1
EXHIBIT C
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into as
of March 7, 1997, by and among Tuboscope Vetco International Corporation, a
Delaware corporation ("Parent"), FGS Acquisition Corp., a Texas corporation and
wholly owned subsidiary of Parent ("Merger Sub"), Fiber Glass Systems, Inc., a
Texas corporation (the "Company"), and the stockholders of the Company named in
the signature pages hereof (the "Company Stockholders").
RECITALS
A. The Boards of Directors of Parent, Merger Sub and the Company each
have determined that the merger of Merger Sub with and into the Company, upon
the terms and subject to the conditions set forth herein, is fair to, and in the
best interests of, their respective corporations and stockholders.
B. The Company Stockholders collectively own all of the outstanding
capital stock of the Company.
C. The merger provided for herein is intended to qualify as a
reorganization under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), for federal income tax purposes.
D. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with, and
to establish various conditions precedent to, the merger provided for herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), Merger Sub shall be merged
(the "Merger") with and into the Company in accordance with the Texas Business
Corporation Act (the "TBCA"). As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation").
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein abandoned pursuant to Section 9.1 and assuming
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") shall take place at 1:00
p.m. on the first business day on or by which all of the conditions to
consummation of the Merger provided in Article VI hereof shall have been
1
2
satisfied or, if permissible, waived at the offices of Xxxxxxx & Xxxxxx, L.L.P.,
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxx 00000, unless another date
or place is agreed to in writing by the parties hereto.
Effective Time. Upon the terms and subject to the conditions
hereof, Articles of Merger (the "Articles of Merger") shall be duly prepared,
executed and acknowledged by the parties hereto and thereafter delivered to the
Secretary of State of the State of Texas for filing as provided in the TBCA, as
soon as practicable on or after the Closing. The Merger shall become effective
upon the filing of the Articles of Merger with the Secretary of State of the
State of Texas or at such time thereafter as is provided in the Articles of
Merger (the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the Merger shall have
the effects set forth in the TBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all properties, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub, subject to the restrictions contained herein, shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws. At the Effective Time, the
articles of incorporation and bylaws of Merger Sub in effect at the Effective
Time shall be the articles of incorporation and bylaws of the Surviving
Corporation, in each case until amended in accordance with applicable law.
1.5 Directors and Officers. At the Effective Time, the officers and
directors of Merger Sub immediately prior to the Effective Time shall become the
officers and directors of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the parties hereto or the holders
of any securities of the Company:
(a)The shares of common stock, no par value, of the Company
(the "Company Common Stock") which are issued and outstanding immediately prior
to the Effective Time shall be converted into and represent the right to receive
(i) 1,689,542 shares (the "Share Consideration") of common stock, par value $.01
per share, of Parent (the "Parent Common Stock"), (ii) cash (the "Cash
Consideration") in the amount of $906,869.01 and (iii) the 1997 Earnout (as
defined herein), if any, as provided in Section 2.2 (the "Earnout
Consideration," and together with the Share Consideration and the Cash
Consideration, the "Merger Consideration"). The Share Consideration and Cash
Consideration shall be allocated among the stockholders of the Company as set
forth in Exhibit A and the Earnout Consideration shall be allocated among the
stockholders of the Company as set forth in Section 2.2.
(b) Each share of Company Common Stock owned by or held in the
treasury of the Company and each share of Company Common Stock owned by Parent
or any direct or
2
3
indirect wholly owned subsidiary of the Company or Parent immediately prior to
the Effective Time shall be automatically cancelled and extinguished without any
conversion thereof and shall cease to exist and no payment or consideration
shall be made or delivered with respect thereto.
(c) Each share of capital stock of Merger Sub which is issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
2.2 1997 Earnout.
(a) On or before Xxxxx 00, 0000, Xxxxx & Young, L.L.P., or
another nationally recognized accounting firm reasonably acceptable to Parent
and the Company Stockholders (the "Auditors"), shall prepare and deliver to
Parent and the Stockholder Representative (as defined herein) an income
statement of the Surviving Corporation for the 1997 fiscal year, including the
portion of such year from December 28, 1996 through the Closing (the "1997
Income Statement"), which statement shall set forth the Surviving Corporation's
EBITDA (as defined below) for such calendar year (the "1997 EBITDA") and a
reasonably detailed calculation of the 1997 Earnout Amount (as defined below).
The 1997 Income Statement shall be prepared by the Surviving Corporation in
accordance with generally accepted accounting principles ("GAAP") in accordance
with past practices and shall fairly and accurately present the EBITDA of the
Surviving Corporation for the calendar year ended December 31, 1997 (and shall
not include adjustments to reflect the allocation of the purchase price). The
determination of the 1997 EBITDA by the Auditors shall be final and binding on
the parties hereto. For purposes of this Agreement, "EBITDA" shall be mean
earnings before interest, taxes, depreciation and amortization, but excluding
the expenses and related items listed on Exhibit G (the "Excluded Expenses").
The parties both agree that the Auditors shall audit the Excluded Expenses in
accordance with generally accepted auditing standards in accordance with past
practices with respect to the Company.
(b) The "1997 Earnout Amount" shall be a number of shares of
Parent Common Stock, not to exceed 750,000 shares in accordance with past
practices, equal to:
750,000 x (1977 EBITDA - $6,000,000)
------------------------
$1,250,000
(i) If the 1997 Earnout Amount is a positive number
of shares, then Parent shall promptly deliver to each Company Stockholder, but
in no event later than May 31, 1998, pro rata based on the number of shares of
Company Common Stock held by each such holder immediately prior to the Effective
Time, the Earnout Consideration to be received by such Company Stockholder
pursuant to this Section 2.2. The Earnout Consideration to be delivered to each
Company Stockholder pursuant to this Section 2.2(b) shall consist of cash and
shares of Parent Common Stock in the percentages set forth in Exhibit A. For
purposes of computing any cash to be paid pursuant to this Section 2.2(b)(i),
all shares of Parent Common Stock shall be valued at $15.00 per share.
3
4
(ii) If the 1997 Earnout Amount is equal to or less
than zero shares, then the Company Stockholders shall not be entitled to receive
any Earnout Consideration pursuant to this Section 2.2.
(c) Parent agrees that during the 1997 Earnout Amount period
it will permit the Company to operate and carry on its business in the ordinary
course consistent with past practices provided that such operations do not
impair the value of the Company in Parent's reasonable judgment.
2.3 Exchange of Certificates. (a) As of the Effective Time, Parent
shall deposit or cause to be deposited with or for the account of a bank or
trust company to be designated by Parent, which is reasonably acceptable to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of the
Company Common Stock, for exchange through the Exchange Agent in accordance with
this Article II, (i) certificates evidencing the shares of Parent Common Stock
representing the Share Consideration issuable in exchange for Shares of Company
Common Stock pursuant to Section 2.1(a)(i) and (ii) cash in the aggregate amount
sufficient to pay the aggregate Cash Consideration for shares of Company Common
Stock converted pursuant to Section 2.1(a)(ii) (the shares and cash so
deposited, together with any dividends or distributions with respect to such
shares, being hereinafter referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the shares of Parent
Common Stock and cash required to be delivered pursuant to Sections 2.1 out of
the Exchange Fund to holders of shares of Company Common Stock. Except as
contemplated by Section 2.3(f), the Exchange Fund shall not be used for any
other purpose. The Exchange Agent shall invest cash in the Exchange Fund, on a
daily basis, as directed by Parent. Any interest, dividends or other income
earned on the investment of cash or other property held in the Exchange Fund
shall be for the account of and payable to Parent.
(b) As soon as practicable (and in no event later than 20 days
after the Effective Date), the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time evidenced outstanding shares of Company Common Stock (the "Certificates"),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only at or
following the Effective Time and only upon delivery of the Certificates to the
Exchange Agent and which shall be in form and substance reasonably satisfactory
to Parent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration with respect to the shares
of Company Common Stock represented thereby. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor (A) certificates evidencing that number of whole shares of
Parent Common Stock which such holder has the right to receive in accordance
with Section 2.1 in respect of the shares of Company Common Stock formerly
evidenced by such Certificate, (B) cash which such holder has the right to
receive in accordance with Section 2.1 in respect of the shares of Company
Common Stock formerly evidenced by such Certificate, (C) any cash payment in
lieu of fractional shares that the holder of such Certificate is entitled to
receive pursuant to Section 2.3(e) and (D) any dividends or other distributions
to which such holder is entitled pursuant to Section 2.3(c), and the Certificate
so surrendered shall be cancelled. In the event of a transfer of ownership of
shares of Company
4
5
Common Stock which is not registered in the transfer records of the Company,
certificates evidencing the proper number of shares of Parent Common Stock and
cash may be issued and paid in accordance with this Article II to a transferee
if the Certificate evidencing such shares of Company Common Stock is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence reasonably satisfactory to Parent that any
applicable stock transfer taxes have been paid. Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145(c) of the Securities Act of 1933, as amended (the "Securities Act"),
shall not be exchanged until Parent has received a written agreement from such
person as provided in Section 6.8. Until surrendered as contemplated by this
Section 2.3, each Certificate shall be deemed at any time after the Effective
Time to represent and evidence only the right to receive upon such surrender the
Merger Consideration with respect to the shares of Company Common Stock formerly
represented thereby in accordance with this Section 2.3.
(c) Notwithstanding any other provision of this Agreement, no
dividends or other distributions declared or made after the Effective Time with
respect to shares of Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock which such holder is entitled to receive,
and no Cash Consideration or cash in lieu of fractional shares shall be paid to
any such holder, until the holder of such Certificate shall surrender such
Certificate for exchange as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate for exchange as provided
herein, there shall be paid to the holder of the certificates evidencing whole
shares of Parent Common Stock issued in exchange therefor, without interest, (i)
as promptly as reasonably practicable following such surrender, the amount of
any cash payable in lieu of fractional shares of Parent Common Stock to which
such holder is entitled pursuant to Section 2.3(e) and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
payable (and not paid) with respect to such whole shares of Parent Common Stock,
in each case less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender payable with respect to
such whole shares of Parent Common Stock, less the amount of any withholding
taxes which may be required thereon.
(d) The shares of Parent Common Stock issued and cash paid
upon the surrender for exchange of shares of Company Common Stock in accordance
with the terms hereof shall be deemed to have been made in full satisfaction of
all rights pertaining to such shares of Company Common Stock.
(e) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued in connection with the Merger, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights as a stockholder of Parent. In lieu of any such fractional shares, each
holder of Company Common Stock upon surrender of a Certificate for exchange
pursuant to this Section 2.3 shall be paid an amount in cash (without interest),
rounded to the nearest cent, determined by multiplying (i) $15.00 by (ii) the
fractional interest to which such holder would otherwise be entitled (after
taking into account all shares of Company Common Stock then held of record by
such holder).
5
6
(f) Any portion of the Exchange Fund which remains
undistributed to the holders of Company Common Stock as of the date which is 12
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent (as unsecured general creditors
thereof) for payment of the Merger Consideration, and any cash in lieu of
fractional shares and any unpaid dividends or distributions with respect to
Parent Common Stock, to which they are entitled pursuant hereto.
(g) Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by Parent or the Exchange
Agent.
(h) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration, and any cash in
lieu of fractional shares and any unpaid dividends or distributions with respect
to the Per Share Consideration to which they are entitled pursuant hereto.
(i) From and after the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of shares of Company Common Stock on the books and records of the
Company or the Surviving Corporation. If, after the Effective Time, any
Certificates are presented to the Exchange Agent or the Surviving Corporation
for any reason, they shall be cancelled and exchanged as provided in this
Article II.
2.4 Stockholder Representative. Holders of a majority of the
outstanding shares of Company Common Stock (as their ownership existed as of the
Closing) may, by written notice to Parent, designate an individual or entity as
the Stockholder Representative for purposes of Section 2.2 (the "Stockholders
Representative"), which individual or entity need not be a holder of Company
Common Stock. Holders of a majority of the outstanding shares of Company Common
Stock may also remove the Stockholder Representative and/or designate a
successor, in which event written notice of such removal or designation shall be
given to Parent. If no Stockholder Representative is so designated, Parent shall
designate an individual or entity to act in such capacity.
6
7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY STOCKHOLDERS
For purposes of this Article III, references to the Company shall
include, without limitation, the Company and the Company Subsidiary (as defined
herein). The Company and the Company Stockholders hereby represent and warrant
to Parent and Merger Sub as of the date hereof as follows:
3.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all requisite power and authority to own, lease and operate its properties
and conduct its business as it is presently being conducted. Star Composites
International, Inc., a wholly owned subsidiary of the Company (the "Company
Subsidiary"), is duly organized, validly existing and in good standing under the
laws of the United States Virgin Islands and has all requisite power and
authority to own, lease and operate its properties and conduct its business as
it is presently being conducted. Each of the Company and the Company Subsidiary
is duly qualified to do business as a foreign corporation or other entity and is
in good standing in each jurisdiction in which such qualification is necessary
under the applicable law as a result of the conduct of its business or the
ownership of its properties, except where the failure to be so qualified would
not have a Material Adverse Effect (as defined below) on the Company. Each
jurisdiction in which the Company or the Company Subsidiary is qualified to do
business as a foreign corporation or other entity is listed in Section 3.1 of
the Disclosure Schedule. For purposes of this Agreement, a "Material Adverse
Effect" shall mean changes, developments or occurrences which, individually or
in the aggregate, have materially adversely affected or would have a material
adverse effect on the business, prospects, assets, profits, sales, financial
position or results of operations of the entity concerned.
3.2 Capitalization of the Company. The authorized capital stock of the
Company consists of 1,300,000 shares divided into (a) one class of 1,000,000
shares of Common Stock, no par value, and (b) one class of 300,000 shares of
Preferred Stock, par value $10.00 per share; provided, however, 21,249 shares of
Series A Preferred Stock were redeemed and cancelled by the Company and are not
available for reissuance. As of the date hereof, there were outstanding
59,738.94 shares of Company Common Stock, the record and, to the knowledge of
the Company and the Company Stockholders, beneficial owners of which are set
forth in Section 3.2 of the Disclosure Schedule. All such outstanding capital
stock is duly authorized, validly issued, fully paid and nonassessable. The
Company has no other outstanding securities, including, but not limited to,
Preferred Stock, options, warrants or other securities convertible into or
exercisable for shares of the Company's capital stock or other securities of the
Company. The Company has not issued any other shares of capital stock, nor
repurchased, redeemed or otherwise acquired any shares of its capital stock.
3.3 Subsidiaries. The Company directly owns all of the outstanding
capital stock of the Company Subsidiary. Except for its interest in the Company
Subsidiary, the Company does not own any stock, partnership interest, joint
venture interest or any other security or ownership
7
8
interest issued by any other corporation or by any partnership, limited
liability company, organization or other entity.
3.4 Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Merger and the other transactions contemplated
hereby to be consummated by the Company. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
Merger and the other transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement or the
consummation of the Merger or the other transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
3.5 No Conflict or Violation. The execution and delivery of this
Agreement by the Company do not, and the performance by the Company of its
obligations hereunder and the consummation by the Company of the Merger and the
other transactions pursuant hereto will not, (a) conflict with or violate the
articles of incorporation or bylaws or other organizational documents of the
Company, (b) conflict with or violate any material law, statute, rule,
regulation, order, judgment, writ, injunction or decree applicable to the
Company or any of its respective properties or assets or (c) result in a
violation or breach of or constitute a default under (or an event which with the
giving of notice or the lapse of time or both would constitute a default under),
require any consent, approval or authorization under, result in the loss of a
material benefit or result in any provision becoming applicable or effective
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
any material property or asset of the Company or any of its subsidiaries may be
bound or affect, except in the case of each of clauses (b) and (c) for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, be reasonably likely to result in a Material
Adverse Effect on the Company.
3.6 Consents and Approvals. No consent, approval, authorization or
permit of, or declaration, filing or registration with, any federal, state,
local, foreign or other governmental, judicial or regulatory authority (each a
"Governmental Entity"), or any other person or entity, is required to be made or
obtained by the Company in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except for (a) the filing and recordation of appropriate
merger documents as required by Texas law, and (b) the pre-merger notification
and report requirements of the Xxxx-Xxxxx-Xxxxxx
8
9
Antitrust Improvements Act of 1976, as amended and the rules and regulations
thereunder (the "HSR Act").
3.7 Financial Statements. The financial statements of the Company as of
and for the periods ended December 30, 1994, December 29, 1995 and December 27,
1996 (the "Financial Statements") (i) are complete and accurate in all material
respects and are consistent with the books and records of the Company (which are
complete and accurate in all material respects), (ii) have been prepared in
accordance with GAAP consistently applied as of the dates and for the periods
covered thereby, and (iii) fairly present, in accordance with GAAP consistently
applied as of the dates and for the periods covered thereby, the financial
condition, results of operations and cash flows of the Company as of the dates
and for the periods then ended and include no change in the application of
accounting principles; provided, however, that the financial statements as of
and for the period ended December 30, 1994 are reviewed, but unaudited and do
not include footnote disclosures in accordance with GAAP (which omitted footnote
disclosures are not, in the aggregate, material). The Financial Statements are
attached hereto as Section 3.7 of the Disclosure Schedule.
3.8 No Undisclosed Liabilities. The Company has no liabilities,
obligations, debts or commitments of any nature (absolute, accrued, contingent
or otherwise), matured or unmatured ("Liabilities"), except (i) Liabilities
which are adequately reflected or reserved against in the Financial Statements
or (ii) Liabilities disclosed in Section 3.8 of the Disclosure Schedule.
3.9 No Changes. Except as disclosed in Section 3.9 of the Disclosure
Schedule, since December 29, 1996 (the "Interim Date") the Company has conducted
its business only in the ordinary course. Without limiting the generality of the
foregoing sentence, except as disclosed in Section 3.9 of the Disclosure
Schedule, since the Interim Date there has not been:
(a) any change in the financial condition, assets,
liabilities, net worth, business or prospects of the Company, except changes in
the ordinary course of business, none of which, individually or in the
aggregate, is in excess of $20,000;
(b) any material damage, destruction or loss, whether or not
covered by insurance, adversely affecting the properties in the aggregate or
business of the Company, or any material deterioration in the operating
condition of the Company's assets;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of the Company's assets, tangible or intangible
in excess of $20,000 in the aggregate;
(d) any strike, walkout, labor trouble or any other new or
continued event, development or condition of any character which has or could
have a Material Adverse Effect on the Company;
(e) any declaration, setting aside or payment of a dividend or
other distribution in respect of any of the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition of any capital
stock of the Company or any rights to purchase such capital stock or securities
convertible into or exchangeable for such capital stock;
9
10
(f) issuance by the Company of, or commitment of the Company
to issue, any shares of stock or other equity securities or obligations or
securities convertible into or exchangeable for shares of stock or other equity
securities;
(g) (i) any increase in the salaries or other compensation
payable or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or stockholder of
the Company, (ii) or any increase in, or any addition to, other benefits
(including without limitation any bonus, profit sharing, pension or other plan)
to which any of the Company's officers, directors, employees or stockholders may
be entitled, or any payments to any pension, retirement, profit sharing, bonus
or similar plan, (iii) any other payment of any kind to or on behalf of any such
officer, director, employee or stockholder other than payment of base
compensation and reimbursement for reasonable business expenses in the ordinary
course of business, (iv) the adoption, creation or amendment of any Plan by the
Company, (v) an employment agreement (written or verbal) made by the Company to
which the Company is a party or (vi) any other change in employment terms for
any of the officers of the Company or, except in the ordinary course of
business, of any of the employees or agents of the Company;
(h) any making or authorization of any capital expenditures in
excess of $20,000;
(i) any cancellation or waiver of any right material to the
operation of the Company's business or any cancellation or waiver of any debts
or claims of substantial value or any cancellation or waiver of any debts or
claims against any Related Party;
(j) any sale, transfer or other disposition of any assets of
the Company, except sales of assets in the ordinary course of business;
(k) acceleration, amendment, cancellation or termination or
threatened cancellation or termination of any Contract, license or other
instrument to which the Company is a party or by which the Company is bound (i)
involving an affiliate of the Company, (ii) involving payments in excess of
$20,000 in the aggregate or (iii) that are otherwise material to the Company;
(l) any payment, discharge or satisfaction of any Liability by
the Company, other than the payment, discharge or satisfaction, in the ordinary
course of business, of Liabilities shown or reflected on the Financial
Statements, or incurred in the ordinary course of business since the Interim
Date;
(m) any delay or failure to repay when due any obligation of
the Company in excess of $10,000;
(n) any adverse change or any overt threat of any adverse
change in the Company's relations with, or any loss or threat of loss of, any of
the Company's customers, clients or suppliers;
10
11
(o) any write-offs as uncollectible of any notes or accounts
receivable of the Company or write-downs of the value of any assets by the
Company other than in immaterial amounts;
(p) any change by the Company in any method of accounting or
keeping its books of account or accounting practices;
(q) any creation, incurrence, assumption or guarantee by the
Company of any Liabilities in excess of $20,000, or any creation, incurrence,
assumption or guarantee by the Company of any indebtedness for money borrowed;
(r) any payment, loan or advance of any amount to or in
respect of, or any sale, transfer or lease of any properties or assets (whether
real, personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any stockholder of the Company, any
of the officers or directors of the Company, any affiliate or relative of any
stockholder of the Company, the Company or any of their respective officers or
directors, or any business or entity in which any stockholder of the Company,
the Company, any of the officers or directors of the Company or any affiliate or
relative of any such person has any direct or material indirect interest (a
"Related Party");
(s) any disposition or license of or failure to keep in effect
any rights in, to or for the use of any patent, trademark, service xxxx, trade
name or copyright, or any disclosure to any person not an employee or Related
Party or other disposal of any trade secret, process or know-how used by the
Company in its business;
(t) any amendment to the organizational documents of the
Company or the Company Subsidiary;
(u) a failure to maintain in full force and effect
substantially the same level and types of insurance coverage as in effect on the
Interim Date;
(v) any agreement (either oral or written) by the Company or
any of its officers or directors to do any of the foregoing; or
(w) any other event or condition of any character that
individually or in the aggregate has a Material Adverse Effect, or any other
event or condition not otherwise disclosed herein or in the Disclosure Schedule
(other than events or conditions affecting the economy generally) known to the
Company that it is reasonable to expect will, individually or in the aggregate,
have a Material Adverse Effect in the future.
The Company has not entered into any written or oral agreement which
would result into any of the above.
3.10 Accounts Receivable. All of the accounts and notes receivable of
the Company are reflected in the Financial Statements and, together with all
notes receivable of the Company arising since the Interim Date, represent bona
fide claims of the Company against debtors for sales, services performed or
other changes arising on or before the date hereof and have arisen in the
ordinary course of business.
11
12
3.11 Title to Assets. Section 3.11 of the Disclosure Schedule contains
a list of all real property (including, without limitation, offices, buildings,
manufacturing facilities, warehouses, improvements and other structures) owned
or leased by, or used in the business of the Company (the "Facilities") and any
rights that the Company may have in real property (including, without
limitation, easements and rights-of-way and access). Section 3.11 of the
Disclosure Schedule identifies all material tangible personal property and
rights in material tangible personal property of Company. The Company's
Facilities and other assets have been maintained in accordance with normal
industry practice, are in reasonable operating condition and repair (except for
ordinary wear and tear), are sufficient for the operation of the Company's
business as currently conducted and conform in all material respects to all
applicable Regulations (including Environmental Laws) relating to their
construction, use and operation. All Facilities and other assets of the Company
material to the conduct of its business as presently conducted are owned or
leased by the Company, and are, except for changes in the ordinary course of
business after the Interim Date, reflected in the Financial Statements. The
Company owns good and, in the case of real property, indefeasible fee or
leasehold title to the real and personal property owned or leased by it, free
and clear of any Encumbrances, except as set forth in Section 3.11 of the
Disclosure Schedule (none of which Encumbrances disclosed or referred to in
Section 3.11 of the Disclosure Schedule impair the current use or diminish the
value of any material item of property to any material extent).
3.12 Leases, Facilities. Section 3.12 of the Disclosure Schedule
contains a list of all real property leases, subleases, amendments, options and
other leasehold interests to which the Company is a party (the "Leases"),
including without limitation a general description of the leased property, the
commencement date, the termination date, monthly rent, the square feet, any rent
escalation provisions, any mandatory or elective expansion provisions, any
renewal options and any early termination options covered by each Lease. All of
the Leases are valid and binding, in full force and effect and enforceable by
the Company in accordance with their respective terms. The Company is not in
default under any Lease, and, to the Company's or the Company Stockholders'
knowledge, no event exists which with notice or lapse of time or both would
constitute a default or an event of default thereunder. Such leased Facilities
are not subject to any Encumbrances, encroachments, zoning ordinances,
administrative regulations or building or use restrictions which in any material
respect interfere with or impair the present and continued use thereof in the
usual and normal conduct of the business of the Company.
Except for Leases listed in Section 3.12 of the Disclosure Schedule and
as contemplated by this Agreement and the transactions contemplated hereby,
there are no leases, subleases, licenses, occupancy agreements, options, rights,
concessions or other agreements or arrangements, written or oral, granting to
any person the right to purchase, use or occupy any Facility, or any real
property.
All Facilities have received all material required approvals of
governmental authorities (including without limitation material Permits (as
defined herein) and a certificate of occupancy or other similar certificate
permitting lawful occupancy of the Facilities) required in connection with the
operation thereof and have been operated and maintained in all material respects
in accordance with applicable Regulations.
12
13
All Facilities are supplied with utilities (including without
limitation water, sewage, disposal, electricity, gas and telephone) and other
services necessary for the operation of such Facilities as currently operated,
and there is no condition which would reasonably be expected to result in the
termination of the present access from any Facility to such utility services.
The improvements constructed on the Facilities, including without
limitation all leasehold improvements, and all Fixtures and Equipment (as
defined below) and other tangible assets owned, leased or used by the Company at
the Facilities are (i) insured to the extent and in a manner customary in the
industry, (ii) structurally sound with no known material defects, (iii) in good
operating condition and repair, subject to ordinary wear and tear, (iv) not in
need of maintenance, repair or correction except for ordinary routine
maintenance and repair, the cost of which would not be material, (v) sufficient
for the operation of the business of the Company as presently conducted and (vi)
in conformity, in all material respects, with all applicable Regulations. None
of the improvements is subject to any commitment or other arrangement for their
sale or use by any affiliate of the Company or third parties. For purposes of
this Agreement, "Fixtures and Equipment" shall mean all of the furniture,
fixtures, furnishings, machinery, automobiles, trucks, spare parts, supplies,
equipment, tooling, molds, patterns, dies and other tangible personal property
owned by the Company, wherever located and including any such Fixtures and
Equipment in the possession of any supplier of the Company, including all
warranty rights with respect thereto.
There are no pending, or to the knowledge of the Company or the Company
Stockholders, threatened (in writing) condemnation proceedings with respect to
any leased real property, or pending or, or to the knowledge of the Company or
the Company Stockholders, threatened (in writing) litigation or administrative
actions relating to any leased Facility.
There are no subleases, licenses, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any Person the right to
xxx or occupy any Facility or any portion thereof or interest therein.
The Company has received no notice and is not aware of any special
assessment relating to any Facility or any portion thereof and there is no
pending or threatened (in writing) special assessment.
3.13 Contracts and Commitments. Except the material contracts,
agreements, commitments and other arrangements, whether oral or written, to
which the Company is a party (the "Contracts") set forth in Section 3.13 of the
Disclosure Schedule, the Company is not a party to any written or oral:
(a) contract, agreement, commitment or personal property lease
which requires the Company to make payments thereunder in excess of $20,000;
(b) note, loan or evidence of indebtedness on the part of the
Company of more than $20,000;
(c) contracts, agreements or commitments not otherwise
described in (a) or (b) above which are not in the ordinary course of the
Company's business or which materially affect the Company's business;
13
14
(d) contracts, agreements or commitments containing covenants
limiting the freedom of the Company to engage in any line of business or compete
with any other person;
(e) partnership or joint venture agreements;
(f) contracts, agreements or commitments which have an
unexpired term in excess of 12 months from the date hereof;
(g) employment contracts, severance agreements or other
contracts involving annual salary or bonus payments, severance payments or the
creation of any Liability, to which any current or former employee or
stockholder of the Company is a party;
(h) labor or union contracts or collective bargaining or
similar agreements;
(i) any oral or written arrangement (or group of related oral
or written arrangements) for the purchase or sale of raw materials, commodities,
supplies, products or other property or for the famishing or receipt of
services, including, without limitation, any customer or vendor contracts,
individually in excess of $20,000;
(j) distribution, franchise, license, technical assistance,
sales, commission, consulting, agency or advertising contracts related to the
business of the Company, except for those providing for payments of less than
$20,000;
(k) promissory notes, loans, agreements, indentures, evidences
of indebtedness, letters of credit, guarantees, or other instruments relating to
an obligation to pay money of the Company, individually in excess of $20,000 or
in the aggregate in excess of $40,000, whether the Company shall be the
borrower, lender or guarantor thereunder or whereby any assets of the Company
are pledged (excluding credit provided by the Company in the ordinary course of
business to purchasers of its products); or
(l) any other written arrangement (or group of related written
arrangements) under which the consequences of a default or termination could
have a Material Adverse Effect on the Company.
The Company has delivered to Parent true, correct and complete copies
of all of the Contracts listed in Section 3.13 of the Disclosure Schedule,
including all amendments and supplements thereto. Neither the Company nor, to
the Company's or the Company Stockholders' knowledge, any other party thereto is
in default in any material respect (nor does any circumstance exist which, with
notice or the lapse of time or both, would result in such a default) under any
contract. All of the Contracts are in full force and effect, are valid and
binding and are enforceable by the Company in accordance with their respective
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally and
subject to the effect of general principles of equity, including without
limitation concepts of materiality, reasonableness, good faith and the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law. Each personal property
lease listed in Section 3.13 of the Disclosure Schedule includes a description
of the leased property, the monthly rent, the term of the lease, any options to
purchase the leased property and any provisions for early termination of
14
15
the lease. Except as set forth in Section 3.13 of the Disclosure Schedule, no
party has given any written or, to the knowledge of the Company or the Company
Stockholders, oral notice of termination or cancellation of any Contract or that
it intends to assert a breach of, or seek to terminate or cancel, any Contract
as a result of the transactions contemplated hereby.
3.14 Litigation, Proceedings and Applicable Law. Except as set forth in
Section 3.14 of the Disclosure Schedule, there is no action, investigation, suit
or other proceeding pending or, to the knowledge of the Company or the Company
Stockholders, threatened against or affecting the Company or any properties or
assets of the Company or before any court, other Governmental Entity or
arbitrator which is material or which could reasonably be expected to prevent or
substantially delay consummation of the Merger or any of the other transactions
contemplated hereby, or otherwise prevent the Company from performing its
obligations under this Agreement. Except as set forth in Section 3.14 of the
Disclosure Schedule, the Company is not in default with respect to any judgment,
order, writ, injunction or decree of any court or Governmental Entity. Except as
set forth in Section 3.14 of the Disclosure Schedule, there is no outstanding
order, ruling, decree, judgment or stipulation by or with any court,
administrative agency, arbitration panel or other similar authority to which the
Company is subject, which adversely affects or could adversely affect (i) the
property, assets, business, condition (financial or otherwise), results of
operations or prospects of the Company or (ii) the ability of the Company to
perform its obligations under this Agreement.
3.15 Compliance with Law. Except as set forth in Section 3.15 of the
Disclosure Schedule, (a) the Company has, in all material respects, complied and
is now in compliance with all federal, state, local and foreign laws, ordinances
and regulations (including, without limitation, those relating to employment and
employment practices), (b) no claims or complaints have been received by the
Company from any governmental authorities or other parties that the Company is
in violation of any such laws, ordinances and regulations, including any
applicable building, zoning, occupational safety and health or similar law,
ordinance or regulation in relation to its offices, buildings or other
structures or equipment, or the operation thereof, or of any applicable fair
employment, equal opportunity or similar law, ordinance or regulation and, to
the Company's and the Company Stockholders' knowledge, no such claims or
complaints are threatened, and (c) the Company has not received any notice from
any governmental authorities of any pending proceedings to take all or any part
of the properties of the Company (whether leased or owned) by condemnation or
right of eminent domain and, to the Company's knowledge, no such proceedings are
threatened. The Company is not in conflict with, or in default or violation of,
its articles of incorporation, bylaws or other organizational documents. Section
3.15 of the Disclosure Schedule sets forth all material Permits (as defined
below) issued or required to be issued as of the date hereof to the Company with
respect to the ownership or lease of its properties and assets or the conduct of
its business. The Company has not failed to comply with, nor is it in violation
of, any material Permit in any material respect. Except as indicated on Section
3.15 of the Disclosure Schedule, all material Permits are final and in full
force and effect and are not subject to any appeals or further proceedings or to
any unsatisfied conditions. No modification, suspension, recession, relocation
or cancellation of any material Permit, or any proceeding with respect to any of
the foregoing, is pending or, to the Company's or the Company Stockholders'
knowledge, threatened. For purposes of this Agreement, "Permit" means any
approval, consent, waiver, exemption, variance, franchise, certificate, order,
permit, authorization or license of or from any federal, state, local or foreign
government,
15
16
governmental agency, board, tribunal, commission, court or other agency or body
with regulatory or governmental authority, including, without limitation, any
federal, state, local or foreign zoning, siting or building permit or license or
authorization.
3.16 Insurance. Section 3.16 of the Disclosure Schedule sets forth (i)
a complete and accurate list of all casualty, business interruption, directors
and officers liability, general liability, workers' compensation and other types
of insurance maintained by or for the benefit of the Company, together with the
names of the policyholder, carriers and insured, additional insured and loss
payees, and the liability limits and expiration date for each such policy, (ii)
a list of all claims (in reasonable detail) under any such insurance policy
since December 31, 1994, and (iii) a description of any risks for which the
Company is self-insured and the amount of reserves established for such purpose.
Each policy is in force, and no notice has been received by the Company from any
insurance carrier purporting to cancel or refuse renewal, reduce or dispute
coverage under any such policy. All premiums or other payments due under all
such policies have been timely paid in full. Section 3.16 of the Disclosure
Schedule identifies which insurance policies are "occurrence" or "claims made."
All insurance coverage held by or for the benefit of the Company and the amount
of reserves established for self-insured risks are reasonably adequate to cover
risks customarily insured against by similar companies in similar businesses.
The Company is not in default under any of such policies or binders, and the
Company has not failed to give any notice or to present any material claim under
any such policy or binder in a due and timely fashion.
3.17 Employee Benefit Plans; ERISA.
(a) Section 3.17 of the Disclosure Schedule contains a list of
all employees of the Company as of December 31, 1996 and the annual compensation
for each such employee as of such date. Section 3.17 of the Disclosure Schedule
also contains a true and complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, employment, severance or
termination pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, savings, stock
bonus, thrift or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (an "ERISA Affiliate"),
that together with the Company would be deemed a "single employer" within the
meaning of Section 4001(b) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder
("ERISA"), for the benefit of any employee or former employee of the Company,
whether formal or informal and whether legally binding or not (the "Plans").
Section 3.17 of the Disclosure Schedule identifies each of the Plans that is an
"employee welfare benefit plan" or "employee pension benefit plan" as such terms
are defined in sections 3(l) and 3(2) of ERISA (such plans being hereinafter
referred to collectively as the "ERISA Plans"). None of the Plans is, or ever
has been, (i) subject to Title IV of ERISA; (ii) subject to Section 412 of the
Code; (iii) a multiemployer pension plan (within the meaning of Section 3(37) of
ERISA); or (iv) subject to Section 501(c)(9) of the Code. Neither the Company
nor any ERISA Affiliate has any formal plan or commitment, whether legally
binding or not, to create any additional Plan or modify or change any existing
Plan that would affect any employee or terminated employee of the Company or any
ERISA Affiliate.
16
17
(b) With respect to each of the Plans, the Company has
heretofore delivered or made available to Parent true and complete copies of
each of the following documents:
(i) a copy of the Plan (including all amendments
thereto);
(ii) a copy of the Form 5500, series annual report,
if required under ERISA, with respect to each such Plan for the last three
years;
(iii) a copy of the most recent Summary Plan
Description ("SPD"), together with all Summaries of Material Modification issued
with respect to such SPD, required under ERISA with respect to such Plan, and
all other material employee communications relating to such Plan;
(iv) if the Plan is funded through a trust or any
other funding vehicle, a copy of the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof;
(v) all contracts relating to the Plans with respect
to which the Company may have any liability, including, without limitation,
insurance contracts, investment management agreements, subscription and
participation agreements and record keeping agreements; and
(vi) the most recent determination letter (or
prototype opinion letter, if applicable) received from the Internal Revenue
Service (the "Service") with respect to each Plan that is intended to be
qualified under Section 401 of the Code.
(c) There are no pending, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of, or against, any of
the Plans or any trusts related thereto.
(d) Neither the Company, nor any ERISA Affiliate, any of the
ERISA Plans, any trust created thereunder nor any trustee, fiduciary or
administrator thereof has engaged in a transaction or has taken or failed to
take any action in connection with which the Company, any ERISA Affiliate, any
of the ERISA Plans, any such trust, any trustee, fiduciary or administrator
thereof, or any party dealing with the ERISA Plans or any such trust could be
subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a tax imposed pursuant to section 4975, 4976 or 4980B of the Code.
(e) Full payment has been made, or will be made in accordance
with section 404(a)(6) of the Code, of all amounts that the Company or any ERISA
Affiliate is required to pay under the terms of each of the ERISA Plans, and all
such amounts properly accrued through the Closing with respect to the current
plan year thereof will be paid by the Company on or prior to the Closing or will
be properly recorded on the Financial Statements.
(f) Each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code.
(g) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified.
17
18
(h) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), or life insurance benefits,
with respect to current or former employees after retirement or other
termination of service other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of the Company, or (iv) benefits, the full
cost of which is borne by the current or former employee (or his or her
beneficiary).
(i) Neither the execution and delivery of this Agreement by
the Company nor the consummation of the transactions contemplated hereby will
result in the acceleration or creation of any rights of any person to benefits
under any Plan (including, without limitation, the acceleration of the vesting
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any pension plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
3.18 Labor Matters.
(a) Except as set forth in Section 3.18 of the Disclosure
Schedule, (i) there is no labor strike, dispute, slowdown, work stoppage or
lockout actually pending or, to the knowledge of the Company, or Company
Stockholders threatened against or affecting the Company and, during the past
five years, there has not been any such action, (ii) to the knowledge of the
Company or the Company Stockholders, there are no union claims to represent the
employees of the Company, (iii) the Company is not a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee association
applicable to employees of the Company, (iv) none of the employees of the
Company are represented by any labor organization and neither the Company nor
the Company Stockholders have any knowledge of any current union organizing
activities among the employees of the Company, nor does any question concerning
representation exist concerning such employees, (v) there are no written
personnel policies, rules or procedures applicable to employees of the Company,
other than those set forth in Section 3.18 of the Disclosure Schedule, true,
correct and complete copies of which have heretofore been delivered to Parent,
(vi) the Company is and has at all times been, in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation,
(vii) there is no unfair labor practice charge or complaint against the Company
pending or, to the knowledge of the Company or the Company Stockholders,
threatened before the National Labor Relations Board or any similar state or
foreign agency, (viii) there is no grievance or arbitration proceeding arising
out of any collective bargaining agreement or other grievance procedure relating
to the Company, (ix) to the knowledge of the Company or the Company
Stockholders, no charges with respect to or relating to the Company are pending
before the Equal Employment Opportunity Commission or any other corresponding
state agency, (x) to the knowledge of the Company or the Company Stockholders,
no federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws intends to conduct an investigation with respect to or
relating to the Company and no such investigation is in progress, (xi) there are
no pending or, to the knowledge of the Company,
18
19
threatened wage and hour claims filed against the Company with the United States
Department of Labor or any corresponding state agency, (xii) there are no
pending citations relating to the Company filed by the Occupational Safety and
Health Administration nor any corresponding state agency, and, to the knowledge
of the Company or the Company Stockholders, there are no threatened citations
relating to the Company, (xiii) there is no pending investigation of, or
complaint pending against, the Company by the Office of Federal Contract
Compliance Programs or any corresponding state agency, and, to the knowledge of
the Company or the Company Stockholders, there are no threatened investigations
or complaints and (xiv) there are no complaints, controversies, lawsuits or
other proceedings pending or, to the knowledge of the Company or the Company
Stockholders, threatened that allege breach or violation of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof, or alleging any other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
(b) Since the enactment of the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act"), the Company has not
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Company, or (ii) a mass layoff (as defined in
the WARN Act) affecting any site of employment or facility of the Company; nor
has the Company been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth in Section 4.18 of the
Disclosure Schedule, none of the employees of the Company has suffered an
"employment loss" (as defined in the WARN Act) since January 1, 1990.
3.19 Tax Matters.
(a) The Company has delivered or made available to Parent (i)
true, correct and complete copies of all federal, state, local and foreign
income and franchise Tax Returns (as defined below) filed by the Company for all
taxable periods ending on or after December 31, 1993 and (ii) all examination
notices and reports and statements of deficiency assessed or proposed against or
agreed to by the Company, the Company Subsidiary or any affiliated group(s) of
corporations including, or which included at any time, the Company or the
Company Subsidiary (such affiliated group(s), as to the taxable periods during
which the Company or the Company Subsidiary were included in such group(s),
being hereinafter referred to as the "Company Affiliated Group") with respect to
any taxable period that ended on or after December 31, 1993 or with respect to
which the Company, the Company Subsidiary or any member of the Company
Affiliated Group has any potential exposure for assessment of a tax. For
purposes of this Agreement, "Tax" or "Taxes" shall mean any federal, state,
local, foreign or other tax, levy, impost, fee, assessment or other government
charge of any nature whatsoever, including without limitation income, estimated
income, business occupation, franchise, property, payroll, personal property,
sales, transfer, use, VAT, excise, employment, commercial rent, occupancy,
franchise and withholding taxes, and any premium, including without limitation
interest, penalties and additions in connection therewith.
(b) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to Taxes (collectively,
"Tax Returns") required to be filed by the Company through the date hereof have
been properly and timely filed (giving effect to
19
20
extensions granted with respect thereto) and the Company will properly and
timely file or cause to be filed all Tax Returns required to be filed on or
prior to the Effective Time. All Tax Returns are and shall be true, correct and
complete in all material respects. All Taxes of the Company, the Company
Subsidiary and the Company Affiliated Group and each member thereof in respect
of periods beginning before the date hereof have been paid or an adequate
reserve has been established therefor, as set forth in Section 3.19 of the
Disclosure Schedule, and neither the Company, the Company Subsidiary nor the
Company Affiliated Group or any member thereof has any liability (actual or
contingent) for Taxes in excess of the amounts so paid or the reserves so
established.
(c) There are no liens for Taxes upon any of the assets of the
Company except liens for taxes not yet due and payable.
(d) To the knowledge of the Company and the Company
Stockholders, all transactions and reporting positions that could give rise to a
penalty as a result of a substantial understatement of income tax by the
Company, the Company Subsidiary, the Company Affiliated Group or any member
thereof within the meaning of Section 6662(d) of the Code (including any
predecessor and similar state statutes) have been adequately disclosed on the
Tax Returns filed as of the date hereof in accordance with Section 6662(d)(2)(B)
of the Code (or, if applicable, any predecessor and similar state statutes).
(e) Neither the Company nor the Company Subsidiary has made
any change in accounting methods from those applied in preparing the most
recently filed Tax Returns of the Company and the Company Subsidiary, received a
ruling from any taxing authority or signed an agreement with any taxing
authority that could reasonably be expected to have, after the date hereof, a
Material Adverse Effect on the Company.
(f) The Company, the Company Affiliated Group and all members
thereof have complied in all material respects with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442, 1445
and 1446 of the Code or similar provisions under any foreign laws) and has,
within the time and the manner prescribed by law, withheld from all payments in
the nature of wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under applicable laws.
(g) Except as set forth in Section 3.19 of the Disclosure
Schedule, no Tax Returns of or including the Company or the Company Subsidiary
and filed after December 31, 1989 have been examined by the Internal Revenue
Service, and no audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of the Company or the
Company Affiliated Group or any member thereof, and, to the best knowledge of
the Company and the Company Stockholders, no person has received written notice
of any pending audits or proceedings. Section 3.19 of the Disclosure Schedule
sets forth the nature of any such audit or proceeding, the type of Tax Return,
any deficiencies proposed, asserted or assessed, the amount thereof and the tax
year(s) in question. Except as set forth in Section 3.19 of the Disclosure
Schedule, to the knowledge of the Company and the Company Stockholders, no
deficiency for any Taxes has been proposed, asserted or assessed against the
Company or the Company
20
21
Affiliated Group or any member thereof that has not been resolved and paid in
full. Except as set forth in Section 3.19 of the Disclosure Schedule, there are
no outstanding waivers, extensions, or comparable consents regarding the
application of any applicable statute of limitations with respect to any Taxes
or Tax Returns that have been given by the Company or the Company Affiliated
Group or any member thereof (including the time for filing of Tax Returns or
paying Taxes) and there are no pending requests for any such waivers,
extensions, or comparable consents.
(h) Neither the Company nor the Company Affiliated Group is a
party to and is bound by or has any obligation under any Tax sharing, allocation
or indemnity agreement or similar contract or arrangement.
(i) No power of attorney granted by the Company, the Company
Affiliated Group or any member thereof with respect to any Taxes is currently in
force.
(j) The Company has not filed a consent to the application of
Section 341(f) of the Code, or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company.
(k) The Company is not and has not been a "United States real
property holding corporation" (as defined in Section 897(c)(2) of the Code)
during an applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(l) The Company has not filed any election to be an "S
Corporation" within the meaning of Section 1362(a) of the Code or under any
analogous provision of state or local law.
(m) The Company is not subject to any joint venture,
partnership or other arrangement or contract that is treated as a partnership
for U.S. federal income tax purposes.
(n) The Company is not subject to liabilities for Taxes of any
other person, including, without limitation, liability arising from the
application of U.S. Treasury Regulation Section 1.1502-6 or any analogous
provision of Tax law.
(o) To the knowledge of the Company and the Company
Stockholders, no claim has ever been made by a taxing authority in a
jurisdiction where the Company does not pay Taxes or file Tax Returns that the
Company is or may be subject to Taxes assessed by such jurisdiction.
(p) Except as set forth on Section 3.19 of the Disclosure
Schedule, the Company is not a party to (i) any "safe harbor lease" within the
meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by the
Tax Equity and Fiscal Responsibility Act of 1982, (ii) a lease involving
"tax-exempt use property" within the meaning of Section 168(h) or (iii) a lease
which is properly characterized as other than a true lease for income tax
purposes.
21
22
(q) The Company has not agreed, or to the knowledge of the
Company or the Company Stockholders, is it otherwise required, to make any
adjustment under Section 481 of the Code by reason of a change in accounting
method or otherwise.
(r) The Company has not made or become obligated to make, or
will not as a result of any event(s) connected with the acquisition of Company
pursuant to this Agreement or any other transaction contemplated in this
Agreement, make or become obligated to make any "excess parachute payment" as
defined in Section 280G of the Code (without regard to subsection (b)(4)
thereof).
(s) There are no outstanding balances of deferred gain or loss
accounts related to deferred intercompany transactions between the Company and
the Company Subsidiary.
(t) The Company's tax basis, and excess loss account, if any,
in the Company Subsidiary is set forth in Section 3.19 of the Disclosure
Schedule.
(u) Section 3.19 of the Disclosure Schedule sets forth each
jurisdiction in which the Company, the Company Subsidiary, the Company
Affiliated Group and each member thereof is, or has been (with respect to any
taxable period or event that ended or occurred after December 31, 1989), subject
to imposition of a Tax.
(v) Each subsidiary of the Company which has been treated by
the Company as an "FSC" within the meaning of Section 922 of the Code has met at
all relevant times the definition of an "FSC" and has qualified and will qualify
for the special treatment of an "FSC" set forth in Code Section 921 et. seq.
(w) Immediately following the Merger, the Company will own at
least 90% of the fair market value of the net assets and at least 70% of the
fair market value of the gross assets held by the Company at the time
discussions were initiated which led to execution of this Agreement. For
purposes of this representation, amounts paid by the Company to dissenters,
amounts paid by the Company to its stockholders who received cash or other
property pursuant to this Agreement or any related agreement or understanding,
Company assets used to pay its reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by the Company at any
time after discussions were initiated which led to execution of this Agreement
will be included as assets of the Company.
(x) The Company is not an "investment company" as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(y) The fair market value of the assets of the Company
immediately prior to and immediately following the Merger will equal or exceed
the sum of the liabilities of the Company, including, without limitation, any
liabilities to which such assets are subject.
(z) To the knowledge of the Company and the Company
Stockholders, none of the Parent Common Stock to be received by any stockholder
of the Company who is also an employee will be separate consideration for, or
allocable to, any employment agreement, and the compensation paid by the Company
to each person who is an employee will be for services
22
23
actually rendered and will be commensurate with the amount which would be paid
to third parties bargaining at arm's length for similar services.
3.20 Environmental Matters.
(a) As used in this Agreement:
(i) "Cleanup" means all actions required by
Environmental Laws or court order by third parties to (A) cleanup, remove, treat
or remediate Hazardous Materials in the indoor or outdoor environment, (B)
prevent the Release of Hazardous Materials so that they do not migrate, endanger
or threaten to endanger public health or welfare of the indoor or outdoor
environment, (C) perform pre-remedial studies and investigations and
post-remedial monitoring and care or (D) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of Hazardous
Materials in the indoor or outdoor environment.
(ii) "Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral) by any third person
or entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, Cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (A) the presence, or Release into the
indoor or outdoor environment, of any Hazardous Materials at any location,
whether or not owned or operated by the Company, or (B) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
(iii) "Environmental Laws" means all federal, state,
local and foreign laws and regulations in effect as of the Effective Date
relating to pollution or protection of occupational and human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials, and all laws relating to endangered
or threatened species of fish, wildlife and plants and the management or use of
natural resources.
(iv) "Hazardous Materials" means all substances
defined as Hazardous Substances, Oils, Pollutants or Contaminants in the
National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5, or defined as such by, or regulated as such under, any
Environmental Law.
(v) "Release" means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater and surface or subsurface
strata) or into or out of any property, including the movement of Hazardous
Materials through or in, the air, soil, surface water, groundwater or property.
23
24
(b) The Company is in compliance in all material respects with
all applicable Environmental Laws (which compliance includes, but is not limited
to, the possession by the Company of all permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof). The Company has not received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company is not in such compliance, and there
are no past or present actions, activities, circumstances, conditions, events or
incidents that may prevent or interfere with such compliance in the future. All
Permits and other governmental authorizations currently held by the Company
pursuant to applicable Environmental Laws are identified in Section 3.20 of the
Disclosure Schedule.
(c) Except as set forth in Section 3.20 of the Disclosure
Schedule, no transfers of permits or other governmental authorizations under
Environmental Laws, and no additional permits or other governmental
authorizations under Environmental Laws, will be required to permit the Company
to conduct its business in material compliance with all applicable Environmental
Laws immediately prior to the Closing.
(d) There is no material Environmental Claim pending or, to
the knowledge of the Company, threatened against the Company or, to the
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or assumed either
contractually or by operation of law.
(e) Except as set forth in Section 3.20 of the Disclosure
Schedule, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the Release,
emission, discharge, presence or disposal of any Hazardous Material, which could
form the basis of any material Environmental Claim against the Company or, to
the knowledge of the Company or the Company Stockholders, against any person or
entity whose liability for any Environmental Claim the Company has or may have
retained or assumed either contractually or by operation of law.
(f) Except as set forth in Section 3.20 of the Disclosure
Schedule, the Company has not, and, to the knowledge of the Company or the
Company Stockholders, no other person has Released, placed, stored, buried or
dumped Hazardous Materials or any other wastes produced by, or resulting from,
any business, commercial or industrial activities, operations or processes, on,
beneath or adjacent to any Facility currently or formerly owned, operated or
leased by the Company.
(g) The Company has delivered or otherwise made available for
inspection to Parent true, complete and correct copies and results of any
reports, studies, analyses, tests or monitoring possessed or initiated by the
Company pertaining to Hazardous Materials in, on, beneath or adjacent to any
Facility currently or formerly owned, operated or leased by the Company, or
regarding the Company's compliance with applicable Environmental Laws.
(h) Except as set forth in Section 3.20 of the Disclosure
Schedule, without in any way limiting the generality of the foregoing, no
Facility currently or formerly owned, operated or leased by the Company contains
any (i) underground storage tanks; asbestos; polychlorinated biphenyls ("PCBs"),
(ii) underground injection xxxxx, (iii) radioactive materials
24
25
or (iv) septic tanks or waste disposal pits in which process wastewater or any
Hazardous Materials have been discharged or disposed (as such terms in (i)-(iv)
are defined in or governed or regulated by or under any Environmental Law).
(i) Except as set forth in Section 3.20 of the Disclosure
Schedule, to the knowledge of the Company or the Company Stockholders, there
have been no written reports, environmental audits or assessments which have
been conducted at any Facility currently or formerly owned, leased or operated
by the Company within the past five years, either by the Company or any
attorney, environmental consultant or engineer engaged for such purpose.
(j) Except as set forth in Section 3.20 of the Disclosure
Schedule, the Company is not a party, whether as a direct signatory or as
successor, assign or third party beneficiary, or otherwise bound, to any Lease
or other Contract under which any corporation is obligated by or entitled to the
benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Claims or Cleanups.
(k) Except as set forth in Section 3.20 of the Disclosure
Schedule, the Company has not released any other person from any Environmental
Claim or waived any rights concerning any Environmental Claim.
3.21 Customers and Suppliers. No customer or supplier accounted for
more than ten percent of the Company's sales or purchases in either of the
Company's immediately preceding two completed fiscal years or the Company's
current fiscal year to date. Section 3.21 of the Disclosure Schedule sets forth
a complete and accurate list of the names of the ten largest (i) customers,
distributors and other agents and representatives of the Company, showing the
approximate total sales in dollars by the Company to each such customer during
the two most recently completed fiscal years and (ii) suppliers of the Company,
showing the approximate total purchases in dollars by the Company from each such
supplier during the two most recently completed fiscal years. Since the Interim
Date, there has been no material adverse change in the business relationship of
the Company with any customer, distributor or supplier named in Section 3.21 of
the Disclosure Schedule. No customer or supplier named in Section 3.21 of the
Disclosure Schedule has terminated or materially altered, or notified the
Company of any intention to terminate or materially alter, its relationship with
the Company, and the Company has no reason to believe that any such customer or
supplier will terminate or materially alter its relationship with the Company.
3.22 Books and Records. The Company has made and kept books, records
and accounts which reasonably reflect its material activities, transactions and
dispositions of its assets. The minute books of the Company reasonably reflect
all material action previously taken by the stockholders or board of directors
of the Company.
3.23 No Brokers. The Company has not entered into nor will enter into
any contract, agreement, arrangement or understanding with any person or firm
which will result in the obligation of Parent or the Company to pay any finder's
fee, brokerage commission or similar payment in connection with the transactions
contemplated hereby.
25
26
3.24 Severance Arrangements. Except as set forth in Section 3.24 of the
Disclosure Schedule, the Company has not entered into any severance or similar
arrangement in respect of any of its current or former officers, employees or
agents (collectively, "Personnel") that provides for any obligation (absolute or
contingent) of the Company or any other person to make any payment to any such
Personnel following termination of employment.
3.25 Transactions With Related Parties. Except as disclosed in Section
3.25 of the Disclosure Schedule, no Related Party is presently, or within the
last two years has been, a party to any transaction with the Company, including
without limitation, any contract, agreement or other arrangement (a) providing
for the furnishing of services by, (b) providing for the rental of real or
personal property from, or (c) otherwise requiring payments to (other than for
services as officers, directors or employees of the Company) any such Related
Party.
3.26 Intellectual Property. Except as set forth in Section 3.26 of the
Disclosure Schedule, the Company owns or has the right to use, free and clear of
any Encumbrances and without infringement or violation of the rights of others,
all United States patents, patent licenses, know-how licenses, tradenames, brand
names, trademarks, service marks, designs, copyrights and all other intangible
property rights owned or used in the conduct of the business of the Company as
presently conducted by it, whether registered or unregistered, and any
applications or registrations therefor (collectively, "Intellectual Property").
Section 3.26 of the Disclosure Schedule identifies each patent or registration
which has been issued to the Company with respect to any of its Intellectual
Property, identifies each pending patent application or application for
registration which the Company has made with respect to its Intellectual
Property, and identifies each license, agreement or other permission which the
Company has granted to any third party with respect to its Intellectual
Property. The Company has not received any written claims or demands of any
person, and there are no proceedings which are pending or, to the knowledge of
the Company after reasonable inquiry, threatened, alleging any infringement or
violation by the Company of any intellectual property of third parties or which
challenge the exclusive rights of the Company in respect of any Intellectual
Property. No Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, arbitrator or
administrative agency, and none of the Intellectual Property is being infringed
by others or used by others (whether or not such use constitutes infringement)
in any material respect.
3.27 Payments. The Company has not (i) directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the business, assets or operations of the Company, which
is, or may be with the passage of time or discovery, illegal under any federal,
state or local laws of the United States (including without limitation the U.S.
Foreign Corrupt Practices Act) or any other country having jurisdiction, (ii)
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers, (iii) established or
maintained any unrecorded fund or asset for any purpose or made any false
entries on the books and records of the Company for any reason.
3.28 Product Liability and Warranty Matters. Except as set forth in
Section 3.28 of the Disclosure Schedule, the Company's products comply in all
material respects with and meet
26
27
the standards of all applicable contracts and specifications and all applicable
federal, state, local and, to the Company's knowledge, non-U.S. laws in
countries in which the Company currently distributes its products. Except as set
forth in Section 3.28 of the Disclosure Schedule, no product or service warranty
or liability or strict liability or negligence claims in respect to such
products or services sold are pending or, to the Company's or the Company
Stockholders' knowledge, threatened. There have been no product recalls in the
last five years.
3.29 Disclosure. No disclosure contained in the Disclosure Schedule
shall be deemed to have been made unless it provides a description in reasonable
detail of the matter required to be disclosed sufficient to alert Parent of the
facts relevant to the representation and warranty to which the disclosure is
responsive.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY STOCKHOLDERS
Each Company Stockholder hereby makes the following
representations and warranties to Parent and Merger Sub:
4.1 Authorization. Each Company Stockholder has all necessary power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each Company Stockholder and is a legal, valid and binding
obligation of the Company Stockholder, enforceable against the Company
Stockholder in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally, and except as the availability of equity
remedies may be limited by general principles of equity (regardless of whether
such equitable principles are applied in a proceeding at law or in equity).
4.2 No Conflict or Violation. The execution, delivery and performance
of this Agreement by each Company Stockholder and the consummation by each
Company Stockholder of the transactions contemplated hereby do not, with or
without the giving of notice or the lapse of time, or both, violate, conflict
with, result in the breach of or a default under, or accelerate the performance
required by or result in any adverse effect under any of the terms, conditions
or provisions of any covenant, agreement, commitment or understanding (including
any covenant not to compete, employment agreement or consulting agreement) to
which the Company Stockholder is a party, or any Permit, authorization, order,
ruling, decree, judgment or arbitration award or, subject to obtaining the
approvals referred to in Section 3.6 hereof, any law, rule, regulation or
stipulation, to which the Company Stockholder is subject, or result in the
creation of any Encumbrance upon any of the properties or assets of the Company
Stockholder.
4.3 Ownership of Stock. Each Company Stockholder is the record and
beneficial owner of the Company Common Stock identified in Section 3.2 of the
Disclosure Schedule, and each Company Stockholder does not own of record or
beneficially any other shares of capital stock of the Company, or any securities
convertible into or exercisable for shares of capital stock of the Company.
27
28
4.4 Review of Agreements; Acknowledgment. Each Company Stockholder has
carefully reviewed this Agreement, fully understands and is aware of its terms,
and understands such Company Stockholder's rights, obligations and
responsibilities hereunder. Such Company Stockholder has reviewed this Agreement
with such legal and other professional advisors of the Company Stockholder as
the Company Stockholder considered to be appropriate. Each Company Stockholder
acknowledges that no facts or circumstances exist which provide a basis for any
claim, demand, action, cause of action, in law or in equity, or suit by the
Company Stockholder against the Company, other than claims described in Section
4.4 of the Disclosure Schedule.
4.5 Investment Representations. Each Company Stockholder (other than
Xxxxx X. Xxxxxxxx, Xxxx X. Xxxxx and Xxxxx X. Xxxxxxxx), severally and not
jointly, hereby represents, warrants, acknowledges, covenants and agrees as
follows: (i) the Parent Common Stock to be issued to the Company Stockholder
pursuant hereto is being acquired for such Company Stockholder's own account for
investment purposes only and not with a view to any public resale, public
distribution or public offering thereof within the meaning of the Securities Act
or any state securities or blue sky laws and such Parent Common Stock will not
be sold or otherwise disposed of except in compliance with the Securities Act or
in reliance upon an exemption therefrom, (ii) the Parent Common Stock has not
been registered under the Securities Act or any state securities or blue sky
law, (iii) such Company Stockholder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act, (iv) in making
such Company Stockholder's decision to invest in the Parent Common Stock, such
Company Stockholder has relied upon independent investigations made by such
Company Stockholder and, to the extent believed by such Company Stockholder to
be appropriate, such Company Stockholder's representatives, including such
Company Stockholder's own professional, tax and other advisors, (v) such Company
Stockholder and such Company Stockholder's representatives have been given a
full opportunity to examine all documents and to ask questions of, and to
receive answers from, Parent and its representatives concerning the terms of the
sale of the Company Common Stock to Parent, such Company Stockholder's
investment in the Parent Common Stock and the business of Parent and such other
information as such Company Stockholder desires in order to evaluate an
investment in the Parent Common Stock, and all such questions have been answered
to the full satisfaction of such Company Stockholder, (vi) such Company
Stockholder has evaluated the merits and risks of an investment in the Parent
Common Stock and has determined that the Parent Common Stock is a suitable
investment for such Company Stockholder in light of such Company Stockholder's
overall financial condition and prospects, (vii) such Company Stockholder is a
resident of the State or nation identified in Section 4.5 of the Disclosure
Schedule.
4.6 Parent's Reliance. Each of the Company Stockholders acknowledges
that Parent is relying, and agrees that Parent is entitled to rely, on the truth
and accuracy of the representations and warranties set forth above.
28
29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, hereby represent
and warrant to the Company as of the date hereof as follows:
5.1 Due Organization. Each of Parent and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
own, lease and operate its properties and conduct its business as it is
presently being conducted. Merger Sub has not engaged in any activities other
than in connection with the transactions contemplated by this Agreement. Each of
Parent and Merger Sub is duly qualified to do business as a foreign corporation
or other entity and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties except where the failure to
be so qualified would not have a Material Adverse Effect on Parent or Merger
Sub.
5.2 Authorization. Each of Parent and Merger Sub has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of Parent and Merger Sub and no other corporate proceedings on the part of
Parent and Merger Sub are necessary to authorize the execution, delivery and
performance of this Agreement or the consummation of the Merger or the other
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
5.3 Consents and Approvals. No consent, approval, authorization or
permit of, or declaration, filing or registration with, any federal, state,
local, foreign or other governmental, judicial or regulatory authority, or any
other person or entity, is required to be made or obtained by Parent or Merger
Sub in connection with the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, except for (a) the
filing and recordation of appropriate merger documents as required by Texas law
and (b) the pre-merger notification and report requirements of the HSR Act.
5.4 No Conflict or Violation. The execution and delivery of this
Agreement by Parent and Merger Sub do not, and the performance by Parent and
Merger Sub of their obligations hereunder and the consummation by Parent and
Merger Sub of the Merger and the other transactions pursuant hereto will not,
(a) conflict with or violate the certificate of incorporation,
29
30
articles of incorporation or Bylaws or organizational documents of Parent or
Merger Sub, (b) conflict with or violate any material law, statute, rule,
regulation, order, judgment, writ, injunction or decree applicable to Parent or
Merger Sub or any of their respective properties or assets or (c) result in a
violation or breach of or constitute a default under (or an event which with the
giving of notice or the lapse of time or both would constitute a default under),
require any consent, approval or authorization under, result in the loss of a
material benefit or result in any provision becoming applicable or effective
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or any material property or asset of the Company may be bound or affect, except
in the case of each of clauses (b) and (c) for any such conflicts, violations,
breaches, defaults or other occurrences which would not, individually or in the
aggregate, be reasonably likely to result in a Material Adverse Effect on Parent
or Merger Sub.
5.5 Parent Common Stock. All of the shares of Parent Common Stock to be
issued pursuant to this Agreement have been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
5.6 No Brokers. Neither Parent nor Merger Sub has entered into nor will
enter into any contract, agreement, arrangement or understanding with any person
or firm which will result in the obligation of the Company to pay any finder's
fee, brokerage commission or similar payment in connection with the transactions
contemplated hereby.
5.7 SEC Documents. Parent has made available to the Company for its
inspection each registration statement, quarterly report on Form 10-Q, annual
report on Form 10-K, current report on Form 8-K, definitive proxy statement or
information statement filed by Parent with the Securities and Exchange
Commission (since January 1, 1995 and prior to the date of this Agreement (the
"Parent SEC Documents"), which are all the documents (other than preliminary
material) that Parent was required to file with the SEC since such date. As of
their respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Securities Exchange
Act of 1934, as amended, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Parent SEC Documents, and none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
5.8 Tax Matters. Merger Sub has been formed solely for the purposes of
effecting the Merger and, immediately prior to the Merger, Parent will "control"
Merger Sub within the meaning of Code Section 368(c). Parent is not an
"investment company" as defined in Code Sections 368(a)(2)(f)(iii) and (iv).
5.9 Knowledge. Neither Parent nor Merger Sub have any actual knowledge
of any breach of any representation, warranty or covenant of the Company or
Company Stockholders contained in this Agreement.
30
31
ARTICLE VI
COVENANTS
6.1 Maintenance of Business. From the date hereof through the Closing,
each of the Company and the Company Subsidiary shall carry on its business in
the ordinary course consistent with past practices and shall use its best
efforts to keep available to the Company and the Company Subsidiary the services
of its present employees and to maintain the relationships between the Company
or the Company Subsidiary and its suppliers, customers and others having
business relations with it. Without limiting the generality of the foregoing,
each of the Company and the Company Subsidiary shall (i) maintain its assets in
their current state of repair, subject to normal wear and tear, (ii) maintain
insurance covering its assets comparable to that in effect as of the date
hereof, (iii) not purchase or commit to purchase any assets, incur (by
guarantee, endorsement or otherwise) any Liabilities or discharge or satisfy any
liens or Liabilities other than in the ordinary course of business and in amount
not to exceed $20,000, without the prior written consent of Parent, (iv) make
timely payments on accounts payable and other obligations of the Company or the
Company Subsidiary in accordance with past practice, (v) maintain its existence
in good standing and (f) maintain proper business and accounting records,
consistent with past practice.
6.2 Certain Prohibited Transactions. From the date hereof through the
Closing, without the prior written consent of Parent, neither the Company nor
the Company Subsidiary shall (i) engage in any transaction or act except in the
ordinary course of business and consistent with past practice, (ii) amend or
change its organizational documents, (iii) issue or sell, or authorize for
issuance or sale, or grant options, warrants or rights to purchase or subscribe
to, or enter into any arrangement with respect to the issuance or sale of, any
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or make any changes in its
capital structure, (iv) organize any subsidiary, acquire any capital stock or
other equity securities of any corporation, or acquire any equity ownership or
other interest in any business, or merge with, liquidate into or otherwise
combine with any other business, person or entity, (v) make any change in
accounting policy, (vi) adopt, enter into, amend or terminate any employment,
consulting, termination, severance or retention agreement or any Plan, (vii)
enter into, terminate or amend in any material respect any contract or
agreement, except in the ordinary course of business, (viii) make any capital
expenditures in excess of $20,000, (ix) dispose of any property other than in
the ordinary course of business and in an amount not exceeding $20,000, (x) pay,
discharge, settle or satisfy or agree to pay, discharge, settle or satisfy, any
Liabilities, other than when due in accordance with their respective terms and
other than Liabilities, in each case, in an amount not in excess of $20,000,
(xi) in any material respect, waive, release, grant or transfer any rights of
value or modify or change any existing license, lease, contract or other
agreement or arrangement to which the Company or the Company Subsidiary is a
party, (xii) make any material change in the Company's or the Company
Subsidiary's business or operations or (xiii) increase the salaries or other
compensation payable or to become payable to, or make any advance (excluding
advances for ordinary business expenses) or loan to, any officer, director,
employee or stockholder of the Company or the Company Subsidiary, or increase or
add to other benefits (including, without limitation, any bonus, profit sharing,
pension or other plan) to which any of the Company's or Company Subsidiary's
officers, directors, employees or stockholders may be entitled.
31
32
6.3 Access to Information. The Company and the Company Subsidiary shall
allow Parent, at Parent's own expense, during regular business hours, prior to
the Closing, through Parent's employees, agents and representatives, to make
such investigation of the business, properties, plants, books, records and key
employees of the Company and the Company Subsidiary, including, without
limitation, financial statements, internal financial reports, projections and
other materials, and to conduct such examination of the condition (financial or
otherwise) of the Company and the Company Subsidiary as Parent deems necessary
or advisable to familiarize itself with such business, properties, plants,
books, records, condition and other matters, and to verify the representations
and warranties of the Company hereunder. Parent and the Company agree that all
information obtained by Parent pursuant to this Section 6.3 shall be deemed
"Information" under, and shall be subject to, that certain Secrecy Agreement
dated as of August 2, 1996 between Parent and the Company, as amended.
6.4 No Solicitation. From the date hereof through the Closing or the
earlier termination of this Agreement, the Company shall not, directly or
indirectly (whether on its own or through its officers, directors or
representatives), enter into, solicit, initiate or continue any discussions or
negotiations with, or encourage or respond to any inquiries or proposals by, or
participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any corporation, partnership, person
or other entity or group, other than Parent, Merger Sub and their respective
officers, directors and representatives, concerning any sale of all or a portion
of the assets of the Company (except in the ordinary course of business) or of
any shares of capital stock of the Company, or any merger, consolidation,
liquidation, dissolution or similar transaction involving the Company (each such
transaction being referred to herein as a "Proposed Acquisition Transaction").
The Company hereby represents that it is not now engaged in discussions or
negotiations with any party other than Parent and Merger Sub with respect to any
of the foregoing. The Company shall notify Parent promptly (orally and in
writing) if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any information is requested with respect to any
Proposed Acquisition Transaction and notify Parent of the terms of any proposal
which it may receive in respect of any such Proposed Acquisition Transaction,
including without limitation the identity of the prospective purchaser or
soliciting party. The Company shall also provide Parent with a copy of any
offer. The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party.
6.5 Consents and Best Efforts. Each of the parties hereto shall use all
commercially reasonable good faith efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, and consult and fully cooperate
with and provide reasonable assistance to each other party and their respective
representatives in order to consummate and make effective the Merger and the
other transactions contemplated by this Agreement as promptly as practicable
hereafter, including without limitation, (i) using all commercially reasonable
good faith efforts to make all filings, applications, notifications, reports,
submissions and registrations with, and to obtain all consents, approvals,
authorizations or permits of, Governmental Entities or other persons or entities
as are necessary for the consummation of the Merger and the other transactions
contemplated hereby (including, without limitation, pursuant to the HSR Act and
other applicable laws and regulations), and (ii) taking such actions and doing
such things as any other party hereto may
32
33
reasonably request in order to cause any of the conditions to such other party's
obligation to consummate the Merger as specified in Article VI of this Agreement
to be fully satisfied.
6.6 Notification of Certain Matters. From the date hereof through the
Closing, the Company shall give prompt notice to Parent, and Parent and Merger
Sub shall give prompt notice to the Company, of (a) the occurrence, or failure
to occur, of any event which occurrence or failure would be likely to cause (i)
any representation or warranty contained in this Agreement or in any exhibit or
schedule hereto to be untrue or inaccurate in any material respect or (ii) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in all material respects and (b) any failure of Parent, Merger
Sub or the Company, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied under this Agreement or
any exhibit or schedule hereto in any material respect; provided, however, that
the delivery of any notice pursuant to this Section shall not limit or otherwise
effect the remedies available hereunder to the party receiving such notice.
6.7 Reorganization. From and after the date hereof and until the
Effective Time, none of Parent, Merger Sub or the Company shall knowingly take
any action, or knowingly fail to take any action, that would preclude
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code or enter into any contract, agreement, commitment or
arrangement that would have such effect. Following the Effective Time, neither
Parent nor the Surviving Corporation shall take any action or fail to conduct
the Surviving Corporation's business in a manner that would preclude the
characterization of the Merger as a reorganization within the meaning of section
368(a) of the Code. After the Effective Time, Parent, the Surviving Corporation
and the Company Stockholders shall not take any position on any Tax Return
fundamentally inconsistent with the characterization of the Merger as a
reorganization under Section 368(a)(2)(E) of the Code (except as otherwise
required due to any judicial or administrative decision that has become final).
6.8 Public Announcements. Unless otherwise required by applicable law
or stock exchange requirements or requirements of Nasdaq, at all times prior to
the earlier of the Effective Time or the termination of this Agreement, no party
hereto shall or shall permit any of its subsidiaries to (and each party shall
use its reasonable best efforts to cause its affiliates and Representatives not
to) issue any press release concerning this Agreement, the Merger or any other
transaction contemplated hereby, without prior consultation with the other
parties hereto.
6.9 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party which incurs such cost or
expense; provided, however, that the filing fee in connection with the filings
under the HSR Act required in connection herewith shall be borne equally by the
Company, on the one hand, and Parent and Merger Sub, on the other hand.
6.10 Registration Rights. On or prior to the Closing, the Company and
Parent agree to execute and deliver the Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement").
33
34
6.11 Employment Agreements. Each of Xxxxxx Xxxxxxx Xxxxx Xxxxx, Xxxxxxx
X. Xxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxx and Xxx X. X'Xxxx shall enter
into employment agreements substantially in the form set forth herein as
Exhibit C.
6.12 Certification of Stockholder Vote. At or prior to the Closing, the
Company shall deliver to Parent a certificate executed by the Secretary of the
Company setting forth the number of shares of Company Common Stock voted in
favor of approval and adoption of this Agreement and the Merger and the number
of shares of Company Common Stock voted against approval and adoption of this
Agreement and the Merger.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party hereto to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) No action or proceeding shall have been instituted before
a court or other governmental body or by any governmental agency or public
authority to restrain or prohibit the transactions contemplated by this
Agreement or to obtain an amount of damages or other material relief in
connection with the execution of this Agreement or the consummation of the
Merger; and no governmental agency shall have given notice to any party hereto
to the effect that consummation of the transactions contemplated by this
Agreement would constitute a violation of any law or that it intends to commence
proceedings to restrain consummation of the Merger.
(b) All consents, approvals and waivers from third parties,
including federal, state, local, foreign and other governmental authorities,
necessary to consummate the transactions contemplated hereby shall have been
obtained, except for filings in connection with the Merger and any other
documents required to be filed after the Effective Time and except where the
failure to have obtained or made any such consent authorization, order,
approval, filing or registration would not have a Material Adverse Effect on the
business of Parent and the Company, taken as a whole, following the Effective
Time.
(c) The waiting period, including any extension thereof, under
the HSR Act applicable to the Merger shall have expired or been terminated.
(d) Parent, Merger Sub and the Company shall have executed and
delivered the Articles of Merger and appropriate certificates for filing with
the Secretary of State of Texas.
7.2 Conditions to the Company's Obligation to Effect the Merger. The
obligations of the Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) The representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct in all material
respects at and as of the Closing as if such
34
35
representations and warranties were made at and as of the Closing, except as and
to the extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms thereof.
(b) Parent shall have performed all agreements and covenants
required hereby to be performed by it prior to or at the Closing; provided,
however, that the Company shall not be entitled to refuse to consummate the
transaction in reliance upon its own breach or failure to perform.
(c) From the date of this Agreement through the Closing, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of Parent that would have or would be
reasonably likely to have a Material Adverse Effect on Parent.
(d) The Company shall have received a certificate executed on
behalf of Parent by an executive officer of Parent to the effect set forth in
clauses (a) through (c) of this Section 7.2.
(e) The Company shall have received an opinion from counsel to
Parent and Merger Sub, dated as of the Closing, substantially in the form
attached hereto as Exhibit D and from General Counsel of Parent, dated as of the
Closing, substantially in the form attached hereto as Exhibit E.
(f) Parent and the Company shall have entered into the
Registration Rights Agreement.
(g) On or prior to the Closing, Parent shall have delivered to
the Company each of the following:
(i) a copy of the text of the resolutions adopted by
the respective Boards of Directors of Parent and Merger Sub authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby; and
(ii) incumbency certificates executed on behalf of
each of Parent and Merger Sub by each of their corporate secretaries certifying
the signature and office of each officer executing this Agreement and such other
agreements contemplated in this Agreement as the Company may request.
7.3 Conditions to Parent and Merger Sub's Obligations to Effect the
Merger. Unless waived by Parent in writing, the obligations of Parent and Merger
Sub to effect the Merger provided for hereby shall be subject to the
satisfaction, on or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of the Company and the
Company Stockholders contained in this Agreement shall be true and correct in
all material respects at and as of the Closing as if such representations and
warranties were made at and as of the Closing,
35
36
except as and to the extent that the facts and conditions upon which such
representations and warranties are based are expressly required or permitted to
be changed by the terms thereof.
(b) The Company shall have performed all agreements and
covenants required hereby to be performed by it prior to or at the Closing;
provided, however, that neither Parent nor Merger Sub shall be entitled to
refuse to consummate the transaction in reliance upon its own breach or failure
to perform.
(c) From the date of this Agreement through the Closing, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of the Company that would have or would be
reasonably likely to have a Material Adverse Effect on the Company.
(d) Parent shall have received a certificate executed on
behalf of the Company by an executive officer of the Company to the effect set
forth in clauses (a) through (c) of this Section 7.3.
(e) Parent will have received an opinion from counsel to the
Company, dated as of the Closing, substantially in the form attached hereto as
Exhibit F.
(f) Each of Messrs. Arian, Burnett, Xxxxxx and X'Xxxx and Xx.
Xxxxxxxx shall have entered into employment agreements substantially in the form
attached hereto as Exhibit C.
(g) Parent shall have conducted a due diligence review of the
Company's books and records, financial statements and other matters as provided
for in Section 6.3 hereof, and in the sole discretion of Parent, Parent shall be
satisfied on the basis of such review that there has been no breach of the
representations, warranties or the covenants of the Company made pursuant to
this Agreement.
(h) On or prior to the Closing, the Company shall have
delivered to Parent each of the following:
(i) the Company's minute books, stock transfer
records, corporate seal and other materials related to the Company's corporate
administration;
(ii) a copy of the articles of incorporation of the
Company, certified by the Secretary of State of the State of Texas, and
Certificates of Good Standing from the Secretaries of State of the States of
Texas and any other states in which the Company is qualified to do business
evidencing the good standing of the Company in each such jurisdiction;
(iii) a copy of each of (x) the text of the
resolutions adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and (y) the bylaws of the Company; along
with certificates executed on behalf of the Company by its corporate secretary
certifying to Parent that such copies are true and complete copies of such
resolutions and Bylaws, respectively, and that such resolutions and Bylaws were
duly adopted and have not been amended or rescinded;
36
37
(iv) incumbency certificates executed on behalf of
the Company by its corporate secretary certifying the signature and office of
each officer executing this Agreement and such other agreements contemplated by
this agreement as Parent may request; and
(v) A certificate of the Company's Secretary
certifying that this Agreement and the consummation of the transactions
contemplated hereby have been approved in the requisite manner by the holders of
the issued and outstanding shares of capital stock of the Company entitled to
vote thereon.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations. All of the representations,
warranties, covenants and agreements made by each party in this Agreement or in
any attachment, exhibit, the Disclosure Schedule, certificate, document or list
delivered by any such party pursuant hereto shall survive the Closing for a
period of (and claims based upon or arising out of such representations,
warranties, covenants and agreements may be asserted at any time before the date
which shall be) two years following the Closing, except with respect to the
representations and warranties set forth in Section 3.19, which shall survive
until the expiration of the applicable statute of limitations (with any
extensions) with respect to the matters addressed in such section, and except
with respect to the representations and warranties set forth in Section 3.2,
which shall survive indefinitely. Each party hereto shall be entitled to rely
upon the representations and warranties of the other party set forth in this
Agreement. The termination of the representations and warranties provided herein
shall not affect the rights of a party in respect of any Claim made by such
party in a writing received by the other party prior to the expiration of the
applicable survival period provided herein.
8.2 Indemnification.
(a) (i) Each of the Company Stockholders shall indemnify, save
and hold harmless Parent, Merger Sub, each of their respective affiliates,
subsidiaries, and respective representatives (collectively, the "Parent Party"),
from and against his, her or its Allocable Portion (as herewith defined) of any
and all costs, losses (including, without limitation, diminution in value),
Taxes, Liabilities, obligations, damages, lawsuits, deficiencies, claims,
demands, and expenses (whether or not arising out of third-party claims),
including, without limitation, interest, penalties, lost profits and other
losses resulting from any shutdown or curtailment of operations, reasonable
attorneys' fees and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing ("Damages"), incurred in connection with,
arising out of, resulting from or incident to (A) any breach of any
representation or warranty or the inaccuracy of any representation made by the
Company in or pursuant to this Agreement, (B) any breach of any covenant or
agreement made by the Company in or pursuant to this Agreement or (C) any
product liability, warranty or similar claim relating to products manufactured
or services performed by the Company prior to the Effective Time. The term
"Allocable Portion" as used herein shall mean with respect to the share of any
Company Stockholder in a particular amount that fraction equal to the number of
shares of Company
37
38
Common Stock the particular Company Stockholder holds over the total number of
shares of Company Common Stock as of the Effective Date.
(ii) Parent and Merger Sub, jointly and severally,
shall indemnify and save and hold harmless the Company, the Company
Stockholders, each of their respective affiliates, subsidiaries and
representatives from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to (A) any breach of any
representation or warranty or the inaccuracy of any representation, made by
Parent or Merger Sub in or pursuant to the Agreement, (B) any breach of any
covenant or agreement made by Parent or Merger Sub in or pursuant to the
Agreement or (C) any claim arising out of the operation of the Company after the
Closing.
(b) The term "Damages" as used in this Section 8.2 is not
limited to matters asserted by third parties against a party, but includes
Damages incurred or sustained by a party in the absence of third party claims.
Payments by a party of amounts for which the party is indemnified, shall not be
a condition precedent to recovery. In determining the amount of any Damages for
any breach of the representations or warranties, or inaccuracy of any
representation, in Section 3.20 hereof, the parties shall make appropriate
adjustments for tax benefits and insurance coverage and take into account the
range of commercially reasonable actions available to address the breach or
inaccuracy and clean up standards for industrial properties; any such Damages
shall not exceed the amount of a commercially reasonable action in line with
clean up standards for industrial properties.
(c) Each indemnified party shall cooperate in all reasonable
respects with each indemnifying party and its representatives (including without
limitation its attorneys) in the investigation, trial and defense of any lawsuit
or action and any appeal arising therefrom; provided, however, that such
indemnified party may, at its own cost, participate in negotiations,
arbitrations and the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. The parties shall cooperate with each other in
any notifications to insurers.
(d) If a claim for Damages (a "Claim") is to be made by a
party entitled to indemnification hereunder against the indemnifying party, the
party claiming such indemnification shall, subject to Section 8.1 hereof, give
written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 8.2. Such Claim Notice shall
specify the nature and amount of the Claim asserted, if actually known to the
party entitled to indemnification hereunder, and include copies of all relevant
documentation. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and in any event
within 30 calendar days after the service of the citation or summons). The
failure of any indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure. After such
notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects at its own cost, risk and
expense, (i) to take control of the defense and investigation of such lawsuit or
38
39
action, (ii) to employ and engage attorneys of its own choice to handle and
defend the same unless the named parties to such action or proceeding (including
any impleaded parties) include both the indemnifying party and the indemnified
party and the indemnified party has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified party that
are different from or additional to those available to the indemnifying party,
in which event the indemnified party shall be entitled, at the indemnifying
party's cost, risk and expense, to separate counsel of its own choosing, and
(iii) to compromise or settle such Claim, which compromise or settlement shall
be made only with the written consent of the indemnified party, such consent not
to be unreasonably withheld. If the indemnifying party fails to assume the
defense of such Claim within 15 calendar days after receipt of the Claim Notice,
the indemnified party against which such Claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such claim on behalf of and for the account and risk of the
indemnifying party; provided, however, that such Claim shall not be compromised
or settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. In the event the indemnified party assumes
the defense of the Claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected pursuant to and in accordance with this Section 8.2 and for any
final judgment (subject to any right of appeal), and the indemnifying party
agrees to indemnify and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.
8.3 Parent's Right of Offset.
Anything in this Agreement to the contrary notwithstanding
Parent may withhold and set off against (i) the 1997 Earn-Out Amount and (ii)
any other amounts otherwise due the Company Stockholders, any amount as to which
Company Stockholders are obligated to indemnify Parent pursuant to any provision
of this Article VIII.
8.4 Limitations.
Except for indemnification for Damages suffered by the Parent
Party arising out of, relating to, in the nature of, or caused by a breach by
any of the representations and warranties made by the Company Stockholders in
Section 3.2 or 3.19 hereof, the maximum aggregate amount of Damages for which
the Company Stockholders, on the one hand, or the Parent Party, on the other
hand, shall be entitled to indemnification hereunder shall not exceed: (i) with
respect to all claims for indemnification hereunder delivered during the period
commencing on the Closing Date and ending on the first anniversary thereof;
$7,500,000, and (ii) with respect to all claims for indemnification hereunder
delivered during the period commencing on the first anniversary of the Closing
Date and ending on the second anniversary thereof, $4,500,000, less any amounts
claimed for indemnification during the period covered by Section 8.4(i) above.
Neither the Company Stockholders, on the one hand, nor the Parent Party, on the
other hand, shall be entitled to indemnification hereunder with respect to any
claim for indemnification hereunder delivered after (i) the expiration of the
applicable statute of limitations with respect to claims for indemnification
under Section 3.2 or Section 3.19 hereof; and (ii) the second anniversary of the
Closing Date with respect to all other claims for indemnification. In
39
40
addition, the Company Stockholders shall not be liable to Parent Party under
this Article VIII for any Damages until the aggregate amount of Damages due
Parent Party exceeds $200,000 aggregate deductible (as which point the Company
Stockholders will only be obligated to indemnify the Parent Party from and
against further such Damages).
8.5 Express Negligence.
THE FOREGOING INDEMNITIES SET FORTH IN THIS ARTICLE VIII ARE
INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS
TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY
SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITEES BECAUSE OF
THE SIMPLE (BUT NOT GROSS NEGLIGENCE) (WHETHER SOLE, CONCURRENT, ACTIVE OR
PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES;
PROVIDED, HOWEVER, IF THE COMPANY AND PARENT ARE ADJUDICATED TO BE AT FAULT WITH
RESPECT TO A THIRD PARTY CLAIM THE FOREGOING INDEMNITIES SET FORTH IN THIS
ARTICLE VIII SHALL NOT EXTEND TO THAT PORTION OF THE LIABILITY ADJUDICATED TO
HAVE BEEN CAUSED BY OR OTHERWISE DUE TO THE APPLICABLE INDEMNIFIED PARTY.
8.6 Exclusive Remedy.
Each of the Parent, Merger Sub, the Company and the Company
Stockholders hereby acknowledge and agree that its sole and exclusive remedy
with respect to (i) any and all claims relating to the representations,
warranties, covenants and agreements contained in this Agreement or (ii) other
claims pursuant to or in connection with this Agreement other than fraud shall
be pursuant to the indemnification provisions set forth in this Article VIII.
ARTICLE IX
MISCELLANEOUS
9.1 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) By mutual written consent of Parent and the Company;
(b) By Parent or the Company if the Closing shall not have
occurred on or before March 31, 1997; provided, however, that this provision
shall not be available to Parent if the Company has the right to terminate this
Agreement under clause (d) of this Section 9. 1, and this provision shall not be
available to the Company if Parent has the right to terminate this Agreement
under clause (c) of this Section 9.1;
(c) By Parent if there is a material breach of any
representation or warranty set forth in Article III hereof or any covenant or
agreement to be complied with or performed by the Company pursuant to the terms
of this Agreement or the failure of a condition set forth in Section 9.1 or 9.3
hereof to be satisfied (and such condition is not waived in writing by Parent)
on or prior to the Closing, or the occurrence of any event which results or
would result in the failure of a condition set forth in Section 7.1 or 7.3
hereof to be satisfied on or prior to the
40
41
Closing; provided, however, that Parent may not terminate this Agreement prior
to the Closing if the Company has not had an adequate opportunity to cure such
failure; or
(d) By the Company if there is a material breach of any
representation or warranty set forth in Article III hereof or of any covenant or
agreement to be complied with or performed by Parent pursuant to the terms of
this Agreement or the failure of a condition set forth in Section 6.1 or 6.2 to
be satisfied (and such condition is not waived in writing by the Company) on or
prior to the Closing, or the occurrence of any event which results or would
result in the failure of a condition set forth in Section 6.1 or 6.2 to be
satisfied on or prior to the Closing; provided, however, that the Company may
not terminate this Agreement prior to the Closing if Parent had not has an
adequate opportunity to cure such failure.
9.2 Effect of Termination. In the event of termination of this
Agreement:
(a) Each party will redeliver or destroy all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same; and
(b) No party hereto shall have any liability to any other
party to this Agreement, except for any willful or grossly negligent breach of
this Agreement occurring prior to its proper termination. The foregoing
provisions shall not limit or restrict the availability of specific performance
or other injunctive relief to the extent that specific performance or such other
relief would otherwise be available to a party hereunder.
9.3 Further Assurances. On and after the Closing, the Company and
Parent shall take all appropriate action and execute any documents of any kind
which may be reasonably necessary or desirable to carry out the provisions
hereof.
9.4 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; provided, however, that Parent may, without such
consent (but subject to Section 6.7), assign all such rights and delegate all of
its obligations to a successor in interest to Parent which shall assume all
obligations and liabilities of Parent under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and no
other person shall have any right, benefit or obligation under this Agreement as
a third party beneficiary or otherwise.
9.5 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
41
42
If to the Company:
Fiber Glass Systems, Inc.
0000 X.X. 00xx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: President
Copy to:
Xxxxxxx & Xxxxxx, L.L.P.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
If to Company Stockholders:
At the addresses set forth on Exhibit I.
If to Parent or Merger Sub, addressed to:
Tuboscope Vetco International Corporation
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, III, Esq.
Copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
9.6 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto (including the Disclosure Schedule)
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of
42
43
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
9.7 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
9.9 Exhibits and Schedules. The Exhibits and Schedules attached to this
Agreement are incorporated herein and shall be a part of this Agreement for all
purposes.
9.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas, without regard to
principles of conflict of laws. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Texas and the United States of America located in the
State of Texas (the "Texas Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby, waives any
objection to the laying of venue of any such litigation in Xxxxxx County, Texas
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum.
9.11 Construction. Differences in language as between similar provisions
covering similar matters may reflect differences in style rather than a
different substantive intent and should be construed accordingly.
9.12 Knowledge. Whenever a phrase herein is qualified by "to the
knowledge" of an entity or person, or a similar phrase, it is intended to refer
to the actual knowledge, after due inquiry, of the officers, directors,
employees, agents and representatives of the entity or person.
9.13 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other document or instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such document or instrument.
9.14 Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
43
44
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
TUBOSCOPE VETCO INTERNATIONAL
CORPORATION
By: /s/ XXXX XXXXXXXX
--------------------------------------
Name: Xxxx Xxxxxxxx
------------------------------------
Its: President and CEO
-------------------------------------
FGS ACQVISITION CORP.
By: /s/ XXXX X. XXXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxxx
------------------------------------
Its: President and CEO
-------------------------------------
FIBER GLASS SYSTEMS, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx
President
45
COMPANY STOCKHOLDERS:
FGSI PARTNERS, L.P.
By: SCF Partners, L.P., General Partner
of FGSI Partners, L.P.
By: X.X. Xxxxxxx & Associates,
Incorporated, general partner
of SCF Partners, L.P.
By: /s/ L.E. SIMMONS
----------------------------
L.E. Simmons, President
/s/ XXXXXXX X. XXXXXXX
-----------------------------------------
XXXXXXX X. XXXXXXX
/s/ XXXXXX XXXXXXX XXXXX XXXXX
-----------------------------------------
XXXXXX XXXXXXX XXXXX XXXXX
/s/ XXXXX X. XXXXXXXX
-----------------------------------------
XXXXX X. XXXXXXXX
/s/ XXXXXX X. HEINYZ
-----------------------------------------
XXXXXX X. HEINYZ
/s/ XXX X. O'XXXX
-----------------------------------------
XXX X. O'XXXX
/s/ XXXXX XXXXXXXX
-----------------------------------------
XXXXX XXXXXXXX
/s/ XXXX XXXXX
-----------------------------------------
XXXX XXXXX
46
COMPANY STOCKHOLDERS:
FGSI PARTNERS, L.P.
By: SCF Partners, L.P., General Partner of
FGSI Partners, L.P.
By: X.X. Xxxxxxx & Associates,
Incorporated, general partner of SCF
Partners, L.P.
By: /s/ L.E. SIMMONS
---------------------------------
L.E. Simmons, President
/s/ XXXXXXX X. XXXXXXX
----------------------------------------------
XXXXXXX X. XXXXXXX
/s/ XXXXXX XXXXXXX XXXXX METAD
----------------------------------------------
XXXXXX XXXXXXX XXXXX NETAD
/s/ XXXXX X. XXXXXXXX
----------------------------------------------
XXXXX X. XXXXXXXX
/s/ XXXXXX X. XXXX
----------------------------------------------
XXXXXX X. XXXX
/s/ XXX X. X'XXXX
----------------------------------------------
XXX X. X'XXXX
/s/ XXXXX XXXXXXXX
----------------------------------------------
XXXXX XXXXXXXX
/s/ XXXX XXXXX
----------------------------------------------
XXXX XXXXX
VOS GROUP, B.V.
By: /s/ XXXX A.M. VOS
-------------------------------------------
Name: XXXX A.M. VOS
-----------------------------------------
47
Exhibit B
Registration Rights Agreement
48
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
March 7, 1997 is by and among TUBOSCOPE VETCO INTERNATIONAL CORPORATION,
a Delaware corporation (the "Company"), and the parties set forth on Exhibit A
hereto (collectively, the "Holders").
RECITALS
A. Pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated March 7, 1997 between the Company, FGS Acquisition Corp., a Texas
corporation and wholly owned subsidiary of the Company, Fiber Glass Systems,
Inc., a Texas corporation, and the Holders, the Holders have collectively
received 1,689,542 shares (the "Initial Shares") of the common stock, par value
$.01 per share, of the Company (the "Common Stock") and, subject to certain
conditions contained in the Merger Agreement, are eligible to receive up to an
additional 726,316 shares of Common Stock (the "Earnout Shares" and, together
with the Initial Shares, the "Shares"). The amount of Initial Shares that have
been received by each Holder and the amount of Earnout Shares that each Holder
is eligible to receive are set forth on Exhibit A hereto.
B. The Company and the Holders desire to provide for the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of the
Shares according to the terms of this Agreement.
C. It is a condition to the closing of the transactions contemplated by
the Merger Agreement that the parties hereto enter into this Agreement, and the
parties believe it is in their best interests to enter into this Agreement on
the terms and conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 The terms "Register," "Registered" and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
1.3 "Registrable Securities" shall mean all of the Shares
owned by the Holders and any Common Stock of the Company that has been issued
pursuant to stock splits, stock dividends and similar distributions with respect
to the Shares; provided, however, that the Shares, Common Stock or other
securities shall only be treated as Registrable Securities if and so
1
49
long as (i) they have not been sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, (ii)
they have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(l)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale or (iii) they are not
eligible for resale without restriction (including legending) under Rule 144(k)
of the Securities Act.
1.4 "Registration Expenses" shall mean all expenses incurred
in complying with Section 2 of this Agreement (excluding Selling Expenses),
including, without limitation, all federal and state registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration, and all other accounting fees and the
reasonable fees and disbursements of one counsel for the Holders.
1.5 "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
2. Piggyback Registration.
2.1 Notice of Piggyback Registration and Inclusion of
Registrable Securities. Subject to the terms of this Agreement, each time the
Company decides to Register any of its equity securities (other than pursuant to
a Form S-4, a Form S-8 or a transaction pursuant to Rule 145 under the
Securities Act), on a form that would be suitable for a registration involving
Registrable Securities (a "Piggyback Registration"), the Company will (a)
promptly give the Holders written notice thereof and (b) include in such
Registration and in the underwriting involved therein, all the Registrable
Securities specified in a written request delivered to the Company by the
Holders within 20 days after the mailing of the written notice by the Company.
2.2 Underwriting in Piggyback Registration.
2.2.1 Notice of Underwriting in Piggyback
Registration. If a Piggyback Registration is an underwritten registration, the
right of the Holders to Registration pursuant to this Section 2 shall be
conditioned upon the inclusion of the Holders' Registrable Securities in such
underwriting to the extent provided in Section 2. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and any other holders distributing their securities through such
underwriting) enter into an underwriting agreement with the representative (the
"Underwriters' Representative") of the underwriter or underwriters selected for
such underwriting by the Company. The Holders shall have no right to participate
in the selection of the underwriters for an offering pursuant to Section 2. The
Company shall not be required under Section 2 to include any of the Holders'
securities in such underwriting unless the Holders accept the terms of the
underwriting as agreed upon between the Company and the Underwriters'
Representative; provided, however, that such underwriting agreement shall not
provide for indemnification or contribution obligations on the part of the
Holders greater than the obligations set forth in Section 7.2.
2.2.2 Priority on Registration. If the total number
of securities, including Registrable Securities and securities offered by the
Company, proposed to be included
2
50
in the underwritten offering exceeds the number of securities that the
underwriters reasonably believe is compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned first to the Company, then to the parties to that
certain Registration Rights Agreement dated as of April 24, 1996 and then pro
rata among the Holders who are selling stockholders according to the total
number of securities each selling stockholder has specified to the Company it
desires to sell in the offering pursuant to Section 2. 1, or in such other
proportions as shall mutually be agreed to by them). For purposes of
apportionment under the preceding parenthetical, for any selling stockholder
which is a Holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and stockholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder," and any pro rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate number of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.
2.2.3 Withdrawal in Piggyback Registration. If the
Holders disapprove of the terms of any such underwriting, they may elect to
withdraw therefrom by written notice to the Company and the underwriter
delivered at least seven days prior to the effective date of the Registration
Statement. Any Registrable Securities or other securities excluded or withdrawn
from such underwriting shall be withdrawn from such Registration.
2.2.4 Blue Sky in Piggyback Registration. In the
event of any Registration of Registrable Securities pursuant to Section 2, the
Company will exercise its best efforts to Register and qualify the securities
covered by the Registration Statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that (a) the Company shall
not be required to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions and (a) notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling stockholders, such expenses shall be payable pro rata by
selling stockholders.
3. Expenses of Registration. All Registration Expenses incurred in
connection with Registrations pursuant to Section 2 shall be borne by the
Company. All Selling Expenses shall be borne by the holders of the securities
Registered pro rata on the basis of the number of shares Registered.
4. Obligations of the Company. Whenever required under Section 2 (so
long as the Company, in its sole discretion, does not abandon the Piggyback
Registration) to use its best efforts to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
4.1 Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to
3
51
become and remain effective; provided, however, that in connection with any
proposed registration intended to permit an offering of any securities from time
to time (i.e. a so-called "shelf registration"), the Company shall in no event
be obligated to cause any such registration to remain effective for more than 90
days;
4.2 Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement; and
4.3 Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
4.4 Notify each Holder of Registrable Securities covered
by such registration statement, and amend or supplement such registration
statement as necessary, at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
5. Information Furnished by the Holders. It shall be a condition
precedent of the Company's obligations under this Agreement to take any action
with respect to the Registrable Securities of any selling Holder that such
Holder furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
6. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such Registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
7. Indemnification.
7.1 Company's Indemnification of the Holders. To the extent
permitted by law, the Company will indemnify the Holders, each of their
respective trustees, officers and directors and each person controlling the
Holders, with respect to which Registration, qualification or compliance of
Registrable Securities has been effected pursuant to this Agreement, against all
claims, losses, damages or liabilities (or actions in respect thereof) to the
extent such claims, losses, damages or liabilities arise out of or are based
upon (a) any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus or Registration Statement incident to any such
Registration, qualification or compliance or (b) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse the
4
52
Holders, each of their respective trustees, directors and officers and each
person who controls the Holders for any reasonable legal and any other expenses
as and when incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that the indemnity
contained in this Section 7.1 shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if settlement is effected
without the consent of the Company; and provided, further, that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based upon any untrue statement or
omission contained in such prospectus or Registration Statement in reliance on
and in conformity with written information furnished to the Company by the
Holders, such trustee, officer or director or such controlling person and stated
to be for use in connection with the offering of securities of the Company; and
provided further that the Company will not be liable in any case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based upon any untrue statement or omission contained in a preliminary
prospectus which was corrected in a final prospectus if such claim is brought by
a purchaser of Registrable Securities of a Holder and such Holder failed to
deliver such purchaser the final prospectus.
7.2 Holders' Indemnification of Company. To the extent
permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors and officers and each person who controls the
Company, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or Registration
Statement, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such directors and officers, or
such control persons for any reasonable legal and any other expenses as and when
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such prospectus or Registration Statement in reliance upon
and in conformity with written information furnished to the Company by such
Holder expressly for use in connection with the offering by the Holders of
securities of the Company; provided however, that the indemnity agreement
contained in this Section 7.2 shall not apply to amounts paid in settlement of
each such claim, loss, damage, liability or action if such settlement is entered
into without the consent of the Holders.
7.3 Indemnification Procedures. Promptly after receipt by an
indemnified party under this Section 7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 7, notify the indemnifying
party in writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to participate in and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to notify an indemnifying party
5
53
promptly of the commencement of any such action, if prejudicial to the ability
of the indemnifying party to defend such action, shall relieve such indemnifying
party, to the extent so prejudiced, of any liability to the indemnified party
under this Section 7, but the omission so to notify the indemnifying party will
not relieve such party of any liability that such party may have to any
indemnified party otherwise other than under this Section 7.
7.4 Contribution. If the indemnification provided for in this
Section 7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the statements
or omissions which result in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action, suit, proceeding or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Market Stand-off. The Holders agree that if so requested by the
Underwriters' Representative in connection with any Registration of any
securities of the Company under the Securities Act, or, if such offering is not
underwritten, if so requested by the Company, the Holders shall not sell or
otherwise transfer any Registrable Securities or other securities of the Company
during the period so requested by the underwriters or the Company, as the case
may be, but in any event not to exceed 90 days following the effective date of a
registration statement filed under the Securities Act. The Company or any
Underwriters' Representative, as the case may be, may impose stock transfer
restrictions with respect to securities subject to the foregoing restrictions
until the end of the applicable transfer restriction period.
9. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Agreement may be assigned by
a Holder to a transferee or assignee receiving all or substantially all of such
Holder's Registrable Securities received pursuant to the Merger Agreement
(including the Earnout Shares), provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and, provided further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
6
54
10. Rule 144 Information. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated by
the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
nonconfidential information so long as necessary to permit sales under Rule 144
under the Securities Act), and it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act (or any successor regulation thereto or any statute
hereafter adopted to replace or to establish the exemption that is now covered
by said Rule 144). Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with the
requirements of this Section 10.
11. Miscellaneous.
11.1 Entire Agreement. This Agreement constitutes the entire
contract between the Company and the Holders with regard to the subject matter
of this Agreement.
11.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
its conflict of law principles or rules.
11.3 Counterparts. This Agreement may be executed 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.
11.4 Headings. The headings of the Sections of this Agreement
are for convenience and shall not by themselves determine the interpretation of
this Agreement.
11.5 Notices. Any notice required or permitted under this
Agreement shall be in writing and either delivered personally, telegraphed or
faxed or sent by certified or registered mail, postage prepaid, and shall be
deemed to be given, dated and received when so delivered personally, telegraphed
or faxed or, if mailed, five business days after the date of mailing to the
following address or facsimile number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder.
If to the Company:
Tuboscope Vetco International Corporation
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, III
7
55
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
If to any Holder:
To the respective address set forth on Exhibit A.
11.6 Amendment of Agreement. Any provision of this Agreement
may be amended only by a written instrument signed by the Company and the
Holders.
11.7 Assignment, Successors and Assigns. Except as provided in
Section 9, this Agreement is not assignable by the parties hereto without the
consent of the other parties. This Agreement shall inure to the benefit of and
be binding upon the permitted successors and assigns of each of the parties.
11.8 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
11.9 Attorney's Fees. In any action or proceeding brought to
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorney's fees in addition to any other available remedy.
8
56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TUBOSCOPE VETCO INTERNATIONAL
CORPORATION, a Delaware corporation
By: /s/ XXXX X. XXXXXXXX
-------------------------
Name: Xxxx X. Xxxxxxxx
Title: President and CEO
THE HOLDERS:
FGSI PARTNERS, L.P.
By: SCF Partners, L.P., General Partner of FGSI
Partners, L.P.
By: L.E. Simmons & Associates,
Incorporated, general partner of SCF
Partners, L.P.
By: /s/ L.E. Simmons, President
------------------------------------
L.E. Simmons, President
/s/ XXXXXXX X. XXXXXXX
-------------------------------------------------
XXXXXXX X. XXXXXXX
/s/ XXXXXX XXXXXXX XXXXX XXXXX
-------------------------------------------------
XXXXXX XXXXXXX XXXXX XXXXX
/s/ XXXXX X XXXXXXXX
-------------------------------------------------
XXXXX X XXXXXXXX
/s/ XXXXXX X. XXXXXX
-------------------------------------------------
XXXXXX X. XXXXXX
/s/ XXX X. X'XXXX
-------------------------------------------------
XXX X. X'XXXX
/s/ XXXXX XXXXXXXX
-------------------------------------------------
XXXXX XXXXXXXX
/s/ XXXX XXXXX
-------------------------------------------------
XXXX XXXXX
57
COMPANY STOCKHOLDERS:
FGSI PARTNERS, L.P.
By: SCF Partners, L.P., General Partner of FGSI
Partners, L.P.
By: X.X. Xxxxxxx & Associates,
Incorporated, general partner of SCF
Partners, L.P.
By: /s/ L.E. SIMMONS
------------------------------------
L.E. Simmons, President
/s/ XXXXXXX X. XXXXXXX
-------------------------------------------------
XXXXXXX X. XXXXXXX
/s/ XXXXXX XXXXXXX XXXXX XXXXX
-------------------------------------------------
XXXXXX XXXXXXX XXXXX XXXXX
/s/ XXXXX X XXXXXXXX
-------------------------------------------------
XXXXX X XXXXXXXX
/s/ XXXXXX X. XXXXXX
-------------------------------------------------
XXXXXX X. XXXXXX
/s/ XXX X. X'XXXX
-------------------------------------------------
XXX X. X'XXXX
/s/ XXXXX XXXXXXXX
-------------------------------------------------
XXXXX XXXXXXXX
/s/ XXXX XXXXX
-------------------------------------------------
XXXX XXXXX
VOS GROUP, B.V.
By: /s/ XXXX A.M. VOS
----------------------------------------------
Name: XXXX A.M. VOS
--------------------------------------------
58
EXHIBIT A
HOLDERS OF REGISTRABLE SECURITIES
Names and Addresses of Holders:
FGSI Partners, L.P.
x/x XXX Xxxxxxxx, X.X.
0000 Xxxxx Commerce Tower
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xx. X.X. Xxxxxxx
Gholamhossein Xxxxx Xxxxx
00000 Xxxxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Xxxxxx X. Xxxxxx
00000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxx 00000
VOS Groep, X.X.
Xxxxxxxxxxxx 0
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Attention: Xxxx A.M. Xxx
Xxxxxxx X. Xxxxxxx
00000 Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Xxx X. X'Xxxx
00000 Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
A-1
