) arising out of
transactions entered into, or any state of facts existing, prior or subsequent
thereto.
Section 2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1999, except as shown on attached SCHEDULE 2.08 or as otherwise expressly
permitted by this Agreement, the Company, Xxxxx, and GSSWD have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, except as shown on SCHEDULE 2.08, there has not
been (a) any material adverse change in the financial condition, results of
operations, or business of the Company, Xxxxx, or GSSWD, (b) any material
damage, destruction, or loss (whether or not covered by insurance) with respect
to any assets of the Company, Xxxxx, or GSSWD, including, without limitation,
the GSSWD Tangible Assets, (c) any change by the Company, Xxxxx, or GSSWD in its
accounting methods, principles, or practices, (d) any entry by the Company,
Xxxxx, or GSSWD into any commitments or transactions material to the Company,
Xxxxx, or GSSWD, (e) any declaration, setting aside, or payment of any dividends
or distributions in respect of shares of the Stock or any redemption, purchase,
or other acquisition of any of the capital stock of the Company, Xxxxx, or
GSSWD, (f) any increase or decrease in or establishment or termination 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 of the Company, Xxxxx,
or GSSWD or any other increase in the compensation payable or to become payable
to any officers or key employees of the Company, Xxxxx, or GSSWD (g) any
incurrence of any indebtedness or other obligations or liabilities by the
Company, Xxxxx, or GSSWD, (h) any proposed law or regulation or any actual event
or condition of any character that is known to the Seller or the Company or
Xxxxx or GSSWD that materially adversely affects the business or future
prospects of the Company, Xxxxx, or GSSWD, (h) any claim, litigation, event, or
condition of any character that materially adversely affects the business or
future prospects of the Company, Xxxxx, or GSSWD, (i) any issuance or purchase
of, or agreement to issue or purchase shares of the capital stock or other
securities of the Company, Xxxxx, or GSSWD, (j) any mortgage, pledge, lien, or
encumbrance made or agreed to be made on any of the assets or properties of the
Company, Xxxxx, or GSSWD, (k) any sale, transfer, other disposition of, or
agreement to sell, transfer, or dispose of the properties or assets, tangible or
intangible, of the Company, Xxxxx, or GSSWD, except as expressly permitted by
this Agreement and except in the ordinary course of business and then only for
full and fair value received, (l) any loans, advances, or agreements with
respect to any loans or advances, other than to customers in the ordinary course
of business and that have been properly reflected as "accounts receivable" on
the books of the Company, Xxxxx, and GSSWD; (m) any transaction outside the
ordinary course of business of the Company, Xxxxx, and GSSWD, (n) any capital
expenditure by the Company, Xxxxx, or GSSWD in excess of $10,000, or (o) any
agreement by the Stock Sellers, the Company, Xxxxx, or GSSWD to do any of the
items described in Subparagraphs (a) through (n) above.
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ACQUISITION AGREEMENT PAGE 6
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Section 2.09 ABSENCE OF LITIGATION. There are no claims, actions,
proceedings, or investigations pending or, to the knowledge of the Stock
Sellers, the Company or GSSWD, threatened against the Company, Xxxxx, or GSSWD
or any of the assets of the Company, Xxxxx, or GSSWD before any court,
arbitrator, or administrative, governmental, or regulatory authority or body,
domestic or foreign. As of the date hereof, none of the Company, Xxxxx, and
GSSWD nor their assets are subject to any order, writ, judgment, injunction,
decree, determination, or award.
Section 2.10 EMPLOYEE BENEFIT PLANS. Except as set forth on attached
SCHEDULE 2.10 (collectively, the "Plans"), the Company and Xxxxx do not have any
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended and the regulations thereunder), any
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, medical, accident, life insurance, disability income, retiree
medical or life insurance, supplemental retirement, severance, and other benefit
plans, programs, or arrangements, or any sick leave and vacation plans. The
Company and Xxxxx, as applicable, have operated the Plans in compliance with all
applicable federal, state, and local laws and regulations, has received no
notice of any claims or violations of any laws and regulations applicable to the
Plans, and, has no existing obligations or liabilities under the Plans which
have not been fully funded or reserved for on the Financial Statements. Any and
all such plans, programs, and arrangements previously adopted and subsequently
terminated by the Company or Xxxxx were duly and validly terminated in
accordance with all applicable laws and the Company and Xxxxx have no continuing
obligations or liabilities and has received no notice of any claims or
violations with respect to such former plans, programs, and arrangements.
Section 2.11 TITLE TO STOCK. The Stock Sellers own good and marketable
title to all of the Stock, free and clear of liens, claims, and encumbrances of
any kind or character.
Section 2.12 ASSETS OF THE COMPANY, XXXXX, AND GSSWD.
(a) SCHEDULE 2.12(a) attached hereto contains a complete and
correct description of all real property which is, or as of the Closing will be,
owned by or leased to the Company, Xxxxx, or GSSWD or in which the Company,
Xxxxx, or GSSWD otherwise holds, or as of the Closing will hold, contractual
rights, together with all applicable real property leases and contracts. All
such leases and contracts are valid and in full force and effect and all rents,
royalties, and other sums payable by the Company, Xxxxx, or GSSWD thereunder
have been timely paid. There exists no default or event or circumstance which,
with notice or lapse of time or both, will constitute a default under any of
such lease agreements.
(b) SCHEDULE 2.12(b) attached hereto contains a complete and
accurate description of all vehicles, equipment, furniture, fixtures, and other
personal property of any kind or character, tangible or intangible, that is
owned by, in the possession of, or used by the Company, Xxxxx, and
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ACQUISITION AGREEMENT PAGE 7
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GSSWD (the "Subject Real Estate"). Except as shown on SCHEDULE 2.12(b), no
personal property owned or used by the Company, Xxxxx, or GSSWD in connection
with its business is held under any lease, security agreement, conditional sales
contract, or other title retention or financing agreement or is located any
place other than in the possession of the Company.
Section 2.13 TITLE TO AND CONDITION OF THE ASSETS OF THE COMPANY AND
XXXXX. The Company and Xxxxx have, or will have at Closing, good and marketable
title to all of their assets and properties, real and personal, tangible and
intangible, that are material to the business and future prospects of the
Company and Xxxxx, free and clear of liens, claims, charges, and encumbrances of
any kind or nature, save and except (a) the liens and security interests shown
on attached SCHEDULE 2.13, (b) liens for real and personal property taxes that
are not yet due and payable and (c) possible minor matters that, in the
aggregate, are not substantial in amount and do not materially interfere with or
detract from the present or intended use of any of the assets and properties nor
materially impair the business operations of the Company and Xxxxx. The tangible
assets of the Company and Xxxxx are in good operating condition and repair,
normal wear and tear excepted.
Section 2.14 TITLE TO AND CONDITION OF THE DISPOSAL AND BRINE
FACILITIES. GSSWD has, or will have at Closing, good and marketable title to
100% of the operating rights in, and subject to any royalties payable under the
Disposal and Brine Agreements (hereinafter defined), 100% of the revenues
derived or derivable from the operation of, the Disposal and Brine Facilities,
free and clear of liens, claims, charges, and encumbrances of any kind or
character, except (a) liens for real and personal property taxes that are not
yet due and payable and (b) as may be expressly set forth on EXHIBIT A. The
Disposal and Brine Facilities are in good operating condition and repair, normal
wear and tear excepted.
Section 2.15 TAXES. The Company and Xxxxx are and at all times in the
past have been "C" corporations within the meaning of Section 1361 of the
Internal Revenue Code of 1986, as amended. The Company and Xxxxx presently
maintain and at all times in the past have maintained fiscal years ending as of
December 31 for federal income tax purposes. The Company and Xxxxx have filed
all state and federal Tax Returns (defined below) required to be filed by them,
and the Company and Xxxxx have paid and discharged all Taxes (as defined below)
shown due thereon and have paid all other Taxes as are due. The liability for
Taxes set forth in each such Tax Return does not materially understate the Taxes
required to be reflected on such Tax Return. For purposes of this Agreement,
"Tax" or "Taxes" means taxes of any kind, payable to any federal, state, local,
or foreign taxing authority, including (without limitation) (i) income,
franchise, profits, gross receipts, ad valorem, value added, sales, use,
service, real or personal property, payroll, withholding, employment, social
security, unemployment compensation, and production taxes, and (ii) interest,
penalties, and additions to tax imposed with respect thereto, whether disputed
or not; and "Tax Returns" means all returns, reports, declarations, claims for
refund, and information statements with respect to Taxes required to be filed
with the Internal Revenue Service or any other taxing authority, domestic or
foreign, through the time of Closing hereunder, including, without limitation,
consolidated, combined, and unitary tax returns and any schedule or amendment
thereto. The Company and Xxxxx have not (i) granted any waiver of any statute of
limitations with respect to, any
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ACQUISITION AGREEMENT PAGE 8
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Tax, or (ii) obtained an extension of time with respect to the filing of any Tax
Return other than Tax Returns that were duly filed within the applicable
extension period. No claim has been made by an authority in a jurisdiction where
the Company or Xxxxx does not file Tax Returns that the Company or Xxxxx may be
subject to taxation by that jurisdiction. There are no liens or security
interests on any of the assets of the Company or Xxxxx that arose in connection
with any failure (or alleged failure) to pay any Tax. The Company and Xxxxx have
disclosed on all federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. The Company and Xxxxx have withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third-party. There is no dispute or claim concerning any liability for Tax
of the Company or Xxxxx (i) claimed or raised by any authority in writing or
(ii) as to which the Company or Xxxxx or any officers (and employees responsible
for Tax matters) of the Company or Xxxxx have knowledge.
Section 2.16 ENVIRONMENTAL MATTERS.
(a) The Company, Xxxxx, and GSSWD have conducted all operations
and activities in material compliance with all applicable Environmental Laws (as
defined below), and none of the assets of the Company, Xxxxx or GSSWD
(including, without limitation, the Disposal and Brine Facilities) is being or
has been operated in violation of any Environmental Laws.
(b) The Company, Xxxxx, and GSSWD possess all permits required
under Environmental Laws for the operation of their respective assets.
(c) The assets of the Company, Xxxxx, and GSSWD and the
operations conducted thereon or therewith, are not subject to any existing,
unfulfilled administrative or judicial order requiring remedial action under any
Environmental Law.
(d) Neither the Stock Sellers nor the Company, Xxxxx, or GSSWD
has received any notice of any investigation or inquiry regarding failure of the
assets of the Company, Xxxxx, or GSSWD, or the operations conducted thereon or
therewith, to comply with Environmental Laws.
As used in this Section 2.16, "Environmental Laws" shall mean the
federal Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Superfund Amendments and Reauthorization Act, as amended, Safe
Drinking Water Act, New Mexico Solid Waste Disposal Act, the Resource
Conservation and Recovery Act, as amended, the Hazardous and Solid Waste
Amendments Act, as amended, the Toxic Substances Control Act, as amended, the
Clean Water Act, as amended, and the Clean Air Act, as amended, and any other
applicable federal, state, or local environmental law and all rules, regulations
and administrative orders related thereto, as such laws, rules, regulations and
administrative orders exist as of the Closing Date.
Section 2.17 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 Seller or the Company, Xxxxx, or GSSWD.
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Section 2.18 CONTRACTS. Attached hereto as SCHEDULE 2.18 is a list of
all currently effective agreements respecting property, goods, and/or services
of or binding upon the Company, Xxxxx or their respective assets (the
"Contracts"). None of the Contracts has been modified, amended, supplemented or
altered except as specifically shown on attached SCHEDULE 2.18. The Company has
made copies of all of the Contracts (including all modifications, amendments,
and supplements thereto) available to Purchaser. All of the Contracts are in
full force and effect and the Company, and Xxxxx are not in default under any of
the Contracts.
Section 2.19 DISPOSAL AND BRINE AGREEMENTS. All leasehold and other
contractual rights owned or used by or binding upon GSSWD in connection with
operation of the Disposal and Brine Facilities (collectively, the "Disposal and
Brine Agreements") are described on attached EXHIBIT A. Except as shown on
EXHIBIT A, none of the Disposal and Brine Well Agreements has been modified,
amended, supplemented, or altered. All rentals, royalties, and other sums
payable under the Disposal and Brine Agreements have been timely and properly
made. The Disposal and Brine Agreements are in full force and effect and GSSWD
is not in default (and no circumstance or event has occurred which with notice
or the passage of time would constitute a default by GSSWD) under the Disposal
and Brine Agreements. GSSWD has obtained or will have obtained by Closing all
requisite consents of third parties to its conveyance of the Disposal and Brine
Facilities and the Disposal and Brine Agreements to Purchaser.
Section 2.20 NO UNION CONTRACTS. There is no collective bargaining or
other union agreement to or by which the Company or Xxxxx is a party or is
bound, nor is a collective-bargaining agreement currently being negotiated; and
all non-exempt employees have been paid in accordance with the Fair Labor
Standards Act of 1938 and the Portal-to-Portal Act of 1947. The Company and
Xxxxx are in compliance with all federal, state, or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and has not and is not engaged in
any unfair labor practice. The Company and Xxxxx have not experienced any
material labor difficulty during the last three years.
Section 2.21 INSURANCE. SCHEDULE 2.21 attached hereto lists all
insurance policies (the "Insurance Policies") held by the Company, Xxxxx, and
GSSWD and all such listed policies are in the respective principal amounts set
forth therein. The Company, Xxxxx, and GSSWD maintain (a) insurance on all of
its business, operations, and assets of a type customarily insured, covering
property damage and loss of income by fire or other casualty and (b) insurance
protection against all liabilities, claims, and risks against which it is
customary to insure. All premiums due and payable under the Insurance Policies
have been paid. The Company, Xxxxx, and GSSWD are not, and but for a requirement
that notice be given or that a period of time elapse or both would not be, in
violation under any such Insurance Policies.
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ACQUISITION AGREEMENT PAGE 10
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Schedule 2.22 BANK ACCOUNTS. SCHEDULE 2.22 attached hereto contains a
true and correct list of the names and addresses of all banks, financial
institutions, and other depositories in which the Company, Xxxxx, or GSSWD has
an account, deposit, or safe deposit box and the names of all persons authorized
to draw on those accounts or deposits or who have access to them and the account
numbers of each account.
Schedule 2.23 OTHER LIABILITIES AND OBLIGATIONS. SCHEDULE 2.23 attached
hereto contains a true and correct list of all liabilities and obligations of
the Company, Xxxxx, and GSSWD not disclosed elsewhere in this Agreement of any
kind, character, and description, whether accrued, absolute, contingent, or
otherwise, and whether or not required to be disclosed or accrued in the
Financial Statements of the Company, Xxxxx, or GSSWD that exceed $5,000 to any
one creditor. In the case of liabilities that may not be fixed, an estimate of
the maximum amount that may be payable is also included.
Section 2.24 DISCLOSURE. No representations or warranties made by the
Stock Sellers, the Company, or GSSWD in this Agreement, and no statements of the
Stock Sellers or the Company, Xxxxx, or GSSWD contained in any document executed
or delivered by any of them to Purchaser pursuant hereto or in connection with
the transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements herein
or therein not misleading.
Section 2.25 TRANSACTIONS WITH AFFILIATES. Except as shown on attached
SCHEDULE 2.25, the Company, Xxxxx, and GSSWD are not a parties to any
transaction, contract, or agreement with any (i) current or former officer or
director of the Company, Xxxxx, or GSSWD or (ii) any parent, spouse, child,
brother, sister or other family relation of any such officer or director, or
(iii) any corporation or partnership of which any such officer or director or
any such family relation is an officer, director, partner or greater than 10%
stockholder (based on percentage ownership of voting stock) or (iv) any
"affiliate", or "associate" of any such persons or entities (as such terms are
defined in the rules and regulations promulgated under the Securities Act of
1934, including, without limitation, any transaction involving a contract,
agreement, or other arrangement providing for the employment of, furnishing of
materials, products, or services by, rental of real or personal property from,
or otherwise requiring payments to, any such person or entity, except with
respect to services provided on reasonable terms which would not materially
alter the presentation of the Financial Statements, if such transactions had
been entered into with an unrelated third party.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Stock Sellers and GSSWD
as of the date of this Agreement as follows:
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ACQUISITION AGREEMENT PAGE 11
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Section 3.01 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Purchaser is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the assets owned or
operated by Purchaser or the nature of its activities makes such qualification
or licensing necessary.
Section 3.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Purchaser are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Purchaser and, assuming the due
authorization, execution and delivery by all other parties hereto, constitutes
the legal, valid and binding obligation of Purchaser, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to or limiting creditors, rights or by legal
principles of general applicability governing the availability of equitable
remedies.
Section 3.03 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Purchaser do
not, and the performance of this Agreement by Purchaser will not (i) conflict
with or violate the certificate of incorporation or bylaws of Purchaser, (ii) to
the knowledge of Purchaser, conflict with or violate any law applicable to
Purchaser or by which any of its assets are bound or affected or (iii) to the
knowledge of Purchaser, result in any breach 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 result in the creation of a lien or encumbrance on any of
the material assets of Purchaser pursuant to, any note, bond, mortgage,
indenture, or any material contract, agreement, lease, license, permit,
franchise, or other instrument or obligation to which Purchaser is a party or by
which Purchaser or any of its assets are bound or affected.
(b) To the knowledge of Purchaser, the execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign.
Section 3.04 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 Purchaser.
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ARTICLE IV
CONDUCT OF BUSINESS OF THE COMPANY, XXXXX, AND
GSSWD PENDING THE CLOSING DATE
Pending the Closing Date or earlier termination of this Agreement, and
except as otherwise specifically contemplated in this Agreement or the schedules
hereto or as may be consented to and approved in writing by Purchaser, the Stock
Sellers, the Company, and GSSWD covenant and agree as follows:
Section 4.01 ORDINARY COURSE OF BUSINESS. The Company, Xxxxx, and GSSWD
will carry on their business substantially in the same manner as heretofore
conducted, and will not engage in any transaction or activity, enter into any
agreement or make any commitment, except in the ordinary course of business.
Without limiting the generality of the foregoing, the Company, Xxxxx, and GSSWD
will:
(a) operate and maintain their assets diligently and in a good
and workmanlike manner and comply in all material respects with all applicable
laws and with the terms of any agreements binding upon those assets;
(b) maintain and keep in full force and effect all of the
Contracts and all of the Disposal and Brine Agreements and all permits, licenses
and similar rights and privileges of the Company, Xxxxx, and GSSWD and comply in
all material respects with all of their material obligations therein and
thereunder;
(c) maintain all of their tangible assets in at least as good a
condition as they were in at the date hereof, ordinary wear and tear excepted,
and remove no material items therefrom;
(d) maintain the Insurance Policies in full force and effect; and
(e) pay, perform, and discharge, on a basis consistent with prior
practices, all obligations of the Company, Xxxxx, and GSSWD under the Contracts,
the Disposal and Brine Agreements, and the notes, leases, and other instruments
evidencing the indebtedness or other liabilities of the Company, Xxxxx, and
GSSWD which are shown on the Audited Balance Sheet and/or on the schedules
attached to this Agreement in accordance with their respective terms (but
without right of prepayment);
Section 4.02 RESTRICTED ACTIONS. Without the prior written consent of
Purchaser, such consent not to be unreasonably withheld, the Company, Xxxxx, and
GSSWD will not (a) enter into any agreement or commitment, the result of which
would be to incur or expand the existing indebtedness or liabilities of the
Company, Xxxxx, or GSSWD; (b) incur any additional indebtedness other than trade
payables incurred in the ordinary course of business; (c) sell, transfer,
assign, convey or otherwise dispose of any of the assets of the Company, Xxxxx,
or GSSWD other than dispositions
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ACQUISITION AGREEMENT PAGE 13
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of (i) equipment or other personal property which is replaced with property and
equipment of comparable or better value and utility in the ordinary and routine
maintenance and operation of its business and (ii) personal property and
equipment no longer used or useful in the ordinary course of business; or (d)
create or permit the creation of any new lien, security interest, or other
encumbrances on any asset of the Company, Xxxxx, or GSSWD.
Section 4.03 AMENDMENTS TO GOVERNING DOCUMENTS. No change or amendment
shall be made in the articles of incorporation or bylaws of the Company, Xxxxx,
or GSSWD.
Section 4.04 ORGANIZATION. The Company, Xxxxx, and GSSWD will preserve
their respective existences and will keep their business organizations intact
and use their reasonable efforts to preserve their relationships with their
suppliers, customers, and others having business relations with the Company,
Xxxxx, and GSSWD.
Section 4.05 EMPLOYMENT AGREEMENTS. The Company, Xxxxx, and GSSWD will
not enter into any agreement relating to employment with any person.
Section 4.06 ISSUANCE OF SHARES; DIVIDENDS. The Company and Xxxxx will
not issue shares of capital stock, or grant any options, warrants or other
rights to purchase or acquire the capital stock of the Company or Xxxxx. The
Company and Xxxxx will neither declare nor pay or set aside for payment any
dividend or other distribution on their outstanding shares of capital stock, nor
redeem, purchase or otherwise acquire any of their capital stock.
Section 4.07 NO DEFAULT. The Company, Xxxxx, and GSSWD will not
knowingly take any action or knowingly take any action that causes a material
breach of any representation, warranty, covenant or agreement of the Stock
Sellers, the Company, or GSSWD under this Agreement.
Section 4.08 INVESTMENT. The Company and Xxxxx will not make any new
capital investment in, make any loan to, or acquire the securities or assets of
any other person or entity.
Section 4.09 USES OF CASH. Other than in the ordinary course of
business, the Company, Xxxxx, and GSSWD will not make any payments during the
period between the date hereof and the Closing Date except for the purpose of
paying Taxes, paying rentals or other sums owing by the Company, Xxxxx, or GSSWD
under the Contracts or the Disposal and Brine Agreements as and when due,
discharging rentals and trade payables incurred in the ordinary course of
business, and retiring or discharging presently existing indebtedness to
financial institutions or other third parties as and when due in accordance with
the terms of the notes or other instruments evidencing such indebtedness (but
without right of prepayment).
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ACQUISITION AGREEMENT PAGE 14
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ARTICLE V
OTHER AGREEMENTS OF THE PARTIES
Section 5.01 PURCHASER'S DUE DILIGENCE. Purchaser shall have until 6:00
p.m., CST, on March 24, 2000 (the "Inspection Period") to inspect, review, and
audit the assets of the Company, Xxxxx, and GSSWD and all books, records, data,
and other information of the Stock Sellers and the Company, Xxxxx, and GSSWD
relating to the business and financial affairs of the Company, Xxxxx, and GSSWD,
the title to and ownership of the assets of the Company, Xxxxx, and GSSWD, and
the conduct of the Businesses. Except as otherwise expressly provided in this
Agreement, all expenses incurred by the Purchaser relating to its inspections,
reviews, and audits shall be borne and paid exclusively by the Purchaser. The
Stock Sellers, the Company, and GSSWD shall cooperate with Purchaser in all
reasonable respects in facilitating such inspections, reviews, and audits.
Without limiting the foregoing, the Stock Sellers, the Company, and GSSWD agree
that, during the Inspection Period and thereafter until Closing, they will (a)
provide or cause to be provided to Purchaser and its counsel, accountants,
consultants, and other authorized representatives, during normal business hours
or otherwise, if necessary, full access to all of the assets, books, agreements,
commitments and records of the Company, Xxxxx, and GSSWD; and (b) furnish
Purchaser and its representatives with such data, records, and other information
concerning any of the operations and affairs of the Company, Xxxxx, and GSSWD as
Purchaser may reasonably request. If Purchaser shall determine as a result of
its inspections, reviews, and audits that the condition or value of or title to
the assets of the Company, Xxxxx, or GSSWD or the operations or results of the
Company, Xxxxx, or GSSWD are deficient in any material respect, or if Purchaser
is for any other reason, in Purchaser's sole and absolute discretion,
dissatisfied with the transaction contemplated by this Agreement, Purchaser may
elect to terminate this Agreement by giving written notice thereof to the Stock
Sellers prior to the end of the Inspection Period. If Purchaser does not
terminate this Agreement during the Inspection Period, Purchaser may thereafter
continue its reviews, inspections and audits pending Closing, but, except as
otherwise provided in this Agreement, without additional termination rights
after the Inspection Period.
The Stock Sellers and GSSWD further agree that, upon request by
Purchaser prior to or following Closing, the Stock Sellers and GSSWD will
execute and deliver to Purchaser or its accountants such audit response letters
and further confirmations as Purchaser or its accountants may reasonably require
for purposes of verification of the accuracy, validity, and completeness of the
Financial Statements, the Final Balance Sheet (hereinafter defined), and all
other financial and other information provided or made available by the Stock
Sellers, the Company, or GSSWD to Purchaser in connection with the transactions
contemplated by this Agreement.
Section 5.02 ENVIRONMENTAL REPORT. Within fifteen (15) days from the
date of this Agreement, the Stock Sellers, the Company, and GSSWD, at their sole
expense, shall furnish to Purchaser Phase I environmental studies and reports
covering all of the Subject Real Estate and prepared by an environmental
consulting firm or firms mutually acceptable to the Stock Sellers and Purchaser
(the "Environmental Reports"). If the Environmental Reports show any
environmental
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ACQUISITION AGREEMENT PAGE 15
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condition that is unacceptable to Purchaser, Purchaser shall, within ten (10)
days of its receipt of the Environmental Reports, notify the Stock Sellers of
such condition(s) and the reasons for Purchaser's objections thereto
("Purchaser's Environmental Objections"). Upon expiration of such ten-day
notification period, Purchaser shall be deemed to have accepted the form and
substance of the Environmental Reports, except, however, those matters to which
Purchaser has timely objected in accordance with the preceding sentence. The
Stock Sellers, the Company, and GSSWD shall have no obligation to bring any
action or proceeding or otherwise to incur any expense whatsoever to eliminate
or modify any of Purchaser's Environmental Objections. Within five days
following receipt of Purchaser's Environmental Objections, the Stock Sellers,
the Company, and GSSWD shall give notice to Purchaser of what actions, if any,
they propose to take in order to cure Purchaser's Environmental Objections. If
they are unable or unwilling to remedy Purchaser's Environmental Objections to
the reasonable satisfaction of Purchaser, Purchaser may terminate this Agreement
by notice in writing to the Stock Sellers by the earliest to occur of (i) the
Closing Date or (ii) five (5) business days following notice from the Stock
Sellers, the Company, and GSSWD that they are unable or unwilling to remedy
Purchaser's Environmental Objections, in which event, except as expressly
provided otherwise in this Agreement, none of the parties hereto shall have any
further rights or obligations under this Agreement. If this Agreement is
terminated for any reason, Purchaser agrees to immediately return the
Environmental Reports to the Company and to hold the contents thereof strictly
confidential. Likewise, pending and following Closing hereunder, the Stock
Sellers, the Company, and GSSWD shall hold the Environmental Reports strictly
confidential and shall not disclose the same or their contents to any third
party without the prior written consent of Purchaser.
Section 5.03 EXCLUSIVE DEALING. Unless and until this Agreement shall
have been terminated in accordance with the terms hereof, neither the Stock
Sellers nor the Company, Xxxxx, or GSSWD shall directly or indirectly, solicit,
initiate, or participate in negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than the
Purchaser or an affiliate or an associate of the Purchaser) concerning, or enter
into any agreement providing for any sale of the assets of the Company, Xxxxx,
or GSSWD, any sale of shares of capital stock or other equity in the Company,
Xxxxx, or GSSWD, or any similar transactions involving the Company, Xxxxx, or
GSSWD.
Section 5.04 CONSENTS, APPROVALS, AND FILINGS. The Stock Sellers, the
Company, Xxxxx, GSSWD, and Purchaser shall each use its reasonable efforts to
obtain at the earliest practicable date and, in any event, prior to the Closing
Date, all consents and approvals, including any third party consents, and to
make all filings required to be obtained or made under any federal, state, or
local laws or any agreement or other instrument (including, without limitation,
any consent or approval necessary to avoid the loss of any rights under any
agreement) prior to consummating the transactions contemplated hereby, whether
such consent, approval or filing is to be obtained from or made with private
parties or applicable governmental authorities.
Section 5.05 BROKERS AND FINDERS. Purchaser, on the one hand, and the
Stock Sellers, the Company, and GSSWD, on the other hand, shall indemnify each
other and hold each other harmless from any claim against the other for a
broker's or finder's fee, commission, or other like payment in
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ACQUISITION AGREEMENT PAGE 16
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connection with the transactions contemplated by this Agreement which arises
from or is based upon arrangements made by or through the indemnifying party.
Section 5.06 PUBLIC ANNOUNCEMENTS. Pending Closing, except as may be
required by applicable law, no party hereto shall issue any press release or
make any other public pronouncements concerning this Agreement or the
transactions contemplated hereby without the written consent and approval of all
other parties.
Section 5.07 RESIGNATION OF OFFICERS AND DIRECTORS. The Stock Sellers
and the Company will secure the resignation of each then-serving officer and
director of the Company and Xxxxx effective as of the Closing Date.
Section 5.08 NOTICE OF DEVELOPMENTS. Prior to the Closing, the Stock
Sellers, the Company, and GSSWD will give prompt notice to Purchaser of any
material event affecting the assets, liabilities, business, financial condition,
operations, results of operations, or future prospects of the Company, Xxxxx,
and/or GSSWD. No disclosure pursuant to this Section 5.08 shall, however, be
deemed to amend or supplement this Agreement or the schedules hereto or to
prevent or cure any misrepresentation, breach of warranty, or breach of covenant
under this Agreement.
Section 5.09 PRELIMINARY AND FINAL COMPUTATIONS OF NFA. As part of its
diligence processes in this transaction, Purchaser intends to have the books and
records of the Company, Xxxxx, and GSSWD audited by certified professional
accountants and to have audited financial statements prepared for the Company,
Xxxxx, and GSSWD on a consolidated basis in compliance with generally accepted
accounting principles ("GAAP"), all at the expense of Purchaser. The Stock
Sellers, the Company, GSSWD and Purchaser recognize that the financial data
necessary to permit computation of NFA at the Closing may not be complete or
final at such time. The parties accordingly shall estimate NFA at Closing and
shall then finalize their calculation of NFA on a post-Closing basis within
sixty (60) days following the Closing. At least three (3) business days prior to
the Closing, Purchaser shall deliver to the Stock Sellers and GSSWD a
preliminary settlement statement, reflecting its good faith estimate of NFA as
of the Closing Date based upon the best information then available to Purchaser.
At or prior to Closing, the Stock Sellers, GSSWD, and Purchaser shall attempt to
reconcile any differences they may have regarding the preliminary settlement
statement. If there are any items the parties are unable to reconcile prior to
Closing, Purchaser's position shall prevail to enable Closing to proceed, but
without prejudice to the right of any party to this Agreement to dispute any
item of the final settlement statement. Within forty-five (45) days after the
Closing Date, Purchaser shall deliver to the Stock Sellers and GSSWD an audited
balance sheet of the Company, Xxxxx, and GSSWD, on a consolidated basis, for the
period ended as of the Closing Date, prepared in accordance with GAAP, and a
proposed final settlement statement including Purchaser's final computation of
NFA. The Stock Sellers and GSSWD shall have ten (10) days from its receipt of
the such balance sheet and proposed settlement statement to notify Purchaser of
their objections, if any, to the information set forth therein, failing which
the Stock Sellers and GSSWD shall be deemed to have irrevocably accepted the
computations and substance of those documents for all purposes of this
Agreement. If the Stock Sellers and GSSWD
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ACQUISITION AGREEMENT PAGE 17
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timely and properly contest any items within such balance sheet or proposed
final settlement statement, the Stock Sellers, GSSWD, and Purchaser shall
promptly meet and utilize their best efforts to resolve their differences, it
being the intention of the parties to finalize all post-Closing adjustments
within sixty (60) days following the Closing Date. If the parties are unable to
reach final agreement on any such post-Closing matters, they shall resolve their
differences by means of the dispute resolution procedures set forth in Section
10.02 and final settlement between the parties shall be deferred pending
conclusion of such procedures. At the conclusion of the post-Closing accounting
contemplated by this Section 5.09, the Stock Sellers, GSSWD, or Purchaser, as
appropriate, shall immediately remit to the other, in immediately available
funds, the net sum determined owning by such party in the final settlement
statement, whether finalized by agreement of the parties or through dispute
resolution processes. As used in this Agreement, "Final Balance Sheet" and
"Final Settlement Statement" shall mean the final balance sheet and the final
settlement statement proposed by Purchaser, as the same may be modified either
by agreement of the parties or dispute resolution pursuant to the foregoing.
Section 5.10 ACCOUNTS RECEIVABLE. The Stock Sellers and GSSWD expressly
represent and warrant that all accounts receivable of the Company, Xxxxx, and
GSSWD reflected on the Final Balance Sheet as of the Closing Date are
collectible in the normal course of business within 150 days from the Closing
Date without resort to litigation or the retention of collection services.
Following Closing, the Company shall apply partial payments by customers to the
respective outstanding receivables of such customers in the order of their aging
(i.e. older accounts paid first). To the extent any such receivables remain
unpaid following such 150-day period, the Company, without limitation of its
other legal rights and remedies, may require the Stock Sellers and GSSWD to
immediately purchase the same from the Company at full face value and without
subsequent recourse of any kind upon the Company or Purchaser or may offset the
face amount of such unpaid receivables against its payment obligations under the
Note.
Section 5.11 TAXES AND TAX RETURNS. The Stock Sellers shall be
responsible for the timely preparation and filing (without extension, unless
otherwise agreed by Purchaser in writing) of all federal, state, and local Tax
Returns covering or for (or based upon income received or realized during) all
periods prior to and including the Closing Date, except that, if Closing occurs,
Purchaser shall be responsible for the timely preparation and filing of the
federal income tax returns of the Company for calendar year 2000 and ensuing
years. The Stock Sellers shall prepare all such Tax Returns for which the Stock
Sellers are responsible hereunder in accordance with applicable law and shall
submit such Tax Returns to the Company and Purchaser for their review and
concurrence at least ten (10) business days prior to filing. If, after the
Closing Date, any applicable taxing authority shall determine there to be a
deficiency in the amount of any federal, state, or local Tax paid or payable by
the Company or Xxxxx which is not reserved for or reflected on the Final Balance
Sheet and which relates to any period prior to the Closing Date, the Stock
Sellers shall be fully responsible for the payment of any such deficiency.
Following Closing, if any Tax Return covering a period of time prior to the
Closing Date shall be audited by an applicable taxing authority, the Company
shall promptly notify the Stock Sellers of such audit. The Stock Sellers and
Purchaser and the Company shall jointly and not severally conduct all
discussions and negotiations with applicable taxing
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ACQUISITION AGREEMENT PAGE 18
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authorities regarding each such audited Tax Return as it may relate to periods
prior to the Closing Date. The Company shall have exclusive authority to conduct
all discussions and negotiations with applicable taxing authorities regarding
Tax Returns relating to periods from and after the Closing Date and shall be
solely responsible for the payment of all Taxes attributable to such periods.
Section 5.12 INDEMNIFICATION.
(a) Indemnification by the Stock Sellers and GSSWD. The Stock
Sellers and GSSWD agree to indemnify and hold harmless Purchaser and the Company
and Xxxxx after the Closing Date against and in respect of any of the following
matters which may be asserted or established:
(i) All liabilities of the Company, Xxxxx, and GSSWD of
any nature, whether accrued, absolute, contingent, or otherwise, which
existed as of the Closing Date and are not provided for or reflected on
the Final Balance Sheet;
(ii) Any and all liabilities or obligations arising from
or attributable to the ownership or operation of the GSSWD Assets for
all periods prior to the Closing Date;
(iii) Any and all damages, losses, expenses, or
deficiencies resulting from any breach of the warranties,
representations and covenants of the Stock Sellers, the Company, and/or
GSSWD contained in this Agreement or in any schedule hereto; and
(iv) All demands, assessments, judgments, costs, and
expenses (including reasonable legal fees and other expenses of
litigation, both at the trial and appellate level) arising from or in
connection with any action, suit, proceeding, or claim incident to any
of the foregoing.
(b) Indemnification by Purchaser. Purchaser agrees to indemnify
and hold harmless the Stock Sellers after the Closing Date against or in respect
of any of the following matters:
(i) Any and all damages, losses, expenses, or
deficiencies resulting from any breach of the warranties,
representations and covenants of Purchaser contained in this Agreement
or in any schedule hereto; and
(ii) All demands, assessments, judgments, costs, and
expenses (including reasonable legal fees and other expenses of
litigation, both at the trial and appellate level) arising from or in
connection with any action, suit, proceeding, or claim incident to any
of the foregoing.
Section 5.13 RELEASE AND WAIVER BY THE STOCK SELLERS AND GSSWD. Any
provisions of this Agreement to the contrary notwithstanding, following Closing
hereunder, the Stock Sellers and
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ACQUISITION AGREEMENT Page 19
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GSSWD shall have no right of contribution, indemnity, reimbursement, or other
legal or equitable right of recourse upon the Company or Xxxxx based upon or
attributable to the breach or non- performance by the Stock Sellers, the
Company, or GSSWD of any of their representations, warranties, and covenants
under this Agreement, and the Stock Sellers and GSSWD, as of Closing hereunder,
expressly release and waive any and all such rights of contribution, indemnity,
reimbursement or other recourse upon or against the Company and Xxxxx. The Stock
Sellers and GSSWD shall be jointly and severally liable and responsible for all
representations, warranties, covenants and other obligations of the Stock
Sellers and/or GSSWD hereunder.
Section 5.14 RELEASE OF PERSONAL GUARANTIES. Upon Closing, Purchaser
shall cooperate fully with the Stock Sellers and shall utilize its best efforts
in attempting to obtain the prompt release by applicable third parties of the
personal guaranties by the Stock Sellers of indebtedness of the Company which
are shown on attached SCHEDULE 5.14.
Section 5.15 EMPLOYMENT MATTERS. To the extent Purchaser or the Company
shall elect to continue the employment of current employees of the Company
following Closing, each employee so retained by Purchaser or the Company
following Closing shall be eligible for participation in Purchaser's current
employee benefit programs with full credit for length of service prior to
Closing with the Company. The Stock Sellers and the Company acknowledge and
agree that the decision to hire any current employees of the Company is solely
in the discretion of Purchaser and that Purchaser has no obligation of any kind
to employ any of the existing employees of the Company following Closing.
Section 5.16 INVESTMENT REPRESENTATIONS BY THE STOCK SELLERS. Upon
Closing and in connection with any conversion of the unpaid balance of the Note
into common stock in Purchaser as more particularly provided in the Note, the
Stock Sellers expressly represent, warrant, acknowledge, and agree to and with
the Company that:
(a) any such stock so acquired by the Stock Sellers (the
"Stock") may not have been registered under the
Securities Act of 1933 or any other state securities
laws (collectively, the "Securities Acts") because
Purchaser may or will issue the Stock in reliance
upon this Section 5.15 and the exemptions from the
registration requirements of the Securities Acts
providing for issuance of securities not involving a
public offering;
(b) the Stock Sellers will acquire any Stock for the
Stock Sellers' own respective accounts, for
investment, and not with a view to the resale or
distribution thereof;
(c) the Stock Sellers will not transfer, sell or offer
for sale any portion of the Stock unless there is an
effective registration or other qualification
relating thereto under the Securities Act of 1933 and
under any applicable state securities laws or unless
the holder of the Stock delivers to Purchaser an
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ACQUISITION AGREEMENT PAGE 20
21
opinion of counsel, satisfactory to Purchaser, that such
registration or other qualification under such Act and
applicable state securities laws is not required in
connection with such transfer, offer or sale;
(d) Purchaser is under no obligation to register the Stock or
to assist the Stock Sellers in complying with any exemption
from registration under the Acts if the Stock Sellers
should at a later date wish to dispose of the Stock;
(e) Prior to entering into this Agreement, the Stock Sellers
have made an investigation of Purchaser and its business
and has obtained or had made available to them all
information with respect thereto which the Stock Sellers
needed to make an informed decision to structure the
transactions contemplated hereby as provided in this
Agreement;
(f) The Stock Sellers possess adequate experience and
sophistication as investors for the evaluation of the
merits and risks of investment in the Stock; and
(g) Each of the Stock Sellers is an "accredited investor," as
defined in Regulation D as promulgated under the Securities
Act of 1933, as amended, (the "1933 Act").
ARTICLE VI
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to close under this Agreement shall, unless
waived in writing by Purchaser, be subject to the satisfaction on or before the
Closing Date of each of the following conditions, and the Stock Sellers, the
Company, and GSSWD shall use their reasonable efforts to cause each such
condition to be so satisfied.
Section 6.01 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Stock Sellers, the Company, and GSSWD contained in this
Agreement shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date, as though such representations and
warranties were made at and as of such date, except for changes expressly
permitted or contemplated by this Agreement.
Section 6.02 PERFORMANCE. The Stock Sellers, the Company, and GSSWD
shall have performed and complied with all covenants, agreements, obligations
and conditions required by this Agreement to be performed or complied with by
them on or prior to the Closing Date.
Section 6.03 PROCUREMENT OF WRITTEN SURFACE USE AND DAMAGE AGREEMENT.
GSSWD shall have obtained a written surface use and damage agreement for the
lands upon which the salt
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ACQUISITION AGREEMENT Page 21
22
water disposal well described on attached EXHIBIT A from all applicable surface
owners in form and substance satisfactory to Purchaser.
Section 6.04 CONSENTS. The consents, approvals, and filings described
in Section 5.04 shall have been obtained or made, as the case may be, without
the imposition of conditions or limitations having a material adverse effect.
Section 6.05 OPINION OF COUNSEL TO THE STOCK SELLERS, THE COMPANY, AND
GSSWD. The Stock Sellers, the Company, and GSSWD shall have delivered to
Purchaser the opinion of their legal counsel, Xxxx Xxx Xxxxxx, in form and
substance reasonably acceptable to Purchaser and its counsel, and favorably
addressing the organization, qualification, good standing, and capitalization of
the Company, Xxxxx, and GSSWD, the due and proper authorization, execution, and
delivery and the enforceability of this Agreement and all instruments and
documents executed by the Stock Sellers, the Company and GSSWD in connection
herewith, and such other matters as Purchaser or its counsel may reasonably
require.
Section 6.06 NO INJUNCTION. There shall not be in effect any
preliminary or permanent injunction or temporary restraining order issued by any
state or federal court that prevents the consummation of the transactions
contemplated hereby.
Section 6.07 OTHER DOCUMENTS. All documents required to be delivered to
Purchaser by the Stock Sellers, the Company, or GSSWD on or prior to the Closing
Date shall have been so delivered.
Section 6.08 MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have been any material adverse change in, to, or affecting the
Company, Xxxxx, or GSSWD or their operations or assets.
Section 6.09 CERTIFICATES. The Stock Sellers, the Company, and GSSWD
shall have delivered to Purchaser certificates confirming the continuing
validity of their representations and warranties pursuant to Section 6.01 and
certifying their performance hereunder as contemplated by Section 6.02.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE STOCK SELLERS,
THE COMPANY, AND GSSWD TO CLOSE
The obligations of the Stock Sellers, the Company, and GSSWD to
consummate the transactions contemplated by this Agreement shall, unless waived
in writing by them, be subject to the satisfaction on or before the Closing Date
of each of the following conditions, and Purchaser shall use its reasonable
efforts to cause each such condition to be so satisfied:
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ACQUISITION AGREEMENT PAGE 22
23
Section 7.01 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Purchaser contained in this Agreement shall be true and
correct in all respects as of the date made and as of the Closing Date, as
though such representations and warranties were made at and as of such date,
except for changes permitted or contemplated by this Agreement.
Section 7.02 PERFORMANCE. Purchaser shall have performed and complied
in all material respects with all covenants, agreements, obligations, and
conditions required by this Agreement to be performed or complied with by
Purchaser on or prior to the Closing Date.
Section 7.03 CONSENTS AND APPROVALS. The consents, approvals, and
filings described in Section 5.04 shall have been obtained or made, as the case
may be, without the imposition of conditions or limitations having a material
adverse effect.
Section 7.04 NO INJUNCTION. There shall not be in effect any
preliminary or permanent injunction or temporary restraining order issued by any
state or federal court that prevents the consummation of the transactions
contemplated hereby.
Section 7.05 OTHER DOCUMENTS. All documents required to be delivered to
the Stock Sellers, the Company, or GSSWD by Purchaser on or prior to the Closing
Date shall have been so delivered.
Section 7.06 CERTIFICATES. Purchaser shall have delivered to the Stock
Sellers, the Company, and GSSWD certificates confirming the continuing validity
of its representations and warranties pursuant to Section 7.01 and certifying
its performance hereunder as contemplated by Section 7.02.
ARTICLE VIII
THE CLOSING
Section 8.01 CLOSING. The closing ("Closing") of the transaction
contemplated hereby shall take place at the offices of Purchaser at 000 X. Xxx
Xxxxxx, Xxxxxxx, Xxxxx, on a business date of Purchaser's unilateral selection
within thirty (30) days following any successful completion by Purchaser of an
initial public offering of common stock in the Company through a recognized
national stock exchange (the "Sierra IPO"), but in no event later than April 30,
2000, or at such other place and time as the parties hereto might hereafter
mutually agree in writing. Such date or any alternative date so selected by the
parties is referred to in this Agreement as the "Closing Date." Purchaser shall
afford the Stock Sellers, the Company, and GSSWD at least ten (10) days prior
written notice of its desired Closing Date pursuant to the foregoing.
Section 8.02 DELIVERIES. At the Closing, the following shall occur:
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ACQUISITION AGREEMENT Page 23
24
(a) The Stock Sellers shall endorse and deliver the
certificate(s) evidencing the Stock to Purchaser, free and clear of liens,
claims, and encumbrances;
(b) GSSWD and Purchaser shall execute and deliver an
assignment and xxxx of sale that is substantially identical in form and
substance to that attached hereto as EXHIBIT E;
(c) The Stock Sellers, the Company, and GSSWD shall deliver to
Purchaser their closing certificates in compliance with the provisions of
Section 6.09;
(c) The Stock Sellers, the Company, and GSSWD shall deliver,
or cause to be delivered, to Purchaser the legal opinion of their counsel, as
specified in Section 6.05;
(d) Xxxxx Xxxxxxx, Xx., Xxxx Xxxxxxx, and Xxx Xxxxxx and
Purchaser shall respectively execute and deliver employment agreements which are
substantially identical in form and substance to that attached hereto as EXHIBIT
F (in each case specifying a salary and a position mutually acceptable to the
applicable employee and Purchaser, but the failure to of those parties to agree
upon such matters shall only terminate and extinguish the obligation of
Purchaser to employee such prospective employee hereunder and shall not
otherwise affect the remaining obligations of Sierra and such party or any other
parties under this Agreement, including, but not limited to, the obligation of
the Stock Sellers and of GSSWD to sell the Stock and the GSSWD Assets,
respectively, at Closing);
(e) Xxxxx Xxxxxxx (Sr.), Xx Xxxxxxx, Xxxxx Xxxxxxx, Xx., Xxxx
Xxxxxxx, Xxx Xxxxxx, and Xxx Xxxxxx and Purchaser shall respectively execute and
deliver non-competition agreements which are substantially identical in form and
substance to that attached hereto as EXHIBIT G;
(f) The parties shall attempt to agree upon an estimate of NFA
and shall execute a preliminary closing statement as contemplated by Section
5.09;
(g) Purchaser shall pay to the Stock Sellers and GSSWD by wire
transfer their respective portions of the cash portion of the Purchase Price
payable at Closing pursuant to Section 1.03(1);
(h) Purchaser shall execute and deliver the Note to the
designee of the Stock Sellers;
(i) The Company and the Stock Sellers' designee shall execute
and deliver the Security Agreement;
(j) Purchaser shall deliver to the Stock Sellers its closing
certificate in compliance with the provisions of Section 7.06;
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ACQUISITION AGREEMENT PAGE 24
25
(k) The Stock Sellers, the Company, and GSSWD shall execute
such notifications to depository institutions and such changes of authorized
signatories upon the accounts of the Company and GSSWD as Purchaser may
reasonably request; and
(l) At the option of Purchaser in each instance, the Stock
Sellers shall execute and deliver to Purchaser three-year leases covering the
Main Street and old Halliburton properties in Eunice, New Mexico, and the yard
in Hobbs, New Mexico, which are substantially identical in form and substance to
that attached hereto as EXHIBIT H (the "Yard Leases").
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.01 Termination and Abandonment. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of all of the parties hereto;
(b) by Stock Sellers if Closing shall not have occurred on or
prior to April 30, 2000, other than due to breach or non-performance by Stock
Sellers hereunder;
(c) by Purchaser if it fails or is unable to conclude the
Sierra IPO on or before April 30, 2000;
(d) by Purchaser, if the conditions set forth in Article VI
shall not have been complied with and performed in any material respect and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) on or before the Closing Date;
(e) by Stock Sellers, the Company, and GSSWD if the conditions
set forth in Article VII have not been complied with and performed in any
material respect and such noncompliance or nonperformance shall not have been
cured or eliminated (or by its nature cannot be cured or eliminated) on or
before the Closing Date; or
(f) by either Purchaser or Stock Sellers, the Company, and
GSSWD by written notice to the other, if any action or proceeding shall have
been instituted before any court or other governmental body or, to the knowledge
of the party giving such notice, shall have been threatened formally in writing
by any public authority with requisite jurisdiction, to restrain or prohibit the
transactions contemplated by this Agreement or to subject one or more of the
parties or their directors or their officers to liability on the grounds that it
or they have breached any law or regulation or otherwise acted improperly in
connection with such transactions, and such action or
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ACQUISITION AGREEMENT PAGE 25
26
proceeding shall not have been dismissed or such written threat shall not have
been withdrawn or rescinded on or before the Closing Date.
Section 9.02 REMEDIES, RIGHTS AND OBLIGATIONS ON TERMINATION. If this
Agreement is terminated and abandoned as provided in this Article IX:
(a) Redelivery. Each party will redeliver all documents, work
papers, and other materials of any other party relating to the transactions
contemplated by this Agreement, whether obtained before or after the execution
of this Agreement, to the party furnishing the same, and all information
received by any party to this Agreement with respect to the business of any
other party shall not at any time be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party furnishing such
information; provided, however, that this subsection (a) shall not apply to any
documents, work papers, material, or information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
governmental authority or is otherwise in the public domain.
(b)(1) Default by Purchaser. If Purchaser fails or refuses to
close in accordance with the terms of this Agreement and if Stock Sellers, the
Company, and GSSWD have timely satisfied all the conditions to Purchaser's
obligation to close hereunder and are not in default hereunder, then, and as the
exclusive remedy of Stock Sellers, the Company, and GSSWD for such breach, Stock
Sellers, the Company, and GSSWD shall have the right to declare this Agreement
terminated and to receive the total sum of $15,000.00 from Purchaser as
liquidated damages and not a penalty for the breach hereof by Purchaser (the
same as if Purchaser had deposited such sum with Stock Sellers, the Company, and
GSSWD as a down payment or xxxxxxx money hereunder). In this regard, the parties
acknowledge and agree that the damages occasioned to Stock Sellers, the Company,
and GSSWD by any such breach are difficult of ascertainment or calculation and
that the specified sum of liquidated damages represents a fair and reasonable
estimate of such damages.
(b)(2) Default by Stock Sellers, the Company and/or GSSWD. If
Stock Sellers, the Company, and/or GSSWD fails or refuses to close in accordance
with the terms of this Agreement and if Purchaser has timely satisfied all the
conditions to Purchaser's obligation to close hereunder and is not in default
hereunder, Purchaser shall have the right either (i) to declare this Agreement
canceled or (ii) to seek enforcement of this Agreement at law or in equity,
including, without limitation, an action for specific performance of the terms
of this Agreement by Stock Sellers, the Company, and GSSWD or for recovery of
the actual damages occasioned to Purchaser by such breach. The provisions of
Section 10.02 hereof shall have no application to any claim or action by
Purchaser under this Section 9.01(b)(2).
(c) Continuing Liability. The continuing liability of the
parties to this Agreement with respect to any breach of any representation,
warranty, covenant, or agreement contained therein shall not be affected by such
termination or abandonment, unless this Agreement is terminated or
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ACQUISITION AGREEMENT Page 26
27
abandoned by agreement of the parties pursuant to Section 9.01 (a) or due to
failure to successfully conclude the Sierra IPO pursuant to Section 9.01(c).
ARTICLE X
POST CLOSING REMEDIES
Section 10.01 OFFSET/WAIVER. Subject to the provisions of Section
10.02, after the Closing, Purchaser, without limitation of its other rights and
remedies, shall have a right of offset against its obligations under the Note
for any breach of the representations, warranties, and covenants of Stock
Sellers, the Company, and/or GSSWD under this Agreement. In any proceedings by
the Purchaser to assert or prosecute any claims under, or to otherwise enforce,
this Agreement, Stock Sellers, the Company, and GSSWD agree that they will not
assert as a defense, or as a bar to recovery, and hereby waive any right to so
assert such defense or such bar to recovery, that (a) prior to the Closing, the
Company or Xxxxx shall have had knowledge of the circumstances giving rise to
the claim being pursued by Purchaser, or (b) prior to the Closing, the Company
or Xxxxx engaged in conduct or took action that caused or brought about the
circumstances giving rise to such claim, or otherwise contributed thereto.
Section 10.02 DISPUTE RESOLUTION.
(a) Unless expressly provided otherwise in this Agreement, any
and all claims, disputes, controversies, and other matters in question involving
the parties hereto and arising out of or relating to this Agreement and the
transactions contemplated hereby, any provision hereof, the alleged breach of
such provision, or in any way relating to the subject matter of this Agreement
(collectively, "Disputes"), whether such Disputes sound in contract, tort, or
otherwise, at law or in equity, under State or federal law, whether provided by
statute or common law, for damages or any other relief, shall be resolved in
accordance with this Section 10.02.
(b) The parties shall attempt in good faith to resolve any
Dispute promptly by negotiations between representatives who have authority to
settle the controversy. Any party may give the other party written notice of any
Dispute not resolved in the normal course of business, together with a request
that the parties meet and confer ("Notice of Dispute"). Within fifteen (15) days
after delivery of a Notice of Dispute, the parties or their representatives
shall meet at a mutually acceptable time and place, and thereafter as often as
they reasonably deem necessary, to exchange relevant information and to attempt
to resolve the Dispute. If the matter has not been resolved within thirty (30)
days after delivery of the Notice of Dispute, or if the parties fail to meet
within fifteen (15) days after delivery of the Notice of Dispute, either party
may initiate mediation of the claim or dispute as provided hereafter. If a party
or its representative intends to be accompanied at a meeting by an attorney, the
other parties shall be given advance notice of such intention and may also be
accompanied by an attorney. All negotiations pursuant to this clause are
confidential and shall be
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ACQUISITION AGREEMENT PAGE 27
28
treated as compromise and settlement negotiations for purposes of the Federal
Rules of Evidence and any state's rules of evidence.
(c) If a Dispute has not been resolved by negotiation as
provided in Section 10.02 (b), the parties shall endeavor to settle the claim or
dispute by mediation under the Center for Public Resources ("CPR") Model
Procedure for Mediation of Business Disputes. A neutral third party will be
selected from the CPR panel of neutrals. If the parties encounter difficulty in
agreeing on a neutral third party, they will seek the assistance of CPR in the
selection process. Mediation under this Section 10.02 (c) will commence within
sixty (60) days of the Notice of Dispute.
(d) If the Dispute has not been resolved by non-binding means
pursuant to Sections 10.02(b) or (c) within thirty (30) days of the initiation
of mediation, either party may submit such Dispute for resolution by binding
arbitration as follows:
(i) It is the intention of the parties that the
arbitration shall be conducted pursuant to
the Federal Arbitration Act (the "Act"), as
modified by this Agreement. The validity,
construction, and interpretation of this
Section 10.02 (d), and all procedural
aspects of the arbitration conducted
pursuant to this Section 10.02 (d),
including, but not limited to, the
determination of issues that are subject to
arbitration (i.e. arbitrability), the scope
of the arbitrable issues, allegations of
fraud in the inducement to enter into this
Agreement, or this arbitration provision,
allegations of waiver, laches, delay, or
other defenses to arbitrability, and the
rules governing the conduct of the
arbitration (including the time for filing
an answer, the time for filing
counterclaims, the times for amending
pleadings, the specificity of the pleadings,
the extent and scope of discovery, the
issuance of subpoenas, the times for
designation of experts, whether the
arbitration is to be stayed pending
resolution of related litigation involving
third parties not bound by this Agreement,
the receipt of evidence and the like), shall
be decided by the arbitrators. The
arbitration shall be administered by the
American Arbitration Association ("AAA"),
and shall be conducted pursuant to the
Commercial Arbitration Rules of the AAA, as
modified by this Agreement. Notwithstanding
any provision of this Agreement to the
contrary, the parties expressly agree that
the arbitrators shall have absolutely no
authority to award incidental, special,
treble, exemplary, or punitive damages of
any type under any circumstances regardless
of whether such damages may be available
under New Mexico law, the law of any other
state, or federal law, or under the Act, or
the Commercial Arbitration Rules of the AAA,
the parties hereby waiving their right, if
any, to recover incidental, special, treble,
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ACQUISITION AGREEMENT PAGE 28
29
exemplary, or punitive damages in connection
with any such Disputes.
(ii) The arbitration proceeding shall be
conducted in Midland, Texas before a panel
of three (3) arbitrators appointed in
accordance with the Commercial Arbitration
Rules of the AAA. The arbitrators shall
conduct a hearing as soon as reasonably
practicable after appointment of the third
arbitrator, and a final decision completely
disposing of all Disputes that are the
subject of the arbitration proceedings shall
be rendered by the arbitrators as soon as
reasonably practicable after the hearing.
There shall be no transcript of the hearing
before the arbitrators. The arbitrators'
ultimate decision after final hearing shall
be in writing, but shall be as brief as
possible, and the arbitrators shall not
assign reasons for their ultimate decision.
(iii) The fees and expenses of the arbitrators
shall be borne equally by the parties, but
the decision of the arbitrators may include
such award of the arbitrators' fees and
expenses and of other costs and attorneys'
fees as the arbitrators determine
appropriate.
(iv) To the fullest extent permitted by law, the
arbitration proceeding and the arbitrators'
award shall be maintained in confidence by
the parties.
(v) The award of the arbitrators shall be
binding upon the parties and final and
nonappealable to the maximum extent
permitted by law, and judgment thereon may
be entered by a court of competent
jurisdiction and enforced by any party as a
final judgment of such court.
(e) All applicable statutes of limitation and defenses based
upon the passage of time shall be tolled while the procedures specified in
Sections 10.02(b) and (c) are pending. The parties will take such actions, if
any, as may be required to effectuate such tolling.
(f) Each party is required to continue to perform its
obligations under this Agreement pending final resolution of any Dispute covered
by this Article X.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified, or supplemented only by writing duly
executed by all of the parties hereto.
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ACQUISITION AGREEMENT PAGE 29
30
Section 11.02 WAIVER OF COMPLIANCE. Any failure of the Stock Sellers,
the Company, or GSSWD, on the one hand, or Purchaser, on the other, to comply
with any obligation, covenant, agreement or condition contained herein may be
expressly waived in writing by Purchaser or Stock Sellers, the Company, and
GSSWD, respectively; provided, however, such waiver or failure to insist upon
strict compliance shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
Section 11.03 NOTICES. All notices, requests, demands, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand (including, without
limitation, by overnight courier), transmitted by facsimile, or mailed,
certified or registered mail (return receipt requested) with postage prepaid:
(a) if to Stock Sellers or the Company (only until the
Closing Date) or GSSWD, to:
Xx. Xxxxx Xxxxxxx (Sr.)
Gold Star Service Company, Inc.
Xxx 0000
Xxxxxx, Xxx Xxxxxx 00000
Fax: (____) _____________
with a copy to:
Xxxx Xxx Xxxxxx, P. A.
000 Xxxxx Xxxxx
Xxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000.
or to such other person or addresses as Stock Sellers or the Company shall
furnish Purchaser in writing in accordance with this Section 11.03; and
(b) if to Purchaser (or to the Company after Closing),
to:
Sierra Well Service, Inc.
000 X. Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, President
with a copy to:
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ACQUISITION AGREEMENT PAGE 30
31
Xxxx & Xxxx, L. L. P.
000 X. Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Xx.
or to such other persons or addresses as Purchaser shall furnish to Stock
Sellers and the Company in writing in accordance with this Section 11.03.
Delivery of notices shall be effective only upon actual receipt by the
intended recipient (or, in the case of facsimile transmission, the completion of
such transmission during the recipient's normal business hours).
Section 11.04 SURVIVAL. This Agreement is intended in part to evidence
the continuing rights and obligations of the parties following Closing, and,
except as may otherwise be expressly provided herein, all of the
representations, warranties, covenants, and obligations of the parties are
hereby expressly made to survive Closing.
Section 11.05 EXPENSES. Purchaser shall pay its own fees and expenses,
including, without limitation, professional fees and expenses, incurred in
connection with the negotiation, execution, and performance of this Agreement
and the transactions contemplated hereby. All fees and expenses of Stock Seller
and GSSWD and all fees and expenses of the Company for periods to and including
the Closing Date, including, without limitation, professional fees and expenses,
incurred in connection with the negotiation, execution, and performance of this
Agreement and the transactions contemplated hereby, shall be borne and paid
exclusively by Stock Sellers.
Section 11.06 BINDING NATURE; NO THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained herein, express or implied, is intended to confer on
any person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
Section 11.07 GOVERNING LAW. This Agreement, and the legal relations
among the parties hereto arising from this Agreement, shall be governed by and
construed in accordance with the laws of the State of New Mexico, without regard
to its conflicts of laws rules.
Section 11.08 ENTIRE AGREEMENT. This Agreement (including the exhibits
and schedules hereto and the other instruments referred to herein) embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
warranties, covenants or undertakings, other than those expressly set forth or
referred to
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ACQUISITION AGREEMENT PAGE 31
32
herein. This Agreement supersedes all prior agreements and understandings among
the parties with respect to such subject matter.
Section 11.09 HEADINGS. The headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.10 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
Section 11.11 SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future law, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof, and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision, there shall be added
automatically, as part of this Agreement, a provision as similar in terms and
substance to such illegal, invalid, or unenforceable provision as may be
possible and legal, valid, and enforceable.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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ACQUISITION AGREEMENT PAGE 32
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and made and entered into as of the date first set forth above.
THE STOCK SELLERS:
/s/ XXXXX XXXXXXX XX.
------------------------------------
XXXXX XXXXXXX (SR.)
/s/ EMMA XX XXXXXXX
------------------------------------
EMMA XX XXXXXXX
/s/ XXXX XXXXXXX
------------------------------------
XXXX XXXXXXX
/s/ XXXXXX XXXXXX
------------------------------------
XXXXXX XXXXXX
/s/ XXXXX X. XXXXXXX, XX.
------------------------------------
XXXXX X. XXXXXXX, XX.
THE COMPANY:
GOLD STAR SERVICE COMPANY,
INC., a New Mexico corporation
By: /s/ XXXXX XXXXXXX XX.
----------------------------------
Printed Name: XXXXX XXXXXXX XX.
------------------------
Title: President
-------------------------------
GOLD STAR SWD, LTD. CO., a New
Mexico limited liability company
By: /s/ XXXXX XXXXXXX XX.
------------------------------------
Printed Name: XXXXX XXXXXXX XX.
--------------------------
Title: Manager
---------------------------------
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ACQUISITION AGREEMENT PAGE 33
34
PURCHASER:
SIERRA WELL SERVICE, INC., a
Delaware corporation
By: /s/ XXXXXXX XXXXX
------------------------------------
Printed Name: Xxxxxxx Xxxxx
--------------------------
Title: Vice President
---------------------------------
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBIT A THE DISPOSAL AND BRINE FACILITIES
EXHIBIT B THE NOTE
EXHIBIT C THE SECURITY AGREEMENT
EXHIBIT D THE FINANCIAL STATEMENTS
EXHIBIT E THE ASSIGNMENT AND XXXX OF SALE
EXHIBIT F FORM EMPLOYMENT AGREEMENT
EXHIBIT G FORM NON-COMPETITION AGREEMENT
EXHIBIT H YARD LEASES
SCHEDULE 1.02 EXCLUDED ASSETS
SCHEDULE 2.08 EXTRAORDINARY TRANSACTIONS
SCHEDULE 2.10 EMPLOYEE BENEFIT PLANS
SCHEDULE 2.12(a) REAL PROPERTY
SCHEDULE 2.12(b) PERSONAL PROPERTY
SCHEDULE 2.13 EXISTING LIENS
SCHEDULE 2.18 CONTRACTS
SCHEDULE 2.21 INSURANCE POLICIES
SCHEDULE 2.22 BANK ACCOUNTS
SCHEDULE 2.23 OTHER LIABILITIES
SCHEDULE 2.25 TRANSACTIONS WITH AFFILIATES
SCHEDULE 5.14 PERSONAL GUARANTIES OF STOCK SELLERS
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ACQUISITION AGREEMENT PAGE 34
35
EXHIBIT B
SECURED PROMISSORY NOTE
$600,000.00 Eunice, New Mexico ____________, 2000
FOR VALUE RECEIVED, the undersigned, SIERRA WELL SERVICE, INC., a
Delaware corporation ("Maker"), promises to pay to the order of [TO BE
DESIGNATED BY STOCK SELLERS] ("Payee"), at Xxx 0000, Xxxxxx, Xxx Xxxxxx, Xxx
Xxxxxx 00000, the principal sum of SIX HUNDRED THOUSAND AND NO/100 DOLLARS
($600,000.00), together with interest on the unpaid principal balance from day
to day outstanding prior to default or maturity at a floating per annum rate
which shall from quarter to quarter be equal to the lesser of (i) the Prime Rate
(hereinafter defined) in effect hereunder (the "Established Rate") (calculated
on the basis of actual days elapsed in a year consisting of 365 or 366 days, as
appropriate) or (ii) the Maximum Rate (hereinafter defined) (calculated on the
basis of actual days elapsed in a year consisting of 365 or 366 days, as
appropriate). The interest rate on this Note shall initially be determined as of
the first Friday most immediately preceding the date of this Note that is a
business day (the "Initial Determination Date") and shall thereafter be
redetermined quarterly until maturity based upon the Prime Rate in effect as of
the first Friday most immediately preceding each ensuing calendar quarter from
the date hereof that is a business day (each such date being hereinafter
referred to as a "Redetermination Date"). Each change in the rate of interest
charged hereunder shall, subject to the terms hereof, become effective, without
notice to Maker, upon the applicable quarterly adjustment date (as opposed to
the Redetermination Date). If at any time and from time to time the Established
Rate exceeds the Maximum Rate, thereby causing the interest payable to be
limited to the Maximum Rate, then any subsequent reduction in the Established
Rate shall not reduce the rate of interest hereunder below the Maximum Rate
until the total amount of interest accrued hereon equals the amount of interest
that would have accrued if the Established Rate had at all times been in effect.
All past due principal of and accrued interest on this Note shall bear interest
at the Maximum Rate.
As used herein, "Prime Rate" shall mean the floating rate of interest
denominated and published as such by the Wall Street Journal on the Initial
Determination Date and thereafter on each applicable Redetermination Date.
As used herein, "Maximum Rate" shall mean the maximum non-usurious rate
of interest that at any time, or from time to time, may be contracted for,
taken, reserved, charged, or received under applicable law on the indebtedness
evidenced by this Note, after taking into account, to the extent required by
applicable law, any and all relevant payments, charges, or other amounts under
this Note and all instruments securing payment of this Note.
The principal of and accrued interest on this Note are due and payable
one year from the date hereof. This Note may be prepaid in whole or in part
without penalty. Partial prepayments shall be applied first to any accrued and
unpaid interest and the balance remaining, if any, to principal.
This Note is secured by that certain Security Agreement of even date
herewith, between Gold Star Service Company, Inc., as Grantor, and Payee, as
Secured Party, covering all of the collateral therein described.
It is understood and agreed that in the event of default in the payment
of this Note or any installment hereof, principal or interest, and if such
default shall continue unremedied for more than ten (10) days
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ACQUISITION AGREEMENT PAGE 36
36
following written notice thereof from Payee to Maker, or in the event of any
default (other than non-payment of this Note) in any instrument securing payment
of this Note and if such default shall continue unremedied for more than thirty
(30) days following written notice thereof from Payee to Maker, the entire
principal balance of and all accrued and unpaid interest on this Note shall at
once become due and payable without notice, at the option of Payee. Failure by
Payee to exercise this option on any one or more occasions shall not constitute
a waiver of the right to exercise such option in the event of subsequent
default.
Except as otherwise herein expressly provided, the makers, signers,
sureties, and endorsers of this Note jointly and severally waive demand,
presentment, notice of dishonor, notice of intent to demand or accelerate
payment hereof, diligence in collecting, grace, notice, and protest, and agree
to one or more extensions for any period or periods of time and partial
payments, before or after maturity, without prejudice to Payee; and if this Note
shall be collected by legal proceedings or through probate or bankruptcy court,
or shall be placed in the hands of an attorney for collection after default or
maturity, Maker agrees to pay all costs of collection, including reasonable
attorney's fees.
All agreements between Maker and Payee, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that under
no contingency, whether by reason or demand for payment or acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged, or
received by Payee exceed the Maximum Rate. If, for any circumstance whatsoever,
interest would otherwise be payable to Payee in excess of the Maximum Rate, the
interest payable to Payee hereunder shall be reduced to the Maximum Rate; and if
for any circumstance Payee shall ever receive anything of value deemed interest
by applicable law in excess of the Maximum Rate, then an amount equal to any
such excess shall be applied to the reduction of the principal hereof and not
the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal hereof, such excess shall be refunded to Maker. All
interest paid or agreed to be paid to Payee shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal (including the period of any
renewal or extension hereof) so that the interest hereon for such full period
shall not exceed the Maximum Rate.
Any provisions of this Agreement to the contrary notwithstanding, if
Maker shall successfully conclude an initial public offering of common stock in
Maker through a nationally recognized stock exchange at any time prior to
maturity or payment in full of this Note, whether stated or by acceleration,
(the "Sierra IPO"), Maker and Payee agree to convert the unpaid balance of this
Note to unregistered common stock in Maker at a per share price equivalent to
the per share price at which Maker issued its common stock in the Sierra IPO
within forty-five (45) business days following successful conclusion of the
Sierra IPO. Maker and Payee shall effectuate such conversion of indebtedness for
stock through the delivery of this Note by Payee to Maker, marked "PAID," in
return for the delivery by Maker of the requisite number of shares of its
unregistered common stock to Payee.
This Note is in all respects subject to that certain Stock Purchase
Agreement dated as of March 14, 2000, between Payee, as Stock Sellers, Gold Star
Service Company, Inc., as the Company, Gold Star Swd Ltd. Co., and Maker, as
Purchaser.
This Note shall be governed by and construed in accordance with the
laws of the State of New Mexico.
SIERRA WELL SERVICE, INC.
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
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ACQUISITION AGREEMENT PAGE 37
37
FIRST AMENDMENT TO ACQUISITION AGREEMENT
THIS FIRST AMENDMENT TO ACQUISITION AGREEMENT ("First Amendment") is
made and entered into as of the 20th day of March 2000, between XXXXX XXXXXXX
(SR.), EMMA XX XXXXXXX, XXXX XXXXXXX, XXXXXX XXXXXX, and XXXXX X. XXXXXXX, XX.
(the "Stock Sellers"), GOLD STAR SERVICE COMPANY, INC., a New Mexico corporation
(the "Company"), GOLD STAR SWD, LTD. CO., a New Mexico limited liability company
("GSSWD"), and SIERRA WELL SERVICE, INC., a Delaware corporation ("Purchaser"),
with reference to the following:
RECITALS
A. The Stock Sellers, the Company, GSSWD, and Purchaser are parties to
that certain Acquisition Agreement (the "Agreement") dated as of March 14, 2000,
relating to, among other things, the sale and purchase of all of the issued and
outstanding capital stock of the Company and of certain related assets.
B. The Stock Sellers, the Company, GSSWD, and Purchaser wish to amend
the Agreement upon the terms which follow.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EXTENSION OF CLOSING DATE. The Stock Sellers, the Company,
GSSWD, and Purchaser hereby modify and amend existing Section 8.01 of the
Agreement to read as follows:
Section 8.01 CLOSING. The closing ("Closing") of the
transaction contemplated hereby shall take place at the
offices of Purchaser at 000 X. Xxx Xxxxxx, Xxxxxxx, Xxxxx, on
a business date of Purchaser's unilateral selection within
thirty (30) days following any successful completion by
Purchaser of an initial public offering of common stock in the
Company through a recognized national stock exchange (the
"Sierra IPO"), but in no event later than June 30, 2000, or at
such other place and time as the parties hereto might
hereafter mutually agree in writing. Such date or any
alternative date so selected by the parties is referred to in
this Agreement as the "Closing Date." Purchaser shall afford
the Stock Sellers, the Company, and GSSWD at least ten (10)
days prior written notice of its desired Closing Date pursuant
to the foregoing.
2. DEFINITIONS. Except as expressly indicated otherwise herein,
capitalized terms in this First Amendment shall have the same meanings as are
ascribed to them in the Agreement.
38
3. CONFIRMATION. The parties hereto hereby ratify, confirm, and
adopt the Agreement, as amended hereby. Except as modified hereby, the Agreement
remains in full force and effect.
4. FAX; COUNTERPARTS. This First Amendment may be executed by
fax and in multiple counterparts.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
First Amendment as of the day and year first above written.
THE STOCK SELLERS:
/s/ XXXXX XXXXXXX XX.
------------------------------------
XXXXX XXXXXXX (SR.)
/s/ EMMA XX XXXXXXX
------------------------------------
EMMA XX XXXXXXX
/s/ XXXX XXXXXXX
------------------------------------
XXXX XXXXXXX
/s/ XXXXXX XXXXXX
------------------------------------
XXXXXX XXXXXX
/s/ XXXXX X. XXXXXXX, XX.
------------------------------------
XXXXX X. XXXXXXX, XX.
THE COMPANY:
GOLD STAR SERVICE COMPANY,
INC., a New Mexico corporation
By: /s/ XXXXX XXXXXXX
--------------------------------
Printed Name: XXXXX XXXXXXX
-----------------------
Title: PRESIDENT
-----------------------------
GOLD STAR SWD, LTD. CO., a New
Mexico limited liability company
By: /s/ XXXXX XXXXXXX
--------------------------------
Printed Name: XXXXX XXXXXXX
-----------------------
Title: MANAGER
-----------------------------
PURCHASER:
SIERRA WELL SERVICE, INC., a
Delaware corporation
By: /s/ XXXXXXX XXXXX
--------------------------------
Printed Name: XXXXXXX XXXXX
-----------------------
Title: VICE PRESIDENT
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FIRST AMENDMENT TO ACQUISITION AGREEMENT PAGE 2
