ASSET PURCHASE AGREEMENT
BETWEEN
HALLIBURTON NUS CORPORATION,
RESOURCES CONSERVATION COMPANY
AND
RESOURCES CONSERVATION CO. INTERNATIONAL
AND
IONICS, INCORPORATED
DECEMBER 30, 1993
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . .. . . . . 1
2. Transfer of Assets and Assumption of Liabilities . . 6
(a) Transfer of Assets . . . . . . . . . . . . . . . . . 6
(b) Assets Not Transferred.. . . . . . . . . . . . . . . 8
(c) Nonassignable Contracts. . . . . . . . . . . . . . . 9
(d) Assumption of Liabilities. . . . . . . . . . . . . . 9
(e) Excluded Liabilities.. . . . . . . . . . . . . . . . 10
(f) Buyer's Option to Use Subsidiary . . . . . . . . . . 11
(g) Excluded Receivables and Excluded Payables . . . . . 11
3. Purchase Price, Payment Procedure, Tax Allocation... 12
(a) Purchase Price. . . . . . . . . . . . . . . . . . . 12
(b) Procedure for Calculating the Purchase Price.. . . . 12
(c) Payment. . . . . . . . . . . . . . . . . . . . . 14
(d) Tax Allocation. . . . . . . . . . . . . . . . . . . 16
4. Closing and Closing Date. . . . . . . . . . . . . . 16
(a) The Closing. . . . . . . . . . . . . . . . . . . . 16
(b) Deliveries at the Closing. . . . . . . . . . . . . . 16
5. Representations and Warranties of Sellers and HNUS.. 16
(a) Status of Sellers. . . . . . . . . . . . . . . . . . 17
(b) Authorization of Transaction . . . . . . . . . . . . 17
(c) Noncontravention . . . . . . . . . . . . . . . . . . 17
(d) Brokers' Fees. . . . . . . . . . . . . . . . . . . . 17
(e) Financial Statements . . . . . . . . . . . . . . . . 18
(f) Events Subsequent to Most Recent Fiscal Month End. . 19
(g) Legal Compliance; Environmental Matters. . . . . . . 20
(h) Tax Matters. . . . . . . . . . . . . . . . . . . . . 21
(i) Tangible Assets. . . . . . . . . . . . . . . . . . . 21
(j) Real Property. . . . . . . . . . . . . . . . . . . . 21
(k) Intellectual Property. . . . . . . . . . . . . . . . 21
(l) Contracts. . . . . . . . . . . . . . . . . . . . . . 22
(m) Insurance. . . . . . . . . . . . . . . . . . . . . . 23
(n) Litigation . . . . . . . . . . . . . . . . . . . . . 23
(o) Employees. . . . . . . . . . . . . . . . . . . . . . 23
6. Representations and Warranties of Buyer . . .. . . . 24
(a) Status of Buyer. . . . . . . . . . . . . . . . . . . 25
(b) Authorization of Transaction . . . . . . . . . . . . 25
(c) Noncontravention . . . . . . . . . . . . . . . . . . 25
(d) Brokers' Fees. . . . . . . . . . . . . . . . . . . . 25
(e) Access to Information. . . . . . . . . . . . . . . . 25
7. Pre-Closing Covenants . . . . . . . . . . . . . . . 25
(a) General. . . . . . . . . . . . . . . . . . . . . . . 25
(b) Consents . . . . . . . . . . . . . . . . . . . . . . 25
(c) Operation of Business. . . . . . . . . . . . . . . . 26
(d) Full Access. . . . . . . . . . . . . . . . . . . . . 26
(e) Notice of Developments . . . . . . . . . . . . . . . 26
(f) Exclusivity. . . . . . . . . . . . . . . . . . . . . 26
(h) . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8. Post-Closing Covenants. . .. . . . . . . . . . . . . 27
(a) General. . . . . . . . . . . . . . . . . . . . . . . 27
(b) Litigation Support . . . . . . . . . . . . . . . . . 27
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Risk Allocation for Certain Projects . . . . . . . . 27
(e) Diamo Project. . . . . . . . . . . . . . . . . . . . 33
(f) Noncompetition . . . . . . . . . . . . . . . . . . . 33
(g) Confidentiality. . . . . . . . . . . . . . . . . . . 34
(h) Employees; Employee Benefits . . . . . . . . . . . . 35
(i) Warranty Work. . . . . . . . . . . . . . . . . . . . 35
(j) Maintain Records . . . . . . . . . . . . . . . . . . 35
(k) Performance and Payment Bonds. . . . . . . . . . . . 36
(l) Halliburton Marks. . . . . . . . . . . . . . . . . . 36
9. Conditions to Obligation to Close . . . .. . . . . . 36
(a) Conditions to Obligation of Buyer. . . . . . . . . . 36
(b) Conditions to Obligation of Sellers. . . . . . . . . 37
10. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Survival of Representations and Warranties . . . . . 38
(b) Indemnification Provisions for Benefit of Buyer. . . 38
(c) Indemnification Provisions for Benefit of Sellers. . 38
(d) Matters Involving Third Parties. . . . . . . . . . . 39
(e) Determination of Adverse Consequences. . . . . . . . 39
(f) Exclusive Remedy . . . . . . . . . . . . . . . . . . 40
11. Tax Matters . . . . . . . . . . . . . . . . . . . . 40
12. Termination . . . .. . . . . . . . . . . . . . . . . 40
(a) Termination of Agreement . . . . . . . . . . . . . . 40
(b) Effect of Termination. . . . . . . . . . . . . . . . 41
13. Miscellaneous . . . .. . . . . . . . . . . . . . . . 41
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) No Third-Party Beneficiaries . . . . . . . . . . . . 41
(c) Entire Agreement . . . . . . . . . . . . . . . . . . 41
(d) Succession and Assignment. . . . . . . . . . . . . . 41
(e) Counterparts . . . . . . . . . . . . . . . . . . . . 42
(f) Notices. . . . . . . . . . . . . . . . . . . . . . . 42
(g) Governing Law. . . . . . . . . . . . . . . . . . . . 42
(h) Amendments and Waivers . . . . . . . . . . . . . . . 42
(i) Severability . . . . . . . . . . . . . . . . . . . . 43
(j) Expenses . . . . . . . . . . . . . . . . . . . . . . 43
(k) Construction . . . . . . . . . . . . . . . . . . . . 43
(l) Incorporation of Exhibits, Annexes, and Schedules. . 43
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of December
30, 1993, by and between IONICS, INCORPORATED, a Massachusetts
corporation ("Buyer"), on the one hand, and HALLIBURTON NUS
CORPORATION, a Delaware corporation ("HNUS"), RESOURCES
CONSERVATION COMPANY, a Delaware corporation (the "Company"), and
RESOURCES CONSERVATION CO. INTERNATIONAL, a Delaware corporation
("RCCI"), on the other hand. The Company and RCCI are referred
to collectively herein as the "Sellers". Buyer, HNUS and Sellers
are referred to collectively herein as the "Parties."
RECITALS:
This Agreement contemplates a transaction in which Sellers
will sell to Buyer and Buyer will purchase all the assets,
tangible and intangible (except as set forth in this Agreement)
of Sellers, and Buyer will assume certain associated obligations
and liabilities.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the repre-
sentations, warranties, and covenants herein contained, the
Parties agree as follows:
1. Definitions.
"Additional Consideration" has the meaning set forth in
Section 3(b)(iii).
"Advance Account Balance" means the amount of cash, if any,
advanced or loaned to Sellers by any of Sellers' Affiliates as of
the Closing, minus any such amounts included in Schedule 2(e)(v).
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Aggregate Job Margin" has the meaning set forth in Section
8(d)(i)(B).
"Annual Statement of Income" has the meaning set forth in
Section 3(b)(iv).
"Applicable Rate" means the corporate base rate or prime
rate of interest publicly announced from time to time by
Citibank, N.A. plus 1% per annum.
"Assets" has the meaning set forth in Section 2(a).
"Assigned Contracts" has the meaning set forth in Section
2(a)(ix).
"Assumed Liabilities" has the meaning set forth in Section
2(d).
"B.E.S.T. Technology" means the technology licensed by the
Company from Reading & Bates pursuant to a license agreement
dated August 30, 1991.
"Brown & Root" means Brown & Root Holdings, Inc., a Delaware
corporation.
"Business Day" means any day that is not a Saturday, a
Sunday, or a day that is a banking holiday under United States or
Washington Law.
"Buyer" has the meaning set forth in the preface above.
"Calendar Year" has the meaning set forth in Section
3(b)(iii).
"Closing" has the meaning set forth in Section 4(a).
"Closing Date" has the meaning set forth in Section 4(a).
"Code" means the Internal Revenue Code of 1986 as amended.
All citations to the Code shall include any amendments or any
substitute or successor provisions thereto.
"Company" means Resources Conservation Company, a Delaware
corporation.
"Confidential Information" means any information concerning
the Assets that is not already generally available to the public.
"Contracts" has the meaning set forth in Section 5(l).
"CPA" means Price Waterhouse or, if they will not agree to
serve, a national "big-six" accounting firm mutually acceptable
to Buyer and Sellers.
"Disclosure Schedule" has the meaning set forth in Section
5.
"Earnings" has the meaning set forth in Section 3(b)(iii).
"Employee" has the meaning set forth in Section 8(h).
"Employee Benefit Plan" means any (a) Employee Pension
Benefit Plan (including any Multiemployer Plan), (b) Employee
Welfare Benefit Plan or (c) fringe benefit plan or program other
than an Employee Pension Benefit Plan or Employee Welfare Benefit
Plan.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Clean Water Act, the Clean Air
Act, the Superfund Amendments and Reauthorization Act, the
Hazardous and Solid Waste Amendments Act, the Toxic Substances
Control Act, and any applicable state environmental law, all as
amended through the Closing Date.
"Estimated Advance Account Balance" means the Advance
Account Balance as estimated in good faith by Sellers.
"Estimated Negative Account Balance" means the Negative
Account Balance as estimated in good faith by Sellers.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" has the meaning set forth in Section 2(b).
"Excluded Liabilities" has the meaning set forth in Section
2(e).
"Excluded Payables" has the meaning set forth in Section
2(g).
"Excluded Receivables" has the meaning set forth in Section
2(g).
"Financial Statements" has the meaning set forth in Section
5(e).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Gordonsville Job Loss" has the meaning set forth in Section
8(d)(ii)(B).
"Gordonsville Project" means the work being performed by the
Company under an Evaporator Construction Contract dated effective
March 5, 1993, between the Company and Gordonsville Energy, L.P.
"Gordonsville Project Accounting" has the meaning set forth
in Section 8(d)(ii)(B).
"Gordonsville Target Job Loss" has the meaning set forth in
Section 8(d)(ii)(A).
"Governmental Authority" means any government or any
department, agency, political subdivision, or court thereof.
"Halliburton" means Halliburton Company, a Delaware
corporation.
"Halliburton Marks" has the meaning set forth in Section
2(b)(v).
"HNUS" means Halliburton NUS Corporation, a Delaware
corporation.
"Indemnified Party" has the meaning set forth in Section
10(d)(i).
"Indemnifying Party" has the meaning set forth in Section
10(d)(i).
"Intellectual Property" has the meaning set forth in Section
2(a)(vi).
"Job Margin" means project revenues minus project costs,
calculated on a basis that is consistent with past practice of
Sellers, as modified pursuant to Section 8(d)(i)(B) for the
Projects, and as modified pursuant to Section 8(d)(ii)(B) for the
Gordonsville Project.
"Knowledge" means actual knowledge of the officers and
directors of the applicable Person.
"Law" means any constitution, statute, code, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any applicable Governmental Authority.
"Leased Real Property" has the meaning set forth in Section
2(a)(iii).
"Most Recent Financial Statements" has the meaning set forth
in Section 5(e).
"Most Recent Fiscal Month End" has the meaning set forth in
Section 5(e).
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
"Negative Account Balance" means the amount of cash, if any,
advanced or loaned by Sellers to HNUS or any of its Affiliates as
of the Closing.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with
respect to quantity and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization, or a Governmental Authority.
"Project Accounting" has the meaning set forth in Section
8(d)(i)(B).
"Projects" has the meaning set forth in Section 8(d)(i).
"Purchase Price" has the meaning set forth in Section 3(a).
"Reportable Event" has the meaning set forth in ERISA Sec.
4043.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes
not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Survival Period" means two years after the Closing Date.
"Target Aggregate Job Margin" has the meaning set forth in
Section 8(d)(i)(A).
"Target Job Margin" has the meaning set forth in Section
8(d)(i)(A).
"Tax" means any federal, state, local, or foreign tax,
including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto.
"Third Party Claim" has the meaning set forth in Section
10(d)(i).
"Transactions" means the transactions contemplated by this
Agreement.
2. Transfer of Assets and Assumption of Liabilities.
(a) Transfer of Assets. Subject to the terms and
conditions of this Agreement, at the Closing Date, Sellers shall,
and HNUS shall cause Sellers to, sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall purchase from Sellers for
the Purchase Price, all of the assets, properties and rights of
every kind and description owned by Sellers, whether real,
personal, tangible, intangible or mixed, whether accrued,
contingent or otherwise (except the Excluded Assets)
(collectively and individually, the "Assets"). The Assets shall
include, without limitation, all of those items in the following
categories owned by Sellers (except the Excluded Assets):
(i) All tangible personal property, including,
without limitation, fixtures, machinery and equipment,
furniture, tools and supplies. The latest available lists of
such items which are capitalized on the accounting records of
Sellers are set forth in Schedule 2(a)(i);
(ii) All inventories (including spare parts,
replacement parts and component parts with respect thereto).
The latest available list of such items are set forth in
Schedule 2(a)(ii);
(iii) The leased real property (including all
leasehold improvements) listed in Schedule 2(a)(iii) (the
"Leased Real Property");
(iv) All trade accounts receivable, both billed and
unbilled, and inclusive of related reserves for bad debts,
(except for those receivables and related reserves for bad
debts which are listed in Schedule 2(b)(vi)), retainage
receivables, cost and estimated earnings in excess of billings
on projects, receivables from employees, notes receivable and
prepaid expenses. The latest available lists of such items
are set forth in Schedule 2(a)(iv);
(v) All cash, cash equivalents, prepaid expenses,
deposits, bank account balances, and other similar assets of
Sellers on the Closing Date. The latest available list of
such items are set forth in Schedule 2(a)(v);
(vi) The patents, patent applications, trademarks
and trade names, trademark and trade name registrations, service
marks and service mark registrations, including common law
rights and the applications therefor, and the goodwill
associated therewith, copyrights and copyright registrations,
trade secrets, inventions (whether or not patented),
processes, improvements, know-how, proprietary information,
and the licenses with respect thereto (including, without
limitation, the Company's license rights to the B.E.S.T.
Technology), together with the goodwill and the business
appurtenant thereto and any rights, claims, or choses in
action relating to or deriving from any of the foregoing
("Intellectual Property"), and attributable to Sellers,
including but not limited to, those listed on Schedule
2(a)(vi), as well as all right, title and interest in the name
"Resources Conservation Company" including any and all
trademarks or service marks, trade names, slogans and other
like property relating to or including the "Resources
Conservation Company" logo or any derivative thereof (either
alone or in conjunction with other names), and the goodwill
associated therewith, and after the Closing Sellers shall
promptly discontinue the use of such name and logo (and any
derivatives thereof) and change their corporate names to
delete the words "Resources Conservation";
(vii) All catalogues, brochures, sales literature,
promotional material and other selling material relating
solely to Sellers;
(viii) Originals or copies of all books and records
(other than personnel records) and all files, including,
without limitation, computer files, documents, papers,
agreements, drawings, designs, plans, methods, engineering and
manufacturing specifications, formulas, procedures, computer
programs and customer lists, as well as a file for each
employee assigned to Sellers who becomes an Employee
containing the name, address, date of employment and wage
history of such Employee;
(ix) The rights of Sellers under all contracts,
agreements, licenses, leases, sales orders, purchase orders,
bid contracts, proposals and other commitments, except for
those for which any required consent cannot be obtained
despite compliance with Section 7(b) ("Assigned Contracts");
(x) All motor vehicles, whether leased or owned.
Schedule 2(a)(x) lists all such motor vehicles; and
(xi) All transferable business licenses, permits,
and equivalent documents in the name of, or which relate solely
to the operations of, the Sellers.
(b) Assets Not Transferred. Notwithstanding anything to
the contrary contained herein, the following assets and
properties of Sellers are specifically excluded from the Assets
and shall be retained by Sellers ("Excluded Assets"):
(i) Claims for refunds of taxes and other
governmental charges for the period ending on or prior to the
Closing Date (except for such Claims, if any, reflected on the
Most Recent Financial Statements) and the benefit of net
operating loss carry-forwards of Sellers;
(ii) Claims or rights against third parties based on
facts or events occurring prior to the Closing Date (except
for any such claims or rights (a) reflected on the Most Recent
Financial Statements or (b) which will be reflected in the
Gordonsville Job Loss or the Job Margin);
(iii) All insurance policies and rights thereunder,
including rights to any cancellation value on the Closing Date
(except for builder's risk policies listed in Schedule
2(b)(iii));
(iv) HNUS' management procedures and guidelines,
accounting procedures, proprietary financial reporting
formats, instructions, organizational manuals and strategic
plans, provided that Buyer will have the right to adopt and
use for its own purposes certain policies and procedures
currently being employed by the Company which are Excluded
Assets;
(v) All "Halliburton NUS", "Halliburton" and "Brown
& Root" marks including any and all trademarks or service
marks, trade names, slogans or other like property relating to
or including the names "Halliburton NUS", "Halliburton" or
"Brown & Root", and the Halliburton NUS, Halliburton, and
Brown & Root logos and any derivatives thereof (the
"Halliburton Marks");
(vi) The Excluded Receivables (as finally determined
in accordance with Section 2(g) and listed on Schedule
2(b)((vi);
(vii) The shares of stock or other equity interests
owned by the Company in RCCI unless Buyer, at its sole option,
elects to purchase the shares of RCCI instead of its assets;
(viii) The consideration to be delivered to Sellers
pursuant to this Agreement, and Sellers' rights under this
Agreement;
(ix) Sellers' minute books, stock books, and
corporate seals (except for such items of RCCI in the event Buyer
elects to acquire the outstanding stock, rather than the assets,
of RCCI);
(x) Unless otherwise agreed by the Parties, the
equipment leased by or on behalf of the Sellers under terms of
any master lease in the name of HNUS, Brown & Root, or
Halliburton or any of their Affiliates other than Sellers; and
(xi) Sellers' Employee Benefit Plans.
With respect to each such Excluded Asset, Buyer does not assume
any of Seller's or HNUS' obligations, financial or otherwise,
related thereto.
(c) Nonassignable Contracts. Nothing in this Agreement
shall be construed as an attempt or agreement to assign any
contract or right as to which a required third party consent to
assignment can- not be obtained. If, however, following the
Closing, there is any contract, agreement, license, lease, sales
order, purchase order or other commitment which would have
constituted an Assigned Contract had the required consent been
obtained, or any right for which consent to the assignment
thereof cannot be obtained, the Parties agree to take such
action, to the extent permitted by applicable law and such
contract or right, in order for Buyer to obtain the benefit and
assume the obligations thereunder, including Sellers' designating
Buyer as Sellers' subcontractor or agent for purposes of
performing such contracts and rights and Sellers' collecting
monies due under such contracts and paying the same promptly over
to Buyer.
(d) Assumption of Liabilities:
(i) Subject to the terms and conditions set forth
herein Buyer shall assume and agree to pay, honor and
discharge all of the Assumed Liabilities. The term "Assumed
Liabilities" shall mean only the following liabilities and
obligations relating to the Sellers or the Assets:
(A) Unless listed as an Excluded Payable
under2(e) below, all trade and other payables, billings in
excess of cost and estimated earnings, bank overdrafts,
accruals, reserves and advances from parent of Sellers
included in the Most Recent Financial Statements (to the
extent not discharged prior to Closing) and all such
items incurred in the Ordinary Course of Business after
the date of the Most Recent Financial Statements and
prior to Closing;
(B) Any and all liabilities, obligations and
commitments arising out of the Assigned Contracts, but not
including any liability for any breach thereof occurring prior to
the Closing Date (except to the extent such liability is reserved
on the Most Recent Financial Statements or is properly includable
in Job Margin or the Gordonsville Job Loss);
(C) Any and all liabilities, obligations and
commitments arising out of or relating to the ownership or use of
the Assets after the Closing Date; and
(D) Any and all liabilities, obligations and
commitments specifically undertaken by Buyer pursuant to the
other terms of this Agreement.
(ii) Buyer shall assume the Assumed Liabilities by
executing and delivering to Sellers at Closing an Assumption
Agreement in a form mutually agreeable to the Parties.
(e) Excluded Liabilities. Buyer shall not assume and
Seller shall retain any liabilities, obligations or commitments
of Sellers or HNUS relating to or arising out of Sellers' or
HNUS' operations prior to the Closing Date (the "Excluded
Liabilities"), other than the Assumed Liabilities. The Excluded
Liabilities shall include, without limitation, the following:
(i) Except as provided in Section 8(h), any and all
claims by any of Sellers' or HNUS' directors, officers and
employees relating to or arising out of actions by Sellers or
HNUS in connection with this Agreement or the Transactions,
and any claims by any of them relating to any of Sellers' or
HNUS' Employee Benefit Plans;
(ii) Except as provided in Section 2(d)(i)(A), any
obligation or liability to any pension, profit sharing, thrift
or other retirement plan; any medical, hospitalization, vision,
dental, life, disability, vacation or other group insurance or
welfare benefit plan; any employee stock ownership, deferred
compensation, stock option, stock bonus, stock purchase,
restricted stock, performance share, bonus, benefit or other
incentive plan; any severance or other similar plan; or any other
"employee benefit plan" within the meaning of Section 3(3) of
ERISA, whether or not any such employee benefit plan is otherwise
exempt from the provision of ERISA, to which any of the Sellers
or HNUS contributes or is a party or is bound or under which it
may have liability and under which employees or former employees
of any of the Sellers or HNUS (or their beneficiaries) are
eligible to participate or derive a benefit;
(iii) Any and all liabilities under, or arising from,
contracts, agreements and commitments which are not Assigned
Contracts;
(iv) Any and all liabilities for salaries, wages,
bonuses and other compensation of any Employee applicable to
any period prior to the Closing Date;
(v) The Excluded Payables as finally determined in
accordance with Section 2(g) and listed on Schedule 2(e)(v);
(vi) Liability for all Taxes relating to the period
prior to the Closing; and
(vii) Any environmental liability which exists, or
with respect to which the underlying condition which gives rise
to such liability exists, on the Closing Date with respect to
the Leased Real Property and the Assigned Contracts.
(f) Buyer's Option to Use Subsidiary. Buyer may elect to
have a wholly owned subsidiary acquire the Assets and assume the
Assumed Liabilities at Closing. In such event, such subsidiary
shall become a party to this Agreement (on the same terms and
conditions as Buyer), but Buyer shall remain obligated hereunder
for all obligations of the "Buyer".
(g) Excluded Receivables and Excluded Payables. The
parties agree that certain receivables existing as of the Closing
Date will not be assigned by Sellers to Buyer at Closing (the
"Excluded Receivables"), and that certain payables and other
liabilities existing as of the Closing Date (and with a value
approximately equal to the value of the Excluded Receivables)
will not be assumed by Buyer at Closing (the "Excluded
Payables"). The Excluded Receivables and the Excluded Payables
will be determined as follows:
(i) Approximately 5 days prior to Closing, HNUS will
produce to Buyer a list of Sellers' receivables and payables and
other liabilities that are expected to be in existence as of the
Closing Date. HNUS and Buyer will mutually agree on which
receivables from the list will be Excluded Receivables and which
payables and liabilities will be Excluded Payables. The
receivables so identified as Excluded Receivables will be listed
in Schedule 2(b)(vi) which Schedule shall be attached to this
Agreement at Closing. The payables and other liabilities so
identified as Excluded Payables will be listed on Schedule
2(e)(v), which Schedule shall also be attached hereto at Closing.
(ii) If it is determined by HNUS or Buyer after Closing that
any of the Excluded Receivables or Excluded Payables were not in
existence (or were otherwise not properly includable), HNUS and
Buyer will agree on appropriate adjustments that may be necessary
to approximately equalize the value of the Excluded Receivables
and the Excluded Payables. Any such adjustments shall be
recorded in a post-Closing supplement to Schedules 2(b)(vi) and
2(e)(v), as appropriate.
(iii) Buyer and HNUS will use all reasonable efforts to
resolve any differences they may have regarding the adjustments.
If they cannot resolve the differences, the matter shall be
presented to and resolved by the CPA in accordance with the
procedure set forth in Section 3(b)(ii).
(iv) If after adjustment, the value of the Excluded
Receivables is greater than the value of the Excluded Payables,
Sellers will promptly pay the difference to Buyer. If after
adjustment, the value of the Excluded Payables is greater than
the value of the Excluded Receivables, Buyer will promptly pay
the difference to Sellers.
3. Purchase Price, Payment Procedure, Tax Allocation.
(a) Purchase Price. Buyer agrees to pay to Sellers a sum
equal to $11,000,000, plus the Advance Account Balance, if any,
minus the Negative Account Balance, if any, plus the Additional
Consideration, if any, (the "Purchase Price"). The Advance
Account Balance, the Negative Account Balance, and the Additional
Consideration will be determined in accordance with the
provisions of Section 3(b). Payment of the Purchase Price will
be made in accordance with the provisions of Section 3(c).
(b) Procedure for Calculating the Purchase Price.
(i) At least two Business Days prior to the
Closing, Sellers shall furnish a notice to Buyer setting forth
the Estimated Advance Account Balance, if any, or the Estimated
Negative Account Balance, if any.
(ii) As soon as practicable after Closing, Buyer and
HNUS will mutually calculate the Advance Account Balance, if
any, or the Negative Account Balance, if any. Buyer and HNUS
will use all reasonable efforts to resolve any differences
they may have regarding such accounts themselves. If the
Parties do not obtain a final resolution and agreement within
60 days after Closing, however, the final positions of the
Parties as to the Advance Account Balance or the Negative
Account Balance, as applicable, shall be presented in writing
to the CPA, which shall as soon as practicable select either
the final position taken by Buyer or the final position taken
by HNUS, and the CPA shall have no power or right to make any
other determination. The determination of the CPA will be set
forth in writing and will be conclusive and binding upon the
Parties. The amounts of the Advance Account Balance or the
Negative Account Balance as resolved (by agreement or by the
CPA) pursuant to this Section 3(b)(ii) shall be used for
purposes of Section 3(c)(iii).
(iii) The "Additional Consideration" means a sum
equal to 50% of the amount by which the aftertax earnings (with
taxes calculated at the applicable statutory rates) of the
business represented by the Assets (determined in accordance
with GAAP applied on a basis consistent with the preparation
of the Financial Statements and including reasonable overhead
and G & A allocations and other reasonable direct charges of
Buyer) (the "Earnings") exceeds $1,200,000 for each of the
calendar years 1994, 1995, and 1996 (each a "Calendar Year"),
provided that in no event shall the Additional Consideration
exceed $3,000,000 in the aggregate and provided further that
in the event that Buyer has made one or more payments into the
Escrow Account pursuant to Section 8(d)(i)(G), the sum of such
payments plus the Additional Consideration shall in no event
exceed $3,200,000.
(iv) As soon as practicable after the end of each
Calendar Year (and, in any event, within 120 days thereafter),
Buyer shall prepare and furnish to HNUS a statement of income
of the business represented by the Assets as of the Calendar
Year end (the "Annual Statement of Income"), prepared as
provided above concerning the determination of the Earnings,
and which statement of income shall include a calculation of
the Earnings for the year; provided, however, that the Annual
Statement of Income shall be determined without regard to and
ignoring the effect of (A) any change after the Closing in the
fundamental type of business represented by the Assets, (B) any
disposition of any material Assets not in the Ordinary
Course of Business, and (C) any action or inaction by Buyer
having as a material part of the motive or purpose for such
action or inaction the reduction of the Earnings so that the
Additional Consideration payable to Sellers will be reduced.
(v) If HNUS have any objections to the calculation
of Earnings for a particular Calendar Year, it will deliver a
detailed statement describing its objections to Buyer within
60 days after receiving the Annual Statement of Income.
(vi) Buyer and HNUS will use all reasonable efforts
to resolve any such objections themselves. If the Parties do not
obtain a final resolution and agreement within 30 days after
Buyer has received the statement of objections, however, the
final positions of the Parties as to the amount of the
Earnings shall be presented in writing to the CPA, which shall
as soon as practicable select either the final position taken
by Buyer or the final position taken by HNUS, and the CPA
shall have no power or right to make any other determination.
The determination of the CPA will be set forth in writing and
will be conclusive and binding upon the Parties. The amount
of the Earnings (and thus the Additional Consideration, if
any) as resolved (by agreement or by the CPA) pursuant to this
Section 3(b)(vi) shall be used for purposes of Section
3(c)(iv).
(vii) Buyer will make the work papers and back-up
materials used in preparing the Annual Statement of Income
and the applicable books and records of Buyer available to
HNUS and its accountants and other representatives at
reasonable times and upon reasonable notice at any time during
(A) the preparation of the Annual Statement of Income, (B) the
review by Sellers of the calculation of the Advance Account
Balance or the Negative Account Balance, and the Annual
Statement of Income, and (C) the resolution by the Parties of
any objections thereto. Furthermore, Buyer will make
available to the CPA all books, records, and financial staff
of Buyer, together with anything else that the CPA may
reasonably request in connection with performing the duties
placed upon the CPA by virtue of this Section 2. Buyer and
HNUS will cooperate with the CPA in all reasonable ways so as
to enable the CPA to perform hereunder in as expeditious a
manner as is feasible.
(viii) The fees and expenses of the CPA attributable
to any determination by the CPA shall be borne by the Party whose
position was not selected by the CPA.
(c) Payment. Payment of the Purchase Price shall
be effected as follows:
(i) At the Closing, Buyer shall pay to Sellers cash
in the amount of $11,000,000, plus the Estimated Advance
Account Amount, if any, minus the Estimated Negative Account
Balance, if any, less the Escrowed Amount.
(ii) At Closing, Buyer shall deposit the sum of
$1,200,000 (the "Escrowed Amount") with the Escrow Agent
pursuant to the Escrow Agreement attached as Exhibit A. The
Escrowed Amount, including any additions to the Escrowed
Amount pursuant to Section 8(d), shall be disbursed to the
parties as and when provided in the Escrow Agreement.
(iii) If it is resolved pursuant to Section 3(b)(ii)
that (A) the Advance Account Balance is in excess of the
Estimated Advance Account Balance, or (B) the Estimated
Negative Account Balance is in excess of the Negative Account
Balance, then Buyer shall, within 10 days following such
resolution, pay to Sellers the amount of such excess. If it
is resolved pursuant to Section 3(b)(ii) that (1) the
Estimated Advance Account Balance is in excess of the Advance
Account Balance, or (2) the Negative Account Balance is in
excess of the Estimated Negative Account Balance, then Sellers
shall, within ten days following such resolution, pay to Buyer
the amount of such excess.
(iv) If the amount of the Earnings is resolved
pursuant to Section 3(b)(vi) in a manner such that Additional
Consideration is due to Sellers, then Buyer shall, within ten
days following such resolution, pay to Sellers the amount of
the Additional Consideration.
(v) All payments referred to in this Section 3(c)
and in subsequent Sections of this Agreement shall be made by
wire transfer of same day federal funds or other same day funds
as the payor shall have been instructed in writing by the payee
to one or more bank accounts designated by the payee.
(vi) Any payment owing pursuant to this Section 3
shall be paid in full, and no such payment shall be reduced
through setoff or any similar right or remedy.
(vii) The making of the payments called for by this
Section 3 shall result in the complete discharge of any and
all indebtedness or liability that gave rise to or resulted in
there being an Advance Account Balance or Negative Account
Balance.
(d) Tax Allocation. Within 60 days following Closing,
Buyer and Sellers shall cooperate in the allocation of the
Purchase Price to broad categories constituting components of the
Assets for purposes of Internal Revenue Service Form 8594, and
each of them shall timely file a completed Form 8594 with respect
to the Transactions. Each Party will report the purchase and
sale of Assets in accordance with the agreed upon allocation
among such broad categories for all federal tax purposes.
4. Closing and Closing Date.
(a) The Closing. The closing of the Transactions (the
"Closing") shall take place at the offices of Sellers in
Bellevue, Washington, commencing at 9:00 a.m. local time on
January 29, 1994 or such other date and place as Buyer and
Sellers may mutually determine (the "Closing Date"). The Buyer
will continue to work with Sellers prior to the Closing to
improve Sellers' operational capabilities.
(b) Deliveries at the Closing. At the Closing, (i) Sellers
will deliver to Buyer the documents referred to in Section 9(a),
(ii) Buyer will deliver to Sellers the documents referred to in
Section 9(b), (iii) Sellers will deliver to Buyer an Assignment
in the form of Exhibit B attached hereto, executed certificates
of title, and other appropriate documents as may be reasonably
necessary or appropriate to vest in Buyer good and marketable
title to the Assets free and clear of all Security Interests,
(iv) Buyer will deliver to Sellers the Assumption Agreement
referred to in Section 2(d)(ii), and (v) Buyer will deliver to
Sellers the consideration specified in Section 2(d)(i).
5. Representations and Warranties of Sellers and HNUS.
Sellers and HNUS represent and warrant to Buyer that the
statements contained in this Section 5 are correct and complete
as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Section 5), except as set forth in any of the
schedules attached hereto or in the disclosure schedule delivered
by Sellers to Buyer on the date hereof and initialed by the
Parties (the "Disclosure Schedule"). Except in those particular
representations and warranties in which a dollar amount is
provided as a measure of materiality (so that unscheduled matters
or Adverse Consequences to Buyer in excess of such dollar amount
would be deemed to be a breach), Sellers shall not have breached
their representations and
warranties so long as the aggregate of
the Adverse Consequences to Buyer as a result of inaccuracies in
Sellers' or HNUS' representations and warranties do not exceed
$100,000. In the event the Adverse Consequences to Buyer as a
result thereof do exceed $100,000, then the threshold amount of
$100,000 provided in Section 10(b) hereof shall have been
satisfied for the purposes of that Section.
(a) Status of Sellers. Each of Sellers and HNUS is a
corporation duly incorporated, validly existing, and in good
standing under the Laws of the jurisdiction of its incorporation,
and has full power and authority to carry on its business as now
conducted. Sellers are duly qualified to do business in each
jurisdiction in which the failure to be so qualified would have a
material adverse effect on the Sellers' business.
(b) Authorization of Transaction. Each of Sellers and HNUS
has full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of
Sellers and HNUS, enforceable in accordance with its terms and
conditions. None of Sellers or HNUS needs to give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any Governmental Authority in order to consummate the
Transactions, except where the failure to give notice, to file,
or to obtain any authorization, consent, or approval would not
have a material adverse effect on the Assets or on the ability of
Sellers or HNUS to consummate the Transactions.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
Transactions, will (i) violate any Law to which Sellers or HNUS
are subject or any provision of the charter or bylaws of any of
them or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require
any notice or consent under any agreement, contract, lease,
license, instrument, or other arrangement to which either of
Sellers or HNUS is a party or by which any of them is bound or to
which any of the Assets is subject, except where the violation,
conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not
have a material adverse effect on the Assets or on the ability of
Sellers and HNUS to consummate the Transactions.
(d) Brokers' Fees. Neither Sellers nor HNUS have any
liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the Transactions for
which Buyer could become liable or obligated.
(e) Financial Statements. Attached hereto as Schedule 5(e)
are the following unaudited consolidated financial statements
(collectively the "Financial Statements") of the Company and RCCI
(i) unaudited consolidated balance sheets and statements of
income as of and for the fiscal years ended December 28, 1991 and
December 26, 1992, and (ii) unaudited consolidated balance sheets
and statements of income, (the "Most Recent Financial
Statements") as of and for the 11 months ended November 27, 1993
(the "Most Recent Fiscal Month End").
The usual accounting practice of the Company has been to
utilize the percentage-of-completion method for recognition of
revenue and gross margin on major fixed-price contracts. The
basis for measuring the percent complete is the ratio of costs
incurred to the total estimated costs at completion. For major
fixed price contracts awarded during 1992, however, the Company
employed a modified version of this percentage-of-completion
method which attributed a higher degree of profit to the
engineering and design component of a project than to the
equipment supply and construction components. The Company
estimates that use of this modified method decreased revenue and
gross margin recognized during 1992 by approximately $45,000 and
decreased revenue and gross margin recognized during the first
eleven months of 1993 by approximately $92,000 Effective with
major fixed-price contracts awarded during 1993, the Company
reverted to the recognition method formerly employed, but adopted
the practice of holding back twenty percent of gross margin
earned until the project is near completion. This change had the
effect of lowering revenue and gross margin by approximately
$286,000 for the eleven month period ended November 27, 1993.
The Most Recent Financial Statements reflect an accrued
liability for estimated payroll burdens of approximately
$276,000. All or part of this accrual may be determined to be in
excess of financial requirements pending the completion of a
review of this account. The Company anticipates that the excess
accrual amount (if any) will be reversed into income in December,
1993 business.
Except for (i) changes in the application of certain
practices employed in the determination of percentage-of-
completion for revenue and job margin as discussed above, (ii)
any adjustment which arises from the reversal of excess payroll
burden accrual, as discussed above, (iii) the recording of income
tax accruals (or benefits) which are accounted for at the
consolidated group level by the ultimate parent of the Company,
and (iv) the lack of certain minor reclassifications, footnotes
and other presentation-related items, the Financial Statements
have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and
present fairly the consolidated financial
condition of Sellers as of such dates and the consolidated
results of operations of Sellers for such periods.
(f) Events Subsequent to Most Recent Fiscal Month End.
Since the Most Recent Fiscal Month End, there has not been any
material adverse change in the financial condition of Sellers
taken as a whole, exclusive of reduction of sales backlog caused
by cancellation of projects or completion of work in progress.
Without limiting the generality of the foregoing, since that
date:
(i) none of Sellers has sold, leased, transferred,
or assigned any of its material assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of
Business;
(ii) except for Project-related purchase orders and
subcontracts, none of Sellers has entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, lease, and licenses) either involving more than
$25,000 or outside the Ordinary Course of Business;
(iii) no party (including either of Sellers) has
accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $10,000
to which either of Sellers is a party or by which either of
them is bound;
(iv) none of Sellers has imposed or permitted to be
created any Security Interest upon any of its assets, tangible
or intangible;
(v) none of Sellers has made any capital
expenditure (or series of related capital expenditures) either
involving more than $10,000 or outside the Ordinary Course of
Business;
(vi) none of Sellers has made any capital investment
in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series or related capital
investments, loans, and acquisitions) either involving more
than $10,000 singly or $25,000 in the aggregate;
(vii) none of Sellers has issued any note, bond, or
other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized
lease obligation either involving more than $10,000 singly or
$25,000 in the aggregate;
(viii) none of Sellers has delayed or postponed the
payment of material accounts payable and other liabilities
outside the Ordinary Course of Business;
(ix) none of Sellers has cancelled, compromised,
waived, or released any right or claim (or series of related
rights and claims) either involving more than $10,000 or
outside the Ordinary Course of Business;
(x) none of Sellers has granted any license or
sublicense of any rights under or with respect to any
Intellectual Property;
(xi) none of Sellers has experienced any material
damage, destruction, or loss (whether or not covered by
insurance) to its property;
(xii) none of Sellers has made any loan to, or
entered into any other transaction with (except for salary or
benefit payments in the Ordinary Course of Business), any of its
directors, officers, and employees;
(xiii) none of Sellers has entered into any employment
contract or collective bargaining agreement or modified the
terms of any existing such contract or agreement;
(xiv) none of Sellers has granted any increase in the
base compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xv) none of Sellers has made any other material
change in employment terms for any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xvi) none of Sellers has made or pledged to make any
material charitable contribution; and
(xvii) there has not been any other material
occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving
either of Sellers.
(g) Legal Compliance; Environmental Matters. Each of
Sellers has complied with all Laws, including, without
limitation, Environmental Laws, except where the failure to
comply would not have a material adverse effect upon the Assets.
To the Knowledge of HNUS, (i) the Assets are not subject to any
existing, unfulfilled remedial obligation under any Environmental
Laws, (ii) Sellers possess all permits and similar authorizations
required under Environmental Laws for the operation of the
Assets; (iii)
there are no investigations or inquiries regarding
failure of the Assets to comply with Environmental Laws; (iv) all
hazardous waste and chemical waste materials disposed of by
Sellers have been disposed of by appropriately licensed carriers
at authorized disposal facilities; (v) except as reported in
accordance with Law, there have been no spills, dumping,
discharge or cleanup of hazardous waste or chemical materials on
or at any facilities occupied by Sellers; and (vi) Sellers have
no outstanding claims of violation of any Environmental Law based
on a condition existing prior to the date hereof, the acts or
omissions of Sellers prior to the date hereof, or the leasing,
occupancy or ownership by Sellers of their properties prior to
the date hereof.
(h) Tax Matters. Each of Sellers has filed all Tax Returns
that it was required to file, and has paid all Taxes shown
thereon as owing, or otherwise due and payable as of the date
hereof. There are not, and there will not be as of the Closing
Date, any taxes due and payable which have not been paid. There
are no unpaid taxes with respect to any period ending on or
before the date hereof which are or could become a lien on the
Assets, except for current taxes not yet due and payable.
(i) Tangible Assets. Sellers have indefeasible title to,
or a valid leasehold interest in, the material tangible personal
property assets they use regularly in the conduct of their
businesses. The tangible personal property assets owned or
leased by Sellers are in good condition, ordinary wear and tear
excepted, except where the failure to be in such condition would
not have a material adverse effect on the Assets. Schedules
2(a)(i) and 2(a)(ii) constitute complete and correct lists as of
the Most Recent Fiscal Month End of the tangible Assets that are
capitalized on the accounting records of Sellers.
(j) Real Property.
(i) Sellers do not own any real property.
(ii) Schedule 2(a)(iii) lists all the real property
leased by Sellers ("Leased Real Property").
Sellers have made available to Buyer correct and complete copies
of the leases listed in Schedule 2(a)(iii) (as amended to date).
To the Knowledge of HNUS, each lease listed in Schedule 2(a)(iii)
is legal, valid, binding, enforceable, and in full force and
effect, except where the illegality, invalidity, nonbinding
nature, unenforceability, or ineffectiveness would not have a
material adverse effect on the Assets.
(k) Intellectual Property. Schedule 2(a)(vi) identifies
each unexpired patent or registration that has been issued to
either of
Sellers with respect to any of its Intellectual
Property, identifies each pending patent application or
application for registration that either of Sellers has made with
respect to any of its Intellectual Property, both U.S. and
foreign, and identifies each license that either of Sellers has
granted to any third party with respect to any of its
Intellectual Property or has received from any third party with
respect to such third party's intellectual property. Neither of
the Sellers has received any notice of adverse claim or threat of
adverse claim by any third party with respect to its patents or
registrations, and, to the knowledge of HNUS, the activities of
Sellers as currently conducted do not infringe any intellectual
property rights of other Persons. There are no Intellectual
Property rights not owned or licensed by Sellers which are needed
to operate their businesses as presently conducted, and Sellers
have the right to convey the Intellectual Property to Buyer,
subject to the receipt of any required consents.
(l) Contracts. Schedule 5(l) sets forth Sellers' latest
lists of the following contracts and other agreements (the
"Contracts") to which either of Sellers is a party:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person
providing for lease payments in excess of $10,000 per annum;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which
will extend over a period of more than one year, result in a
material loss to Sellers taken as a whole, or involve
consideration in excess of $10,000;
(iii) any agreement creating a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $10,000 or under which it has imposed
a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of Sellers' Affiliates;
(vii) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of $10,000 or
providing material severance benefits;
(viii) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
(ix) any agreement not otherwise disclosed under
which the consequences of a termination could have a
material adverse effect on the Assets; or
(x) any agreement not otherwise disclosed (or group
of related agreements) the performance of which involves
consideration in excess of $10,000.
Sellers have made available to Buyer a correct and complete copy
of each such agreement (as amended to date). Sellers have
fulfilled when due, or have taken all action necessary to enable
them to fulfill when due, all of their obligations under the
Contracts, except where the failure to fulfill would not have a
material adverse effect on the Assets. HNUS has no Knowledge of
any default by any party other than Sellers to any of the
Contracts.
(m) Insurance. During the two year period prior to
Closing, Sellers have maintained workers compensation, commercial
general liability, and property insurance policies with coverages
and limits appropriate for Sellers' business and such policies
will be maintained through the Closing Date.
(n) Litigation. The Disclosure Schedule sets forth each
instance in which either of Sellers (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the Knowledge of HNUS, is
threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court of quasi-
judicial or administrative agency of any federal, state, local,
or foreign jurisdiction.
(o) Employees. Neither of the Sellers is a party to or
bound by any collective bargaining agreements or similar labor
arrangements. To the Knowledge of HNUS, no organizational effort
is presently being made or threatened by or on behalf of any
labor union with respect to employees of either of Sellers.
(p) Assets. The Assets represent all assets (not including
non assignable permits, licenses and similar requirements of any
Governmental Authority) required by Buyer to operate the business
represented by the Assets as currently operated by Sellers.
(q) Accounts Receivable. Schedule 2(a)(iv) sets forth a
true, correct and complete list of the accounts receivable of
Sellers as of the Most Recent Financial Month End, including an
aging thereof. All such trade accounts receivable arose out of
the sale of goods or services in the Ordinary Course of Business
of Sellers and are collectible in the face value thereof within
90 days of the date of invoice, using normal collection
procedures.
(r) Undisclosed Liabilities. There are no uninsured
liabilities or obligations of Sellers, either accrued, absolute,
contingent or otherwise, which are material to the business
represented by the Assets taken as a whole, except (i) those
reflected or otherwise provided for in the Most Recent Financial
Statements, (ii) those set forth in this Agreement, the
Disclosure Statement, or the Schedules attached hereto, (iii)
those which, in accordance with GAAP, would not be required to be
provided for or reserved against in a balance sheet of the
Sellers, (iv) those arising since the date of the Most Recent
Financial Statements in the Ordinary Course of Business and (v)
those not required to be set forth in the Disclosure Statement or
Schedules attached hereto because of an exception provided for in
this Agreement.
(s) Employee Benefit Plans. All of the Employee Pension
Benefit Plans and all of the Employee Welfare Benefit Plans
(together, the "Benefit Plans") comply in all material respects,
to the extent applicable, with the requirements of ERISA and the
Code; none of the Benefit Plans subject to Part 3 Subtitle B of
Part II of ERISA has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section
412 of the Code; no material liability to the Pension Benefit
Guaranty Corporation has been incurred with respect to any of the
Benefit Plans; Sellers have not incurred any material liability
for taxes imposed under the Code or ERISA with respect to any of
the Benefit Plans; and no suits, actions, or other litigation
(excluding claims for benefits incurred in the ordinary course of
plan activities) have been brought against or with respect to any
of the Benefit Plans. All contributions to the Benefit Plans
that were required to have been made to the Benefit Plans as of
the Closing Date have been (or will have been by such date) paid,
accrued or otherwise adequately reserved in accordance with GAAP
as of such date, and Sellers have performed (or will have
performed by the Closing Date,) all material obligations required
to be performed as of such date under the Benefit Plans.
6. Representations and Warranties of Buyer.
Buyer represents and warrants to Sellers that the statements
contained in this Section 6 are correct and complete as of the
date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this
Section 6).
(a) Status of Buyer. Buyer is a corporation duly
incorporated, validly existing, and in good standing under the
Laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. Buyer has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions. Buyer need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Authority in order to
consummate the Transactions.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
Transactions, will (i) violate any Law to which Buyer is subject
or any provision of its charter or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice or consent
under any agreement, contract, lease, license, instrument, or
other arrangement to which Buyer is a party or by which it is
bound or to which any of its assets is subject.
(d) Brokers' Fees. Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the Transactions for which any Sellers or HNUS could
become liable or obligated.
(e) Access to Information. Sellers and HNUS have provided
Buyer with all information, documents and data related to the
Assets and Sellers which have been requested by Buyer for
purposes of Buyer's independent due diligence investigation.
7. Pre-Closing Covenants.
The Parties agree as follows with respect to the period
between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use all reasonable
efforts to take all action and to do all things necessary, proper
or advisable in order to consummate and make effective the
Transactions (including satisfaction, but not waiver, of the
closing conditions set forth in Section 9).
(b) Consents. Sellers and HNUS will use all reasonable
efforts to obtain any third-party consents necessary to
consummate the Transactions.
(c) Operation of Business. Except as Buyer may otherwise
consent in writing, Sellers will not engage in any practice, take
any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the
foregoing, Sellers will not engage in any practice, take any
action, or enter into any transaction of the sort described in
Section 5(f) without Buyer's prior consent, except that Sellers
may incur Project-related expenditures in the Ordinary Course of
Business without regard to the dollar limitations in Section
5(f).
(d) Full Access. Each of Sellers will permit
representatives of Buyer to have full access at all reasonable
times, and in a manner so as not to interfere with the normal
business operations of Sellers, to all premises, properties,
personnel, books, records, contracts, and documents of or
pertaining to each of Sellers. Buyer will treat and hold as such
any Confidential Information it has heretofore received from
Sellers and hereafter receives from Sellers in the course of the
reviews contemplated by this Section 7(d), will not use any of
the Confidential Information except in connection with this
Agreement, and if this Agreement is terminated for any reason,
will return to Sellers all tangible embodiments (and all copies)
of the Confidential Information obtained by Buyer.
(e) Notice of Developments. Sellers and HNUS shall
promptly notify Buyer of any development causing a breach of any
of the representations and warranties in Section 5. Unless Buyer
has the right to terminate this Agreement pursuant to Section
12(a)(ii) by reason of the development and exercises that right
within the period of ten days referred to in Section
12(a)(ii)(A), the written notice pursuant to this Section 7(e)
will be deemed to have amended the Disclosure Schedule, to have
qualified the representations and warranties contained in Section
5, and to have cured any misrepresentation or breach of warranty
that otherwise might have existed hereunder by reason of the
development.
(f) Exclusivity. Sellers and HNUS will not solicit,
initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any capital stock
or other voting securities, or any substantial portion of the
assets of, either of Sellers (including any acquisition
structured as a merger, consolidation, or share exchange).
(g) Press Releases and Public Announcements. No Party or
Affiliate of a Party shall issue any press release or make any
public announcement relating to the subject matter of this
Agreement without the prior written approval of Buyer and HNUS;
provided, however, that any of the Parties (or their Affiliates)
may make any public disclosure it believes in good faith is
required by Law or any listing or trading agreement concerning
its publicly-traded securities (in which case the disclosing
Party or its Affiliate will use all reasonable efforts to advise
the other Party prior to making the disclosure).
(h) Bids and Proposals. HNUS and Sellers will consult with
Buyer on Sellers' bids and proposals for new work, and Buyer will
participate in all material decisions relating to such bids and
proposals.
8. Post-Closing Covenants.
The Parties agree as follows with respect to the period
following the Closing.
(a) General. In case at any time after the Closing any
further action is necessary or desirable to carry out the
purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such
further instruments and documents) as the other Party reasonably
may request all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification
therefor under Section 10).
(b) Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity practice, plan,
occurrence, event, incident, action, failure to act, or
transaction involving the Assets, the other Party will cooperate
with it and its counsel in the contest or defense, make available
its personnel, and provide such testimony and access to its books
and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 10).
(c) Project Indemnification. HNUS and Sellers shall
indemnify Buyer from and against any Adverse Consequences caused
by Sellers' failure to obtain on a timely basis any permits or
licenses required to engage in the performance of any of the
Projects other than Gordonsville; provided, however, that in the
event any progress or milestone payment due on any such Project
is more than 30 days past due, Buyer will inform HNUS, and
thereafter consult and work cooperatively with HNUS in order to
bring current any such overdue payments. In the event that Buyer
cannot
establish to HNUS' reasonable satisfaction that an overdue
payment is forthcoming (other than for reasons relating to
Buyer's performance, in connection with which Buyer is making
reasonable efforts to cure), HNUS may request Buyer to cease
performing any further work and Buyer shall thereafter cease any
further work on the project, or, may carry on the work at its own
complete risk (i.e., Buyer shall not be entitled to
indemnification hereunder for work performed subsequent to the
cease work request from HNUS). For purposes of this Section,
Adverse Consequences shall include any liability which Buyer may
incur to a Project owner as a result of such cessation of
performance.
(d) Risk Allocation for Certain Projects.
(i) The Parties agree that the risk of achieving
the Aggregate Job Margin of the projects listed in Schedule
8(d)(1), and any additional projects which may be booked by
the Sellers between the date hereof and the Closing Date
(other than the Diamo Project as described in Section 8(e)
hereof), which additional projects shall be added to Schedule
8(d)(1) (collectively, the "Projects"), shall be shared by
them on the basis set forth below in this Section 8(d)(i).
(A) The Parties agree that the "Target Job
Margin" for each Project and the "Target Aggregate Job
Margin" for all the Projects as of the date hereof is set
forth in Schedule 8(d)(i).
(B) As soon as practicable after completion of
all the Projects, but in no event later than 14 months
from the Closing Date, the Buyer shall prepare and
furnish to the Sellers an accounting for the Projects
(the "Project Accounting") which shall in summary form
list the project revenues and costs and the Job Margin
for each of the Projects, and the aggregate Job Margin
for the Projects taken together (the "Aggregate Job
Margin"). The Project Accounting shall be determined on
a basis consistent with Sellers' practice prior to the
Closing, subject to the following:
I. The Aggregate Job Margin shall be
determined without regard to and ignoring the effect of any
liquidated damages incurred on the Projects, or of any failure to
collect Project revenue because of Sellers' failure to obtain on
a timely basis any permits or licenses required to engage in the
performance of any Projects. The cost of the inability to
collect Project revenue for any other reason shall be included in
the determination of Aggregate Job Margin.
II. Project revenue, cost and resulting
Job Margin associated with any increase in the scope of the work
of a Project agreed to after the Closing Date shall be
disregarded in calculating the Job Margin for that Project, so
that the Project Accounting for such Project shall be prepared on
the basis of the Project as scoped as of the Closing Date on
Schedule 8(d)(1). In connection with the foregoing, Buyer agrees
to account for the revenues and costs for any such increased
scope on a separate basis.
III. Any decrease in the scope of the
work of a Project agreed to after the Closing Date shall result
in an appropriate adjustment to the Target Job Margin for the
Project concerned, and a corresponding adjustment in the
"Target Aggregate Job Margin". The Target Job Margin adjustment
will be determined by the percentage of scope reduction computed
by dividing estimated revenues attributable to the reduction by
estimated revenues for the Project at the Closing Date. The
Target Job Margin for the Project will then be reduced by
percentage of scope reduction so determined and the revised
Target Aggregate Job Margin shall be calculated using the reduced
Target Job Margin for the Project.
IV. In the event a Project has not been
completed at the time of the preparation of the Project
Accounting, Buyer shall prepare and use a good faith estimate of
the Job Margin for such Project to be utilized in the Project
Accounting.
V. Aggregate Job Margin shall include
the cost of warranty claims in excess of the aggregate warranty
reserves for the Projects (which warranty reserves shall be
maintained in a manner consistent with the manner in which the
warranty reserves were accrued and recorded in Sellers' books on
November 27, 1993). In the event that the warranty periods for
the Projects have not all terminated at the time of
preparation of the Project Accounting, then Buyer and HNUS shall
mutually agree on any additional increment to the warranty
reserves that may be required in accordance with the
provisions of GAAP at that time. Any such addition to the
warranty reserve made at that time shall be treated as an
additional cost of the Projects for purposes of calculating
Aggregate Job Margin. Warranty cost in the aggregate greater
than the aggregate budgeted warranty cost for the Projects (which
is included in Schedule 8(d)(i) and will be supplemented prior to
Closing for new Projects) will be treated as an adjustment to the
Purchase Price.
(C) The Project Accounting shall separately
note the amount of any liquidated damages incurred on the
Project, if any, and the reason the liquidated damages
were incurred (it being understood and agreed that the
Buyer's remedy for the incurrence of any such liquidated
damages shall be limited to the indemnification
provisions for Buyer's benefit set forth in Section 10(b)
hereof).
(D) If Sellers have any objections to the
calculation of Aggregate Job Margin or the statement of
liquidated damages for the Projects, they will deliver a
detailed statement describing their objections to Buyer
within 20 days after receiving the Project Accounting.
(E) Buyer and Sellers will use all reasonable
efforts to resolve any such objections themselves. If
the Parties do not obtain a final resolution and
agreement within 20 days after Buyer has received the
statement of objections, however, the final positions of
the Parties as to the amount of the Aggregate Job Margin
and the liquidated damages shall be presented in writing
to the CPA, which shall as soon as practicable select
either the final position taken by the Buyer or the final
position taken by Sellers, and the CPA shall have no
power or right to make any other determination. The
determination of the CPA will be set forth in writing and
will be conclusive and binding upon the Parties. The
amount of the Aggregate Job Margin and liquidated damages
resolved (by agreement or by the CPA) pursuant to this
Section 8(d)(i)(E) shall be used for purposes of Sections
8(d)(i)(G) and 10(b)(ii).
(F) If it is resolved pursuant to Section
8(d)(i)(E) that the Aggregate Job Margin exceeds the
Target Aggregate Job Margin by more than $200,000, then
Buyer shall, within ten days following such resolution,
pay into the Escrow Account the amount of such excess.
If it is resolved pursuant to Section 8(d)(i)(E) that the
Aggregate Job Margin exceeds the Target Aggregate Job
Margin by $200,000 or less, or is less than the Aggregate
Job Margin, then no additional payment shall be made into
the Escrow Account.
(G) Fifteen months from the Closing Date (or
on the first business day next following such date if not a
business day), the Escrow Account shall be disbursed as
follows: Sellers shall receive the amount of the Escrow
Account, less the amount by which the Target Aggregate
Job Margin exceeds the Aggregate Job Margin by more than
$200,000, less the dollar amount of any Adverse
Consequences suffered by Buyer as a result of a breach or
breaches by Sellers or HNUS of their representations and
warranties concerning the gross accounts receivable (in
excess of Sellers' bad debt reserves which are not
included in Schedule 2(b)(vi)) or the value or
realizability of other Assets.
(H) Following the disbursement of the Escrow
Account, upon the expiration of all warranty periods of
all the Projects, if total warranty costs are less than
the amount of the warranty reserve established pursuant
to Section 8(d)(i)(B)(V), then Buyer shall promptly pay
to Sellers the amount by which the warranty reserve
exceeds such total warranty costs. If total warranty
costs exceed the amount of such warranty reserve, then
Sellers shall promptly pay Buyer the amount by which the
total warranty costs exceed the warranty reserve (up to
a maximum equal to the amount received by Sellers out of
the Escrow Account).
(I) Sellers shall have the right to appoint a
representative to the Auburndale, Indiantown and Apache Nitrogen
projects who may monitor all aspects of the performance of said
projects and who shall be given full access to each of the
projects, to all internal correspondence and documentation with
respect thereto, and to all communication with the clients,
including attendance at meetings. Buyer agrees to give due
consideration to any recommendation made by Sellers'
representative concerning performance of any of the
projects.
(ii) The Parties agree that the risk of
profitability of the Gordonsville Project shall be shared between
them on the basis set forth below in this Section 8(d)(ii):
(A) The Parties agree that the Target Job
Margin for the Gordonsville Project is a negative $450,000 (the
"Gordonsville Target Job Loss").
(B) As soon as practicable after the
completion of the Gordonsville Project, Buyer shall prepare and
furnish to Sellers an accounting for the Gordonsville
Project (the "Gordonsville Project Accounting") which
shall in summary form list the project revenues and costs
and the Job Margin for Gordonsville Project (the
"Gordonsville Job Loss"). The Gordonsville Project
Accounting shall be prepared on a basis consistent with
Sellers' practice prior to the Closing, subject to the
following:
I. The Gordonsville Job Loss shall be
determined without regard to and ignoring the effect of any
liquidated damages incurred on the Gordonsville Project.
II. The Gordonsville Job Loss shall
include the cost of warranty claims in excess of the aggregate
warranty reserve for the Gordonsville Project (which warranty
reserve shall be maintained in a manner consistent with the
manner in which the warranty reserves were accrued and recorded
in Sellers' books on November 27, 1993). In the event that the
warranty period has not expired at the time of preparation of the
Gordonsville Project Accounting, then Buyer and HNUS shall
mutually agree on any additional increment to the warranty
reserve that may be required in accordance with the provisions of
GAAP at that time. Any such addition to the warranty reserve
made at that time shall be treated as an additional cost of the
Gordonsville Project for purposes of calculating the Gordonsville
Job Loss.
III. The Gordonsville Job Loss shall
include the cost of inability to collect Gordonsville Project
revenue for any reason.
(C) The Gordonsville Project Accounting shall
separately note the amount of any liquidated damages incurred on
the Gordonsville Project, if any, and the reason the liquidated
damages were incurred (it being understood and agreed that the
Buyer's remedy for the incurrence of any such liquidated damages
shall be
limited to the indemnification provisions for Buyer's
benefit set forth in Section 10(b) hereof).
(D) If Sellers have any objections to the
calculation of the Gordonsville Job Loss or the statement of
liquidated damages for the Gordonsville Project, they will
deliver a detailed statement describing their objections to Buyer
within 20 days after receiving the Gordonsville Project
Accounting.
(E) Buyer and Sellers will use all reasonable
efforts to resolve any such objections themselves. If the
Parties do not obtain a final resolution and agreement within 20
days after Buyer has received the statement of objections,
however, the final positions of the Parties as to the amount of
the Gordonsville Job Loss and the liquidated damages shall be
presented in writing to the CPA, which shall as soon as
practicable select either the final position taken by the Buyer
or the final position taken by Sellers, and the CPA shall have no
power or right to make any other determination. The
determination of the CPA will be set forth in writing and will be
conclusive and binding upon the Parties. The amount of the
Gordonsville Job Loss and liquidated damages resolved (by
agreement or by the CPA) pursuant to this Section 8(d)(ii)(E)
shall be used for purposes of Sections 8(d)(ii)(F) and 10(b)(ii).
(F) If it is resolved pursuant to Section
8(d)(ii)(E) that the Gordonsville Job Loss is less than
the Gordonsville Target Job Loss, then Buyer shall, within ten
days following such resolution, pay to Sellers an amount equal to
50% of the difference. If it is resolved pursuant to Section
8(d)(ii)(E) that the Gordonsville Job Loss is greater than the
Gordonsville Target Job Loss, then Sellers shall, within ten days
following such resolution, pay to Buyer the difference.
(G) Sellers shall have the right to appoint a
representative to the Gordonsville Project who may monitor all
aspects of the performance of the project and who shall be given
full access to the project, to all internal correspondence and
documentation with respect thereto, and to all communication with
the clients, including attendance at meetings, and whose
reasonable directives concerning all aspects of the performance
of the Gordonsville Project will be followed by Buyer.
(iii) Buyer will make the work papers and back-up
materials used in preparing the Project Accounting and the
Gordonsville Project Accounting, and the applicable books and
records of the Buyer, available to Sellers and its accountants
and other representatives at reasonable times and upon
reasonable notice at any time during (A) the preparation of
the Project Accounting and the Gordonsville Project
Accounting, (B) the review by Sellers of the Aggregate Job
Margin, the liquidated damages, the Gordonsville Job Loss, the
Project Accounting and the Gordonsville Project Accounting,
and (C) the resolution by the Parties of any objections
thereto. Furthermore, Buyer will make available to the CPA
all books, records, and financial staff of the Buyer, together
with anything else that the CPA may reasonably request in
connection with performing the duties placed upon the CPA by
virtue of this Section 8(d). Buyer and Sellers will cooperate
with the CPA in all reasonable ways so as to enable the CPA to
perform hereunder in as expeditious a manner as is feasible.
(iv) The fees and expenses of the CPA attributable
to any determination by the CPA shall be borne by the Party whose
position was not selected by the CPA.
(e) Diamo Project. Subject to this Section, Buyer will
assume all risk concerning the Diamo Project.
(i) Prior to Closing, Buyer will undertake a
complete review of the content of Sellers' proposal for the Diamo
Project.
(ii) In the event that at any time before Closing
Buyer has reasonable grounds to believe that the Diamo Project
will result in a loss, Buyer shall have the right to terminate
this Agreement by so notifying Sellers.
(iii) HNUS and Sellers agree that Sellers shall not
accept an award of the Diamo Project (on terms which are
different from those contained in the Company's submitted
written proposal) without the prior written consent of the
Buyer.
(iv) Provided that the Diamo Project is awarded to
Sellers and assigned to Buyer hereunder or is awarded to
Buyer, HNUS shall cause (and prior to the Closing shall obtain
the undertaking of Brown & Root to cause) its Affiliate, Brown
& Root Skoda, to be responsible for the civil
works/installation subcontract for the Diamo Project on terms
which are consistent with the bid material and other
information previously prepared and supplied by Brown & Root
Skoda to Sellers and which Sellers utilized in their proposal,
including risks of cost overruns, foreign exchange
fluctuations, and risks of performance within scope. Buyer
shall award a subcontract on the foregoing terms to Brown &
Root Skoda if the Diamo Project is awarded to Sellers and
assigned to Buyer hereunder or is awarded to Buyer.
Alternatively, if required to obtain the Diamo Project, HNUS
agrees to cause Brown & Root or one of its Affiliates to (A)
issue a guarantee of the Buyer's (or its Affiliate's)
performance of the Diamo Project, provided, however, that
Buyer shall have first guaranteed performance of the Diamo
Project to Brown & Root on the same terms as the Brown & Root
guarantee or (B) enter into a contract as prime contractor on
said Project on terms consistent with those which Sellers
utilized in their proposal, provided, however, that Buyer
shall have first entered into a back-to-back subcontract with
Brown & Root by which Buyer shall be obligated to perform all
of the obligations of the prime contractor for the Project on
the same terms and for the same consideration received by
Brown & Root (and, in such event, Brown & Root Skoda will be
a subcontractor to Buyer). (v) Notwithstanding any other
provision, if prior to Closing it is determined that the Diamo
Project will not be awarded to Sellers, such project shall not be
part of the Assets, but there shall be no other effect under this
Agreement.
(f) Noncompetition.
(i) Neither Sellers, HNUS nor any of their
Affiliates will directly or indirectly employ, engage or seek to
employ or engage at any time before the fourth anniversary of the
Closing Date, any Employee, unless the employment of such
Employee is terminated by Buyer after the Closing Date.
(ii) For a period of four years following the
Closing, neither the Sellers, HNUS, nor any of their Affiliates
shall engage in the business currently engaged in by the Sellers
(the "Treatment Business"), provided, however, that HNUS and its
Affiliates may continue to engage in the business any of them
currently engage in, and further provided that nothing contained
in this Agreement shall preclude the Sellers, HNUS or their
Affiliates from:
(A) owning less than 5% of the equity
securities or interest of any Person engaged in the Treatment
Business;
(B) agreeing (by merger, consolidation or
acquisition of stock or assets) or thereafter owning any Person
which, as an immaterial part of such Person's businesses (10% or
less of such
Person's revenues in the immediately preceding
fiscal year), engages in the Treatment Business;
(C) engineering, designing, constructing,
managing, or maintaining any project or facility that includes a
water treatment system as part of a larger project or facility;
or
(D) performing studies (including, without
limitation water treatment studies), remedial investigations,
feasibility studies, laboratory tests, regulatory filings,
monitoring services and remediation and other environmental
cleanup projects, except that such services shall not be
offered in conjunction with the design and provision of the
systems and technologies currently offered by the Sellers.
(g) Confidentiality. Any non-public information that is
part of the Assets, including but not limited to information
concerning trade secrets, licenses, research projects, costs,
profits, markets, sales, customer lists, strategies, plans for
future development and any other information of a similar nature,
shall be deemed confidential and, after Closing, Sellers and HNUS
shall not disclose any such information to any third party or use
such information to the detriment of Buyer; provided that (i)
Sellers and HNUS may use and disclose any such information once
it has been publicly disclosed (other than in breach of their
obligations under this Section) and (ii) to the extent that
Sellers or HNUS may become compelled by Law to disclose any of
such information, Sellers or HNUS may disclose such information
if they shall have used all reasonable efforts, and shall have
afforded the Buyer the opportunity at Buyer's expense, to obtain
an appropriate protective order, or other satisfactory assurance
of confidential treatment, for the information compelled to be
disclosed.
(h) Employees; Employee Benefits. Buyer agrees that it
will offer employment to all of the employees employed by or
assigned to Sellers on the Closing Date, effective on such date.
All such persons who accept such employment are referred to
herein as "Employees." Except as hereinafter provided, each such
person offered employment on the Closing Date shall be offered
such employment at his or her rate of monthly or hourly
compensation in effect on the Closing Date together with employee
benefits generally available to Buyer's employees with comparable
years of service and rate of pay. Nothing herein shall be deemed
to require Buyer to continue any particular person's employment
for a definite period. Buyer shall give each Employee full
credit for periods during which Employees were employed by or
assigned to Sellers for purposes of eligibility to participate
in, and the running of any
vesting periods under (but not for the
purpose of accruing benefits), all employee benefit plans and
arrangements maintained by Buyer.
(i) Warranty Work. At Sellers' request, Buyer shall
perform all service, repair, replacement and similar work
required to fulfill warranty obligations of Sellers under
contracts entered into prior to Closing which are not Assigned
Contracts, and Sellers shall compensate Buyer for such work at
agreed rates.
(j) Maintain Records. Buyer shall maintain for a period
of 5 years after Closing (or such longer period as may be
required by Law) all original records, working papers and other
supporting financial records and documents relating to the Assets
(and any other information that may be relevant in connection
with or to the preparation of any return, audit, examination,
proceeding or determination by any taxing authority or judicial
or administrative proceedings relating to liability for taxes)
which Buyer receives hereunder. Buyer will make all such
original documents available to Sellers, HNUS or their agents at
reasonable times for inspection and copying or, to the extent
reasonably required, borrowing such originals. If Buyer
determines to dispose of any such original documents, it shall
notify Sellers of such intention. Sellers shall have 90 days
from receipt of such notice either (i) to notify Buyer that they
do not desire to have such original documents, or (ii) to collect
such original documents from their location at Sellers' sole cost
and expense. Buyer may destroy the original documents which are
subject of such notice at the earlier of Buyer's receipt of
notice in accordance with (i) above or the expiration of the 90-
day period.
(k) Performance and Payment Bonds. Sellers and HNUS shall
cause the payment and performance bonds issued on any of Sellers'
projects as of the Closing to remain in place until completion of
the projects (as scoped as of Closing). Buyer shall hold
harmless and indemnify Sellers, HNUS or any of their Affiliates
from all Adverse Consequences relating to or arising out of the
bonds (other than for payment of premiums as scoped as of
Closing) in the event the bonding company is required to make
payment(s) under any bond by reason of any alleged default by
Buyer after the Closing.
(l) Halliburton Marks. In the event that any of the Assets
conveyed to Buyer (including without limitation, the items
described in Section 2(a)(vi)) contain any Halliburton Marks,
Buyer shall use all reasonable efforts to remove or cover such
Halliburton Marks as soon as practicable after Closing. In the
case of printed materials bearing any Halliburton Marks,
Buyer shall use all reasonable efforts to remove or cover the
Halliburton Marks before making any distribution of such
materials and shall use such materials only until the supply as
of Closing is exhausted.
9. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in
Section 5 shall be true and correct in all material respects
at and as of the Closing Date;
(ii) Sellers and HNUS shall have performed and
complied with all of their covenants hereunder in all material
respects through the Closing;
(iii) there shall not be any injunction, judgment,
order, decree, ruling or charge preventing consummation of any
of the Transactions;
(iv) Sellers and Buyer shall have obtained all of
the consents referred to in Section 7(b) including, without
limitation, the consent of Reading & Bates to the assignment
of the B.E.S.T. license agreement to Buyer;
(v) Sellers and HNUS shall have delivered to Buyer
a certificate to the effect that each of the conditions
specified above in Sections 9(a)(i)-(iv) are satisfied in all
respects;
(vi) all actions to be taken by Sellers and HNUS in
connection with consummation of the transactions contemplated
hereby and all certificates, instruments, and other documents
required to effect the Transactions will be reasonably
satisfactory in form and substance to Buyer;
(vii) Sellers and HNUS shall have delivered to Buyer
an opinion of Sellers' and HNUS' in-house counsel in a form
reasonably acceptable to Buyer;
(viii) Buyer shall not have received any notice or
information to the effect that less than substantially all of
the employees assigned to Sellers will accept employment with
Buyer; and
(ix) Sellers and HNUS shall have delivered to Buyer
the undertaking of Brown & Root called for in Section 8(e).
Buyer may waive any condition specified in this Section 9(a)
if it executes a writing so stating at or prior to the
Closing.
(b) Conditions to Obligation of Sellers. The obligation of
Sellers and HNUS to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction
of the following conditions:
(i) the representations and warranties set forth in
Section 6 shall be true and correct in all material respects
at and as of the Closing Date;
(ii) Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through
the Closing;
(iii) there shall not be any injunction, judgment,
order, decree, ruling or charge preventing consummation of any
of the Transactions;
(iv) Sellers and Buyer shall have obtained all of
the consents referred to in Section 7(b) including, without
limitation, the consent of Reading & Bates to the Assignment
of the B.E.S.T. Technology license agreement to Buyer;
(v) Buyer shall have delivered to Sellers a
certificate to the effect that each of the conditions
specified above in Sections 9(b)(i)-(iv) is satisfied in all
respects;
(vi) all actions to be taken by Buyer in connection
with consummation of the transactions contemplated hereby and
all certificates, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Sellers and HNUS; and
(vii) Buyer shall have delivered to Sellers and HNUS
an opinion of Buyer's in-house counsel in a form reasonably
acceptable to Sellers and HNUS.
Sellers and HNUS may waive any condition specified in this
Section 9(b) if they execute a writing so stating at or prior to
the Closing.
10. Indemnification
(a) Survival of Representations and Warranties. All of
the representations and warranties of the Parties contained in
Sections 5 and 6 shall survive the Closing hereunder (unless the
damaged
Party had Knowledge of any misrepresentation or breach of
warranty at the time of Closing).
(b) Indemnification Provisions for Benefit of Buyer.
Provided that the Closing occurs and that Buyer makes a written
claim for indemnification against Sellers pursuant to Section
13(f) within the Survival Period, Sellers and HNUS shall
indemnify Buyer from and against (i) any Adverse Consequences
caused by any breach by Sellers or HNUS of their representations
and warranties in Section 5 that survived the Closing (other than
those provided in Section 5 (q), the sole remedy for breach of
which shall be provided for at Section 8(d)(i)(G)) or caused by
any breach by Sellers or HNUS of their covenants and agreements
in this Agreement (other than Section 8(d)); (ii) the amount of
liquidated damages resolved pursuant to Section 8(d)(i)(E) and
Section 8(d)(ii)(B); and (iii) any Adverse Consequences on
account of any Excluded Liabilities; provided, however, that
Sellers and HNUS shall not have any obligation to indemnify
Buyer from and against any such Adverse Consequences or
liquidated damages (A) until Buyer has suffered such Adverse
Consequences and liquidated damages in excess of a $100,000
aggregate deductible (after which point Sellers and HNUS will be
obligated to indemnify Buyer from and against further such
Adverse Consequences and liquidated damages), or (B) thereafter
to the extent that such Adverse Consequences and liquidated
damages Buyer has suffered exceed a $10,000,000 aggregate ceiling
(after which point Sellers and HNUS will have no obligation to
indemnify Buyer from and against further such Adverse
Consequences and liquidated damages). The Parties agree that any
Adverse Consequences caused by any breach by any of Sellers or
HNUS of its representations or warranties in Section 5 which are
properly includable as a job cost of one or more of the Projects
or the Gordonsville Project, shall be treated as a job cost of
such project and shall not give rise to a claim for
indemnification under this Section 10.
(c) Indemnification Provisions for Benefit of Sellers.
Provided that the Closing occurs and that Sellers or HNUS makes a
written claim for indemnification pursuant to Section 13(f)
within the Survival Period, Buyers shall indemnify Sellers and
HNUS from and against any Adverse Consequences caused by any
breach by Buyer of its representations and warranties contained
in Section 6 that survived the Closing or caused by any breach by
Buyer of its covenants and agreements in this Agreement (other
than Section 8(d)); provided, however, that Buyer shall not have
any obligation to indemnify Sellers and HNUS from and against
any such Adverse Consequences (A) until Sellers and HNUS have
suffered such Adverse Consequences in excess of a $100,000
aggregate deductible (after which point Buyer will be obligated
to indemnify Sellers and HNUS from and against further such
Adverse Consequences), or (B) thereafter to the extent that such
Adverse Consequences Seller and
HNUS have suffered exceed a
$10,000,000 aggregate ceiling (after which point Buyer will have
no obligation to indemnify Seller and HNUS from and against
further such Adverse Consequences.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") that may give rise to a claim for indemnifica-
tion against any other Party (the "Indemnifying Party") under
this Section 10, then the Indemnified Party shall promptly
(and in any event within five Business Days after receiving
notice of the Third Party Claim) notify the Indemnifying Party
thereof in writing.
(ii) The Indemnifying Party will have the right to
assume and thereafter conduct the defense of the Third Party
Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party; provided, however, that the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of
money damages and does not impose an injunction or other
equitable relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes
the defense of the Third Party Claim as provided in Section
10(d)(ii), however, the Indemnified Party may defend against the
Third Party Claim in any manner it may reasonably deem
appropriate.
(iv) In no event will the Indemnified Party consent
to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld
unreasonably).
(e) Determination of Adverse Consequences. The Parties
shall make appropriate adjustments for Tax benefits and insurance
coverage and take into account the time cost of money (using the
Applicable Rate as the discount rate) in determining Adverse
Conse- quences for purposes of this Section 10.
(f) Exclusive Remedy.
Provided that the Closing occurs, the indemnification
provisions in this Section 10 are the exclusive remedy of the
Parties for any breach of the representations and warranties in
Sections 5 and 6 or of the covenants and agreements in this
Agreement; provided, however that other specific remedies
provided for in any other Section of this Agreement shall be
available to the Parties, and provided further that equitable
relief, including specific performance, shall be available to
Buyer in the event of a breach by HNUS or Sellers of Sections
2(c), 8(e)(iv), 8(f), 8(g), and 8(k).
11. Sales Tax.
Buyer and Sellers agree that any sales or other similar
transaction tax incurred on account of this Agreement or the
Transactions shall be borne equally by them.
12. Termination.
(a) Termination of Agreement.
The Parties may terminate this Agreement as provided
below:
(i) Buyer and Sellers may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving
written notice to Sellers at any time prior to the Closing in
the event (A) Sellers have within the then previous ten days
given Buyer any notice pursuant to Section 7(e) and (B) the
development that is the subject of the notice has had a
material adverse effect upon the Assets or Buyer's ability to
conduct the business represented by the Assets as presently
conducted by Sellers;
(iii) Buyer may terminate this Agreement by giving
written notice to Sellers at any time prior to the Closing in
the event Sellers have breached any material representation,
warranty, or covenant contained in this Agreement in any
material respect, Buyer has notified Sellers of the breach,
and the breach has continued without cure for a period of 15
days after the notice of breach or (B) if the Closing shall
not have occurred on or before January 31, 1994, by reason of
the failure of any condition precedent under Section 9(a)
(unless the failure results primarily from Buyer itself
breaching any representation, warranty, or covenant contained
in this Agreement);
(iv) Sellers and HNUS may terminate this Agreement
by giving written notice to Buyer at any time prior to the
Closing in the event Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, Sellers and HNUS have
notified Buyer of the breach, and the breach has continued
without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or
before January 31, 1994, by reason of the failure of any
condition precedent under Section 9(b) (unless the failure
results primarily from Sellers themselves breaching any
representation, warranty, or covenant contained in this
Agreement); and
(v) Buyer may terminate this Agreement as provided
in Section 8(e).
(b) Effect of Termination.
If either Party terminates this Agreement pursuant to
Section 12(a), all rights and obligations of the Parties
hereunder shall terminate without any liability of either Party
to the other Party (except for any liability of the Party then in
breach); provided, however, that the confidentiality provisions
contained in Section 7(d) shall survive termination.
13. Miscellaneous.
(a) Bulk Sales Law. Buyer hereby waives compliance by
Sellers with the requirements of any applicable laws relating to
bulk sales and transfers, and the Sellers and HNUS agree to
indemnify and hold Buyer harmless from and against any and all
liabilities not otherwise assumed by the Buyer in this Agreement
arising from claims of creditors of Sellers by reason of failure
to comply with such bulk sales laws. Such agreement of Sellers
to indemnify and hold Buyer harmless shall remain in effect for
the one-year period commencing on the Closing Date.
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement
among the Parties and supersedes any prior understandings,
agreements, or representations between the Parties, written or
oral, to the extent they related in any way to the subject matter
hereof.
(d) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of
other Party.
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
(f) Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
sent by (i) personal delivery (including courier service), (ii)
telecopier during normal business hours to the number indicated,
or (iii) registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set
forth below (and any communication shall be deemed given upon
receipt):
If to Sellers and HNUS:
Halliburton NUS Corporation
Resources Conservation Company
c/o Brown & Root, Inc.
4100 Clinton Drive
Houston, TX 77020
Attention: General Counsel
Telecopier No.: 713-676-4514
If to Buyer:
Ionics, Incorporated
65 Grove Street
Watertown, Massachusetts 02172
Attention: Vice President and General Counsel
Telecopier No.: 617-926-3760
Any Party may change its telecopier number or its address to
which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic Laws of the State of
Delaware without giving effect to any choice or conflict of Law
provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of Delaware.
(h) Amendments and Waivers. No amendments of any provision
of this Agreement shall be valid unless the same shall be in
writing and signed by Buyer and Sellers. No waiver by either
Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way
any rights arising by virtue of any prior or subsequent such
occurrence.
(i) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Expenses. Each of the Parties will bear its own costs
and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby.
(k) Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
Parties, and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship
of any of the provisions of this Agreement. The word "including"
shall mean including without limitation.
(l) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
IONICS, INCORPORATED
By:/s/Artur L. Goldstein
Arthur L. Goldstein, President
HALLIBURTON NUS CORPORATION
By:/s/Peter Arrowsmith
Peter Arrowsmith, President
RESOURCES CONSERVATION COMPANY
By:/s/Russell C. Vandenberg
Russell C. Vandenberg, President
RESOURCES CONSERVATION CO.
INTERNATIONAL
By:/s/Russell C. Vandenberg
Russell C. Vandenberg