EXHIBIT 2(a)
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THIS PLAN AND AGREEMENT OF MERGER IS NOT A PROSPECTUS AND ANY OFFERING OF THE
SHARES OF COMMON STOCK OF THE SHAW GROUP INC., COVERED BY THIS AGREEMENT IS NOT
A PUBLIC OFFERING. RECIPIENTS OF SUCH SHARES WILL NOT BE ENTITLED TO BRING A
CAUSE OF ACTION FOR RESCISSION UNDER SECTION 12(2) OF THE SECURITIES ACT OF 1933
FOR AN UNTRUE STATEMENT OF A MATERIAL FACT OR FOR THE FAILURE TO STATE A
MATERIAL FACT.
PLAN AND AGREEMENT OF MERGER
AMONG
THE SHAREHOLDERS OF NAPTech, INC., NAPTech, INC.,
SAON, INC. AND THE SHAW GROUP INC.
Dated as of August 5, 1996
TABLE OF CONTENTS
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(Not a Part of the Agreement)
Page
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ARTICLE I DEFINITIONS ................................................. 1
SECTION 1.01. Certain Defined Terms.................. 1
ARTICLE II THE MERGER, ETC. ........................................... 10
SECTION 2.01. The Merger............................. 10
SECTION 2.02. Effective Time......................... 10
SECTION 2.03. Closing................................ 10
SECTION 2.04. Terms of Merger........................ 10
SECTION 2.05. Merger Consideration; Cancellation of
the Shares in the Merger, Etc.......... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND THE COMPANY.......................... 12
SECTION 3.01. Capacity of the Shareholders ................ 12
SECTION 3.02. Organization, Authority and Qualification of
the Company.................................. 12
SECTION 3.03. Capital Stock of the Company; Ownership of
the Shares................................... 13
SECTION 3.04. Subsidiaries ................................ 13
SECTION 3.05. Corporate Books and Records.................. 15
SECTION 3.06. No Conflict.................................. 15
SECTION 3.07. Governmental Consents and Approvals.......... 16
SECTION 3.08. Financial Information and Books and Records.. 16
SECTION 3.09. Certain Additional Representations........... 17
SECTION 3.10. No Undisclosed Liabilities or Capital
Commitments ................................. 17
SECTION 3.11. Acquired Assets ............................. 18
SECTION 3.12. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions....... 18
SECTION 3.13. Litigation................................... 20
SECTION 3.14. Certain Interests............................ 21
SECTION 3.15. Compliance with Laws......................... 21
SECTION 3.16. Environmental and Other Permits and Licenses;
Related Matters.............................. 21
SECTION 3.17. Material Contracts........................... 23
SECTION 3.18. Intellectual Property........................ 25
SECTION 3.19. Real Property................................ 26
SECTION 3.20. Tangible Personal Property................... 26
SECTION 3.21. Assets....................................... 27
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SECTION 3.22. Accounts Receivable and Inventory............ 28
SECTION 3.23. Customers ................................... 28
SECTION 3.24. Employee Benefit Matters .................... 28
SECTION 3.25. Labor Matters................................ 32
SECTION 3.26. Key Employees................................ 33
SECTION 3.27. Risk Management.............................. 33
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes;
Powers of Attorney........................... 34
SECTION 3.29. Full Disclosure.............................. 35
SECTION 3.30. Investment Purpose, Etc...................... 35
SECTION 3.31. Brokers...................................... 36
SECTION 3.32. Freeport Property............................ 36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE PARENT SUB............................. 36
SECTION 4.01. Organization and Authority of the Parent and
the Parent Sub .............................. 37
SECTION 4.02. No Conflict.................................. 37
SECTION 4.03. Governmental Consents and Approvals.......... 37
SECTION 4.04. Litigation................................... 37
SECTION 4.05. Brokers...................................... 38
SECTION 4.06. Reports; Financial Statements ............... 38
ARTICLE V ADDITIONAL AGREEMENTS ....................................... 39
SECTION 5.01. Conduct of Business Prior to the Effective
Time......................................... 39
SECTION 5.02. Access to Information........................ 40
SECTION 5.03. Confidentiality ............................. 41
SECTION 5.04. Regulatory and Other Authorizations; Notices
and Consents................................. 43
SECTION 5.05. Notice of Developments....................... 44
SECTION 5.06. Acquisition Proposals........................ 44
SECTION 5.07. Use of Names and Intellectual Property....... 45
SECTION 5.08. Non-Competition.............................. 45
SECTION 5.09. Release of Indemnity and Other Obligations... 46
SECTION 5.10. Further Action............................... 46
SECTION 5.11. Removal of Encumbrances on Assets............ 46
SECTION 5.12. Certain Additional Covenants................. 47
SECTION 5.13. Termination of Inter-Company Arrangements,
etc.......................................... 48
ARTICLE VI MINORITY SHAREHOLDERS....................................... 48
SECTION 6.01. Certain Limitations on Representations
and Warranties of the Minority Shareholders.. 48
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ARTICLE VII TAX MATTERS................................................ 49
SECTION 7.01. Representations, Warranties and Covenants ... 49
SECTION 7.02. Access to Information........................ 54
SECTION 7.03. Returns and Payments......................... 55
SECTION 7.04. Refunds ..................................... 56
SECTION 7.05. Indemnity ................................... 56
SECTION 7.06. Contests .................................... 58
SECTION 7.07. Time of Payment.............................. 59
SECTION 7.08. Cooperation and Exchange of Information...... 60
SECTION 7.09. Retention of Tax Returns and Records......... 60
SECTION 7.10. Conveyance Taxes............................. 61
SECTION 7.11. Miscellaneous................................ 61
ARTICLE VIII CONDITIONS TO CLOSING..................................... 62
SECTION 8.01. Conditions to Obligations of the Shareholders
and the Company.............................. 62
SECTION 8.02. Conditions to Obligations of the Parent and
the Parent Sub............................... 64
ARTICLE IX SURVIVAL AND INDEMNIFICATION................................ 68
SECTION 9.01. Survival of Representations, Warranties and
Covenants.................................... 68
SECTION 9.02. Indemnification.............................. 69
SECTION 9.03. Limits on Indemnification.................... 73
SECTION 9.04 Security for Shareholders' Agreement to
Indemnify.................................... 74
ARTICLE X TERMINATION AND WAIVER........................................ 74
SECTION 10.01. Termination by the Shareholders or Parent..... 74
SECTION 10.02. Effect of Termination......................... 75
SECTION 10.03. Waiver........................................ 76
ARTICLE XI GENERAL PROVISIONS........................................... 76
SECTION 11.01. Solidary Obligation of Shareholders
Other than Minority Shareholders.............. 76
SECTION 11.02. Expenses...................................... 76
SECTION 11.03. Notices....................................... 76
SECTION 11.04. Public Announcements.......................... 78
SECTION 11.05. Headings; Construction........................ 78
SECTION 11.06. Severability.................................. 78
SECTION 11.07. Entire Agreement.............................. 78
SECTION 11.08. Assignment.................................... 78
SECTION 11.09. No Third Party Beneficiaries.................. 78
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SECTION 11.10. Amendment...................................... 79
SECTION 11.11. Governing Law.................................. 79
SECTION 11.12. Counterparts................................... 79
SECTION 11.13. Specific Performance........................... 79
SECTION 11.14. Legal Advice .................................. 79
SECTION 11.15 Remedies Not Exclusive ........................ 79
ARTICLE XII SHAREHOLDER REPRESENTATIVE; POWER
OF ATTORNEY ......................................... 79
SECTION 12.01. Shareholder Representative; Etc. ........ 79
Exhibits
Exhibit 1.01(i) List of Minority Shareholders
Exhibit 1.01(ii) Permitted Encumbrances
Exhibit 1.01(iii) List of Shareholders Represented by Company's
Counsel
Exhibit 2.05(a)(ii) Allocation of Merger Consideration Among
Shareholders
Exhibit 3.03 List of Shares Owned by Each of the Shareholders
Exhibit 3.32 Members and Percentage Ownership of Freeport
Properties, L.L.C.
Exhibit 5.04 Third Party Consents and Estoppel Certificates
Exhibit 5.08(a) Locations for Non-Competition
Exhibit 8.01(f) Legal Opinion of Parent's Counsel
Exhibit 8.01(s)(1) Registration Rights Agreement
Exhibit 8.02(f) Legal Opinion of Company's Counsel
Exhibit 8.02(h)(1) Directors and Officers of the Subsidiary who are
not resigning or to be removed
Exhibit 8.02(s)(2) Representation Letter by the Shareholders
Exhibit 8.02(l) Escrow Agreement
Disclosure Schedule
3.02 Organization, Authority and Qualification of
the Company
3.03 Outstanding Options of the Company
3.04 Subsidiaries
3.07 Governmental Consents and Approvals
3.10 No Undisclosed Liabilities or Capital Commitments
3.13 Litigation
3.14 Certain Interests
3.15 Compliance with Laws
3.16 Environmental and Other Permits and Licenses;
Related Matters
3.17 Material Contracts
3.18 Intellectual Property
3.19 Real Property
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3.20 Tangible Personal Property
3.21 Assets Needing Repairs
3.22 Accounts Receivable and Inventory
3.23 Customers
3.24 Employee Benefit Matters
3.25 Labor Matters
3.26 Key Employees
3.27 Risk Management
3.28 Accounts; Lockboxes; Safe Deposit Boxes;
Powers of Attorney
5.09 Certain Agreements Not Released
5.13 Inter-Company Agreements Not Terminated
7.01 Representations and Warranties
8.01(l) Certain Obligations to be Paid by the Company
Pre-Closing
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THIS PLAN AND AGREEMENT OF MERGER, dated as of August 5, 1996, among
the undersigned shareholders of NAPTech, INC. (collectively, the
"Shareholders"), NAPTech, INC., a Delaware corporation (the "Company"), THE SHAW
GROUP INC., a Louisiana corporation (the "Parent"), and SAON, INC., a Louisiana
corporation (the "Parent Sub").
RECITALS
WHEREAS, the Shareholders own all the issued and outstanding shares
(the "Shares") of common stock, $0.01 par value per share (the "Common Stock"),
of the Company; and
WHEREAS, the Parent owns all of the issued and outstanding shares of
common stock, $0.01 par value, of the Parent Sub; and
WHEREAS, the Parent, the Parent Sub, the Shareholders and the Company
each have determined that it is in their best interests for the Parent Sub to
merge with and into the Company, upon the terms and subject to the conditions of
this Agreement with the Company to be the Surviving Corporation; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Sections
368(a)(1)(A) and (a)(2)(E) or Section 368(a)(1)(B) of the Code;
WHEREAS, the Boards of Directors of the Company and the Parent Sub have
duly approved this Agreement and have authorized the execution hereof by the
respective undersigned officers of the Company and the Parent Sub, and have
directed that this Agreement be submitted to the votes of their respective
shareholders, the Shareholders and the Parent, in accordance with Sections
251-262 of the General Corporation Law of the State of Delaware and Part XI of
the Business Corporation Law (La.R.S. 12:111-116) of the State of Louisiana,
respectively;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Shareholders, the Company,
the Parent Sub and the Parent hereby agree as follows:
ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Acquisition Documents" has the meaning specified in Section 9.01.
"Acquisition Proposal" has the meaning specified in Section 5.06.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
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"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Plan and Agreement of
Merger, dated as of the date set forth in the preamble to this Agreement, among
the Shareholders, the Company, the Parent Sub and the Parent (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 11.10.
"APB 16" has the meaning specified in Section 3.09.
"Asset" or "Assets" has the meaning specified in Section 3.21.
"Balance Sheet Date" means March 29, 1996.
"Best" means A.M. Best Company, Inc.
"Business" means the forming, bending, coating, welding, sale,
engineering, fabrication and manufacture of piping, pipeline systems, piping
sub-assemblies, skids, and modules, and seamless steel pressure vessels, and all
other businesses which are on the date hereof being conducted by the Company,
the Subsidiary and the LLC Subsidiary.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the State
of Louisiana or in the State of Utah.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. ss.ss. 9601 et seq.
"Certificate of Merger" shall mean the certificate of merger with
respect to the merger of the Parent Sub with and into the Company, containing
the provisions required by, and executed in accordance with, Section 112 of the
LBCL and Sections 103 and 251 of the DGCL.
"Claim Notice" has the meaning specified in Section 9.02.
"Closing" has the meaning specified in Section 2.03 .
"Closing Date" has the meaning specified in Section 2.03.
"COBRA" means continuation coverage as set forth in Sections 601 and
602 of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Company" has the meaning specified in the preamble to this Agreement.
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"Company Certificate(s)" has the meaning specified in Section 2.05.
"Company GAAP Statements" has the meaning specified in Section 3.08.
"Company Interim GAAP Statements" has the meaning specified in
Section 3.08.
"Company's Counsel" means LeBoeuf, Lamb, Greene & MacRae L.L.P., legal
counsel to the Shareholders listed on Exhibit 1.01 (iii), the Company, the
Subsidiary and the LLC Subsidiary in connection with this Agreement and the
transactions contemplated hereby.
"Company Options" means those outstanding stock options issued by the
Company which are identified in Section 3.03(b) of the Disclosure Schedule.
"Control" (including, without limitation, the terms "controls",
"controlled by" and "under common control with"), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, or as trustee or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Convertible Note" means that certain convertible promissory note dated
July 26, 1996, made by the Company, having a principal amount outstanding as of
the date hereof of $36,000, payable to Edward Davin.
"D&P" means Duff & Phelps Credit Rating Co.
"DGCL" means the General Corporation Law of the State of Delaware.
"Disclosure Schedule" means the schedules attached hereto and delivered
to the Parent and the Parent Sub by the Shareholders and the Company together
with this Agreement.
"Effective Time" shall have the meaning specified in Section 2.02.
"Encumbrance" or "Encumbrances" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, settlements, consent orders or consent agreements
by any Person relating in any way to any Environmental Law, Environmental
Permits or Hazardous Materials, or arising from alleged injury or threat of
injury to health, safety or the environment.
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"Environmental Law" means any Law, now in effect, and any judicial or
administrative interpretation thereof, including, without limitation, any
judicial or administrative order, consent decree or judgment, relating to or
addressing the environment, health, safety or Hazardous Materials, including
without limitation any Occupational Safety and Health Law.
"Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental Law, or (b) damages
arising from, or costs incurred by, such Governmental Authority in response to a
Release of a Hazardous Material.
"Environmental Permits" means all Permits required under any applicable
Environmental
Law.
"ERISA" has the meaning specified in Section 3.24.
"Escrow Agreement" means the agreement referred to in Section 8.02.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning specified in Section 3.08.
"Freeport Property" means the land, building(s) and other improvements
located on South Freeport Industrial Parkway, Clearfield, Utah, in which the
Company conducts its primary business activities and which is owned by Freeport
Properties, L.L.C.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time.
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" or "Governmental Orders" means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Materials" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred
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purchase price of property or services, (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all obligations of such Person as lessee under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such Person under acceptance, letter of credit or
similar facilities, (g) all obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h) all
Indebtedness of others referred to in clauses (a) through (f) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including, without limitation, any agreement to pay
for property or services irrespective of whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against loss,
and (i) all Indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02.
"Indemnifying Party" has the meaning specified in Section 9.02.
"Indemnity Notice" has the meaning specified in Section 9.02.
"Intellectual Property" means (a) trademarks, service marks, trade
dress, logos, trade names and corporate names, whether or not registered, (b)
copyrights, whether or not registered, and all patents, patent applications and
inventions and discoveries, (c) registrations of and applications for
registration of any of the foregoing, (d) computer software, including, without
limitation, source code, operating systems and specifications, data, data bases,
files, documentation and other materials related thereto, data and
documentation, (e) trade secrets and confidential, technical and business
information, and (f) whether or not confidential, technology (including, without
limitation, know-how and show-how), research and development information,
drawings, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing information, business and marketing plans
and customer and supplier lists and information.
"Inter-Company Arrangements" has the meaning specified in Section 3.14.
"IRS" means the Internal Revenue Service of the United States.
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"Law" or "Laws" means any United States federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, order, Permit, other
legal requirement or rule of law.
"LBCL" means the Business Corporation Law of the State of Louisiana,
La.R.S. 12:1, et
seq.
"LLC Subsidiary" means IRM NAPTech Joint Venture, L.L.C.
"Lease" for purposes of Sections 3.17, 3.19 and 3.20 means any and all
leases, subleases, sale/leaseback agreements or similar arrangements, whether or
not capitalized.
"Leased Real Property" means the real property leased by the Company,
the Subsidiary or the LLC Subsidiary, as tenant, together with, to the extent
leased by the Company or the Subsidiary, all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or the
Subsidiary attached or appurtenant thereto, and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company, the Subsidiary or the LLC Subsidiary
from a third party.
"Losses" has the meaning specified in Section 9.02 .
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business or the Company that, individually or in the aggregate with any
other circumstances, changes in, or effects on, the Business or the Company: (a)
is or could be materially adverse to the business, operations, prospects,
results of operations or financial condition of the Company, or (b) could
materially and adversely affect the ability of the Parent or the Company to
operate or conduct the Business in the manner in which it is currently operated
or conducted by the Company, the Subsidiary and the LLC Subsidiary.
"Material Contracts" has the meaning specified in Section 3.17.
"Merger" shall mean the merger of the Parent Sub with and into the
Company as contemplated by Section 2.01.
"Merger Consideration" shall have the meaning specified in Section
2.05.
"Minority Shareholders" means the Shareholders owning 4.33% of the
Shares who are identified on Exhibit 1.01(i).
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"Multiemployer Plan" has the meaning specified in Section 3.24.
"Multiple Employer Plan" has the meaning specified in Section 3.24.
"Name" has the meaning specified in Section 5.07.
"Notice Period" has the meaning specified in Section 9.02.
"Occupational Safety and Health Law" means any law, rule or regulation
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any mandatory program designed to
provide safe and healthful working conditions.
"Owned Intellectual Property" means all Intellectual Property in and to
which the Company, the Subsidiary, or the LLC Subsidiary holds, or has a right
to hold, any right, title and interest.
"Owned Real Property" means the real property owned by the Company, the
Subsidiary or the LLC Subsidiary prior to the Closing, together with all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Company, the Subsidiary or the LLC Subsidiary attached
or appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Parent" has the meaning specified in the preamble to this Agreement.
"Parent SEC Reports" has the meaning specified in Section 4.06.
"Parent Sub" has the meaning specified in the preamble of this
Agreement.
"Parent's Common Stock" means the common stock, no par value, of the
Parent.
"Parent's Counsel" means Kantrow, Spaht, Weaver & Blitzer (A
Professional Law Corporation) and Fulbright & Jaworski L.L.P., legal counsel to
the Parent and the Parent Sub in connection with this Agreement and the
transactions contemplated hereby.
"Parent's Due Diligence Review" has the meaning specified in Section
8.02(q).
"Permits" has the meaning specified in Section 3.16.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable which are not in excess of $10,000 in the
aggregate or which are being contested in good faith and for which reserves in
accordance with GAAP have been established on the Financial Statements; (b)
Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing
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obligations that (i) are not overdue for a period of more than 30 days or (ii)
are not in excess of $5,000 in the case of a single property or $10,000 in the
aggregate at any time or which are being contested in good faith and for which
reserves in accordance with GAAP have been established on the Financial
Statements; (c) pledges or deposits to secure obligations under worker's
compensation laws or similar legislation or to secure public or statutory
obligations; (d) minor survey exceptions, reciprocal easement agreements and
other customary encumbrances on title to real property that (i) were not
incurred in connection with any Indebtedness,(ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually or in
the aggregate, materially adversely affect the value or use of such property for
its current purposes; (e) in the case of stock of a corporation, restrictions on
the payment of dividends arising under applicable corporate law or on
transferability arising under applicable securities laws; and (f) the
Encumbrances identified on Exhibit 1.01(ii).
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization, governmental authority or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Plan of Merger" shall mean this Agreement.
"Plans" has the meaning specified in Section 3.24.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Regulations" means the Treasury Regulations (including, without
limitation, Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes.
"Release" means the release or threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migrating into the indoor or outdoor environment of any Hazardous Material.
"Replacement Options" means stock options to be issued by the Parent at
the Closing pursuant to its 1993 Employee Stock Option Plan in substitution of
the Company Options held by employees of the Company which have not been
exercised prior to the Effective Time, each such Replacement Option to have the
same term, aggregate exercise price, vesting and other provisions, as the
Company Option for which it is substituted and shall be exercisable into the
number of shares of the Parent's Common Stock equal to the product of 0.0772611
times the aggregate number of shares included in the Company Option.
"Returns" has the meaning specified in Section 7.01.
"S&P" means Standard & Poor's Corporation.
"SEC" means the Securities and Exchange Commission.
"Secured Real Property" has the meaning specified in Section 3.16.
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"Securities" has the meaning specified in Section 2(11) of the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Representative" has the meaning specified in Section
12.07.
"Shareholders" has the meaning specified in the preamble to this
Agreement.
"Shareholders' Accountants" means Deloitte & Touche LLP, independent
accountants of the Company and the Subsidiary.
"Shares" has the meaning specified in the preamble to this Agreement.
"Subsidiary" means NAPTech Pressure Systems Corporation, a Utah
corporation.
"subsidiaries" means any and all other corporations, partnerships,
joint ventures, limited liability companies, associations and other entities
controlled by the Company directly or indirectly through one or more
intermediaries.
"Surviving Corporation" shall mean the surviving corporation in the
Merger.
"Tangible Personal Property" has the meaning specified in Section 3.20.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, premiums, property,
sales, use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value added, or
gains taxes; license, registration and documentation fees; and customs duties,
tariffs, and similar charges.
"Tax Returns" has the meaning specified in Section 7.01.
"Third Party Claim" has the meaning specified in Section 9.02.
ARTICLE II
THE MERGER, ETC.
SECTION 2.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Parent Sub will be merged with and into
the Company in accordance with the provisions of the LBCL and the DGCL and with
the effect provided in Section 115 of the LBCL and Section 259 of the DGCL. The
separate corporate existence of the Parent Sub shall
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thereupon cease and the Company shall be the Surviving Corporation and shall
continue to be governed by the laws of the State of Delaware.
SECTION 2.02 Effective Time. The merger shall become effective on such
date and at such time (the "Effective Time") as (a) the Plan of Merger or, in
lieu thereof, a certificate of merger as permitted by La.R.S. 12:112(F) and
Section 251(c) of the DGCL (the "Certificate of Merger"), shall have been
accepted for filing by the Secretary of State of the State of Louisiana and the
Secretary of State of the State of Delaware, or (b) such later date and time as
may be specified in the Plan of Merger or Certificate of Merger, as permitted by
the LBCL and the DGCL.
SECTION 2.03 Closing. Upon the terms and subject to the conditions of
this Agreement, the exchange of the Shares contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at the offices of Kantrow,
Spaht, Weaver & Blitzer (A Professional Law Corporation), Baton Rouge,
Louisiana, at 10:00 A.M. Baton Rouge time on a day selected by the Parent
following the satisfaction or waiver of all other conditions to the obligations
of the parties set forth in Article 8, or at such other place or at such other
time or on such other date as the Shareholders and the Parent may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date"). The Effective Time shall occur on the Closing Date.
SECTION 2.04 Terms of Merger.
(a) Articles of Incorporation. The Articles of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and of the DGCL.
(b) Bylaws. The Bylaws of the Company in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Articles of Incorporation of the
Surviving Corporation and of the DGCL.
(c) Directors and Officers. The directors and officers of the Parent
Sub at the Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation and the DGCL.
SECTION 2.05 Merger Consideration; Cancellation of the Shares in the
Merger, Etc.
(a) Consideration; Cancellation of the Shares in the Merger. At
the Effective Time, by virtue of the Merger and without any action by the
holders thereof:
(i) The Shares, constituting all of the issued and outstanding
capital stock of the Company immediately prior to the Effective Time, shall be
converted into the right to receive in exchange therefor 432,783 unregistered
shares of the Parent's Common Stock (the "Merger Consideration"), such number of
shares to be (i) appropriately adjusted for any stock dividends, stock split or
combination of the outstanding shares of the Parent's Common Stock declared
after the date hereof and prior to the Closing Date and (ii) reduced by the
aggregate number of shares
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of the Parent's Common Stock for which (A) Replacement Options shall be
exercisable after the Effective Time and (B) the Convertible Note is convertible
after the Effective Time at a conversion ratio of 0.0772611 of shares of the
Parent's Common Stock for each share of the Common Stock.
(ii) All of the Shares to be converted into the right to
receive in exchange therefor the Parent's Common Stock, pursuant to this Section
2.05, shall cease to be outstanding, shall be canceled and retired and shall
cease to exist, and the Shareholders, which are the registered holders of the
certificates representing the Shares (the "Company Certificate(s)") shall
thereafter cease to have any rights with respect to the Shares, except the right
to receive, upon the surrender of the Company Certificate(s) in accordance with
Section 2.05(b), the Merger Consideration to be allocated among the Shareholders
as set forth on Exhibit 2.05(a)(ii).
(iii) Each share of common stock par value $0.01 per share, of
the Parent Sub issued and outstanding immediately prior to the Effective Time
shall continue to be outstanding and shall be converted into a share of common
stock of the Surviving Corporation.
(b) Exchange of the Shares in the Merger. Following the Effective Time,
upon surrender of the Company Certificate(s) for cancellation to the Parent, the
Shareholders shall receive, in exchange for the Shares represented by the
Company Certificate(s), the Merger Consideration and the Company Certificate(s)
so surrendered shall forthwith be canceled. Until surrendered, the Company
Certificate(s) shall, upon and after the Effective Time, be deemed canceled and
for all purposes to evidence ownership of the number of shares of the Parent's
Common Stock into which the Shares have been converted pursuant to Section
2.05(a).
(c) No Transfer of Shares after the Day Prior to the Date of this
Agreement. The Shareholders and the Company agree that no transfers of the
Shares will be made on the stock transfer books of the Company after the close
of business on the day prior to the date of this Agreement except as
contemplated by Section 5.12(c)-(e).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND THE COMPANY
Subject to the terms and conditions of this Agreement, each of the
Shareholders and the Company hereby represents and warrants to the Parent and
the Parent Sub as of the date hereof, except as may otherwise be set forth on
the Disclosure Schedule, as set forth in Sections 3.01 through 3.31, as follows:
SECTION 3.01. Capacity of the Shareholders. The Shareholders are either
(i) individuals with full legal capacity to enter into this Agreement, to carry
out Shareholders' obligations hereunder and to consummate the transactions
contemplated hereby, or (ii) corporations, partnerships or limited liabilities
companies duly organized, validly existing and in good standing under the laws
of their respective state(s) of formation with all necessary power and authority
to enter into this Agreement and to carry out their obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Shareholders, the performance by the Shareholders of their
obligations hereunder and the consummation by the Shareholders of the
transactions contemplated hereby have been duly authorized by all requisite
action by the Shareholders signatories hereto. This Agreement has been duly
executed and delivered by the Shareholders, and this Agreement constitutes a
legal, valid and binding obligation of the Shareholders enforceable against the
Shareholders in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting rights of creditors generally or by general principles of
equity.
SECTION 3.02. Organization, Authority and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to conduct the Business. The Company has all necessary power
and authority to enter into this Agreement, and upon shareholder approval as
required by the DGCL, to carry out the Company's obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company, and this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting rights of creditors generally or by general principles of
equity. The Company is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary
(other than those jurisdictions where the failure to be so licensed or qualified
are not reasonably likely to have a Material Adverse Effect) and all such
jurisdictions are set forth on Schedule 3.02 of the Disclosure Schedule. All of
the foregoing registrations, licenses, and qualifications are in full force and
effect and the Company has not received any notice of any event, inquiry,
investigation or proceeding that could result in the suspension, revocation or
limitation of any such registration, license, or qualification and to the best
knowledge of the Shareholders and the Company, there is no sustainable basis for
any such suspension, revocation or limitation. All corporate actions taken by
the Company have been
- 12 -
duly authorized or ratified, and the Company has not taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of its Articles of Incorporation or By-laws. True and
correct copies of the articles of incorporation and by-laws of the Company, each
as in effect on the date hereof, have been delivered by the Shareholders to the
Parent.
SECTION 3.03. Capital Stock of the Company; Ownership of the Shares.
(a) The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock. As of the date hereof, 5,124,058 shares of Common Stock are issued
and outstanding, all of which are validly issued, fully paid and nonassessable.
None of the issued and outstanding shares of Common Stock was issued in
violation of any preemptive rights.
(b) Except as set forth in Section 3.03 of the Disclosure Schedule,
there are no options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating to the capital
stock of the Company or obligating the Shareholders or the Company to issue or
sell any shares of capital stock of, or any securities or obligations
convertible into or exchangeable for shares of capital stock of the Company, or
any other interest in, the Company; and, except as permitted by Section 5.12(c)
and (d), no options, warrants, convertible securities or other such rights,
agreements, assignments or commitments shall be outstanding as of the Closing
Date.
(c) The Shares constitute all the issued and outstanding capital stock
of the Company. The Shares are owned of record and beneficially solely by
Shareholders and are registered in the names of Shareholders free and clear of
all Encumbrances other than those set forth in item (e) of Permitted
Encumbrances. Exhibit 3.03 accurately sets forth the number of the Shares owned
by each of the Shareholders.
(d) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any of the Shares.
SECTION 3.04. Subsidiaries. (a) There are no subsidiaries other than
the Subsidiary and the LLC Subsidiary. Section 3.04 of the Disclosure Schedule
sets forth, with respect to the Subsidiary and the LLC Subsidiary, the
jurisdiction and date of its incorporation or formation, its authorized capital
stock or membership interests, the number and type of its issued and outstanding
shares of capital stock or membership interests and the current ownership of
such shares or membership interests.
(b) The Company is not a partner or member of (nor is any part of the
Business conducted through) any partnership or limited liability company other
than the LLC Subsidiary. The Company is not a participant in any other joint
venture or similar arrangement.
(c) (i) The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah and has all
necessary power and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to conduct its business. The Subsidiary
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business
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makes such licensing or qualification necessary (other than those jurisdictions
where the failure to be so qualified or licensed is not reasonably likely to
have a Material Adverse Effect) and all such jurisdictions are set forth on
Schedule 3.04(a) of the Disclosure Schedule. All of the foregoing registrations,
licenses, and qualifications are in full force and effect and the Subsidiary has
not received any notice of any event, inquiry, investigation or proceeding that
could result in the suspension, revocation or limitation of any such
registration, license, qualification or membership, and to the best knowledge of
the Shareholders and the Company, there is no sustainable basis for any such
suspension, revocation or limitation.
(ii) The LLC Subsidiary is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Utah and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to conduct its
business. The LLC Subsidiary is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the properties owned or leased by
it or the operation of its business makes such licensing or qualification
necessary (other than those jurisdictions where the failure to be so qualified
or licensed is not reasonably likely to have a Material Adverse Effect) and all
such jurisdictions are set forth on Schedule 3.04(a) of the Disclosure Schedule.
All of the foregoing registrations, licenses, and qualifications are in full
force and effect and the LLC Subsidiary has not received any notice of any
event, inquiry, investigation or proceeding that could result in the suspension,
revocation or limitation of any such registration, license, qualification or
membership, and to the best knowledge of the Shareholders and the Company, there
is no sustainable basis for any such suspension, revocation or limitation.
Satisfactory evidence of the execution and registration of the Articles of
Organization of the LLC Subsidiary was provided to Kennecott Utah Cooper
Corporation ("Kennecott") prior to the commencement of any work being performed
by the LLC Subsidiary relating to Kennecott's purchase order no. BP009.0A-P.
(d) (i) All the outstanding shares of capital stock of the Subsidiary
are validly issued, fully paid, nonassessable, free of preemptive rights and
owned by the Company, free and clear of all Encumbrances other than those set
forth in item (e) of Permitted Encumbrances.
(ii) No less than 50% of the membership interests of the LLC
Subsidiary are owned by the Company, and all membership interests of the LLC
Subsidiary are validly issued, fully paid, nonassessable, free of preemptive
rights and, as of the Closing Date, all membership interests of the LLC
Subsidiary shall be owned by the Company and the Subsidiary, free and clear of
all Encumbrances other than those set forth in item (e) of Permitted
Encumbrances.
(e) (i) There are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Subsidiary or obligating the Shareholders, the
Company, the Subsidiary or the LLC Subsidiary to issue or sell any shares of
capital stock of, or any other interest in, the Subsidiary.
(ii) There are no options, warrants, convertible securities,
or other rights, agreements, arrangements or commitments of any character
relating to the membership interests of the LLC Subsidiary or obligating the
Shareholders, the Company, the Subsidiary or the LLC
- 14 -
Subsidiary to issue or sell any membership interests of, or any other interest
in, the LLC Subsidiary.
(f) (i) All corporate actions taken by the Subsidiary have been duly
authorized or ratified and the Subsidiary has not taken any action that in any
respect conflicts with, constitutes a default under or results in a violation of
any provision of, its articles of incorporation or by-laws. Complete and
accurate copies of the articles of incorporation and by-laws, in each case as in
effect on the date hereof, of the Subsidiary have been delivered by the
Shareholders and the Company to the Parent.
(ii) All actions taken by the LLC Subsidiary have been duly
authorized or ratified and the LLC Subsidiary has not taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of, its articles of organization or operating
agreement. Complete and accurate copies of the articles of organization and
operating agreement, in each case as in effect on the date hereof, of the LLC
Subsidiary have been delivered by the Shareholders and the Company to the
Parent.
(g) (i) The Subsidiary is not a partner or member of (nor is any part
of its business conducted through) any partnership or limited liability company
nor is the Subsidiary a participant in any joint venture or similar arrangement.
(ii) The LLC Subsidiary is not a partner or member of (nor is
any part of its business conducted through) any partnership or limited liability
company nor is the LLC Subsidiary a participant in any joint venture or similar
arrangement.
(h) (i) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other interests in the
Subsidiary.
(ii) There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any membership interest of or any other interests in the
LLC Subsidiary.
SECTION 3.05. Corporate Books and Records. The minute books of the
Company and the Subsidiary contain minutes of all meetings of the stockholders,
Boards of Directors and all committees of the Boards of Directors of the Company
and the Subsidiary. Complete and accurate copies of all such minute books of the
Company and the Subsidiary have been made available to the Parent by the
Shareholders and the Company.
SECTION 3.06. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section 3.07 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by the Shareholders and the Company do not and will not (a) violate,
conflict with or result in the breach of any provision of (i) the articles of
incorporation or by-laws (or similar organizational documents) of the Company or
the Subsidiary or (ii) the articles of organization or operating agreement of
the LLC Subsidiary, (b) conflict with or violate
- 15 -
any Law or Governmental Order applicable to the Shareholders, the Company, the
Subsidiary or any of their respective assets, properties or businesses,
including, without limitation, the Business, or (c) conflict with, result in any
breach of, constitute a default (or event which with the giving of notice or the
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Shares or on any of the assets or properties of the
Shareholders, the Company, the Subsidiary or the LLC Subsidiary pursuant to any
note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which the
Shareholders, the Company, the Subsidiary or the LLC Subsidiary is a party or by
which any of the Shares or any of such assets or properties is bound or
affected.
SECTION 3.07. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other third party, except as
set forth on Section 3.07 of the Disclosure Schedule.
(b) Neither the Shareholders nor the Company has knowledge of any facts
or circumstances pertaining to the Parent or the Parent Sub which are reasonably
likely to prevent the parties hereto from obtaining the governmental consents
and approvals contemplated by Section 3.07(a).
SECTION 3.08. Financial Information and Books and Records. (a) The
Shareholders have previously furnished the Parent complete and accurate copies
of (i) the audited consolidated GAAP balance sheet of the Company and the
Subsidiary for each of the fiscal years ended as of March 29, 1996, March 31,
1995, and April 1, 1994, and the related audited GAAP consolidated statements of
earnings, stockholder's equity and cash flows for each of such periods then
ended together with all related notes and schedules thereto, accompanied by the
reports thereon of the Company and the Shareholders' Accountants (collectively
referred to herein as the "Company GAAP Statements") and (ii) the unaudited GAAP
consolidated balance sheets of the Company and its Subsidiary as May 31, 1996,
and the related unaudited GAAP consolidated statements of earnings for two-month
period then ended (collectively referred to herein as the "Company Interim GAAP
Statements" and, together with the Company GAAP Statements, the "Financial
Statements"). The Financial Statements (i) were prepared in accordance with the
books of account and other financial records of the Company and the Subsidiary,
(ii) present fairly in all material respects the consolidated financial
condition and results of operations of the Company and the Subsidiary as of the
dates thereof or for the periods covered thereby in accordance with GAAP,
applied on a basis consistent with the past practices of the Company, and (iii)
include all adjustments that are necessary for a fair presentation of the
consolidated financial condition and the results of the operations of the
Company and the Subsidiary as of the dates thereof or for the periods covered
thereby in accordance with GAAP (subject, in the case of the Company Interim
GAAP Statements, to normal year-end audit adjustments).
(b) The books of account and other financial records of the
Company and the Subsidiary: (i) reflect all items of income and expense and all
assets and liabilities required to be
- 16 -
reflected therein in accordance with GAAP, (ii) are in all material respects
complete and correct, and (iii) have been maintained in accordance with good
business and accounting practices.
(c) The LLC Subsidiary has no liabilities except as disclosed in
Section 3.08(c) of the Disclosure Schedule. All receipts and disbursements of
the LCC Subsidiary are reflected in its bank account or will be reflected in the
Company's June and July, 1996 inter-company account.
SECTION 3.09. Certain Additional Representations.
(a) The Shareholders and the Company hereby acknowledge that the Parent
would not have entered into this Agreement unless it were able to account for
the transactions contemplated by this Agreement by the pooling of interest
method within the meaning of Accounting Principles Board Opinion No. 16 ("APB
16"). Accordingly, with respect to the transactions contemplated by this
Agreement, the Shareholders and the Company hereby represent, warrant and
covenant that the Company has as of the date hereof, and will have as of the
Closing Date, the attributes of a combining enterprise for the pooling of
interest method within the meaning of APB 16. Not by way of limitation or
exclusion, the Shareholders and the Company represent and warrant that there
have not been any transactions which could be construed and interpreted to be a
change in the equity interest of the common stock of the Company in accordance
with APB 16, Paragraph 47c, within two years before the date of this Agreement
and between the date of this Agreement and the Closing Date.
(b) The Convertible Note has been paid in full.
(c) The consolidated losses of the Company, computed in accordance with
GAAP, for the months of April through August, 1996, shall not exceed $700,000.
(d) The Company and the Shareholders represent and warrant that all of
the Company Options held by individuals no longer employed by the Company, the
Subsidiary or the LLC Subsidiary as of the date hereof are fully vested in
accordance with the original terms of such Company Options.
SECTION 3.10. No Undisclosed Liabilities or Capital Commitments.
(a) There are no Liabilities of the Company, the Subsidiary or the LLC
Subsidiary, other than Liabilities (i) reflected or reserved against in the
Financial Statements, (ii) completely and accurately disclosed in Section 3.10
of the Disclosure Schedule or (iii) incurred since the Balance Sheet Date in the
ordinary course of business of the Company or the Subsidiary and which have not
had and could not have a Material Adverse Effect.
(b) Except as completely and accurately set forth in Section 3.10 of
the Disclosure Schedule or arising in the ordinary course of business, none of
the Company, the Subsidiary or the LLC Subsidiary is subject to any commitment,
actual or contingent, to make any investment or capital contribution, or
purchase any securities, or supply funds to any Person, in each case in excess
of $5,000 or $10,000 in the aggregate.
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SECTION 3.11. Acquired Assets. Each asset of the Company, the
Subsidiary or the LLC Subsidiary (including, without limitation, the benefit of
any licenses, leases or other agreements or arrangements) acquired since the
Balance Sheet Date has been acquired for consideration not more than the fair
market value of such asset at the date of such acquisition.
SECTION 3.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Balance Sheet Date, except as
completely and accurately disclosed in Section 3.12 of the Disclosure Schedule
(a) the Business has been conducted in the ordinary course and consistent with
past practice and (b) none of the Company, the Subsidiary or the LLC Subsidiary
has:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of the Company, the Subsidiary or the LLC
Subsidiary to be subjected to any Encumbrance, other than Permitted Encumbrances
and Encumbrances that will be released at or prior to the Closing;
(ii) except in the ordinary course of business, discharged or
otherwise obtained the release of any Encumbrance or paid or otherwise
discharged any Liability, other than current liabilities reflected on the
Financial Statements and current liabilities incurred in the ordinary course of
business since the Balance Sheet Date;
(iii) guaranteed any Indebtedness of, or otherwise incurred
any Indebtedness on behalf of any Person;
(iv) failed to pay any creditor any amount owed to such
creditor when due;
(v) redeemed any of the capital stock or declared, made or
paid any dividends or distributions with respect to capital (whether in cash,
securities or other property) to the holders of capital stock of the Company or
the Subsidiary or otherwise, other than dividends, distributions and redemptions
declared, made or paid by the Subsidiary solely to the Company;
(vi) made any material changes in the customary methods of
operations of the Company, the Subsidiary or the LLC Subsidiary, including,
without limitation, purchasing, marketing, selling, pricing, investing or
accounting practices and policies;
(vii) merged with, entered into a consolidation with or
acquired any interest of 5% or more in any Person or acquired a substantial
portion of the assets or business of any Person or any division or line of
business thereof, or otherwise acquired any assets other than in the ordinary
course of business consistent with past practice;
(viii) made any capital expenditure or commitment for any
capital expenditure in excess of $5,000 in any individual instance, $10,000 in
the aggregate;
(ix) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, investment assets,
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leasehold interests and intangible assets), other than the sale of its products
in the ordinary course of business;
(x) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company, the Subsidiary or the LLC Subsidiary.
(xi) except as completely and accurately set forth in Section
3.12 of the Disclosure Schedule, entered into any agreement, arrangement or
transaction with any of its directors, officers, employees or shareholders (or
with any relative, beneficiary, spouse or Affiliate of such Person);
(xii) except as completely and accurately set forth in Section
3.12 of the Disclosure Schedule, (A) granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by the Company, the Subsidiary or the LLC Subsidiary to
any of its employees, including, without limitation, any increase or change
pursuant to any Plan or (B) established or increased or promised to increase any
benefits under any Plan;
(xiii) revalued (other than in accordance with GAAP and as
completely and accurately set forth in Section 3.12 of the Disclosure Schedule)
or restructured any assets of the Company, the Subsidiary or the LLC Subsidiary
(xiv) amended, terminated, cancelled or compromised any
material claims of the Company or the Subsidiary or waived any other rights of
substantial value to the Company, the Subsidiary or the LLC Subsidiary;
(xv) made any change in any method of accounting or accounting
practice or policy used by the Company, the Subsidiary or the LLC Subsidiary
other than changes which were required by GAAP and are completely and accurately
set forth in Section 3.12 of the Disclosure Schedule;
(xvi) failed to maintain the Assets material to the operation
of the Business in such operating condition and repair as is suitable for the
purposes for which they are used;
(xvii) allowed any material Permit or material Environmental
Permit that was issued or relates to the Company, the Subsidiary or the LLC
Subsidiary or otherwise relates to any Asset to lapse or terminate or failed to
renew any such Permit or Environmental Permit or any insurance policy under
which the Company, the Subsidiary or the LLC Subsidiary is an insured that is
scheduled to terminate or expire within forty-five (45) days of the Closing
Date;
(xviii) incurred any Indebtedness in excess of $5,000 in any
individual instance or since the Balance Sheet Date $10,000 in the aggregate;
- 19 -
(xix) amended or modified in any material respects, or
consented to the termination of, any Material Contract or the Company's, the
Subsidiary's or the LLC Subsidiary's rights thereunder;
(xx) amended or restated the articles of incorporation or the
by-laws (or other organizational documents) of the Company or the Subsidiary or
the articles of organization or operating agreement of the LLC Subsidiary;
(xxi) terminated, discontinued, closed or disposed of any
office, facility or other business operation, or laid off any employees (other
than less than 15 employees in the ordinary course of business consistent with
past practice) or implemented any early retirement, separation or program
providing early retirement window benefits within the meaning of Section
1.401(a)-4 of the Regulations or announced or planned any such action or program
for the future;
(xxii) settled or compromised any liability, with respect to
Taxes of the Company, the Subsidiary or the LLC Subsidiary;
(xxiii) suffered any casualty loss or damage with respect to
any of the Assets which in the aggregate have a replacement cost in excess of
$10,000, whether or not such loss or damage shall have been covered by
insurance;
(xxiv) disclosed any confidential Intellectual Property (other
than as requested by the Parent) or permitted to lapse or abandoned any
Intellectual Property (or any registration or grant thereof or any application
relating thereto) to which, or under which, the Company or the Subsidiary has
any right, title, interest or license and which is material to the Business;
(xxv) suffered any Material Adverse Effect; or
(xxvi) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 3.12 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in this Section 3.12,
except as expressly contemplated by this Agreement.
SECTION 3.13. Litigation. Set forth in Section 3.13 of the Disclosure
Schedule (with respect to each Action disclosed therein) are the parties, the
nature of the proceeding, the date and method commenced and the amount of
damages or other relief sought and, if applicable, paid or granted. Except as
completely and accurately set forth in Section 3.13 of the Disclosure Schedule,
there are no Actions by or against the Company, the Subsidiary or the LLC
Subsidiary (or by or against the Shareholders or any Affiliate thereof and
relating to the Business, the Company, the Subsidiary or the LLC Subsidiary), or
affecting any of the Assets, pending before any Governmental Authority (or, to
the best knowledge of the Shareholders and the Company, threatened to be brought
by or before any Governmental Authority). No such Action has, has had or could
have a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby. None of the Company, the Subsidiary, or the LLC Subsidiary,
any of the Assets or the Shareholders is subject to any Governmental Order (nor,
to the best knowledge of the Shareholders and the Company,
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are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has, has had or could have a Material Adverse
Effect.
SECTION 3.14. Certain Interests. None of the Shareholders or any
Affiliate of the Shareholders (other than the Company, the Subsidiary or the LLC
Subsidiary) have and no officer or director of the Company, the Subsidiary or
the LLC Subsidiary, and no relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such officer or director has (i)
outstanding any Indebtedness to the Company or the Subsidiary, or (ii) entered
into any transactions with the Company, the Subsidiary or the LLC Subsidiary,
individually or in the aggregate, exceeding $20,000, other than market rate
loans which have been paid in full as of the date hereof (any arrangement
referred to in (i) or (ii) shall be referred to as an "Inter-Company
Arrangement") except as completely and accurately set forth in Section 3.14 of
the Disclosure Schedule. Except as set forth in Section 3.14 of the Disclosure
Schedule, all Inter-Company Arrangements are on terms that are at least as
favorable to the Company, the Subsidiary or the LLC Subsidiary as would prevail
in a comparable arm's-length transaction with a third party.
SECTION 3.15. Compliance with Laws. The Company, the Subsidiary and the
LLC Subsidiary have each conducted and continue to conduct the Business in
accordance with all material Laws and Governmental Orders applicable to the
Company, the Subsidiary or the LLC Subsidiary or any of the Assets or the
Business, and none of the Company, the Subsidiary or the LLC Subsidiary is in
violation of any such Law or Governmental Order. The Company, the Subsidiary and
the LLC Subsidiary have duly and validly filed or caused to be filed all
material reports, statements, documents, registrations, filings or submissions
that were required by applicable Laws to be filed; all such filings complied
with all applicable Laws in all material respects when filed, and no material
deficiencies have been asserted with respect to any such filings which have not
been satisfied.
SECTION 3.16. Environmental and Other Permits and Licenses; Related
Matters.
(a) The Shareholders, the Company, the Subsidiary and the LLC
Subsidiary currently hold all the permits, licenses, authorizations,
certificates, consents, exemptions and approvals required under any Law
(collectively, "Permits"), including, without limitation, Environmental Permits,
necessary for the ownership, use, occupancy and operation of each Asset of the
Company, the Subsidiary and the LLC Subsidiary and the conduct of the Business,
and all such Permits are in full force and effect.
(b) (i) Each tenant and occupant of the Real Property holds all
Permits, including, without limitation, Environmental Permits, necessary for the
use, occupancy and operation of the Real Property by such tenant or occupant,
and all such Permits are in full force and effect; (ii) there is no existing
practice, action or activity of any tenant or occupant of the Real Property, or
of any owner, tenant or occupant of any real property in which the Company, the
Subsidiary or the LLC Subsidiary or with respect to the Business, the
Shareholders currently holds a security interest (the "Secured Real Property"),
which will give rise to any criminal liability or civil Liability under, or
violate or prevent compliance with, any applicable material Law, including,
without limitation, any applicable Environmental Law; (iii) no tenant or
occupant
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of the Owned Real Property has received any notice from any Governmental
Authority revoking, cancelling, rescinding, materially modifying or refusing to
renew any Permit or providing written notice of violations under any Law,
including, without limitation, any applicable Environmental Law; (iv) each
tenant and occupant of the Owned Real Property is in all respects in compliance
with its Permits, including, without limitation, Environmental Permits; (v)
there is no existing practice, action or activity of the Company, the Subsidiary
or the LLC Subsidiary or, with respect to any portion of the Business, the
Shareholders and no existing condition of the Assets of the Company, the
Subsidiary or the LLC Subsidiary or the Business which has given or will give
rise to any unresolved criminal liability or civil Liability under, or violate
or prevent compliance with, any applicable Law, including, without
limitation,any applicable Environmental Law; (vi) none of the Shareholders, the
Company, the Subsidiary or the LLC Subsidiary has received any notice from any
Governmental Authority revoking, cancelling, rescinding, materially modifying or
refusing to renew any Permit; and (vii) the Company, the Subsidiary and the LLC
Subsidiary are in all respects in compliance with the Permits, including,
without limitation, Environmental Permits. Section 3.16(a) of the Disclosure
Schedule completely and accurately identifies all Permits, including, without
limitation, Environmental Permits and indicates by asterisk those that will
require the consent of any Governmental Authority in the event of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement.
(c) (i) None of the Company, the Subsidiary or the LLC Subsidiary, nor,
with respect to any portion of the Business, the Shareholders has violated or is
violating any applicable Environmental Law; (ii) no tenant or occupant of the
Real Property or owner, tenant or occupant of the Secured Real Property is
violating any applicable Environmental Law in connection with the ownership,
use, occupancy or operation of the Real Property or Secured Real Property; (iii)
there has been no Release of Hazardous Materials at, to, from, or under any real
property currently or formerly owned, leased, or operated by the Company, the
Subsidiary or the LLC Subsidiary, or, with respect to any portion of the
Business, the Shareholders, or at, to, from or under any Secured Real Property
except (x) Releases which individually or collectively do not exceed the
applicable reportable quantity established pursuant to CERCLA, or (y) Releases
of petroleum or its derivatives which individually or collectively do not exceed
ten gallons; (iv) none of the Company, the Subsidiary or the LLC Subsidiary nor,
with respect to any portion of the Business, the Shareholders has generated,
transported or arranged for the transport of, or disposed of any Hazardous
Materials at any location, other than amounts and types of Hazardous Materials
normally present in ordinary office trash or household waste other than the
transportation set forth in Section 3.16 of the Disclosure Schedule; (v) no
tenant or occupant of the Real Property has generated at such Real Property any
Hazardous Material, other than amounts and types of Hazardous Materials normally
present in ordinary office trash or household waste; (vi) none of the Company,
the Subsidiary or the LLC Subsidiary nor, with respect to any portion of the
Business, the Shareholders has any Liabilities in connection with the Release of
any Hazardous Material at any location; (vii) there is not present at any of the
Real Property any underground storage tanks or sumps, asbestos, or
polychlorinated biphenyls; (viii) no Environmental Lien has attached to any of
the Real Property; and (ix) there are no unresolved past, pending or threatened
Environmental Claims against the Company, the Subsidiary or the LLC Subsidiary,
or, with respect to the Business, the Shareholders, nor are there any
circumstances that may form the basis of any such Environmental Claim.
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SECTION 3.17. Material Contracts. (a) Section 3.17(a) of the Disclosure
Schedule completely and accurately lists each of the following contracts and
agreements (including, without limitation, oral agreements) of the Company, the
Subsidiary and the LLC Subsidiary (such contracts and agreements, together with
all contracts, agreements and Leases concerning the management or operation of
any Real Property (including, without limitation, brokerage contracts) listed or
otherwise disclosed in Section 3.19(a) or 3.19(b) of the Disclosure Schedule to
which the Company, the Subsidiary or the LLC Subsidiary is a party and all
agreements relating to Intellectual Property set forth in Section 3.18(a) of the
Disclosure Schedule, being "Material Contracts"):
(i) each contract and agreement for the purchase of materials
or personal property with any supplier or for the furnishing of services to the
Company, the Subsidiary and the LLC Subsidiary or otherwise related to the
Business under the terms of which the Company, the Subsidiary or the LLC
Subsidiary: (A) is likely to pay or otherwise give consideration of more than
$10,000 individually and $20,000 in the aggregate during the current fiscal
year, (B) is likely to pay or otherwise give consideration of more than $5,000
in the aggregate over the remaining term of such contract or (C) cannot be
cancelled by the Company, the Subsidiary or the LLC Subsidiary without penalty
or further payment and without more than 30 days' notice;
(ii) each contract and agreement for the sale of materials or
personal property or for the furnishing of services by the Company, the
Subsidiary or the LLC Subsidiary which: (A) is likely to involve consideration
of more than $5,000 in the aggregate during the calendar year ending December
31, 1996, (B) is likely to involve consideration of more than $5,000 in the
aggregate over the remaining term of the contract or (C) cannot be cancelled by
the Company, the Subsidiary or the LLC Subsidiary without penalty or further
payment and without more than 30 days' notice;
(iii) all broker, distributor, agency, sales promotion, market
research, marketing consulting and advertising contracts and agreements to which
the Company, the Subsidiary or the LLC Subsidiary is a party pursuant to which
services were being provided on the Balance Sheet Date in an amount more than
$5,000 individually and $10,000 in the aggregate over the term of the contract
or agreement;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company, the
Subsidiary or the LLC Subsidiary is a party and which are not cancelable without
penalty or further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of
the Company, the Subsidiary or the LLC Subsidiary in an amount more than $5,000
individually and $10,000 in the aggregate over the term of the contract or
agreement;
(vi) all contracts and agreements with any Governmental
Authority to which the Company, the Subsidiary or the LLC Subsidiary is a party;
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(vii) all contracts and agreements that limit or purport to
limit the ability of the Company, the Subsidiary or the LLC Subsidiary to
compete in any line of business or with any Person or in any geographic area or
during any period of time;
(viii) all Inter-Company Arrangements and all other contracts
and agreements between or among the Company, the Subsidiary or the LLC
Subsidiary and the Shareholders or any Affiliate of the Shareholders (other than
the Company, the Subsidiary or the LLC Subsidiary);
(ix) all trust agreements or other security agreements related
thereto, to which the Company, the Subsidiary or the LLC Subsidiary is a party
that remain in force; and
(x) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to the Company, the
Subsidiary or the LLC Subsidiary or the conduct of the Business or the absence
of which would have a Material Adverse Effect.
(b) Each Material Contract is legal, valid, binding, enforceable and in
full force and effect, and will not cease to be in full force and effect on
terms identical to those currently in effect following the consummation of the
transactions contemplated by this Agreement, except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors, of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Material Contract. None of the Company, the
Subsidiary or the LLC Subsidiary is in breach of, or default under, any Material
Contract.
(c) To the best knowledge of the Shareholders and the Company, no other
party to any Material Contract is in breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than the ordinary course of
business consistent with past practice, any of the properties or assets of the
Company, the Subsidiary or the LLC Subsidiary.
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SECTION 3.18. Intellectual Property.
(a) Section 3.18(a)(i) of the Disclosure Schedule sets forth a complete
and accurate list and a brief description of the Owned Intellectual Property
consisting of trademarks, service marks, corporate and assumed names, trade
names and copyrights, patents and pending registrations and applications
therefor and Section 3.18(a)(ii) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description, including, without
limitation, a description of any license or sublicense thereof, of all Licensed
Intellectual Property. In each case where a registration or application for
registration listed in Section 3.18(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office. To the Shareholders' and the Company's knowledge, the
rights of the Company, the Subsidiary or the LLC Subsidiary, as the case may be,
in or to such Intellectual Property do not conflict with or infringe on the
rights of any other Person, and none of the Shareholders, the Company, the
Subsidiary or the LLC Subsidiary has received any claim or written notice of
infringement or conflict in respect of any Intellectual Property.
(b) (i) all the Owned Intellectual Property is owned by either the
Company, the Subsidiary or the LLC Subsidiary, as the case may be, free and
clear of any Encumbrance other than Permitted Encumbrances, (ii) the Company,
the Subsidiary or the LLC Subsidiary has the right, pursuant to valid and
enforceable licenses, to use the Licensed Intellectual Property in the manner in
which the Licensed Intellectual Property is currently being used and (iii) no
Actions have been made or asserted or are pending (nor, to the best knowledge of
the Shareholders and the Company, has any such Action been threatened) against
the Company, the Subsidiary or the LLC Subsidiary either (A) based upon or
challenging or seeking to deny or restrict the use by the Company, the
Subsidiary or the LLC Subsidiary of any of the Intellectual Property or (B)
alleging that any services provided or products sold by the Company, the
Subsidiary or the LLC Subsidiary are being provided or sold in violation of any
trademarks, or any other rights of any Person. To the best knowledge of the
Shareholders and the Company, no Person is using any trademarks, service marks,
trade names or similar property that are confusingly similar to the Owned
Intellectual Property or that infringe upon the Owned Intellectual Property or
upon the rights of the Company, the Subsidiary or the LLC Subsidiary therein.
None of the Shareholders, the Company, the Subsidiary or the LLC Subsidiary has
granted any license or other right to any other Person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the owned
Intellectual Property or any of the rights of the Company, the Subsidiary or the
LLC Subsidiary in any of the Licensed Intellectual Property.
(c) The Intellectual Property described in Section 3.18(a)(i) and
3.18(a)(ii) of the Disclosure Schedule constitutes all of the Intellectual
Property used or held or intended to be used by the Company, the Subsidiary or
the LLC Subsidiary or forming a part of all such Intellectual Property necessary
and material in the conduct of the Business and there are no other items of
Intellectual Property that are material to the Company, the Subsidiary or the
LLC Subsidiary or the Business. Such Intellectual Property is all that is
necessary for the operation of the Businesses as currently conducted.
SECTION 3.19. Real Property.
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(a) Section 3.19(a) of the Disclosure Schedule lists: (i) the street
address of each parcel of Owned Real Property, (ii) the date on which each
parcel of Owned Real Property was acquired, (iii) the current owner of each such
parcel of Owned Real Property, (iv) information relating to the recordation of
the deed pursuant to which each such parcel of Owned Real Property was acquired
and (v) the current use of each such parcel of Owned Real Property.
(b) Section 3.19(b) of the Disclosure Schedule lists: (i) the street
address of each parcel of Leased Real Property, (ii) the identity of the lessor,
lessee and current occupant (if different from lessee) of each such parcel of
Leased Real Property and (iii) the current use of each such parcel of Leased
Real Property.
(c) The Shareholders have, or have caused to be, delivered to the
Parent complete and accurate copies of all Leases listed in Section 3.19(b) of
the Disclosure Schedule. Each such Lease is legal, valid, binding, enforceable
and in full force and each such Lease will not cease to be in full force and
effect on terms identical to those currently in effect as a result of the
consummation of the transactions contemplated by this Agreement, except, in
either case, as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Lease or otherwise give the landlord a right to
terminate such Lease in accordance with the terms thereof.
(d) There are no condemnation proceedings or eminent domain proceedings
of any kind pending or, to the best knowledge of the Shareholders and the
Company, threatened against the Real Property.
(e) The rental set forth in each Lease of the Leased Real Property is
the actual rental being paid, and there are no separate agreements or
understandings with respect to the same.
SECTION 3.20. Tangible Personal Property. (a) Section 3.20 of the
Disclosure Schedule lists each group of equipment, inventory, supplies,
furniture, fixtures, personalty, vehicles and other tangible personal property
(the "Tangible Personal Property") used in the Business or owned or leased by
the Company, the Subsidiary or the LLC Subsidiary with a value reasonably
estimated by the Shareholders for each group to exceed $5,000. Except as set
forth in Section 3.20 of the Disclosure Schedule, all of the Tangible Personal
Property is located at 851 South Freeport Industrial Parkway, Clearfield, UT
84105.
(b) The Shareholders have, or have caused to be, delivered to the
Parent complete and accurate copies of all Leases for Tangible Personal Property
providing for annual rentals in excess of $5,000 and any and all material
ancillary documents pertaining thereto. Each such Lease is legal, valid,
binding, enforceable and in full force and effect and each such Lease will not
cease to be legal, valid, binding, enforceable and in full force and effect on
terms identical to those currently in effect as a result of the consummation of
the transactions contemplated by this Agreement except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity, nor will the consummation of the
transactions contemplated by
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this Agreement constitute a breach or default under such Lease or otherwise give
the lessor a right to terminate such Lease in accordance with the terms thereof.
SECTION 3.21. Assets. (a) None of the Company, the Subsidiary or the
LLC Subsidiary, as the case may be, owns, leases or has the legal right to use
all the properties and assets, including, without limitation, the Owned
Intellectual Property, the Licensed Intellectual Property, the Real Property and
the Tangible Personal Property, used in the conduct of the Business or otherwise
purported to be owned, leased or used by the Company, the Subsidiary or the LLC
Subsidiary and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all material contracts, agreements and other
arrangements used by the Company, the Subsidiary or the LLC Subsidiary or in or
relating to the conduct of the Business (all such properties, assets and
contract rights being the "Assets"). Any of the Company, the Subsidiary or the
LLC Subsidiary, as the case may be, has good and marketable title to, or, in the
case of leased or subleased Assets, valid and subsisting leasehold interests in,
all the Assets, free and clear of all Encumbrances, except for Permitted
Encumbrances. All buildings, plants, and structures owned by the Company, the
Subsidiary and the LLC Subsidiary lie wholly within the boundaries of the real
property owned by the Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person. The LLC
Subsidiary owns no buildings, plants or structures.
(b) Except as set forth in Section 3.21 of the Disclosure Schedule, all
the Assets, including without limitation the buildings, plants, structures, and
equipment of the Company, the Subsidiary and the LLC Subsidiary, are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, equipment or other Assets is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Company,
the Subsidiary and the LLC Subsidiary are sufficient for the continued conduct
of the Business after the Closing in substantially the same manner as conducted
prior to the Closing.
(c) Immediately following the Closing, any of the Company, the
Subsidiary or the LLC Subsidiary, as the case may be, will continue to own,
pursuant to good and marketable title, or lease, under valid and subsisting
leases, or otherwise retain its respective interest in, the Assets without
incurring any material penalty or other materially adverse consequence,
including, without limitation, any increase in rentals, royalties, or licenses
or other fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement. Immediately following the Closing,
any of the Company, the Subsidiary or the LLC Subsidiary, as the case may be,
shall own and possess all presently existing documents, books, records,
agreements and financial data of any sort used by the Company, such Subsidiary
or such LLC Subsidiary, in the conduct of the Business or otherwise.
SECTION 3.22. Accounts Receivable and Inventory. (a) All accounts
receivable of the Company, the Subsidiary and the LLC Subsidiary that are
reflected on the Financial Statements or on the accounting records of the
Company, the Subsidiary and the LLC Subsidiary as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course
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of business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date collectible net of the respective reserves
shown on the Financial Statements or on the accounting records of the Company,
the Subsidiary and the LLC Subsidiary as of the Closing Date (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Company GAAP Statements represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging). Subject to such reserves, each of the
Accounts Receivable either has been or will be collected in full, without any
set-off, within 90 days after the day on which it first becomes due and payable.
There is no contest, claim or right of set-off, other than returns in the
ordinary course of business, under any contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Section 3.22(a) of the Disclosure Schedule contains a complete and accurate list
of all Accounts Receivable as of the last day of the calendar month preceding
the date of this Agreement, which list sets forth the aging of such Accounts
Receivable.
(b) Except as set forth in Section 3.22(b) of the Disclosure Schedule,
all inventory of the Company, the Subsidiary and the LLC Subsidiary, whether or
not reflected in the Financial Statements, consists of a quality and quantity
usable and salable in the ordinary course of business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value in the Financial Statements or on the
accounting records of the Company, the Subsidiary and the LLC Subsidiary as of
the Closing Date, as the case may be. All inventories not written off have been
priced at the lower of cost or market on a first in, first out basis. Except as
set forth in Section 3.22 of the Disclosure Schedule, the quantities of each
item of inventory (whether raw materials, work-in-process, or finished goods)
are not excessive, but are reasonable in the present circumstances of the
Company, the Subsidiary and the LLC Subsidiary
SECTION 3.23. Customers. Listed in Section 3.23 of the Disclosure
Schedule are the names and addresses of the most significant customers (by sales
volume) of the Company, the Subsidiary and the LLC Subsidiary for the
twelve-month period ended March 29, 1996 and the amount of products which each
purchased during such period.
SECTION 3.24. Employee Benefit Matters.
(a) Plans and Material Documents. Section 3.24(a) of the Disclosure
Schedule is a complete and accurate list of (i) all employee welfare benefit and
employee pension benefit plans as defined in Sections 3(1) and 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, but not limited to, plans that provide retirement income or result in
a deferral of income by employees for periods extending to termination of
employment or beyond, and plans that provide medical, surgical, or hospital care
benefits or benefits in the event of sickness, accident, disability, death or
unemployment, and (2) all other employee benefit agreements or arrangements,
including without limitation deferred compensation plans, incentive plans, bonus
plans or arrangements, stock option plans, stock purchase plans, stock award
plans, golden parachute agreements, severance pay plans, dependent care plans,
cafeteria plans, employee assistance programs, scholarship programs, employment
contracts, vacation policies,
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and other similar plans, agreements and arrangements that are currently in
effect or were maintained within three years of the date of this Agreement, or
have been approved before this date but are not yet effective, for the benefit
of directors, officers, employees or former employees (or their beneficiaries)
of the Company, the Subsidiary or the LLC Subsidiary, (ii) each employee benefit
plan for which the Company, the Subsidiary or the LLC Subsidiary could
reasonably be expected to incur liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated, and (iii) any plan in respect
of which the Company, the Subsidiary or the LLC Subsidiary could reasonably be
expected to incur liability under Section 4212(c) of ERISA (collectively, the
"Plans"). Section 3.24(a) of the Disclosure Schedule sets forth a complete
description of each Plan that is not in writing and, with respect to each Plan
that is in writing, the Shareholders has furnished the Parent with a complete
and accurate copy of each Plan and a complete and accurate copy of each material
document prepared in connection with each such Plan including, where applicable,
without limitation, (i) a copy of each trust or other funding arrangement, (ii)
the most recently distributed summary plan description and summary of material
modifications, (iii) the most recently filed annual IRS Form 5500, 990 and 1041
reports, (iv) the most recently prepared actuarial report and financial
statement in connection with each such Plan, (v) the most recent IRS
determination letter and all rulings or determinations requested from the IRS
after the date of that determination letter, and (vi) all other correspondence
from the IRS or the Department of Labor received that relate to one or more of
the Plans with respect to any matter, audit or inquiry that is still pending.
Except as completely and accurately set forth in Section 3.24(a) of the
Disclosure Schedule, none of the Company, the Subsidiary or the LLC Subsidiary
has any express or implied commitment (i) to create, incur liability with
respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) Absence of Certain Types of Plans. Except as completely and
accurately disclosed in Section 3.24(b) of the Disclosure Schedule, none of the
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any Person or obligates the Company, the Subsidiary or
the LLC Subsidiary to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement or
as a result of a "change in control", within the meaning of such term under
Section 280G of the Code. Except as completely and accurately described in
Section 3.24(b) of the Disclosure Schedule, none of the Plans provides for the
deferral of compensation (other than any Plan intended to be qualified under
Section 401(a) of the Code) or for the grant of stock options, restricted stock,
stock appreciation rights, phantom shares or other equity-based awards or
contingent compensation. Each of the Plans is subject only to the laws of the
United States or a political subdivision thereof.
(c) Compliance with Applicable Law. Except as completely and accurately
disclosed in Section 3.24(c) of the Disclosure Schedule, each Plan is now and
always has been operated in all material respects in accordance with the
requirements of all applicable Law, including, without limitation, ERISA and the
Code, and all "fiduciaries" of such Plans (within the meaning of Section 3(21)
of ERISA) have always acted in accordance with the provisions of all applicable
Law, including, without limitation, ERISA and the Code. Each of the Company, the
Subsidiary
- 29 -
and the LLC Subsidiary has performed all obligations required to be performed by
it under, is not in any respect in default under or in violation of, and has no
knowledge of any default or violation by any party to, any Plan. There is no
litigation, action, proceeding, investigation or claim asserted or, to the
Shareholders', the Company's or the Subsidiary's or the LLC Subsidiary's
knowledge, threatened or contemplated, with respect to any Plan (other than the
payment of benefits in the normal course) nor any issue resolved adversely to
the Company, the Subsidiary or the LLC Subsidiary that may subject the Company,
the Subsidiary or the LLC Subsidiary to the payment of a penalty, interest, tax
or other amount.
(d) Qualification of Certain Plans. Except as completely and accurately
disclosed in Section 3.24(d) of the Disclosure Schedule, each Plan which is
intended to be qualified under Section 401(a) of the Code or Section 401(k) of
the Code has received a favorable determination letter from the IRS that it is
so qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and
no fact or event has occurred since the date of such determination letter from
the IRS which could reasonably be expected to adversely affect the qualified
status of any such Plan or the exempt status of any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Except as completely and accurately
set forth in Section 3.24(e) of the Disclosure Schedule, none of the Company,
the Subsidiary or the LLC Subsidiary has incurred any liability for any penalty
or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the Code or any
liability under Section 502 of ERISA, and no fact or event exists which could
reasonably be expected to give rise to any such liability. Except as set forth
in Section 3.24(e) of the Disclosure Schedule, none of the Company, the
Subsidiary or the LLC Subsidiary has incurred any liability under, arising out
of or by operation of Title IV of ERISA (other than liability for premiums to
the Pension Benefit Guaranty Corporation arising in the ordinary course),
including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer
Plan, and no fact or event exists which could reasonably be expected to give
rise to any such liability. Except as completely and accurately set forth in
Section 3.24(e) of the Disclosure Schedule, no complete or partial termination
has occurred within the five years preceding the date hereof with respect to any
Plan. No reportable event (within the meaning of Section 4043 of ERISA) for
which the 30 days' notice to the Pension Benefit Guaranty Corporation is not
waived has occurred or is expected to occur with respect to any Plan subject to
Title IV of ERISA. Except as set forth in Section 3.24(d) of the Disclosure
Schedule, no Plan had an accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived, as of
the most recently ended plan year of such Plan. None of the assets of the
Company, the Subsidiary or the LLC Subsidiary is the subject of any lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code; none of the
Company, the Subsidiary or the LLC Subsidiary has been required to post any
security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no
fact or event exists which could reasonably be expected to give rise to any such
lien or requirement to post any such security.
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(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Certain Employee-Benefit Assets. Except as completely and
accurately disclosed in Section 3.24(g) of the Disclosure Schedule, each of the
guaranteed investment contracts and other funding contracts with any insurance
company that are held by any of the Plans and any annuity contracts purchased by
any of the Plans was issued by an insurance company which carried the highest
rating from each of D&P, S&P, Best and Moody's Investors Service, Inc., as of
the date such contract was issued, the date hereof and the Closing Date.
(h) Retiree Medical Benefits. No Plan is or includes any plan or
arrangement providing for post-employment health and/or medical benefit coverage
except to the extent required by COBRA.
(i) Supplemental Pension Benefits. The Company, the Subsidiary and the
LLC Subsidiary have no Liability for any (i) supplemental retirement benefits or
other nonqualified deferred compensation, (ii) severance pay relating to any
termination of employment which occurs prior to the Closing, (iii) for
nonqualified deferred compensation or incentive or contingent compensation
relating to any Plan as in effect, or commitment made, prior to the Closing Date
(to the extent related to periods prior to the Closing Date), (iv) for uninsured
health, medical, disability or worker's compensation claims incurred prior to
the Closing Date, regardless of whether such claims are reported prior to the
Closing Date or are not so reported, or (v) the payment of accrued bonuses to
the extent related to periods prior to the Closing Date and not accrued or
reflected on the Balance Sheet.
(j) No Implied Rights. Nothing contained herein, express or implied, is
intended to or shall confer upon any employee or former employee of the Company,
the Subsidiary or the LLC Subsidiary any right or remedy of any nature or kind
whatsoever under or by reason of this Agreement, including any rights of
continued employment for any period.
(k) Severance Pay and Vacation Pay. No Plan will cause the Company, the
Subsidiary, the LLC Subsidiary or the Parent Sub to have liability for severance
pay or vacation pay as a result of the consummation of the transactions
described in this Agreement.
SECTION 3.25. Labor Matters. (a) Except as completely and accurately
disclosed in Section 3.25(a) of the Disclosure Schedule, none of the Company,
the Subsidiary or the LLC Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, the Subsidiary or the LLC Subsidiary and currently there are no known
organizational campaigns, petitions or other unionization activities seeking
recognition of any other collective bargaining unit.
(b) There are no strikes, slowdowns, work stoppages or material
labor relations controversies pending or, to the best knowledge of the
Shareholders and the Company, threatened
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between the Company, the Subsidiary or the LLC Subsidiary and any of their
respective employees, and none of the Company, the Subsidiary or the LLC
Subsidiary has experienced any such strike, slowdown, work stoppage or material
controversy within the past three years.
(c) The Company, the Subsidiary and the LLC Subsidiary are in
compliance, in all material respects, with all applicable Laws relating to the
employment of labor, including, without limitation, those related to wages,
hours and the payment and withholding of taxes and other sums as required by the
appropriate Governmental Authority, and have withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees of the
Company, the Subsidiary or the LLC Subsidiary and are not liable for any arrears
of wages, taxes, penalties or other sums for failure to comply with any of the
foregoing.
(d) Except as set forth in Section 3.25(e) of the Disclosure Schedule,
the Company, the Subsidiary and the LLC Subsidiary have paid in full to all
their respective employees, retired employees and contractors or adequately
accrued for in accordance with GAAP all wages, salaries, commissions, bonuses,
benefits and other compensation due to or on behalf of such employees, retired
employees and contractors.
(e) There is no claim against the Company, the Subsidiary or the LLC
Subsidiary with respect to payment of wages, salary or overtime pay that has
been asserted or is now pending or, to the best knowledge of the Shareholders
and the Company, threatened before any Governmental Authority with respect to
any Persons currently or formerly employed by the Company, the Subsidiary or the
LLC Subsidiary.
(f) None of the Company, the Subsidiary or the LLC Subsidiary is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices.
(g) There is no charge or proceeding with respect to a violation of any
occupational safety or health standards that has been asserted or is now pending
or, to the best knowledge of the Shareholders and the Company, threatened with
respect to the Company, the Subsidiary or the LLC Subsidiary.
(h) Except as set forth in Section 3.25(h) of the Disclosure Schedule,
there is no charge against the Company, the Subsidiary or the LLC Subsidiary of
discrimination in employment or employment practices, for any reason, including,
without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or, to the best knowledge of
the Shareholders and the Company, threatened before the United States Equal
Employment Opportunity Commission, or any other Governmental Authority in any
jurisdiction in which the Company, the Subsidiary or the LLC Subsidiary has
employed or currently employs any Person.
SECTION 3.26. Key Employees. Section 3.26 of the Disclosure Schedule
lists the name, place of employment, the current annual salary rates, bonuses,
deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or
- 32 -
payable (in cash or otherwise) in 1995, 1994, 1993 and 1992, the date of
employment and a brief description of position and job function of each current
salaried employee, officer or director of the Company, the Subsidiary or the LLC
Subsidiary whose current base salary exceeded (or, in 1996, is expected to
exceed) $50,000.
SECTION 3.27. Risk Management. (a) Section 3.27(a) of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including, without limitation, policies providing property, casualty,
business interruption, liability, workers' compensation, and bond and surety
arrangements) under which the Company, the Subsidiary or the LLC Subsidiary is
an insured, a named insured or otherwise the principal beneficiary of coverage:
(i) the name of the agent or broker; (ii) the name of the insurer and the names
of the principal insured and each named insured; (iii) the policy number and the
period of coverage; (iv) the type, scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and amount of
coverage; and (v) the premium charged for the policy, including, without
limitation, a description of any retroactive premium adjustments or other
loss-sharing arrangements.
(b) With respect to each such insurance policy: (i) the policy is in
full force and effect; (ii) none of the Company, the Subsidiary or the LLC
Subsidiary is in breach or default (including any breach or default with respect
to the payment of premiums or the giving of notice), and no event has occurred
which, with the giving of notice or the lapse of time or both, would constitute
such a breach or default or permit termination or modification, under the
policy; (iii) no party to the policy has repudiated in writing, or given written
notice of an intent to repudiate, any provision thereof; and (iv) to the best
knowledge of the Shareholders and the Company, no insurer on the policy has been
declared insolvent or placed in receivership, conservatorship or liquidation or
currently has a rating of "B+" or below from Best or a claims paying ability
rating of "BBB" or below from S&P.
(c) Section 3.27(c) of the Disclosure Schedule completely and
accurately sets forth all risks of the Company, the Subsidiary or the LLC
Subsidiary which are covered under any material risk retention program in which
the Company, the Subsidiary or the LLC Subsidiary participates, together with
details for the last three years of the Company's, the Subsidiary's and the LLC
Subsidiary's loss experience with respect to such risks.
(d) Since February 10, 1992, the Company, the Subsidiary and the LLC
Subsidiary have been covered by insurance policies or binders of insurance in
such types and covering such risks as are consistent with customary practices
and standards of companies engaged in businesses and operations similar to those
of the Company, the Subsidiary or the LLC Subsidiary, as the case may be, in
amounts deemed reasonable by the Company, the Subsidiary or the LLC Subsidiary,
as the case may be.
(e) Except as set forth in Section 3.27(e) of the Disclosure Schedule,
at no time subsequent to January 1, 1993 has the Company, the Subsidiary or the
LLC Subsidiary (i) been denied any insurance or indemnity bond coverage which it
has requested, (ii) made any material reduction in the scope or amount of its
insurance coverage, or received notice from any of its insurance carriers that
any insurance coverage listed in Section 3.27(a) of the Disclosure Schedule
- 33 -
will not be available in the future substantially on the same terms as are now
in effect or (iii) suffered any extraordinary increase in premium for renewed
coverage. Since February 10, 1992, no insurance carrier has cancelled, failed to
renew or materially reduced any insurance coverage for the Company, the
Subsidiary or the LLC Subsidiary or given any notice or other indication of its
intention to cancel, not renew or reduce any such coverage.
(f) The Shareholders are not aware of any facts pertaining to the
Company, the Subsidiary or the LLC Subsidiary or the Business which are
reasonably likely to prevent the Parent from obtaining insurance following the
consummation of the transactions contemplated by this Agreement on terms
substantially similar to the terms currently in effect.
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney. Section 3.28 of the Disclosure Schedule is a complete and accurate
list of (a) the names of each bank, savings and loan association, securities or
commodities broker or other financial institution in which the Company, the
Subsidiary or the LLC Subsidiary has an account, including, without limitation,
cash contribution accounts, and the names of all persons authorized to draw
thereon or have access thereto, (b) the location of all lockboxes and safe
deposit boxes of the Company, the Subsidiary and the LLC Subsidiary and the
names of all Persons authorized to draw thereon or have access thereto and (c)
the names of all Persons, if any, holding powers of attorney from the
Shareholders relating to the Company, the Subsidiary or the LLC Subsidiary or
the Business, or from the Company, the Subsidiary or the LLC Subsidiary. At the
time of the Closing, without the prior written consent of the Parent, none of
the Company, the Subsidiary or the LLC Subsidiary shall have any such account,
lockbox or safe deposit box other than those listed in Section 3.28 of the
Disclosure Schedule, nor shall any additional Person have been authorized, from
the date of this Agreement, to draw thereon or have access thereto or to hold
any such power of attorney relating to the Company, the Subsidiary or the LLC
Subsidiary or the Business or from the Company, the Subsidiary or the LLC
Subsidiary. There are no commingled monies or accounts of the Company, the
Subsidiary or the LLC Subsidiary with other monies or accounts of the
Shareholders or relating to the other businesses of the Shareholders nor has the
Shareholders transferred monies or accounts of the Company, the Subsidiary or
the LLC Subsidiary other than to an account of the Company, such Subsidiary or
the LLC Subsidiary. At the time of the Closing, all monies and accounts of the
Company, the Subsidiary and the LLC Subsidiary shall be held by, and be
accessible only to, the Company, such Subsidiary or such LLC Subsidiary.
SECTION 3.29. Full Disclosure. (a) There are no facts pertaining to the
Company, the Subsidiary or the LLC Subsidiary or the Business that are
reasonably likely to have a Material Adverse Effect that have not been disclosed
in this Agreement, the Disclosure Schedule or the Financial Statements.
(b) No representation or warranty of the Shareholders in this
Agreement, nor any certificate furnished or to be furnished by the Shareholders
to the Parent pursuant to this Agreement, or in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
SECTION 3.30. Investment Purpose; Etc.
- 34 -
(a) Each of the Shareholders hereby confirms that the Parent's Common
Stock which (it)(he) will receive in the Merger will be acquired for investment
for the Shareholders' own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that each of the
Shareholders has no present intention of selling, granting any participation in
or otherwise distributing the Parent's Common Stock. By executing this
Agreement, each of the Shareholders further represents that (it)(he) has no
present intention of selling, granting any participation in or otherwise
distributing the same in a manner contrary to the Securities Act or applicable
state law.
(b) Each of the Shareholders understands that the shares of the
Parent's Common Stock that (it)(he) will receive in the Merger are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Parent in a transaction not involving a public
offering and that under such laws and applicable regulations such shares of the
Parent's Common Stock may be resold without registration under the Securities
Act only in certain limited circumstances and in accordance with the terms and
conditions set forth in the legend described in Section 3.30(c). In this
connection, each of the Shareholders represents that (it)(he) is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
(c) To the extent applicable, each certificate evidencing any of the
shares of the Parent's Common Stock issued to the Shareholders shall be endorsed
with a legend in substantially the form set forth below, and each of
Shareholders covenants that, except to the extent such restrictions are waived
by the Parent, the Shareholders shall not transfer the shares represented by any
such certificate without complying with the restrictions on transfer described
in the legend endorsed on such certificate:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID
SECURITIES, OR (ii) THIS CORPORATION RECEIVES AN OPINION OF LEGAL
COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THIS
CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO (A) THE
RESTRICTION SET FORTH IN SECTION 7.01(a)(ii)(A)(2) OF THAT CERTAIN PLAN
AND AGREEMENT OF MERGER DATED AS OF SEPTEMBER _____, 1996 (THE "PLAN OF
MERGER") AMONG THE SHAREHOLDERS OF NAPTech, INC., SAON, INC. AND THE
SHAW GROUP INC. ("SHAW") AND (B) THE RESTRICTIONS SET FORTH IN THOSE
TWO (2) CERTAIN REGISTRATION RIGHTS AGREEMENTS DATED AS OF
______________, 1996 (THE "REGISTRATION AGREEMENTS") BETWEEN SHAW AND
THE SHAREHOLDERS OF
- 35 -
NAPTech, INC. AND SHAW AND FREEPORT PROPERTIES, L.L.C., RESPECTIVELY.
COPIES OF THE PLAN OF MERGER AND THE REGISTRATION AGREEMENTS ARE FILED
WITH THE SECRETARY OF SHAW. BY ACCEPTANCE OF THIS CERTIFICATE, THE
HOLDER HEREOF AGREES TO BE BOUND BY THE TERMS OF THE PLAN OF MERGER AND
THE REGISTRATION AGREEMENTS.
(d) Each of the Shareholders is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
(e) None of the Shareholders or their Affiliates have purchased or sold
any shares of Parent's Common Stock since February 1, 1996.
SECTION 3.31. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement from the Company, the
Subsidiary or the LLC Subsidiary based upon arrangements made by or on behalf of
the Shareholders, the Company, the Subsidiary or the LLC Subsidiary
SECTION 3.32 Freeport Property. The Freeport Property is owned by
Freeport Properties, L.L.C., a Utah limited liability company, the members of
which and percentage ownership of each member is set forth on Exhibit 3.32, and
the only Encumbrance thereon other than Permitted Encumbrances, is a mortgage in
favor of Research Industries having a present outstanding principal balance of
$1,848,588.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PARENT SUB
Each of the Parent and the Parent Sub hereby represents and warrants to
the Shareholders and the Company as follows:
SECTION 4.01. Organization and Authority of the Parent and the Parent
Sub. Each of the Parent and the Parent Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and has all necessary corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. Upon the approval of this Agreement by the
Board of Directors of the Parent, the execution and delivery of this Agreement
by the Parent and the Parent Sub, the performance by the Parent and the Parent
Sub of their respective obligations hereunder and the consummation by the Parent
and the Parent Sub of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Parent. This
Agreement has been duly executed and delivered by the Parent and the Parent Sub,
and (assuming due authorization, execution and delivery by the Company and the
Shareholders) upon receipt of the necessary approvals by Governmental
Authorities, this Agreement will constitute a legal, valid
- 36 -
and binding obligation of the Parent and the Parent Sub enforceable against the
Parent and the Parent Sub in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting rights of creditors or by general principles of
equity.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, except as may result from any facts or
circumstances relating solely to the Shareholders or the Parent Sub, the
execution, delivery and performance of this Agreement by the Parent and the
Parent Sub does not and will not (a) violate, conflict with or result in the
breach of any provision of the articles of incorporation or by-laws of the
Parent or the Parent Sub, (b) conflict with or violate any Law or Governmental
Order applicable to the Parent or the Parent Sub which would have a Material
Adverse Effect on the ability of the Parent or Parent Sub to consummate the
transactions contemplated by this Agreement or (c) conflict with, or result in
any breach of, constitute a default (or event which with the giving of notice or
the lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation, or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of the Parent or the Parent Sub
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
the Parent or the Parent Sub is a party or by which any of such assets or
properties are bound or affected which would have a Material Adverse Effect on
the ability of the Parent or the Parent Sub to consummate the transactions
contemplated by this Agreement. The Parent's Common Stock to be issued pursuant
to Section 2.05 will, when issued, be duly authorized, validly issued, fully
paid and nonassessable.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Parent and the Parent Sub do
not and will not require any consent, approval, authorization or other order of,
action by, filing with, or notification to, any Governmental Authority or any
other third party, except as set forth in Section 3.07 of the Disclosure
Schedule.
SECTION 4.04. Litigation. Except as disclosed in a writing given to the
Shareholders by the Parent prior to the execution of this Agreement, no claim,
action, proceeding or investigation is pending or, to the best knowledge of the
Parent and the Parent Sub after due inquiry, threatened, which seeks to delay or
prevent the consummation of, or which could reasonably be expected to materially
adversely affect the Parent's or the Parent's Sub ability to consummate, or
which could otherwise affect the legality, validity or enforceability of, the
transactions contemplated by this Agreement.
SECTION 4.05. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Parent.
- 37 -
SECTION 4.06. Reports; Financial Statements.
(a) Copies of all reports, registration statements and other filings,
together with any amendments thereto, filed by the Parent with the Securities
and Exchange Commission (the "SEC") since December 8, 1993 through the date of
this Agreement (the "Parent SEC Reports"), have been heretofore delivered to the
Shareholders by the Parent. As of the respective dates of their filing with the
SEC, the Parent SEC Reports complied, and all such reports, registration
statements and other filings to be filed by the Parent with the SEC prior to the
Closing Date will comply, in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder, and did not at the time they were
filed with the SEC, or will not at the time they are filed with the SEC, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
materially misleading.
(b) The consolidated financial statements (including, in each case, any
related notes thereto) contained in the Parent SEC Reports and in any such
reports, registration statements and other filings to be filed by the Parent
with the SEC prior to the Closing Date (i) have been or will be prepared in
accordance with the published rules and regulations of the SEC and GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and (ii) fairly present or will fairly present
in all material respects the consolidated financial position of the Parent and
its subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated, except that any
unaudited interim financial statements were or will be subject to normal and
recurring year-end adjustments and may omit footnote disclosure as permitted by
regulations of the SEC.
(c) Since May 31, 1996, to the date hereof, there has been no material
adverse event relating to the Parent and its subsidiaries taken as a whole and
no material adverse change in the financial position or results of operations of
the Parent and its subsidiaries taken as a whole which, in either case, (i)
require a public disclosure or filing by the Parent with the SEC or (ii) will be
required to be included in a Parent SEC Report which report includes the period
from May 31, 1996, to the date hereof.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Effective Time. (a) Each
of the Shareholders and the Company covenants and agrees that from the date
hereof through the earlier of the Closing Date or the termination of this
Agreement, none of the Company, the Subsidiary or the LLC Subsidiary shall
conduct its business other than in the ordinary course and consistent with the
Company's, the Subsidiary's or the LLC Subsidiary's prior practice in order to
protect the value of the Company, the Subsidiary and the LLC Subsidiary. Without
limiting the generality of the foregoing, the Shareholders shall cause the
Company, the Subsidiary, and the LLC Subsidiary, and the Company agrees, to (i)
continue their advertising and promotional activities, pricing and purchasing
policies, operations, and business plan implementation; (ii) not materially
shorten or lengthen the customary payment cycles for any of their payables or
- 38 -
receivables; (iii) use reasonable efforts to attempt to (A) keep available to
the Parent and the Parent Sub the services of the employees of the Company, (B)
continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of the Company
and the Business except as required by applicable law and (C) preserve their
current relationships with their suppliers, employees, customers and other
persons with which they have significant business relationships; (iv) exercise,
but only after notice to the Parent and receipt of the Parent's prior written
approval, any rights of renewal pursuant to the terms of any of the leases or
subleases set forth in Section 3.19(b) or Leases for Tangible Personal Property
set forth in Section 3.20(a) of the Disclosure Schedule which by their terms
would otherwise expire; (v) maintain all material licenses, qualifications,
registrations and authorizations to do business in each jurisdiction in which
they are so licensed, qualified, registered or authorized; and (vi) not engage
in any practice, take any action, fail to take any action or enter into any
transaction, in each case outside the normal course of business which could
reasonably be expected to cause any representation or warranty of the
Shareholders or the Company to be untrue for purposes of this Section 5.01(a) as
of the date made in any material respect or result in a breach of any covenant
made by the Shareholders or the Company in this Agreement.
(b) Each of the Shareholders and the Company covenants and agrees that,
prior to the Effective Time, without the prior written consent of the Parent,
which consent will not be unreasonably withheld, none of the Company, the
Subsidiary or the LLC Subsidiary will make outside the ordinary course of
business consistent with past practice any commitment, actual or contingent, to
make any investment or capital contribution, or otherwise expend capital, or
purchase any inventory, or supply funds to any Person, in each case in excess of
$5,000 individually or $10,000 in the aggregate.
(c) Each of the Shareholders and the Company covenants and agrees to,
and shall cause the Company to, use reasonable efforts to minimize the
termination, withdrawal or nonrenewal of any Material Contract.
(d) Prior to the Effective Time, neither the Shareholders nor the
Company, without the prior written consent of the Parent, will:
(i) except as set forth in Section 3.03 of the Disclosure
Schedule, issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, disposition or pledge or
other encumbrance of, (A) any additional shares of the capital stock of any
class of the Company, or the Subsidiary, or any membership interest of the LLC
Subsidiary, or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of the capital stock of the
Company, or the Subsidiary, or any membership interest of the LLC Subsidiary or
any rights, warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of the capital stock of the Company,
the Subsidiary or any membership interest of the LLC Subsidiary or any
securities or rights convertible into, exchangeable for or evidencing the right
to subscribe for any shares of the capital stock or membership interest of the
LLC Subsidiary, or (B) any other securities in respect of, in lieu of, or in
substitution for the Shares;
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(ii) redeem, purchase or otherwise acquire any of the
outstanding Securities of the Company, the Subsidiary or the LLC Subsidiary;
(iii) split, combine, subdivide or reclassify any shares of
the capital stock or declare, set aside for payment or pay any dividend, or make
any other actual constructive or deemed distribution in respect of any shares of
the capital stock of the Company, or the Subsidiary, or any membership interest
of the LLC Subsidiary or otherwise make any payments to the shareholder or
shareholders of the Company, the Subsidiary or the LLC Subsidiary, as the case
may be, in its capacity as such.
SECTION 5.02. Access to Information. (a) From the date hereof until the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice, each of the Shareholders and the Company shall and shall
cause each of its Affiliates and each of the Company's and such Affiliates'
officers, directors, employees, agents, representatives, accountants and counsel
to: (i) afford the officers, employees and authorized agents, accountants,
counsel, financing sources, prospective financing sources, and representatives
of the Parent full access to the offices, properties, other facilities, books
and records of the Company, the Subsidiary and the LLC Subsidiary to those
officers, directors, employees, managers, members, agents, accountants and
counsel of the Shareholders and the Company and each of their Affiliates who
have any knowledge relating to, and to the books and records of the Shareholders
and their Affiliates relating to, the Company, the Subsidiary or the LLC
Subsidiary or the Business, (ii) furnish to the Parent monthly financial and
management statements of the Company, the Subsidiary or the LLC Subsidiary as
prepared in the ordinary course of business and (iii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources,
prospective financing sources, and representatives of the Parent such additional
financial and operating data and other information regarding the assets,
properties and good will of the Company, the Subsidiary and the LLC Subsidiary,
and the Business (or legible copies thereof) as the Parent or any of its
officers, employees, authorized agents, accountants, counsel, financing sources,
prospective financing sources or representatives may from time to time
reasonably request.
(b) Subject to Section 7.08, in order to facilitate the resolution of
any claims made by or against or incurred by the Shareholders or the Company
prior to the Effective Time for a period of seven years after the Effective
Time, or for such longer period as may be required so as to extend to the end of
the applicable statute of limitations, the Parent or Parent Sub shall (i) retain
the books and records (or copies thereof) of the Company, the Subsidiary and the
LLC Subsidiary relating to periods prior to the Effective Time in a manner
reasonably consistent with past practice and (ii) upon reasonable notice, afford
the authorized agents and representatives of the Shareholders reasonable access
(including, without limitation, the right to make, at the Shareholders' expense,
photocopies), during normal business hours, to such books and records.
(c) Subject to Section 7.08, in order to facilitate the resolution of
any claims made by or against or incurred by the Parent, the Parent Sub, any
Affiliate of the Parent or the Parent Sub, the Company, the Subsidiary or the
LLC Subsidiary after the Effective Time, for a period of seven years following
the Effective Time, or for such longer period as may be required so as to extend
to the end of the applicable statute of limitations, the Shareholders shall (i)
retain the books
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and records (or copies thereof) of the Shareholders which relate to the Company,
the Subsidiary and the LLC Subsidiary and their operations for periods prior to
the Effective Time and which shall not otherwise have been delivered to the
Parent, the Company, the Subsidiary or the LLC Subsidiary and (ii) upon
reasonable notice, afford the officers, employees and authorized agents and
representatives of the Parent, the Parent Sub, any Affiliate of the Parent or
the Parent Sub, the Company, the Subsidiary or the LLC Subsidiary reasonable
access (including, without limitation, the right to make photocopies, at the
expense of the Parent, the Parent Sub, such Affiliate of the Parent or the
Parent Sub, the Company, such Subsidiary or such LLC Subsidiary), during normal
business hours, to such books and records.
(d) Within 45 days after the end of each month, each of the
Shareholders and the Company covenants and agrees to provide to the Parent the
monthly consolidated financial statements of the Company prepared in accordance
with GAAP for each month ending between the date hereof and the Closing Date,
together with all related notes, exhibits and schedules thereto.
(e) From the date hereof until the earlier of the Effective Time or the
termination of this Agreement, the Parent agrees to make available to the
Shareholder Representative and the Company's Counsel, upon reasonable notice,
its executive officers to discuss the publicly available information of the
Parent.
SECTION 5.03. Confidentiality. (a) Each of the Shareholders and the
Company agrees to, and shall use their best efforts to cause its agents,
representatives, Affiliates, employees, officers and directors and those of its
Affiliates to: (i) treat and hold as confidential all non-public information
relating to trade secrets, trademark applications, product development, price,
distributor, and customer lists, pricing and marketing plans, policies and
strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
Business, the Company, the Subsidiary and the LLC Subsidiary, except as the
Shareholders or the Company reasonably believes is otherwise required to be
disclosed by applicable Law, in which event each of the Shareholders or the
Company agrees to, and shall instruct its agents, representatives, Affiliates,
employees, officers and directors and those of its Affiliates to, furnish only
that portion of such confidential information which the Shareholders or the
Company are legally required to be provided and exercise its reasonable efforts
to obtain assurances that confidential treatment will be accorded such
information, and (ii) in the event that the Shareholders or any such agent,
representative, Affiliate, employee, officer or director and those of its
Affiliates are served with a subpoena, order or other legal process to disclose
any such information, provide the Parent with prompt written notice of such
requirement so that the Parent, the Parent Sub, the Company, the Subsidiary or
the LLC Subsidiary may, at the expense of the Parent, seek a protective order or
other remedy. Each of the Shareholders and the Company agrees to, and shall
cause its agents, representatives, Affiliates, employees, officers and directors
to, furnish promptly (prior to, at, or as soon as practicable following, the
Effective Time) to the Parent Sub or the Parent any and all copies (in whatever
form or medium) of all such confidential information then in the possession of
the Shareholders or the Company or any of their agents, representatives,
Affiliates, employees, officers and directors and, except as otherwise required
by Section 5.02(c) or Section 7.09, destroy any and all additional copies then
in the possession of the
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Shareholders or any of such agents, representatives, Affiliates (other than the
Company, the Subsidiary and the LLC Subsidiary), employees, officers and
directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, this Section 5.03(a) shall not apply to any information that, at the
time of disclosure, is available publicly or was not disclosed in breach of this
Agreement by the Shareholders or the Company or their agents, representatives,
Affiliates, employees or officers or directors of its Affiliate. Each of the
Shareholders and the Company agrees and acknowledges that remedies at law for
any breach of its obligations under this Section 5.03(a) are inadequate and that
in addition thereto the Parent or the Parent Sub shall be entitled to seek
equitable relief, including injunction and specific performance, in the event of
any such breach. The non-disclosure obligations of the Company and the
Shareholders in this Section 5.03(a) shall include any non-public or proprietary
information relating to the Parent or its Affiliates which they may obtain in
the course of their due diligence activities permitted by this Agreement.
(b) Prior to the Closing or upon earlier termination of this Agreement,
each of the Parent and the Parent Sub agrees to, and shall use their best
efforts to cause its agents, representatives, Affiliates, employees, officers
and directors and those of its Affiliates to: (i) treat and hold as confidential
all non-public information relating to trade secrets, trademark applications,
product development, price, distributor, and customer lists, pricing and
marketing plans, policies and strategies, details of client and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
information with respect to the Business, the Company, the Subsidiary and the
LLC Subsidiary, except as the Parent or the Parent Sub reasonably believes is
otherwise required to be disclosed by applicable Law, in which event each of the
Parent or the Parent Sub agrees to, and shall instruct its agents,
representatives, Affiliates, employees, officers and directors and those of its
Affiliates to, furnish only that portion of such confidential information which
the Parent or the Parent Sub are legally required to be provided and exercise
its reasonable efforts to obtain assurances that confidential treatment will be
accorded such information, and (ii) in the event that the Parent Sub or any such
agent, representative, Affiliate, employee, officer or director and those of its
Affiliates are served with a subpoena, order or other legal process to disclose
any such information, provide the Shareholders Representative with prompt
written notice of such requirement so that the Company or the Shareholders may,
at the expense of the Shareholders seek a protective order or other remedy. Upon
termination of this Agreement, each of the Parent and the Parent Sub agrees to,
and shall cause its agents, representatives, Affiliates, employees, officers and
directors to, furnish promptly (prior to, at, or as soon as practicable
following, the Effective Time) to the Company any and all copies (in whatever
form or medium) of all such confidential information then in the possession of
the Parent or the Parent Sub or any of their agents, representatives,
Affiliates, employees, officers and directors and, except as otherwise required
by Section 5.02(b) or Section 7.09, destroy any and all additional copies then
in the possession of the Parent, the Parent Sub or any of such agents,
representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, this
Section 5.03(b) shall not apply to any information that, at the time of
disclosure, is available publicly or was not disclosed in breach of this
Agreement by the Parent or the Parent Sub or their agents, representatives,
Affiliates, employees or officers or directors of its Affiliate. Each of the
Parent and the Parent Sub agrees and acknowledges that remedies at law for any
breach of its
- 42 -
obligations under this Section 5.03(b) are inadequate and that in addition
thereto the Parent or the Parent Sub shall be entitled to seek equitable relief,
including injunction and specific performance, in the event of any such breach.
(c) Notwithstanding the foregoing provisions of this Section 5.03, the
Parent is expressly permitted to make a press release or other public
announcement on filing regarding this transaction as it deems appropriate in its
discretion.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) Each of the Shareholders, the Company, the Parent Sub and the
Parent shall use all reasonable efforts to obtain (or cause the Company, the
Subsidiary and the LLC Subsidiary to obtain) all authorizations, consents,
orders and approvals of all Governmental Authorities and officials that are or
become necessary for their execution and delivery of, and the performance of
their obligations pursuant to, this Agreement, including without limitation
those set forth on Exhibit 5.04 and will cooperate fully with each other in
promptly seeking to obtain all such authorizations, consents, orders and
approvals.
(b) The Shareholders shall cause the Company, the Subsidiary, and the
LLC Subsidiary, and the Company agrees, to give promptly such notices to third
parties and use all reasonable efforts to obtain such third party consents and
estoppel certificates in connection with the transactions contemplated by this
Agreement, including without limitation those set forth on Exhibit 5.04.
(c) The Parent and the Parent Sub shall cooperate and use all
reasonable efforts to assist the Shareholders, the Company, the Subsidiary and
the LLC Subsidiary in giving such notices and obtaining such consents and
estoppel certificates; provided, however, that none of the Shareholders, the
Company, the Parent or the Parent Sub shall have any obligation to give any
guarantee or other consideration of any nature in connection with any such
notice, consent or estoppel certificate or to consent to any change in the terms
of any agreement or arrangement which would be adverse to the interests of the
Shareholders, the Parent, the Parent Sub, the Company, the Subsidiary and the
LLC Subsidiary or the Business.
(d) The Shareholders and the Parent agree that, in the event any such
consent, approval or authorization reasonably necessary to preserve for the
Business, the Company, the Subsidiary or the LLC Subsidiary any right or benefit
under any lease, license, contract, commitment or other agreement or arrangement
to which the Shareholders, the Company, the Subsidiary or the LLC Subsidiary are
or is a party is not obtained prior to the Effective Time, the Shareholders
will, subsequent to the Effective Time, cooperate with the Parent and the Parent
Sub in attempting to obtain such consent, approval or authorization as promptly
thereafter as practicable and, in the case of contracts and agreements, so as to
provide for the Parent and Parent Sub the benefits under such contracts and
agreements.
SECTION 5.05. Notice of Developments. (a) Prior to the earlier of the
Closing or termination of this Agreement, the Shareholders and the Company shall
notify promptly, and in any event within five Business Days, the Parent in
writing, to the extent of the best knowledge of the Shareholders and the
Company, of (i) all events, circumstances, facts and occurrences
- 43 -
arising subsequent to the date of this Agreement which could reasonably be
expected to result in any breach of a representation or warranty or covenant of
the Shareholders or the Company in this Agreement or which could reasonably be
expected to have the effect of making any representation or warranty of the
Shareholders or the Company in this Agreement untrue or incorrect in any
material respect and (ii) all other material developments, other than general
economic or market changes, and changes in Tax Law affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
distributor, customer or employee relations or prospects of the Company, the
Subsidiary or the LLC Subsidiary or the Business.
(b) Prior to the earlier of the Effective Time or termination of this
Agreement, the Parent and the Parent Sub shall promptly, and in any event within
five Business Days, notify the Shareholders in writing, to the extent of the
best knowledge of the Parent and the Parent Sub, of all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement which
could reasonably be expected to result in any breach of a representation or
warranty or covenant of the Parent or Parent Sub in this Agreement or which
could reasonably be expected to have the effect of making any representation or
warranty of the Parent or Parent Sub in this Agreement untrue or incorrect in
any respect.
SECTION 5.06. Acquisition Proposals. (a) The Shareholders and the
Company and their respective officers, directors, employees, representatives and
agents shall immediately cease any existing discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. Neither
the Shareholders, the Company, nor their respective officers, directors,
employees or investment bankers, attorneys, accountants or other agents retained
by either of them will (i) initiate or solicit, directly or indirectly, any
inquiries regarding the making of any Acquisition Proposal, or (ii) engage in
negotiations or discussions with, or furnish any information or data to any
third party relating to an Acquisition Proposal.
(b) For purposes of this Agreement, the term "Acquisition Proposal"
shall mean any purchase offer made by a third party to acquire (i) beneficial
ownership (as defined pursuant to Section 13(d) of the Exchange Act) of an
equity interest in the Company or the Assets or Business pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock or
similar transaction involving the Company, including, without limitation, any
single or multi step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of a
majority or greater equity interest in the Company or the Assets or Business or
(ii) all or substantially all of the business or assets of the Company or the
Business (other than the transactions contemplated by this Agreement).
SECTION 5.07. Use of Names and Intellectual Property. (a) Each of the
Shareholders covenants and agrees that following the Effective Time, the Parent
shall have the exclusive and royalty-free right to use the names NAPTech, North
American Piping Technologies, NAPTech Pressure Systems, NAPTech and Design
Pressure Products and such other names as may be determined upon completion of
the Due Diligence Review by Shaw (collectively, the "Name").
(b) From and after the Effective Time, neither the Shareholders nor any
of its Affiliates shall use the Name, any of the Owned Intellectual Property or
any of the Licensed Intellectual Property.
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SECTION 5.08. Non-Competition. (a) For a period of two years following
the Effective Time, none of the Shareholders shall, directly or indirectly, or
as a member, shareholder, officer, director, consultant or employee of any other
person or entity, compete with the Parent or any of its subsidiaries or
Affiliates, or own, manage, operate, join, control or participate in the
ownership, management, operation, or control of, or become employed by, consult
or advise, or be connected in any manner with any business or activity which is
in actual, direct or indirect competition or anticipated competition with the
Parent or any of its subsidiaries or Affiliates within those counties, parishes,
municipalities or other places listed in Exhibit 5.08(a) annexed hereto and made
a part hereof, so long as the Parent or any of its subsidiaries or Affiliates
carries on a like business therein. Not by way of limitation or exclusion, none
of the Shareholders shall, within the aforesaid locations and during the
aforesaid time period, call upon, solicit, advise or otherwise do, or attempt to
do, business with any customers or distributors of the Business, the Company,
the Subsidiary or the LLC Subsidiary with whom the Business, the Company, the
Subsidiary or the LLC Subsidiary or any of the Shareholders had any dealings
during the period of time in which the Company was an Affiliate of the
Shareholders, or take away or interfere or attempt to interfere with any custom,
trade, business or patronage of the Business, the Company, the Subsidiary or the
LLC Subsidiary, or interfere with or attempt to interfere with any officers,
employees, distributors, representatives or agents of the Business, the Company,
the Subsidiary or the LLC Subsidiary, or employ or induce or attempt to induce
any of them to leave the employ of the Company, the Subsidiary or the LLC
Subsidiary or violate the terms of their contracts, or any employment
arrangements, with the Company, the Subsidiary or the LLC Subsidiary. Each of
the Shareholders acknowledges and agrees that any breach of the foregoing
covenant not to compete would cause irreparable injury to the Parent and its
subsidiaries and Affiliates, and that the amount of injury would be impossible
or difficult to fully ascertain. Each of the Shareholders agrees that the Parent
and its subsidiaries and affiliates shall, therefore, be entitled to obtain an
injunction restraining any violation, further violation or threatened violation
of the covenant not to compete hereinabove set forth, in addition to any other
remedies that the Parent or its subsidiaries or Affiliates may pursue.
Notwithstanding the foregoing provisions of this Section 5.08, the Shareholders,
may own, solely as an investment, securities if the Shareholders (A) are not an
affiliate of the issuer of such securities and (B) do not, directly or
indirectly, beneficially own more than 5% of the class of which such securities
are a part. If the two year period referred to in this Section 5.08(a) shall be
finally determined by a court to exceed the maximum period which is permissible
by applicable law, the said period shall be reduced to the maximum period
permitted by such law.
(b) Each of the Shareholders acknowledges that the covenants of the
Shareholders set forth in Section 5.08(a) are an essential element of this
Agreement and that, but for the agreement of the Shareholders to comply with
these covenants, the Parent would not have entered into this Agreement. Each of
the Shareholders has independently consulted with its counsel and after such
consultation agrees that the covenants set forth in this Section 5.08 are
reasonable and proper.
SECTION 5.09. Release of Indemnity and Other Obligations. The
Shareholders covenant and agree, on or prior to the Effective Time, to execute
and deliver to the Parent, for the benefit of the Company, the Subsidiary and
the LLC Subsidiary, a general release and discharge, in form and substance
satisfactory to the Parent, releasing and discharging the Parent, Parent Sub,
the Company, the Subsidiary and the LLC Subsidiary, from any and all obligations
to pay any
- 45 -
amounts to or perform any obligations owing to, or indemnify, the Shareholders
or otherwise hold the Shareholders harmless pursuant to any agreement or other
arrangement entered into prior to the Effective Time between the Shareholders or
any Affiliate of the Shareholders (other than the Company, the Subsidiary and
the LLC Subsidiary) and the Company, the Subsidiary or the LLC Subsidiary except
such agreements as are described in Section 5.09 of the Disclosure Schedule.
SECTION 5.10. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable Law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
SECTION 5.11. Removal of Encumbrances on Assets. Each of the
Shareholders and the Company covenants and agrees to cause all Encumbrances on
the Assets (other than Permitted Encumbrances) to be removed at or prior to the
Effective Time. The Parent shall cooperate and use all reasonable efforts to
assist the Shareholders and the Company in obtaining the removal of such
Encumbrances; provided, however, that the Parent and the Parent Sub shall have
no obligation to give any guarantee or other consideration of any nature in
connection with the removal of any such Encumbrance. The parties hereto agree
that, in the event the Shareholders and the Company are unable to cause the
removal of any Encumbrance on any Asset (other than Permitted Encumbrances)
prior to the Effective Time, the Shareholders shall, following the Effective
Time, use reasonable efforts to cooperate with the Parent and the Company in
attempting to remove such Encumbrance as promptly as practicable.
SECTION 5.12. Certain Additional Covenants. (a) The Parent agrees to
cause the Company to maintain, for a period of three years after the Closing,
products liability insurance providing coverage comparable to that maintained by
the Company as of the date hereof, to the extent such coverage is available at a
reasonable cost.
(b) The Shareholders agree not to take, and prior to the Effective Time
to cause the Company not to take, an action which would cause the
representations set forth in Section 3.09(a) to become untrue or inaccurate in
any way.
(c) The Parent agrees to issue the Replacement Options at the Effective
Time in substitution of the Company Options held by employees of the Company at
the Effective Time.
(d) If any of the Company Options are exercised by any of the persons
listed in Section 3.03(b) of the Disclosure Schedule after the date of this
Agreement but before the Closing Date, then the Company and the Shareholders
covenant and agree:
(i) If the person exercising the Company Option is an
"accredited investor" within the meaning of Rule
501(a) of Regulation D promulgated under the
Securities Act, to cause such person to become a
signatory to this Agreement at the time of such
exercise; or
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(ii) If the person exercising the Company Option is not an
"accredited
---
investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act, to
purchase on or before the Closing Date, but prior to
the Closing, the Common Stock into which the Company
Option is exercised at a price per share equal to the
product of 0.0772611 times the average of the
published
-----
closing price of the Parent's Common Stock on the
Nasdaq Stock Market for the five trading days
immediately preceding the date upon which the Company
purchases the Common Stock.
(e) The Company and the Shareholders covenant and agree to cause the
exercise, prior to the Closing Date, of any Company Options held by individuals
no longer employed by the Company, the Subsidiary or the LLC Subsidiary as of
the date hereof, and upon such exercise, to cause compliance with the provisions
of Section 5.12(d)(i) or (ii) above, as applicable; provided, however, the
Company shall make no payments to such individuals to cause them to exercise any
such Company Options. Provided further, however, the Company and the
Shareholders shall not be required to cause such exercise if the Company's
Counsel renders an opinion satisfactory to the Parent that the exchange of the
Parent's Common Stock in lieu of the Common Stock as permitted by each such
Company Option at a conversion rate of 0.0772611 and the issuance of the
Parent's Common Stock upon exercise of such Company Option is a transaction
which qualifies for an exemption under applicable federal and state securities
laws.
(f) If the Convertible Note is converted, after the date of this
Agreement, but before the Closing Date, by the holder thereof into shares of the
Common Stock, then the Company and the Shareholders agree:
(i) If the Person converting the Convertible Note into
shares of Common Stock is an "accredited investor"
within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act, to cause such
Person to become a signatory to this Agreement at the
time of such conversion; or
(ii) If the Person converting the Convertible Note into
shares of Common Stock is not an "accredited
investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act, to
purchase, on or before the losing Date, but prior to
the Closing, Common Stock into which the Convertible
Note was converted at a price per share equal to the
product of 0.0772611 times the average of the
published closing price of the Parent's Common
Stock for the five trading days immediately
preceding the date upon which the Company purchases
the Common Stock.
(g) The Company and the Shareholders agree to cause the Subsidiary to
acquire on or prior to the Closing Date all of the membership interests of the
LLC Subsidiary not owned as of the date hereof by the Company.
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SECTION 5.13. Termination of Inter-Company Arrangements, etc. At or
prior to the Closing, the Shareholders shall cause the Inter-Company
Arrangements, other than those described in Section 5.13 of the Disclosure
Schedule, to be terminated on terms reasonably satisfactory to the Parent. The
Parent shall have received the general releases and discharges from the
Shareholders referred to in Section 5.09 in form and substance reasonably
satisfactory to the Parent.
ARTICLE VI
MINORITY SHAREHOLDERS
SECTION 6.01. Certain Limitations on Representations and Warranties of
the Minority Shareholders. Notwithstanding any other provision of this Agreement
to the contrary: (a) the representations and warranties of each of the Minority
Shareholders in Sections 3.01, 3.03(b), (c) and (d) and 3.30 are limited to the
Shares owned by each of such Minority Shareholder and to each such Minority
Shareholder, as applicable; and (b) the other representations and warranties of
each of the Minority Shareholders in Article III and Section 7.01 are limited to
the actual knowledge of each such Minority Shareholder.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Representations, Warranties and Covenants.
(a) Reorganization.
(i) The parties hereto intend that the Merger will qualify as
a reorganization under Sections 368(a)(1)(A) and (a)(2)(E) or Section
368(a)(1)(B) of the Code and each party agrees that, unless otherwise required
by law, no such party shall at any time file any return or other document with
the U.S. Internal Revenue Service or any other taxing authority inconsistent
with such treatment.
(ii) In regard to Section 7.01(a) above, the parties hereto
make the following representations, warranties and covenants:
(A) Each of the Shareholders hereby represents and
warrants, as of the date hereof and as of the Closing Date, and
covenants to the Parent as follows:
(1) The Company will retain immediately
after the Merger 90% of the fair market value of the net
assets and 70% of the fair market value of the gross assets
held by the Company immediately prior to the Merger.
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(2) None of the Shareholders has any plan or
intention, and agrees for a period of two years following the
Effective Time not, to sell, exchange or otherwise dispose of
a number of shares of the Parent's Common Stock received in
the Merger that would reduce the Shareholders' ownership of
shares of the Parent's Common Stock to a number of shares
having a value, as of the Closing Date, of less than 50% of
the value of all of the formerly outstanding stock of the
Company as of the same date.
(3) The Parent will acquire in the Merger
80% of the outstanding stock of the Company solely in exchange
for voting stock of the Parent (i.e., the Parent's Common
Stock).
(4) The liabilities of the Company,
including the liabilities to which the transferred assets of
the Company are subject, were incurred by the Company in the
ordinary course of business.
(5) The Company will bear its own expenses
incurred in connection with this Agreement, and any expenses
attributable to the Shareholders incurred in connection with
this Agreement (including the fees and costs of Company's
Counsel and accountants in excess of $81,000) will be paid by
them.
(B) The Parent hereby represents and warrants, as of
the date hereof and as of the Closing Date, to the Shareholders as
follows:
(1) The Parent Sub is newly formed, has no
other business or assets and was created for the purpose of
this transaction.
(2) The Parent has no plan or intention
to redeem or otherwise reacquire any of its stock issued in
the Merger.
(3) The Parent has no plan or intention to
liquidate the Surviving Corporation; to sell or otherwise
dispose of the stock of the Surviving Corporation, or cause
the Surviving Corporation to issue additional shares of its
stock, thereby resulting in the Parent losing control of the
Surviving Corporation within the meaning of Section 368(c) of
the Code; or to cause the Surviving Corporation to dispose of,
in transactions for which full consideration is not received,
more than 20% of the assets of the Company acquired in the
Merger, except for transfers of assets to a corporation
controlled (within the meaning of Section 368(c) of the Code)
by the Surviving Corporation.
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(4) Following the Merger, it is intended
that the Surviving Corporation will continue the historic
business of the Company or will use a significant portion of
the historic business assets of the Company in a business as
such terms are used in Treas.
Reg. ss.1.368-1(d).
(5) The Parent will pay its own expenses
incurred in this transaction and the Parent Sub's expenses, if
any, incurred in connection with this Agreement will be paid
by the Parent.
(6) The Parent will control the Parent Sub
within the meaning of Section 368(c) of the Code immediately
prior to the Closing Date.
(7) The Parent has no present intention to
merge the Company with or into any other corporation, to
transfer the stock of the Company to a corporation other than
one it controls within the meaning of Section 368(c) of the
Code, or to sell or otherwise dispose of the stock of the
Company.
(8) The Parent Sub has no liabilities that
will be assumed by the Company, and the Parent Sub will not
transfer any assets subject to liabilities in the Merger.
(9) Neither the Parent nor the Parent
Sub is an "investment company" as defined in Section 368
(a)(2)(F) of the Code.
(10) There is no intercorporate indebtedness
existing between the Parent and the Company or between the
Parent Sub and the Company that was issued, acquired or will
be settled, in each case at a discount, and that the Parent
and the Parent Sub do not own, nor have they owned during the
past five (5) years, any stock of the Company.
(11) Immediately prior to the Effective
Time, Parent will control the Parent Sub within the meaning of
Section 368(c) of the Code.
(12) Neither the Parent nor the Parent Sub
is an "investment company" as defined in Section 368(a)(2)(F)
of the Code.
(13) There is no intercorporate
indebtedness existing between the Parent and the Company or
between the Parent
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Sub and the Company that was issued, acquired or will be
settled at a discount.
(14) The Parent and the Parent Sub do not
own, nor have they owned during the past five (5) years, any
stock of the Company.
(b) Each of the Shareholders hereby represents and warrants, as
of the date hereof and as of the Closing Date, as follows:
(i) except as set forth in Section 7.01 of the Disclosure
Schedule, (A) all returns and reports in respect of Taxes ("Tax Returns" or
"Returns") required to be filed as of the date of this Agreement with respect to
the Company, the Subsidiary and the LLC Subsidiary (including the consolidated
federal income Tax Returns and state income or franchise Tax Returns that
include the Company, the Subsidiary or the LLC Subsidiary on a consolidated,
combined, or unitary ("combined") basis) have been timely filed; (B) all Taxes
shown to be payable on such Returns and all assessments of Tax made against the
Company, the Subsidiary or the LLC Subsidiary with respect to such Returns have
been paid; (C) all such Returns are true, correct, and complete in all material
respects; and (D) no adjustment relating to such Returns has been proposed
formally or informally by any Tax authority and, to the best knowledge of the
Shareholders and the Company, no basis exists for any such adjustment;
(ii) except as set forth in Section 7.01 of the Disclosure
Schedule, there is no pending or, to the best knowledge of the Shareholders and
the Company, threatened actions or proceedings for the assessment or collection
of Taxes against the Company, the Subsidiary or the LLC Subsidiary;
(iii) no consent under Section 341(f) of the Code has been
filed with respect to the Company, the Subsidiary or the LLC Subsidiary;
(iv) there are no Tax liens on any assets of the Company,
the Subsidiary or the LLC Subsidiary, except liens for Taxes that are not yet
due and payable;
(v) no acceleration of the vesting schedule for any property
that is substantially nonvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement;
(vi) none of the Company, the Subsidiary or the LLC Subsidiary
has been a "United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code;
(vii) except as set forth in Section 7.01 of the Disclosure
Schedule, none of the Company, the Subsidiary or the LLC Subsidiary is or has
been doing business in, is, or has been engaged in a trade or business or has
business in force in any jurisdiction in which it has not filed all required
material income, franchise, or gross premium tax returns or other applicable
returns;
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(viii) none of the Company, the Subsidiary or the LLC
Subsidiary is subject to any accumulated earnings tax penalty or personal
holding company tax;
(ix) there are no outstanding waivers or agreements extending
the statute of limitations for any tax period with respect to any Tax to which
the Company, the Subsidiary or the LLC Subsidiary may be subject;
(x) none of the Company, the Subsidiary or the LLC Subsidiary
(A) has an unrecaptured overall foreign loss within the meaning of Section
904(f) of the Code or (B) has participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code;
(xi) except as set forth in Section 7.01(a) of the Disclosure
Schedule, as of March 29, 1996, none of the Company, the Subsidiary or the LLC
Subsidiary had any (1) income reportable for a taxable period ending after March
29, 1996, but attributable to a transaction (e.q., an installment sale)
occurring in or a change in accounting method made for a taxable period ending
on or prior to March 29, 1996, that resulted in a deferred reporting of income
from such transaction or from such change in accounting method (other than a
deferred intercompany transaction), or (2) deferred gain or loss arising out of
any deferred intercompany transaction that occurred prior to March 29, 1996;
(xii) there are no outstanding requests for information
made by a taxing authority to the Company, the Subsidiary or the LLC Subsidiary;
(xiii) none of the Company, the Subsidiary or the LLC
Subsidiary has been advised by any Governmental Authority of any proposed
reassessments of the value (or other Tax base) of any property owned by the
Company, the Subsidiary or the LLC Subsidiary that could increase the amount of
a property Tax to which the Company, the Subsidiary or the LLC Subsidiary would
be subject;
(xiv) none of the Company, the Subsidiary or the LLC
Subsidiary is obligated under any agreement with respect to industrial
development bonds or other obligations with respect to which the excludability
from gross income of the holder for federal income tax purposes could be
affected by the transactions contemplated hereunder;
(xv) no power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes that could affect the
Company, the Subsidiary or the LLC Subsidiary;
(xvi) except as set forth in Section 3.04 of the Disclosure
Schedule, none of the Company, the Subsidiary or the LLC Subsidiary has been a
member of any partnership or joint venture or the holder of a beneficial
interest in any trust for any period for which the statute of limitations for
any Tax has not expired;
(xvii) except as set forth in Section 7.01 of the Disclosure
Schedule, neither the Shareholders nor any Affiliate of the Shareholders has
made any capital contributions to the
- 52 -
Company, the Subsidiary or the LLC Subsidiary during the two-year period
preceding the date of this Agreement;
(xviii) no "ownership change", within the meaning of Section
382 of the Code has occurred with respect to the Company, the Subsidiary or the
LLC Subsidiary except as contemplated by this Agreement since December 31, 1992;
(xix) Section 7.01 of the Disclosure Schedule (A) lists by
type all income, franchise, and similar Tax Returns (federal, state, local, and
foreign) filed with respect to each of the Company, the Subsidiary and the LLC
Subsidiary for taxable periods ended on or after January 1, 1992; (B) indicates
for which jurisdictions Returns have been filed on the basis of a combined
group; (C) indicates the most recent income, franchise, or similar Tax Return
for each relevant jurisdiction for which an audit has been completed or the
statute of limitations has lapsed; and (D) indicates all Tax Returns that
currently are the subject of audit;
(xx) Section 7.01 of the Disclosure Schedule sets forth as of
March 29, 1996, the amount and expiration dates of any net operating loss, net
capital loss, unused business credit, unused foreign tax credit, or excess
charitable contribution allocable to the Company, the Subsidiary and the LLC
Subsidiary as reported on the consolidated federal income tax return filed by
such corporations. As of March 29, 1996, each of the Company, the Subsidiary and
the LLC Subsidiary had no less than $4.584 million aggregate net operating
losses available for carryover to taxable years beginning after March 29, 1996;
(xxi) liabilities, expenses (defined or otherwise), reserves
and allowances on the books and records of the Company, the Subsidiary and the
LLC Subsidiary have been provided which are adequate to satisfy all Liabilities
for Taxes relating to the Company, the Subsidiary and the LLC Subsidiary for any
and all periods (A) through the date of the Financial Statements (without regard
to the materiality thereof) and (B) after the date of the last Financial
Statement through and including the Effective Time (or if later, the Closing
Date);
(xxii) Section 7.01 of the Disclosure Schedule sets forth the
tax basis of the Company, the Subsidiary and the LLC Subsidiary as of March 29,
1996 in each asset; and
(xxiii) Section 7.01 of the Disclosure Schedule shall, not
later than 30 days prior to the Closing Date, completely and accurately list,
all Tax Returns required to be filed by the Company, the Subsidiary and the LLC
Subsidiary between the date of this Agreement and December 31, 1996.
SECTION 7.02. Access to Information. (a) From the date hereof, the
Shareholders shall and shall cause the Company, the Subsidiary and the LLC
Subsidiary to make available to the Parent: (i) all federal, state, and foreign
income, franchise, and similar Tax Returns for taxable periods ended after
January 1, 1992, and any examination reports and statements of deficiencies
assessed against, proposed to be assessed against, or agreed to by the Company,
the Subsidiary or the LLC Subsidiary for such taxable periods; (ii) any tax
sharing or allocation agreement or arrangement involving the Company, the
Subsidiary or the LLC Subsidiary and a complete and accurate description of any
such unwritten or informal agreement or arrangement; (iii) any pro
- 53 -
forma federal income Tax Returns of the Subsidiary, together with any schedule
reconciling the items in the pro forma Tax Return to the items as included in
the consolidated Tax Return, for all taxable years ended after January 1, 1992;
and (iv) any workpapers or schedules showing (A) the tax basis of the
shareholders in the Common Stock, (B) the tax basis of the Company in the stock
of the Subsidiary or the membership interest in the LLC Subsidiary, and (C) the
amount of U.S. tax earnings and profits for the Company, the Subsidiary and the
LLC Subsidiary.
(b) The information described in Section 7.02(a) shall be made
available to the Parent in accordance with the provisions of Section 5.02(a).
SECTION 7.03. Returns and Payments. (a) From the date of this Agreement
through and after the Closing Date, the Shareholders shall prepare and file or
otherwise furnish in proper form to the appropriate Governmental Authority (or
cause to be prepared and filed or so furnished) in a timely manner (with
extensions) all Tax Returns required to be filed by the Company, the Subsidiary
and the LLC Subsidiary that are due on or before the 10th day after the
Effective Time (or if later, the Closing Date) (and the Parent shall do the same
with respect to any Tax Return required to be filed after the 10th day after the
Effective Time (or if later, the Closing Date)). None of the Parent, the Parent
Sub, the Company, the Subsidiary or the LLC Subsidiary or their employees or
agents shall have any liability to the Shareholders with respect to the
preparation and filing of Returns for periods ending on or prior to the
Effective Time (or if later, the Closing Date) (other than by reason of gross
negligence); the Shareholders shall indemnify each such Person against any
liability or cost by reason of a claim by a Tax authority under Section 6694 of
the Code, or any corresponding provision of any other law, to the extent
relating to such preparation; and the Shareholders shall reimburse the Company,
the Parent Sub and the Subsidiary against third-party professional fees, if any,
incurred in connection with such preparation. Returns of the Company, the
Subsidiary and the LLC Subsidiary not yet filed for any taxable period that
begins before the Effective Time (or if later, the Closing Date) shall be
prepared in a manner consistent with past practices employed with respect to the
Company, the Subsidiary and the LLC Subsidiary (except to the extent present
counsel for the Shareholders or the Company renders a legal opinion that there
is no reasonable basis in law therefor or determines that a Return cannot be so
prepared and filed without being subject to penalties). With respect to any
Return required to be filed by the Parent or the Shareholders with respect to
the Company, the Subsidiary and the LLC Subsidiary and as to which an amount of
Tax is allocable to the other party under Section 7.05(b) or as to which the
other party is responsible for an amount of tax under Section 7.05(a), the
filing party shall provide the other party and such party's authorized
representatives with a copy of such completed Return and a statement certifying
the amount of Tax shown on such Return that is allocable to such other party
pursuant to Section 7.05(b), together with appropriate supporting information
and schedules at least 20 Business Days prior to the due date (including any
extension thereof) for the filing of such Return, and such other party and such
other party's authorized representatives shall have the right to review and
comment on such Return and statement prior to the filing of such Return. Such
other party shall have the right to dispute the amount of Taxes allocated to
such party by the filing party, and any dispute that cannot be resolved between
the parties shall be resolved by an independent certified public accountant
reasonably acceptable to all parties or by binding arbitration as described in
Section 7.03(c). Any objections not raised at least 10 Business Days after the
date the filing party provides a draft completed Return and accompanying
statement shall be deemed waived.
- 54 -
(b) The Shareholders shall pay or cause to be paid when due and payable
all Taxes with respect to the Company, the Subsidiary and the LLC Subsidiary for
any taxable period ending before or on the Effective Time (or if later, the
Closing Date). The Parent shall pay or cause to be paid when due and payable all
Taxes with respect to the Company, the Subsidiary and the LLC Subsidiary for any
taxable period ending before or on the Effective Time (or if later, the Closing
Date) to the extent of the amount, if any, accrued for such Taxes at the
Effective Time (or if later, the Closing Date). The Parent shall also pay or
cause to be paid when due and payable all Taxes for any taxable period ending
after the Effective Time (or if later, the Closing Date) (subject to any right
of indemnification from the Shareholders hereunder for Taxes).
(c) If the parties cannot resolve a dispute under Section 7.03(a) in
the manner set forth therein, either party shall have the right to submit such
dispute to a single arbitrator for resolution. The arbitrator shall be selected
by mutual agreement of the parties. The arbitrator shall be an individual who is
a certified public accountant and who has substantial experience with respect to
tax matters. If the parties cannot agree upon an arbitrator within fifteen (15)
days after either makes a written request for arbitration of the dispute to the
other party, then within ten (10) days after the expiration of such fifteen (15)
day period, the Parent shall select one person qualified to serve as arbitrator
and the Shareholders shall select a second person to serve as arbitrator. The
Parent and the Shareholders shall each notify the other party within such ten
(10) day period of the name, address and other information regarding the person
so selected. The two (2) persons so selected shall, within fifteen (15) days
after the expiration of the ten (10) day period, agree upon a third person to
serve as arbitrator, and such third person shall serve as the sole arbitrator.
Such person must be a certified public accountant with substantial experience in
tax matters. The arbitration shall be conducted as soon as practicable after
final selection of the arbitrator in Baton Rouge, Louisiana according to such
procedures as may be established by the arbitrator; provided, however, the
arbitrator shall apply the Federal Rules of Evidence and Federal Rules of Civil
Procedures to the proceeding. Each party shall advance one-half of the costs and
fees of the arbitrator. Arbitration may proceed in the absence of the Parent or
the Shareholders if notice of the date and time for the proceedings has been
given to the absent party at least fifteen (15) days prior to the date of the
proceeding. Submission of the disputed matter to an arbitrator pursuant to this
Section 7.03(c) shall be specifically enforceable. The decision of the
arbitrator shall be final and binding upon the Parent and the Shareholders. All
costs and expenses (including, without limitation, the arbitrator's fees,
reasonable attorney's fees, disbursements and the costs and expenses of the
Parent and the Shareholder) shall be paid by the non-prevailing party.
SECTION 7.04. Refunds. Any Tax refund (or comparable benefit resulting
from a reduction in Tax liability) for a period ending on or before the
Effective Time (or if later, the Closing Date) arising out of the carryback of a
loss or credit incurred by the Company, the Subsidiary or the LLC Subsidiary in
a taxable year ending after the Effective Time (or if later, the Closing Date)
shall be the property of the Parent and, if received by the Shareholders or any
Affiliate of the Shareholders, shall be paid over promptly to the Parent.
SECTION 7.05. Indemnity. (a) Subject to Section (b) of this Section
7.05, the Shareholders agree to indemnify and hold the Parent, the Company, and
the Subsidiary harmless against any breach of a covenant contained in this
Article VII and the following Taxes (to the extent such Taxes are not satisfied
by liabilities, expenses, reserves or allowances established on
- 55 -
the books and records of the Company, the Subsidiary or the LLC Subsidiary
through and including the Effective Time (or if later, the Closing Date)) and,
except as otherwise provided in Section 7.06, against any loss, damage,
liability, or expense, including reasonable fees for attorneys and consultants,
incurred in contesting or otherwise in connection with any such Taxes: (i) Taxes
imposed on the Company, the Subsidiary or the LLC Subsidiary with respect to
taxable periods of such corporations ending before or on the Effective Time (or
if later, the Closing Date); (ii) with respect to taxable periods beginning
before the Effective Time (or if later, the Closing Date) and ending after the
Closing Date, (A) Taxes imposed on the Company, the Subsidiary or the LLC
Subsidiary which are allocable, pursuant to Section 7.05(b), to the portion of
such period ending on the Effective Time (or if later, the Closing Date), and
(B) Taxes imposed on the Company, the Subsidiary or the LLC Subsidiary by reason
of such corporation's distributive share of income or loss from, or otherwise in
respect of, any partnership in which the Company, the Subsidiary or the LLC
Subsidiary was a member on or prior to the Effective Time (or if later, the
Closing Date) that are allocable, pursuant to Section 7.05(b), to the portion of
such period ending on the Effective Time (or if later, the Closing Date); (iii)
Taxes imposed on the Company, the Subsidiary or the LLC Subsidiary by reason of
being a member of any affiliated group (other than the group for which the
Company is the common parent) with which any of the Company, the Subsidiary and
the LLC Subsidiary file or have filed a Return on a consolidated or combined
basis for a taxable period ending before or on the Effective Date (or if later,
the Closing Date); (iv) Taxes imposed on the Parent or the Company, the
Subsidiary or the LLC Subsidiary as a result of any breach of warranty or
misrepresentation under Section 7.01 (for which purpose the representations in
Section 7.01 shall be deemed to have been made with no exception for items
disclosed in Section 7.01 of the Disclosure Schedule or otherwise), including as
the result of any failure of the Tax attributes referred to in Sections
7.01(xxi) and 7.01(xxii) to at least equal the amounts represented; (v) Taxes
arising in any taxable period ending after the Effective Time (or if later, the
Closing Date) as a result of the disallowance or deferral of any expense or
capitalized item from prior periods or the deferral of income items from prior
periods to the current period (net of any applicable Tax reductions; and (vi)
Taxes arising in any taxable period ending after the Closing Date from the
failure of the Company, the Subsidiary or the LLC Subsidiary to establish or
retain records required under applicable Tax law with respect to any
transaction, event or item. The Shareholders' obligation to indemnify the
Parent, the Company, the Subsidiary or the LLC Subsidiary for pre-Closing Date
Taxes under this Section 7.05 shall be reduced to reflect the present value of
any post-Closing Date benefit that the Parent, the Company, the Subsidiary or
the LLC Subsidiary (or the consolidated group with which it files a federal
income tax return) may be reasonably expected to obtain in post-Closing Date
income tax filings that corresponds to Taxes for which an indemnity payment has
been made.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Effective Time (or if later, the Closing Date) and
ends after the Effective Time (or if later, the Closing Date), the portion of
any such Tax that is allocable to the portion of the period ending on the
Effective Time (or if later, the Closing Date) shall be:
(i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as provided
under Section 7.10), deemed equal to the amount which would be payable if the
taxable
- 56 -
year ended with the Effective Time (or if later, the Closing Date) (except that,
solely for purposes of determining the marginal tax rate applicable to income or
receipts during such period in a jurisdiction in which such tax rate depends
upon the level of income or receipts, annualized income or receipts may be taken
into account if appropriate for an equitable sharing of such Taxes); and
(ii) in the case of Taxes not described in subparagraph (i)
that are imposed on a periodic basis and measured by the level of any item,
deemed to be the amount of such Taxes for the entire period (or, in the case of
such Taxes being determined on an arrears basis, the amount of such Taxes for
the immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on the Effective Time
(or if later, the Closing Date) and the denominator of which is the number of
calendar days in the entire period.
For purposes of this Section 7.05(b) and 7.05(a), the Taxes attributable to the
Company, the Subsidiary or the LLC Subsidiary by reason of such corporation's
distributive share of income, gain, or loss from, or otherwise in respect of,
any partnership in which the Company, the Subsidiary or the LLC Subsidiary is a
member on the Effective Time (or if later, the Closing Date) shall be determined
as if such partnership's taxable year ended on the Effective Time (or if later,
the Closing Date).
SECTION 7.06. Contests. (a) After the Closing, the Parent shall
promptly notify the Shareholders in writing of any written notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding of the
Parent or of any of the Company, the Subsidiary and the LLC Subsidiary which, if
determined adversely to the taxpayer, would be grounds for indemnification under
this Article VII; provided, however, that a failure to give such notice will not
affect the Parent's rights to indemnification under this Article VII except to
the extent that the Shareholders demonstrate that they were materially
prejudiced thereby.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Effective Time (or if later, the
Closing Date), provided that the Shareholders acknowledge in writing its
liability under this Agreement to hold the Parent, the Company, and the
Subsidiary harmless against the full amount of any adjustment which may be made
as a result of such audit or proceeding that relates to periods ending on or
before the Closing Date, the Shareholders shall have the right at their expense
to participate in and control the conduct of such audit or proceeding but only
to the extent that such audit or proceeding relates solely to a potential
adjustment for which the Shareholders have acknowledged its liability. As
security for the indemnification provided hereunder, the Shareholders shall
place 10% of the shares of the Parent's Common Stock received by them at the
Closing in escrow pursuant to the Escrow Agreement. The Parent shall also have
the right at its expense to participate in such audit or proceeding, but the
Parent shall have no right to control all or any portion of such audit or
proceeding permitted to be controlled by the Shareholders under the immediately
preceding sentence. If the Shareholders assume the defense of any such audit or
proceeding, and the Shareholders and the relevant taxing authority are
thereafter willing to settle such audit or proceeding for the payment by the
Shareholders of a fixed amount of Tax but the Parent rejects such settlement,
then the Shareholders' liability under this sentence for Taxes with respect to
such
- 57 -
audit or proceeding shall be limited to the aggregate amount of the proposed
settlement and the Shareholders shall not be liable for any expenses incurred by
the Parent with respect to such audit or proceeding. If the Shareholders do not
assume the defense of any such audit or proceeding, the Parent may defend the
same at the reasonable expense of the Shareholders in such manner as they may
deem appropriate, including, but not limited to, settling such audit or
proceeding with the consent of the Shareholders, which consent shall not be
unreasonably withheld. In the event that issues relating to a potential
adjustment for which the Shareholders have acknowledged their liability are
required to be dealt with in the same proceeding as separate issues relating to
a potential adjustment for which the Parent would be liable, the Shareholders
shall have the right, at its expense, to control the audit or proceeding with
respect to the issues for which it is liable and the Parent shall have the
right, at its expense, to control the audit or proceeding with respect to the
issues for which they are liable.
(c) With respect to issues relating to a potential adjustment for which
the Shareholders, on the one hand (as evidenced by its acknowledgment under this
Section 7.06), and the Parent or the Company, the Subsidiary or the LLC
Subsidiary, on the other hand, could be liable, or which recur for any period
ending after the Effective Time (or if later, the Closing Date) (whether or not
the subject of audit at such time), (i) each party (either the Shareholders, on
the one hand, or the Parent, the Company, or the Subsidiary, on the other hand)
may participate at its own expense in the audit or proceeding, and (ii) the
audit or proceeding with respect to such issues shall be controlled by that
party which would bear the burden of the greater portion of the present value of
the Tax attributable to the adjustments and any corresponding adjustments that
may reasonably be anticipated for future Tax periods. The principle set forth in
the immediately preceding sentence shall govern also for purposes of deciding
any issue that must be decided jointly (including, without limitation, choice of
judicial forum) in situations in which separate issues are otherwise controlled
under this Article VII by the Parent, on the one hand, and the Shareholders, on
the other hand.
(d) Except as provided in Section 7.06(b) above, neither the Parent nor
the Shareholders shall enter into any compromise or agree to settle any claim
pursuant to any Tax audit or proceeding which would adversely affect the other
parties for such year or a subsequent year without the written consent of the
other parties, which consent may not be unreasonably withheld. The Parent and
the Shareholders agree to cooperate, and the Parent agrees to cause the Company,
the Subsidiary and the LLC Subsidiary to cooperate, in the defense against or
compromise of any claim in any audit or proceeding.
SECTION 7.07. Time of Payment. Payment by the Shareholders of any
amounts due under this Article VII in respect of Taxes shall be made (either
directly by the Shareholders or under the Escrow Agreement) as follows:
(a) at least three Business Days before the due date of the applicable
estimated or final Returns required to be filed by the Parent on which are
required to be reported income for a period ending after the Effective Time (or
if later, the Closing Date) for which the Shareholders are responsible under
Sections 7.05(a) and 7.05(b) without regard to whether the Returns shows overall
net income or loss for such period;
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(b) within ten Business Days following an agreement between the
Shareholders and the Parent that an indemnity amount is payable; and
(c) within five days before the due date for the payment of any Tax
pursuant to an assessment of such Tax by either a taxing authority or a
"determination" as defined in Section 1313(a) of the Code.
If liability under this Article VII is in respect of costs or expenses other
than Taxes, payment by the Shareholders or the Parent of any amounts due under
this Article VII shall be made within twenty Business Days after the date when
the party required to make such payment has been notified by the party entitled
to receive such payment that such party has a liability for a determinable
amount under this Article VII and is provided with calculations or other
materials supporting such liability.
Any amounts due and payable under this Article VII shall bear interest
at 18% per annum, or the highest non-usurious rate of interest allowed by
applicable law, whichever is lower.
SECTION 7.08. Cooperation and Exchange of Information. Pursuant to the
terms set forth in Section 5.02 of this Agreement, the Shareholders, on the one
hand, and the Parent, the Company, the Subsidiary and the LLC Subsidiary, on the
other hand, will provide each other with such cooperation and information as any
of them reasonably may request of the others in filing any Return, amended
Return or claim for refund, determining a liability for Taxes or a right to a
refund of Taxes, participating in or conducting any audit or other proceeding in
respect of Taxes or making representations to or furnishing information to
parties subsequently desiring to purchase the Company, the Subsidiary or the LLC
Subsidiary or any part of the Business from the Parent. Such cooperation and
information shall include providing copies of relevant Returns or portions
thereof, together with accompanying schedules, related work papers and documents
relating to rulings or other determinations by Tax authorities. The Shareholders
shall make their accountants and agents available on a basis mutually convenient
to both parties to provide explanations of any documents or information provided
hereunder. The Shareholders shall cooperate, and shall cause the Company, the
Subsidiary and the LLC Subsidiary to cooperate, in maximizing the value to the
Parent and the Company of the net operating loss and capital loss carryovers and
the net unrealized built-in loss of the Company, the Subsidiary and the LLC
Subsidiary. All costs and expenses reasonably incurred by a party in responding
to a request for information or assistance, including the costs incurred by the
Shareholders in connection with the cooperation described in the preceding
sentence, pursuant to this Section 7.08 shall be paid by the party requesting
such information or assistance.
SECTION 7.09. Retention of Tax Returns and Records. Each of the
Shareholders, the Parent, the Company, and the Subsidiary shall retain all
Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of the Company, the Subsidiary and the LLC
Subsidiary for each taxable period first ending after the Effective Time (or if
later, the Closing Date) and for all prior taxable periods until the later of
(i) the expiration of the statute of limitations of the taxable periods to which
such Returns and other documents relate, or (ii) six years following the due
date (without extension) for such Returns; provided, however, that Returns,
schedules, work papers, records and other documents relating to the
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determination of the basis of any asset shall be retained for six years
following the disposition of such asset; and provided, further, that the
Shareholders shall not dispose of any such documents without first notifying the
Parent and providing the Parent a reasonable period of time in which to assume
possession of such documents. Any information obtained under this Section 7.09
shall be kept confidential except as may be otherwise necessary in connection
with the filing of Returns or claims for refund or in conducting an audit or
other proceeding.
SECTION 7.10. Conveyance Taxes. Any real property transfer or gains,
sales, use, transfer, value added, stock transfer, stamp, recording,
registration, and any similar Tax or fee that becomes payable in connection with
any and all of the transactions contemplated by this Agreement shall be paid by
the Shareholders who shall file such applications and documents as shall permit
any such Tax to be assessed and paid on or prior to the Effective Time (or if
later, the Closing Date) in accordance with any available pre-sale filing
procedure. Each party hereto shall execute and deliver all instruments and
certificates necessary to enable the other to comply with the foregoing.
SECTION 7.11. Miscellaneous. (a) The Shareholders and the Parent agree
to treat all payments made by any of them to or for the benefit of the other
(including any payments to the Company, the Subsidiary or the LLC Subsidiary)
under this Article VII, under other indemnity provisions of this Agreement and
for any misrepresentations or breaches of warranties or covenants as adjustments
to the Purchase Price or as capital contributions for Tax purposes and that such
treatment shall govern for purposes hereof except to the extent that the laws of
a particular jurisdiction provide otherwise, in which case such payments shall
be made in an amount sufficient to indemnify the relevant party on an after-Tax
basis.
(b) None of the Shareholders, the Company, the Parent Sub or the Parent
shall file any Return, or take a position with a Tax authority unless otherwise
required by law, that is inconsistent with the Recitals of this Agreement and
the Merger Consideration set forth in Section 2.05.
(c) Except as otherwise specifically provided in Section 7.06, each
party shall bear its own expenses, including expenses for attorneys and other
outside consultants, in contesting any Tax for which such party is liable under
this Article VII.
(d) Any Tax sharing agreement or arrangement between the Company, the
Subsidiary or the LLC Subsidiary, on the one hand, and any other Person, on the
other hand, shall be or have been terminated on or prior to the Effective Time
(or if later, the Closing Date), and no payments shall be permitted or required
to be made thereunder by the Company, or the Subsidiary after the Closing except
to the extent that such amount is shown on the Financial Statements.
(e) Notwithstanding any provision in this Agreement to the contrary,
the obligations of the Shareholders to indemnify and hold harmless the Parent,
the Company, the Subsidiary and the LLC Subsidiary pursuant to this Article VII,
and the representations and warranties contained in Section 7.01, shall
terminate at the close of business on the 30th day following the expiration of
the applicable statute of limitations with respect to the Tax liabilities in
question (giving effect to any waiver, mitigation or extension thereof).
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(f) From and after the date hereof, neither the Company nor the
Subsidiary shall, and the Shareholders shall not permit the Company, the
Subsidiary or the LLC Subsidiary to, make or revoke, or cause or permit to be
made or revoked, any Tax election, or adopt or change any method of accounting,
that would materially affect the Company, the Subsidiary or the LLC Subsidiary
for any taxable year ending after the Effective Time (or if later, the Closing
Date) without the prior written consent of the Parent, which consent shall not
be unreasonably withheld.
(g) The Parent and the Shareholders shall be entitled to recover
professional fees and related costs that they may reasonably incur to enforce
the provisions of this Article VII if and to the extent they prevail in such
enforcement.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Shareholders and the
Company. The respective obligations of the Shareholders and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Parent and the Parent Sub contained in this Agreement shall
have been true and correct as of the date they were deemed to have been made and
shall be true and correct in all material respects as of the Closing, with the
same force and effect as if made as of the Closing, except for such changes as
are permitted or contemplated by this Agreement, and other than such
representations and warranties as are made as of another date. The covenants and
agreements contained in this Agreement to be complied with by the Parent and the
Parent Sub on or before the Closing shall have been complied with. The
Shareholders shall have received a certificate from the Parent to such effect
signed by duly authorized representatives thereof and dated as of the Closing
Date;
(b) Reserved.
(c) No Proceeding or Litigation. No Action shall have been commenced or
threatened by or before any Governmental Authority against any of the
Shareholders, the Company, the Parent Sub or the Parent, seeking to restrain or
adversely alter the transactions contemplated by this Agreement or which is
likely to render it impossible or unlawful to consummate such transactions;
provided, however, that the provisions of this Section 8.01(c) shall not apply
if the Shareholders or the Company has directly or indirectly solicited or
encouraged any such Action;
(d) Resolutions. The Shareholders shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Parent and the Parent Sub of the resolutions duly and validly adopted by the
Board of Directors of the Parent and the sole shareholder and the Board of
Directors of the Parent Sub evidencing its authorization of the
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execution and delivery of this Agreement and the other agreements to be executed
by the Parent as contemplated hereby and the consummation of the transactions
contemplated hereby;
(e) Incumbency Certificate. The Shareholders shall have received a
certificate of the Secretary or an Assistant Secretary of the Parent and the
Parent Sub certifying the names and signatures of the officers of the Parent and
the Parent Sub authorized to sign this Agreement and the other documents to be
delivered hereunder;
(f) Legal Opinion. The Shareholders shall have received from Parent's
Counsel a legal opinion, addressed to the Shareholders and dated the Closing
Date, substantially in the form of Exhibit 8.01(f);
(g) Consents and Approvals. The Shareholders, the Company and the
Parent Sub and the Parent shall have received in form and content satisfactory
to the Company (i) all authorizations,consents, orders and approvals of all
Governmental Authorities listed in Section 3.07 of the Disclosure Schedule
which, in each case, shall not contain any material conditions or limitations
which are reasonably unacceptable to the Shareholders, and (ii) all third party
consents and estoppel certificates listed in Section 5.04 of the Disclosure
Schedule;
(h) Related Agreements. The Registration Rights Agreement, in the form of
Exhibit 8.01(h)(1) shall have been duly executed and delivered by the parties
thereto; and
(i) Organizational Documents. The Shareholders shall have received a
copy of (i) the Articles of Incorporation, as amended, of the Parent, certified
by the Louisiana Secretary of State, as of a date not earlier than 10 Business
Days prior to the Closing Date and accompanied by a certificate of the Secretary
or Assistant Secretary of the Parent, dated as of the Closing Date, stating that
no amendments have been made to such Articles of Incorporation since such date
and (ii) the By-Laws of the Parent, as amended, certified by the Secretary or
Assistant Secretary of the Parent.
(j) Sale of Freeport Property. The Freeport Property shall have been
purchased and sold for the consideration and pursuant to an acquisition
agreement as described in Section 8.02(w).
(k) No Material Adverse Event. Since May 31, 1996, to the Closing Date,
there has been no material adverse event relating to the Parent and its
subsidiaries taken as a whole and no material adverse change in the financial
position or results of operations of the Parent and its subsidiaries taken as a
whole which, in either case, (i) require a public disclosure or filing by the
Parent with the SEC or (ii) will be required to be included in a Parent SEC
Report which report includes the period from May 31, 1996, to the Closing Date.
(l) Payment of Certain Obligations. The Company shall have paid the
obligations described in Section 8.01(l) of the Disclosure Schedule.
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(m) Tax Opinion. The Shareholders shall have received an opinion from the
Company's Counsel that the Merger will qualify as a tax-free reorganization
under Section 368(a) of the Code to the Shareholders.
(n) Release of Personal Guarantees. The Shareholders shall have been
released from the personal guarantees set forth on Exhibit 8.01(n).
SECTION 8.02. Conditions to Obligations of the Parent and the Parent
Sub. The respective obligations of the Parent and the Parent Sub to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment, at or prior to the Closing, of each of the following conditions,
any of which may be waived by the Parent in writing, and the Company and the
Shareholders shall use their best efforts to cause such conditions to be
fulfilled; provided, however, Parent's election to proceed with the Closing of
the transactions contemplated herein shall not be deemed a waiver of any breach
of any representation, warranty or covenant herein, whether or not known to
Parent or Parent Sub or existing on the Closing Date. For purposes of
determining whether a breach of a representation or warranty has occurred, and
determining the amount of damage suffered by the Parent or the Parent Sub or
their Affiliates as a result thereof for purposes of Section 9.02 hereof, the
Shareholders and the Company shall be deemed to have made the agreements
contained in this Agreement and the representations and warranties set forth in
Article III on the Closing Date as if they were made on such date:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Shareholders and the Company contained in this Agreement shall
have been true and correct as of the date as of which they were deemed to have
been made and shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing except for
such changes as are permitted or contemplated by this Agreement, other than such
representations and warranties as are made as of another date. The covenants and
agreements contained in this Agreement to be complied with by the Shareholders,
the Company, and the Subsidiary on or before the Closing shall have been
complied with. The Parent shall have received a certificate from the
Shareholders to such effect dated as of the Closing Date;
(b) Reserved.
(c) No Proceeding or Litigation. No Action shall have been commenced or
threatened by or before any Governmental Authority against any of the
Shareholders, the Company, the Parent Sub or the Parent, seeking to restrain or
adversely alter the transactions contemplated hereby or which is likely to
render it impossible or unlawful to consummate the transactions contemplated by
this Agreement or which could have a Material Adverse Effect; provided, however,
that the provisions of this Section 8.02(c) shall not apply if the Parent or the
Parent Sub has directly or indirectly solicited or encouraged any such Action;
(d) Release of Indemnity Obligations. The Parent shall have received (i)
the general releases and discharges from the Shareholders referred to in Section
5.09 and (ii) evidence of removal of the Encumbrances as required by Section
5.09, each to be in form and substance reasonably satisfactory to the Parent;
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(e) Financing. The Parent and the Parent Sub shall have received the
consent of its commercial lenders to the transactions contemplated hereunder and
obtained financing on terms acceptable to them in their sole and absolute
discretion sufficient to enable them to operate the Business;
(f) Legal Opinions. The Parent and the Parent Sub shall have received from
Company's Counsel a legal opinion, addressed to the Parent and the Parent Sub
and dated the Closing Date, substantially in the form of Exhibit 8.02(f);
(g) Consents and Approvals. The Parent and the Shareholders shall have
received, each in form and substance reasonably satisfactory to the Parent, (i)
all authorizations, consents, orders and approvals of all Governmental
Authorities listed in Section 3.07 of the Disclosure Schedule which shall not
contain any material conditions or limitations which are reasonably unacceptable
to Parent; and (ii) all third party consents and estoppel certificates listed in
Section 5.04 of the Disclosure Schedule;
(h) Resignations of Directors, Officers and Managers. The Parent shall have
received the resignations, effective as of the Closing, or evidence of removal
as of the Closing, of all the directors and officers of the Subsidiary and all
managers of the LLC Subsidiary, `except for such persons as are designated on
Exhibit 8.02(h) hereto;
(i) Organizational Documents. The Parent shall have received a copy of (i)
the Articles of Incorporation, as amended, of the Company and of the Subsidiary,
and Articles of Organization of the LLC Subsidiary, certified by the Secretary
of State of the State of its organization, as of a date not earlier than 10
Business Days prior to the Closing Date and accompanied by a certificate of the
Secretary or Assistant Secretary of each such entity, dated as of the Closing
Date, stating that no amendments have been made to such Articles of
Incorporation and Articles of Organization, as the case may be, since such date
and (ii) the By-laws of the Company and of the Subsidiary and the Operating
Agreement, if any, of the LLC Subsidiary, as amended, certified by the Secretary
or Assistant Secretary of each such entity;
(j) Minute Books. The Parent shall have received a copy of the minute books
and stock register of the Company, the Subsidiary and the minutes book and
membership register of the LLC Subsidiary, certified by their respective
Secretaries or Assistant Secretaries as of the Closing Date;
(k) Good Standing; Qualification to Do Business. The Parent shall have
received good standing certificates, certificates of compliance, or certificates
of existence, as applicable, for the Company, for the Subsidiary and for the LLC
Subsidiary from the secretary of state, or the other applicable Governmental
Authority, of (i) the jurisdiction in which each such entity is incorporated or
organized, and (ii) each other jurisdiction in which each such entity does
business requiring it to qualify in such jurisdiction, in each case dated as of
a date not earlier than ten Business Days prior to the Closing Date;
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(l) Escrow Agreement. The Shareholders shall have executed and delivered
the Escrow Agreement substantially in the form of Exhibit 8.02(l) and made the
transfer to the escrow agreement as contemplated thereby;
(m) Resolutions. The Parent shall have received a true and complete copy,
certified by the Secretary or an Assistant Secretary of the Company resolutions
duly and validly adopted by the Shareholders and the Board of Directors of the
Company evidencing its authorization of the execution and delivery of this
Agreement and the other agreements to be executed by the Company as contemplated
hereby and the consummation of the transactions contemplated hereby;
(n) No Material Adverse Effect. No event or events shall have occurred
which, individually or in the aggregate, have a Material Adverse Effect;
(o) Environmental Matters. (1) At Parent's election, the Parent shall have
received written reports prepared by an environmental consulting firm chosen by
Parent demonstrating that the Company, the Subsidiary and the LLC Subsidiary,
any Affiliates of the Company, the Subsidiary or the LLC Subsidiary and, with
respect to the Business, the Shareholders are, to the satisfaction of the
Parent, in compliance with Environmental Laws in connection with the Business
and the Assets, and that any potential liabilities of the Company, the
Subsidiary and the LLC Subsidiary, any Affiliates of the Company, the Subsidiary
or the LLC Subsidiary and, with respect to the Business, the Shareholders, under
any Environmental Law for the Release of any Hazardous Material would not, in
the opinion of the Parent, have a Material Adverse Effect;
(2) Prior to the Closing, the Parent shall have received a
copy of each Environmental Permit currently required to be obtained or
maintained by the Company or, with respect to the Business, the Shareholders,
together with a description of the terms of each Environmental Law that
conditions, restricts or prohibits the transfer of such Environmental Permit to
any new owner or operator;
(p) No Regulatory Restrictions. None of the Company, the Subsidiary or the
LLC Subsidiary shall be subject to any restriction (whether on its business,
operations, ability to pay dividends or incur indebtedness, or otherwise)
imposed or proposed to be imposed as a result of the transactions contemplated
by this Agreement by any Governmental Authority except restrictions generally
applicable to companies engaging in businesses substantially similar to the
Business and restrictions which result primarily from any action or inaction of
the Parent or the fact that the Parent is a participant in the transactions
contemplated by this Agreement;
(q) Due Diligence. The Parent shall have had a full opportunity to complete
its due diligence review of the Business including (i) a review of all
documents, records and other information which the Parent in its opinion shall
have deemed relevant and (iv) visits to or inspections of any location where the
Business is conducted (the "Parent's Due Diligence Review") which Parent's Due
Diligence Review shall not have revealed any information not known to Parent on
the date hereof which has or is reasonably likely to have a Material Adverse
Effect. Although the Parent has received the Disclosure Schedule and copies of
various documents referred to therein, the Company and the Shareholders agree
and acknowledge that the Parent has not had the opportunity to review the same
and, accordingly, for purposes of this
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Section 8.02(q), the Parent shall be deemed to have no knowledge on the date
hereof of any information contained in the Disclosure Schedule or the documents
referred to therein;
(r) Inter-Company Arrangements. The Shareholders and the Company, the
Subsidiary or the LLC Subsidiary, as applicable, shall have terminated the
Inter-Company Arrangements in accordance with Section 5.13 and delivered to the
Parent and the Parent Sub evidence thereof which is reasonably acceptable to
Parent;
(s) Related Agreements. The Registration Rights Agreement and
Representation Letter by the Shareholders in the respective forms of Exhibit
8.01(s)(1) and Exhibit 8.02(s)(2), respectively, shall have been duly executed
and delivered by the parties thereto; and
(t) Accountants' Opinions. No later than August 11, 1996, the Parent shall
have received an opinion from its independent certified public accountants and
the Company's independent certified public accountants, each in form and
substance satisfactory to the Parent, that the transaction contemplated by this
Agreement will qualify as a "pooling of interest" under applicable accounting
rules.
(u) Board Approval. The Board of Directors of the Parent shall have
approved this Agreement and the transaction contemplated hereby.
(v) Execution by the Board of Directors and the Shareholders of the
Company. All of the members of the Board of Directors of the Company and all of
the Shareholders, other than the Minority Shareholders, shall have executed this
Agreement and provided a copy thereof to the Parent no later than August 7,
1996, and all of the Minority Shareholders shall have executed this Agreement
and provided a copy thereof to the Parent no later than August 16, 1996.
(w) Acquisition of Freeport Property. The Parent Sub shall have acquired
the Freeport Property in consideration for 127,000 unregistered shares of the
Parent's Common Stock pursuant to an acquisition agreement containing
representations, warranties, covenants and indemnities by the parties thereto,
including an escrow agreement by the seller(s) of no less than 12,700 shares of
the Parent's Common Stock, of a type and scope substantially similar to those
contained in this Agreement; provided, however, that such acquisition agreement
shall not contain a provision similar to 9.03(d) and any indemnification in
connection with the representations substantially similar to those in Section
3.16 shall not be limited by any cap.
(x) Employment Agreement and Non-Competition Agreements. Bradford J. Bower
shall have entered into an employment agreement with the Company providing for a
term of one year from the Closing Date and an annual salary of $125,000 and
Messrs. Corgiat, Bennett and Renz shall have entered into non-competition
agreements in favor of the Parent, the Company and their affiliates providing
for a term of no less than two (2) years, after the date of the termination of
their respective employments, the terms of each such agreement to be
satisfactory to the Parent and providing for periodic payments to Messrs.
Corgiat, Bennett and Renz in accordance with the schedule provided to the Parent
by the Company on or prior to August 7, 1996.
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(y) Membership Interest in the LLC Subsidiary. The Subsidiary shall have
acquired all membership interests of the LLC Subsidiary, other than the
membership interest owned by the Company as of the date hereof, on such terms as
are satisfactory in the discretion of the Parent, including without limitation,
no obligation by the Company, the Subsidiary or the LLC Subsidiary to make any
additional payment in connection with such acquisition.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of the Shareholders contained in this
Agreement, the Exhibits to this Agreement and the Disclosure Schedule and any
certificate, statement or report or other document delivered pursuant to this
Agreement (collectively, the "Acquisition Documents"), shall survive the Closing
until the second anniversary of the Effective Time; provided, however, that all
representations and warranties made by Shareholders in Section 3.03, 3.09(a),
3.16, 3.24 and Article VII shall survive until the expiration of the applicable
statute of limitations or any extension thereof (or as otherwise stated in
Article VII). All covenants of the Shareholders shall survive indefinitely after
the Closing Date except as specifically set forth herein. Neither the period of
survival nor the liability of the Shareholders or the Parent with respect to the
Shareholders' or the Parent's representations and warranties shall be reduced by
any investigation made at any time by or on behalf of the Parent or the
Shareholders, as the case may be. If written notice of a claim has been properly
given in the manner required by Section 9.02(d) prior to the expiration of the
applicable representations and warranties, then the relevant representations and
warranties shall survive as to such claim until such claim has been finally
resolved. No representation, warranty or covenant of the Company contained in
the Acquisition Documents shall survive the Closing.
(b) The representations and warranties of the Parent contained in this
Agreement, the Exhibits to this Agreement and the Disclosure Schedule and any
certificate, statement or report or other document delivered pursuant to this
Agreement (collectively, the "Acquisition Documents"), shall survive the Closing
until the second anniversary of the Effective Time; provided, however, that all
representations and warranties made by Parent in Article VII shall survive until
the expiration of the applicable statute of limitations or any extension thereof
(or as otherwise stated in Article VII). All covenants of the Parent shall
survive indefinitely after the Closing Date except as specifically set forth
herein. If written notice of a claim has been properly given in the manner
required by Section 9.02(d) prior to the expiration of the applicable
representations and warranties, then the relevant representations and warranties
shall survive as to such claim until such claim has been finally resolved.
SECTION 9.02. Indemnification. (a) The Parent, the Parent Sub (prior to
the Closing and thereafter the Company) and its other Affiliates, and each of
their officers, directors, employees, agents, consultants, successors and
assigns shall be indemnified and held harmless by the Shareholders (and, prior
to the Closing, the Company) for any and all Liabilities, losses, damages,
claims, reasonable costs and expenses, interest, awards, judgments, damages
(including
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punitive damages), fines, fees and penalties (including, without limitation,
attorneys', experts and consultants' fees and expenses) (collectively, "Losses")
actually suffered or incurred by them (including, without limitation, any Action
brought or otherwise initiated by any of them), arising out of or resulting
from:
(i) the inaccuracy of any representation or warranty made
by the Shareholders or the Company contained in any of the Acquisition
Documents;
(ii) the breach of any covenant or agreement by the
Shareholders or the Company contained in the Acquisition Documents;
(iii) as expressly provided by Article VII hereof; and
(iv) liabilities of the Company, the Subsidiary or the LLC
Subsidiary, any Affiliate of the Company, the Subsidiary or the LLC Subsidiary
or, with respect to the Business, the Shareholders, arising out of or relating
to events occurring or circumstances or conditions existing at or prior to the
Closing under any Environmental Law or involving Hazardous Materials in
connection with the current or former assets and operations of the Company, the
Subsidiary, the LLC Subsidiary or the Business, or any former business conducted
by the Company or any current or former subsidiary or Affiliate, including,
without limitation, in connection with any security interest in real property
obtained by the Company, the Subsidiary or the LLC Subsidiary prior to the
Closing;
(v) liabilities of the Company, the Subsidiary or the LLC
Subsidiary, any Affiliate of the Company, the Subsidiary or the LLC Subsidiary
or, with respect to the Business, the Shareholders, arising out of or relating
to products sold or services rendered at or prior to the Closing in connection
with the current or former operations of the Company, the Subsidiary, the LLC
Subsidiary or the Business, or any former business conducted by the Company or
any current or former subsidiary or Affiliate.
(b) The Shareholders and (prior to the Closing, the Company, the
Subsidiary and the LLC Subsidiary) and their respective Affiliates, officers,
directors, employees, agents, consultants, successors and assigns shall be
indemnified and held harmless by the Parent for any and all Losses actually
suffered or incurred by any Indemnified Party (including, without limitation,
any Action brought or otherwise initiated by any of them), arising out of or
resulting from:
(i) the inaccuracy of any representation or warranty made
by the Parent and the Parent Sub contained in the Acquisition Documents; and
(ii) the breach of any covenant or agreement by the
Parent or the Parent Sub contained in the Acquisition Documents.
(c) To the extent that an Indemnifying Party's undertakings set forth
in this Section 9.02 may be unenforceable, such Indemnifying Party shall
contribute the maximum amount that
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it is permitted to contribute under applicable law to the payment and
satisfaction of all Losses incurred by an Indemnified Party.
(d) All claims for indemnification against the Shareholders or the
Parent, as the case may be (an "Indemnifying Party"), under any provision of
this Article IX shall be asserted and resolved (except for those claims related
to Taxes specifically provided in Section 7.06) as follows:
(i) In the event of any claim or demand for which an
Indemnifying Party would be liable for Losses to the Persons specified in
Section 9.02(a) or (b), as applicable, (each an "Indemnified Party") which is
asserted against or sought to be collected from such Indemnified Party by a
Person other than the Parent, the Parent Sub or the Shareholders ("Third Party
Claim"), the Indemnified Party shall deliver a Claim Notice (as defined below)
with reasonable promptness to the Indemnifying Party after the Indemnified Party
has actual notice of the Third Party Claim. The failure by any Indemnified Party
to provide the Indemnifying Party with the Claim Notice required by the
preceding sentence shall not impair the Indemnified Party's rights hereunder
except to the extent that an Indemnifying Party demonstrates that it has been
materially prejudiced thereby. The Indemnifying Party shall notify the
Indemnified Party within thirty (30) days of receipt of the Claim Notice
("Notice Period") whether the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against such
Third Party Claim.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
9.02(d), then the Indemnifying Party shall have the right to defend, at its sole
cost and expense, and, except as provided in the following sentence, through
counsel of its choice reasonably acceptable to the Indemnified Party such Third
party Claim by all appropriate proceedings, which proceedings shall be
diligently defended by the Indemnifying Party to a final conclusion or shall be
settled at the discretion of the Indemnifying Party (with the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld), so long as the Indemnified Party is fully released with respect to
such Third Party Claim. If there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable judgment
of the Indemnified Party for the same counsel to represent both the Indemnified
Party and the Indemnifying Party and the Indemnifying Party does not provide
separate counsel reasonably acceptable to the Indemnified Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party. Assumption by the
Indemnifying Party of the defense of such Third Party Claim will not constitute
an admission by the Indemnifying Party that the claim or litigation is one for
which the Indemnifying Party is required to indemnify the Indemnifying Party
under this Article IX. The Indemnifying Party shall have full control of such
defense and proceedings; provided, however, that the Indemnified Party may at
the sole cost and expense of the Indemnifying Party, file during the Notice
Period any motion, answer, or other pleadings that the Indemnified Party may
deem necessary or appropriate to protect its interests and not irrevocably
prejudicial to the Indemnifying Party (it being understood and agreed that,
except as provided in Section 9.02(d)(iii) hereof, if an Indemnified Party takes
any such action that is irrevocably prejudicial and conclusively causes
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a final adjudication that is materially adverse to the Indemnifying Party, the
Indemnifying Party will be relieved of its obligations hereunder with respect to
the portion of such Third Party Claim prejudiced by the Indemnified Party's
action); and provided further, however, that if requested by the Indemnifying
Party, the Indemnified Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party elects to contest,
or, if appropriate in the judgment of the Indemnified Party and related to the
Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any Person (other
than the Indemnified Party). The Indemnified Party may, at its sole cost and
expense, participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this Section
9.02(d)(ii).
(iii) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the Indemnifying Party desires
to defend the Indemnified Party pursuant to Section 9.03(d)(i), or if the
Indemnifying Party gives such notice but fails to defend the Third Party Claim,
then the Indemnified Party will have the right (but not the obligation) to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be vigorously
defended by the Indemnified Party or will be settled at the discretion of the
Indemnified Party. The Indemnified Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying Party
agrees, at the sole cost and expense of the Indemnifying Party, to cooperate
with the Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting, or, if appropriate and relating to
the Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any person
(other than the Indemnifying Party or any of its Affiliates). Notwithstanding
the forgoing provisions of this Section 9.02(d)(iii), if the Indemnifying Party
has notified the Indemnified Party with reasonable promptness that the
Indemnifying Party disputes, or reserves its rights to dispute, its liability to
the Indemnified Party with respect to such Third Party Claim and if such dispute
is resolved in favor of the Indemnifying Party, the Indemnifying Party will not
be required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this Section 9.02(d)(iii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all costs and expenses
incurred by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
9.02(d)(iii), but the Indemnifying Party will bear its own costs and expenses
with respect to such participation. Regardless of whether the Indemnifying Party
defends a Third Party Claim on behalf of the Indemnified Party or participates
in the defense thereof, the Indemnified Party and the Indemnifying Party shall
reasonably cooperate with each other in all material respects in connection with
the defense for such Third Party Claim. Each Indemnified Party shall furnish
such information regarding itself and the Third Party Claim as the Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense thereof. No Third Party Claim may be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld), unless such settlement
provides a release of the Indemnified Party for such claim.
- 70 -
(iv) In the event any Indemnified Party should have a claim
for Losses against any Indemnifying Party hereunder that does not involve a
Third Party Claim being asserted against or sought to be collected from the
Indemnified Party, the Indemnified Party shall deliver an Indemnity Notice (as
defined below) with reasonable promptness to the Indemnifying Party after the
Indemnified Party has actual notice of such claim. The failure by any
Indemnified Party to give the notice referred to in the preceding sentence shall
not impair such party's rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been irreparably prejudiced thereby.
The Indemnifying Party and the Indemnified Party agree to proceed in good faith
to negotiate a resolution of any dispute relating to such a claim for Losses
within sixty (60) days following receipt of any Indemnity Notice. If any such
claim is not resolved within the foregoing period, the parties may pursue any
available remedies.
(v) The term "Claim Notice" shall mean written notification of
a Third Party Claim by an Indemnified Party to an Indemnifying Party pursuant to
Section 9.02(d)(i), enclosing a copy of all papers served, if any, and
specifying the nature of and alleged basis for such Third Party Claim and, to
the extent then feasible, the alleged amount or the estimated amount of such
Third Party Claim.
(vi) The term "Indemnity Notice" shall mean written
notification of a claim for indemnity (which claim does not involve a Third
Party Claim) by an Indemnified Party to an Indemnifying Party pursuant to
Section 9.02(d)(iv) hereof, specifying the nature of and specific basis for such
claim and, to the extent then feasible, the amount or the estimated amount of
such claim.
(vii) Any estimated amount of a claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive of the final amount of
such claim.
(viii) Notwithstanding any other provision hereof, any contest
or claim for indemnification under Article VII shall be governed by the
procedures of such Article VII and not by the provisions of this Section 9.03.
(ix) In connection with each Third Party Claim, the
Indemnifying Party shall obligated to provide only one counsel to all
Indemnified Parties.
(e) (i) The terms and provisions set forth in this Section 9.02 shall
constitute the sole rights and remedies of the parties for money damages in
respect of any inaccuracies of representations or warranties or any breaches of
covenants or agreements contained in this Agreement.
(ii) In the event of a claim pursuant to Section 9.02(a)(v),
the Parent agrees, to the extent practical, to seek recovery for the related
Losses first from any products liability insurance providing coverage to the
Parent therefor, and then from the Escrow Shares (as defined in the Escrow
Agreement), prior to collection of such Losses from the Shareholders; provided,
however, the foregoing provision shall in no way limit or restrict any actions
or proceedings by the Parent against any Indemnifying Party, including without
limitation the Shareholders, to the
- 71 -
extent the Parent deems, in its discretion, such actions or proceedings to be
necessary to preserve, maintain or enforce any of its rights against any
Indemnifying Party.
SECTION 9.03. Limits on Indemnification.
(a) No amount shall be payable by any Indemnifying Party pursuant to
Section 9.02(a) or (b) unless and until the aggregate amount of Losses
indemnifiable under Section 9.02(a) or (b) exceeds $300,000 and the Indemnifying
Party shall indemnify the Indemnified Party to the full extent of such Losses up
to but not to exceed $10,000,000.
(b) The limitations set forth in Sections 9.03(a) shall not apply with
respect to any Losses suffered or incurred by the Parent in connection with (i)
the representations contained in Sections 3.03, 3.09(a), 3.24 and 3.09(c), (ii)
the representations, covenants and indemnities contained in Article VII and
(iii) any sums paid by the Subsidiary to acquire the membership interest of the
LLC Subsidiary not owned by the Company on the date hereof, and the Shareholders
shall fully indemnify the Parent for any such Losses from the first dollar of
such Losses to the full extent of such Losses.
(c) The amount of any indemnification obligation of an Indemnifying
Party shall be reduced by an amount equal to the value of the net Tax benefit
actually received by the Indemnified Party (to be calculated at the highest
marginal rate then applicable to the Indemnified Party) with respect to any loss
or other item the payment of which by an Indemnified Party shall produce a
deduction or an addition to basis for federal income tax purposes, such benefit
to be offset to the extent that the payment is treated as taxable income or
results in a reduction in basis to the Indemnified Party. No Indemnified Party
shall take any action or omit to take any action the primary purpose of which is
to avoid the application of this Subsection 9.03(c); provided, however, that
each Indemnified Party shall be permitted to engage in its own tax planning,
notwithstanding that the effect of such tax planning is to cause this Subsection
9.03(c) to be inapplicable.
(d) Notwithstanding any provision of this Agreement to the contrary,
including Section 3.16 and this Article IX, and as consideration for the
Shareholders entering into this Agreement, the Shareholders shall have no
liability under this Agreement, direct or indirect, whether by indemnification,
contribution or otherwise, under any Environmental Law or involving any
Hazardous Waste except for Environmental Claims arising out of or relating to
events occurring or circumstances or conditions existing at or prior to the
Closing under any Environmental Law or involving Hazardous Materials in
connection with the current or former assets and operations of the Company, the
Subsidiary, the LLC Subsidiary or the Business, or any former business conducted
by the Company or any current or former subsidiary or Affiliate.
SECTION 9.04. Security for Shareholders' Agreement to Indemnify. To
secure the Shareholders' obligations to indemnify the Parent hereunder, at the
Closing, the Shareholders shall deposit 10% of the shares of the Parent's Common
Stock received by them at the Closing with City National Bank of Baton Rouge (or
such other financial institution acceptable to the Parent), as escrow agent, to
be held and released in accordance with the terms of the Escrow Agreement. Such
escrowed funds and shares and right of set-off, however, shall not be the
Parent's exclusive
- 72 -
remedies hereunder, and nothing herein shall preclude the assertion by the
Parent of any other right or remedies in respect of the foregoing agreements on
indemnity.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination by the Shareholders or Parent. This
Agreement may be terminated at any time prior to the Effective Time:
(a) by the Parent if, between the date hereof and the time scheduled
for the Closing: (i) an event or condition occurs that has resulted in a
Material Adverse Effect, (ii) any representation or warranty of the Shareholders
or the Company contained in this Agreement shall not have been true and correct
in all material respects as of the date when deemed to have been made and, in
the case of a breach reasonably susceptible to cure, shall not have been cured
within 30 calendar days, (iii) the Shareholders or the Company shall not have
complied in all material respects with any covenant or agreement to be complied
with by it and contained in this Agreement and, in the case of a breach
reasonably susceptible to cure, shall not have been cured within 30 calendar
days, or (iv) the Shareholders, the Company, the Subsidiary or the LLC
Subsidiary makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against, the Shareholders, the Company, the
Subsidiary or the LLC Subsidiary seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization; or
(b) by the Shareholders if, between the date hereof and the time
scheduled for the Closing: (i) any representation or warranty of the Parent or
the Parent Sub contained in this Agreement shall not have been true and correct
in all material respects as of the date when deemed to have been made and, in
the case of a breach reasonably susceptible to cure, shall not have been cured
within 30 calendar days, (ii) the Parent or the Parent Sub shall not have
complied in all material respects with any covenant or agreement to be complied
with by them and contained in this Agreement, and, in the case of a breach
reasonably susceptible to cure, shall not have been cured within 30 calendar
days, or (iii) the Parent or the Parent Sub makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Parent seeking to adjudicate it bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization;
(c) by either the Shareholders or the Parent if the Effective Time
shall not have occurred by September 30, 1996; provided, however, that (i) if
the provisions of Section 8.01(g) have not been satisfied by September 30, 1996,
and the Parent is diligently seeking to satisfy such condition, or (ii) if the
provisions of Section 8.02(g) have not been satisfied by September 30, 1996, and
the Shareholders are diligently seeking to satisfy such condition, then, in each
case (subject to the proviso below) the obligations of the parties to proceed
toward Closing shall be extended until October 30, 1996; and provided, further,
that the right to terminate this Agreement
- 73 -
under this Section 10.01(c) shall not be available to any party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Effective Time to occur on or prior
to such date; or
(d) by either the Parent or the Shareholders in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement or in the reasonable determination of the Parent
or the Shareholders, otherwise render inadvisable the consummation of the
transaction contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(e) by the mutual written consent of the Shareholders, the
Company, the Parent Sub and the Parent.
SECTION 10.02. Effect of Termination. (a) In the event of termination
of this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (a) as set forth in Sections 10.02(b) and 11.02 and (b) that nothing
herein shall relieve any party from liability for any fraud or willful breach of
this Agreement.
(b) Notwithstanding the foregoing, if the Effective Time does not occur
solely because of (i) the failure to satisfy the conditions to the Parent's and
the Parent Sub's obligation to effect the Closing contained in Sections 8.02
(a), (d), (f), (g) (except insofar as such condition relates to the delivery of
documents required to be obtained from any Governmental Authority), (h), (i),
(j), (k), (1), (m), (r), (s), (t) (relating to the Company's accountants), (v),
(w), (x) and (y), then the Shareholders and the Company shall reimburse the
Parent for its reasonable costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel, financial advisors, financing
sources and accountants, incurred by the Parent in connection with the
preparation, negotiation and performance of this Agreement and the transactions
contemplated hereby up to $250,000 (as supported by itemized invoices delivered
to Shareholder), or (ii) the failure to satisfy the conditions to the
Shareholders' or the Company's obligation to effect the Closing contained in
Sections 8.01(a), (d), (e), (f), (g) (except insofar as such condition relates
to the delivery of documents required to be obtained from any Governmental
Authority), (h), (i), (j), (k) or (l), then the Parent shall reimburse the
Shareholders and the Company for their reasonable costs and expenses, including,
without limitation, reasonable fees and disbursements of counsel, financial
advisors and accountants, incurred by the Shareholders in connection with the
negotiation and performance of this Agreement and the transactions contemplated
hereby up to $250,000 (as supported by itemized invoices delivered to the
Parent).
SECTION 10.03. Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver
- 74 -
of any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Solidary Obligation of Shareholders Other than Minority
Shareholders. The obligations of the Shareholders under this Agreement, other
than the Minority Shareholders, shall be solidary; provided the maximum
liability of each such Shareholder shall not exceed a percentage of all amounts
owing by the Shareholders hereunder equal to 125% of a fraction of which the
numerator is the number of Shares owned by such Shareholder immediately prior to
the Closing Date and the denominator is the total number of Shares owned by all
the Shareholders immediately prior to the Closing Date. The obligations of each
of the Minority Shareholders shall be pro-rata based on the number of Shares
owned by each Minority Shareholder immediately prior to the Closing Date as a
percentage of the total number of Shares owned by all the Shareholders
immediately prior to the Closing Date. Following the Closing, the Shareholders
shall have no right of or claim to contribution or indemnity against the Company
with respect to any breach, violation, default, or alleged breach, violation or
default of any representation, warranty or covenant of the Company in any of the
Acquisition Documents.
SECTION 11.02. Expenses. Except as otherwise specified in Section
10.02(b), all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred; provided, however, the costs and expenses of the Company's
counsel and accountants in excess of $81,000 shall be paid by the Shareholders.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy (confirmed by telephone within 24
hours following receipt thereof), or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.03):
(a) if to the Shareholders or the Company:
Bradford J. Brower as Shareholder Representative
851 South Freeport Industrial Parkway
Clearfield, Utah 84015
Telecopy: (801) 773-6185
Telephone: (801) 773-7300
- 75 -
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1000 Kearns Building
136 South Main Street
Salt Lake City, Utah 84101
Attention: Nolan S. Taylor, Esq.
Telecopy: (801) 359-8256
Telephone: (801) 320-6700
and
(b) if to the Parent or the Parent Sub:
The Shaw Group Inc.
11100 Mead Road
Baton Rouge, Louisiana 70816
Attention: Bret M. Talbot
Telecopy: (504) 296-1199
Telephone: (504) 296-1140
with a copy to:
Kantrow, Spaht, Weaver & Blitzer
(A Professional Law Corporation)
Suite 300, City Plaza
445 North Boulevard
P.O. Box 2997
Baton Rouge, Louisiana 70821-2997
Attention: J. Michael Robinson, Jr., Esq.
Telecopy: (504) 343-0637
Telephone: (504) 383-4703
- 76 -
and
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: William H. Caudill, Esq.
Telecopy: (713) 651-5246
Telephone: (713) 651-5151
SECTION 11.04. Public Announcements. Except to the extent that the
Shareholders or Parent believes on the advice of counsel that public disclosure
is required by Law, no party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without prior notification to the other parties, and the parties shall cooperate
as to the timing and contents of any such press release or public announcement.
SECTION 11.05. Headings; Construction. The descriptive headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The
provisions of this Agreement were negotiated by the parties hereto and this
Agreement shall be deemed to have been drafted by all the parties hereto.
SECTION 11.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof.
SECTION 11.08. Assignment. This Agreement may not be assigned by any
party hereto by operation of law or otherwise without the express written
consent of the other parties hereto (which consent may be granted or withheld in
the sole discretion of such other parties).
SECTION 11.09. No Third Party Beneficiaries. Except for the provisions
of Article IX relating to Indemnified Parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
- 77 -
SECTION 11.10. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver
in accordance with Section 10.03.
SECTION 11.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Louisiana, applicable to
contracts executed in and to be performed entirely within that state.
SECTION 11.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.14. Legal Advice. Each party hereto represents and
warrants to the other party that he, she or it has consulted attorneys,
accountants and tax advisors of their own choosing concerning the legal,
financial and tax consequences of this Agreement
SECTION 11.15. Remedies Not Exclusive. Subject to the provisions of
Section 9.02 (e), no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
ARTICLE XII
SHAREHOLDER REPRESENTATIVE; POWER OF ATTORNEY
SECTION 12.01. Shareholder Representative, Etc. Each of the
Shareholders hereby constitutes and appoints Bradford J. Brower as his true and
lawful attorney-in-fact, agent and representative (the "Shareholder
Representative"), with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to negotiate and
sign all amendments to this Agreement, and all other documents in connection
with the transactions contemplated by this Agreement, including without
limitation those instruments called for by this Agreement and all waivers,
consents instructions, authorizations and other actions called for, contemplated
or that may otherwise be necessary or appropriate in connection with this
Agreement or any of the foregoing agreements or instruments, granting unto the
Shareholder Representative full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that the Shareholder Representative, or his substitute or
- 78 -
substitutes, may lawfully do or cause to be done by virtue hereof, including
without limitation the power and authority to deliver and convey his Shares in
accordance with the terms hereof, to receive and give receipt for all
consideration due him pursuant to this Agreement and to receive all notices,
requests and demands that may be made under and pursuant to this Agreement.
Should the Shareholder Representative be unable or unwilling to serve or to
appoint his successor to serve in his stead, and unless the Shareholders appoint
a successor to serve in his stead, the Shareholders shall be required to act
jointly so that the Parent and the Parent Sub may always deal with one person on
their behalf.
IN WITNESS WHEREOF, the Shareholders, the Company the Parent and the
Parent Sub have caused this Agreement to be executed as of the date first
written above, the corporate parties represented herein by their respective
officers thereunto duly authorized.
- 79 -
THIS PLAN AND AGREEMENT OF MERGER IS NOT A PROSPECTUS AND ANY OFFERING OF THE
SHARES OF COMMON STOCK OF THE SHAW GROUP INC., COVERED BY THIS AGREEMENT IS NOT
A PUBLIC OFFERING. RECIPIENTS OF SUCH SHARES WILL NOT BE ENTITLED TO BRING A
CAUSE OF ACTION FOR RESCISSION UNDER SECTION 12(2) OF THE SECURITIES ACT OF 1933
FOR AN UNTRUE STATEMENT OF A MATERIAL FACT OR FOR THE FAILURE TO STATE A
MATERIAL FACT.
COMPANY:
NAPTech, INC.
By: -----------------------------
Name: Bradford J. Brower
Title: President
PARENT:
THE SHAW GROUP INC.
By: -----------------------------
Name: Bret M. Talbot
Title: Vice President and
Chief Financial Officer
PARENT SUB:
SAON, INC.
By: -----------------------------
Name: Bret M. Talbot
Title: President
Members of the Board of Directors of NAPTech, Inc.
- ----------------------- -------------------------
Bradford J. Brower Donald L. Robertson
- ----------------------- -------------------------
M. Russell Ballard Raymond Furgeson
- -----------------------
Robert A. Schroeder
- 80 -
Members of the Board of Directors of SAON, Inc.
- -------------------------- -----------------------------
Bret M. Talbot T.A. Barfield, Jr.
SHAREHOLDERS OF SAON, Inc.
THE SHAW GROUP INC.
By: -------------------------
Name: J. M. Bernhard, Jr.
Title: Chairman of the Board, President
and Chief Executive Officer
- 81 -
SHAREHOLDERS OF NAPTech, Inc.:
- ---------------------------- ------------------------
Bradford J. Brower (30.64%) Gary Stevenson (.98%)
- ---------------------------- -------------------------
Donald L. Robertson (10.71%) Scott Watterson (.98%)
- ---------------------------- -------------------------
Robert A. Schroeder (10.34%) Adelyn Bonin (.05%)
- ---------------------------- -------------------------
NUPETCO Associates (9.76%) Francis Ellyin (.10%)
- ---------------------------- -------------------------
GES Investments (8.29%) Thomas Young (.20%)
- ---------------------------- -------------------------
SRW Investments (8.29%) Roger Fisher (.10%)
- ---------------------------- -------------------------
Ballard Investment (7.81%) Robert Gerbode (.49%)
- ---------------------------- -------------------------
Richard Winwood (6.37%) Harold Stewart (.15%)
- ---------------------------- -------------------------
Prudential Securities (.20%) Karen Norman (.15%)
- ---------------------------- -------------------------
Kim Medeiros (.41%) Harry Norman (.10%)
- ---------------------------- -------------------------
Wendy Robertson (.26%) Eric Menke (.10%)
- ---------------------------- -------------------------
Greg R. Cowley (.98%) Albert Hedges (.15%)
- ---------------------------- -------------------------
Jack Bollerud (.24%) Michael Denicola (.24%)
-------------------------
Sue Olson (.10%)
- 82-
- -------------------------
Anoosh Gulian (.20%)
- -------------------------
Phyllis Sammon (.10%)
- -------------------------
Sharon Slough (.10%)
- -------------------------
Theodore Kaspervic (.10%)
- -------------------------
Douglas Lehman (.10%)
- -------------------------
BAP (.59%)
- -------------------------
Diane Wiacek (.10%)
- -------------------------
BB & GC (.52%)
- 83-
EXHIBIT 2(b)
------------
THIS PURCHASE AND SALE AGREEMENT IS NOT A PROSPECTUS AND ANY OFFERING OF THE
SHARES OF COMMON STOCK OF THE SHAW GROUP INC. COVERED BY THIS AGREEMENT IS NOT A
PUBLIC OFFERING. RECIPIENTS OF SUCH SHARES WILL NOT BE ENTITLED TO BRING A CAUSE
OF ACTION FOR RESCISSION UNDER SECTION 12(2) OF THE SECURITIES ACT OF 1933 FOR
AN UNTRUE STATEMENT OF A MATERIAL FACT OR FOR THE FAILURE TO STATE A MATERIAL
FACT.
PURCHASE AND SALE AGREEMENT
AMONG
THE MEMBERS OF FREEPORT PROPERTIES, L.C.,
FREEPORT PROPERTIES, L.C., SAON PROPERTIES, INC.
AND THE SHAW GROUP INC.
Dated as of January 27, 1997
TABLE OF CONTENTS
-----------------
(Not a Part of the Agreement)
Page
----
ARTICLE I DEFINITIONS ................................................... 1
SECTION 1.01. Certain Defined Terms.................... 1
ARTICLE II AGREEMENT TO PURCHASE AND SELL, ETC........................... 7
SECTION 2.01. Agreement to Purchase and Sell, Etc...... 7
SECTION 2.02. Purchase Price........................... 7
SECTION 2.03. Closing.................................. 8
SECTION 2.04. Closing Deliveries by the Company ....... 8
SECTION 2.05. Closing Deliveries by Acquisition and
the Parent............................... 9
SECTION 2.06. Deposit ................................. 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
MEMBERS AND THE COMPANY................................. 9
SECTION 3.01. Capacity of the Members........................ 9
SECTION 3.02. Reserved ...................................... 9
SECTION 3.03. Reserved ...................................... 10
SECTION 3.04. Organization, Ownership, Authority and
Qualification of the Company................... 10
SECTION 3.05. Reserved....................................... 10
SECTION 3.06. No Conflict.................................... 10
SECTION 3.07. Governmental Consents and Approvals............ 11
SECTION 3.08. Reserved ...................................... 11
SECTION 3.09. Certain Additional Representations............. 11
SECTION 3.10. No Undisclosed Liabilities or Indebtedness..... 11
SECTION 3.11. Reserved....................................... 11
SECTION 3.12. Sole Asset and Activity ....................... 11
SECTION 3.13. Litigation..................................... 11
SECTION 3.14. Reserved ...................................... 11
SECTION 3.15. Compliance with Laws........................... 11
SECTION 3.16. Environmental and Other Permits and Licenses;
Related Matters................................ 12
SECTION 3.17. Material Contracts............................. 13
SECTION 3.18. Reserved ...................................... 13
SECTION 3.19. Real Property.................................. 13
SECTION 3.20. Tangible Personal Property..................... 14
SECTION 3.21. Title, Condition, Etc.......................... 14
SECTION 3.22. Reserved....................................... 14
SECTION 3.23. Reserved....................................... 14
- i -
SECTION 3.24. Employee Benefit Matters ...................... 14
SECTION 3.25. Labor Matters.................................. 15
SECTION 3.26. Reserved....................................... 15
SECTION 3.27. Reserved....................................... 15
SECTION 3.28. Reserved ...................................... 15
SECTION 3.29. Full Disclosure................................ 15
SECTION 3.30. Investment Purpose, Etc........................ 15
SECTION 3.31. Brokers........................................ 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND ACQUISITION.................................. 17
SECTION 4.01. Organization and Authority of the Parent and
Acquisition ................................... 17
SECTION 4.02. No Conflict.................................... 17
SECTION 4.03. Governmental Consents and Approvals............ 18
SECTION 4.04. Litigation..................................... 18
SECTION 4.05. Brokers........................................ 18
SECTION 4.06. Reports; Financial Statements ................. 18
ARTICLE V ADDITIONAL AGREEMENTS ......................................... 19
SECTION 5.01 Conduct of Business After the Closing;
Liquidation ................................... 19
SECTION 5.02 Voting Rights Regarding the Parent's Common
Stock ......................................... 19
ARTICLE VI RESERVED...................................................... 19
ARTICLE VII TAX MATTERS ................................................. 19
SECTION 7.01. Representations, Warranties and Covenants ..... 19
SECTION 7.02. Form 8594 ..................................... 20
SECTION 7.03. Further Assurances; Continuing Cooperation..... 20
SECTION 7.04. Reserved ...................................... 20
SECTION 7.05. Indemnity ..................................... 20
SECTION 7.06. Reserved ...................................... 21
SECTION 7.07. Reserved ...................................... 21
SECTION 7.08. Reserved....................................... 21
SECTION 7.09. Reserved ...................................... 21
SECTION 7.10. Conveyance Taxes............................... 21
ARTICLE VIII CONDITIONS TO CLOSING....................................... 21
SECTION 8.01. Conditions to Obligations of the Members and
the Company.................................... 21
SECTION 8.02. Conditions to Obligations of the Parent and
Acquisition ................................... 23
- ii -
ARTICLE IX SURVIVAL AND INDEMNIFICATION.................................. 25
SECTION 9.01. Survival of Representations, Warranties and
Covenants...................................... 25
SECTION 9.02. Indemnification................................ 25
SECTION 9.03. Limits on Indemnification...................... 30
SECTION 9.04 Security for Members' Agreement to Indemnify... 30
ARTICLE X WAIVER ......................................... 31
SECTION 10.01. Waiver......................................... 31
ARTICLE XI GENERAL PROVISIONS............................................ 31
SECTION 11.01. Solidary Obligation of Members ................ 31
SECTION 11.02. Expenses....................................... 31
SECTION 11.03. Notices........................................ 31
SECTION 11.04. Public Announcements........................... 33
SECTION 11.05. Headings; Construction......................... 33
SECTION 11.06. Severability................................... 33
SECTION 11.07. Entire Agreement............................... 33
SECTION 11.08. Assignment..................................... 33
SECTION 11.09. Successors and Assigns......................... 33
SECTION 11.10. Amendment...................................... 34
SECTION 11.11. Governing Law.................................. 34
SECTION 11.12. Counterparts................................... 34
SECTION 11.13. Specific Performance........................... 34
SECTION 11.14. Legal Advice .................................. 34
SECTION 11.15 Remedies Not Exclusive ........................ 34
Exhibits
Exhibit A Description of Land
Exhibit 1.01 Permitted Encumbrances
Exhibit 2.04(a) Deed
Exhibit 2.04(b) Bill of Sale
Exhibit 2.04(c) Title Policy
Exhibit 2.05(b) Assumption Agreement
Exhibit 3.04 Members and Percentage Ownership of the Company
Exhibit 8.01(f) Legal Opinion of Parent's Counsel
Exhibit 8.01(s)(1) Registration Rights Agreement
Exhibit 8.02(f) Legal Opinion of Company's Counsel
- iii -
Exhibit 8.02(s)(2) Representation Letter by the Members
Exhibit 8.02(l) Escrow Agreement
- iv -
THIS PURCHASE AND SALE AGREEMENT, dated as of January 27, 1997, among
the undersigned members of FREEPORT PROPERTIES, L.C. (collectively, the
"Members"), FREEPORT PROPERTIES, L.C., a Utah limited liability company (the
"Company"), THE SHAW GROUP INC., a Louisiana corporation (the "Parent"), and
SAON PROPERTIES, INC., a Louisiana corporation ("Acquisition").
RECITALS
WHEREAS, the Members own all the membership interest of the Company;
and
WHEREAS, the Parent owns all of the issued and outstanding shares of
common stock, $0.01 par value, of Acquisition; and
WHEREAS, the Parent desires to purchase from the Company, and the
Company desires to sell to the Parent (with title to be conveyed directly from
the Company to Acquisition or such other entity as designated by the Parent),
upon the terms and subject to the conditions of this Agreement, that certain
tract or parcel of land situated in Davis County, State of Utah, as further
described in Exhibit "A" attached hereto and incorporated herein, together with
all rights and interests appurtenant thereto (the "Land"), including all
improvements, structures and fixtures located on the Land (the "Improvements")
and all rights, titles, easements and interests appurtenant to the Land and
Improvements (hereinafter the Land and Improvements are collectively called the
"Freeport Real Property");
WHEREAS, at or prior to the Closing, as hereinafter defined, the Parent
will pay the Purchase Price directly to the Company as consideration for the
purchase of the Freeport Real Property;
WHEREAS, at or prior to the Closing, the Parent will direct the Company
to convey the Freeport Real Property directly to Acquisition (or such other
entity as designated by the Parent) as if the Parent had acquired the Freeport
Real Property (and any liabilities assumed or to which the Freeport Real
Property is subject) directly from the Company in a transaction in which the
Parent's basis in the Freeport Real Property is determined under Section 1012 of
the Code, as hereinafter defined, and the Parent then had transferred the
Freeport Real Property (and liabilities) to Acquisition in a transaction in
which the Parent's basis in the Freeport Real Property is adjusted under Section
358 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Members, the Company,
Acquisition and the Parent hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
- 1 -
"Acquisition" has the meaning specified in the preamble of this
Agreement.
"Acquisition Documents" has the meaning specified in Section 9.01.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Purchase and Sale Agreement,
dated as of the date set forth in the preamble to this Agreement, among the
Members, the Company, Acquisition and the Parent (including the Exhibits hereto)
and all amendments hereto made in accordance with the provisions of Section
11.10.
"Assumption Agreement" has the meaning specified in Section 2.05(b).
"Bill of Sale" has the meaning specified in Section 2.04(b).
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the State
of Louisiana or in the State of Utah.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. ss.ss. 9601 et seq.
"Claim Notice" has the meaning specified in Section 9.02.
"Closing" has the meaning specified in Section 2.03.
"Closing Date" has the meaning specified in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"Company" has the meaning specified in the preamble to this Agreement.
"Company's Counsel" means LeBoeuf, Lamb, Greene & MacRae L.L.P., legal
counsel to the Company and two of the Members, Bradford J. Brower and Greg R.
Cowley, in connection with this Agreement and the transactions contemplated
hereby.
"Control" (including, without limitation, the terms "controls",
"controlled by" and "under common control with"), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, or as trustee or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of
- 2 -
voting securities, as trustee or executor, by contract or otherwise, including,
without limitation, the ownership, directly or indirectly, of securities having
the power to elect a majority of the board of directors or similar body
governing the affairs of such Person.
"Deed" has the meaning specified in Section 2.04(a).
"Encumbrance" or "Encumbrances" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, settlements, consent orders or consent agreements
by any Person relating in any way to any Environmental Law, Environmental
Permits or Hazardous Materials, or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Law" means any Law, now in effect, and any judicial or
administrative interpretation thereof, including, without limitation, any
judicial or administrative order, consent decree or judgment, relating to or
addressing the environment, health, safety or Hazardous Materials, including
without limitation any Occupational Safety and Health Law.
"Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental Law, or (b) damages
arising from, or costs incurred by, such Governmental Authority in response to a
Release of a Hazardous Material.
"Environmental Permits" means all Permits required under any applicable
Environmental Law.
"ERISA" has the meaning specified in Section 3.24.
"Escrow Agreement" means the agreement referred to in Section 8.02.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Freeport Mortgage Loan" has the meaning specified in Section 2.02.
"Freeport Real Property" has the meaning specified in the Recitals to
this Agreement.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time.
- 3 -
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" or "Governmental Orders" means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Materials" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under any Environmental Law.
"Improvements" has the meaning specified in the Recitals to this
Agreement.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (h) all Indebtedness of others
referred to in clauses (a) through (f) above guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to or in any other manner invest in the debtor (including,
without limitation, any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or (iv)
otherwise to assure a creditor against loss, and (i) all Indebtedness referred
to in clauses (a) through (f) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Encumbrance on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02.
- 4 -
"Indemnifying Party" has the meaning specified in Section 9.02.
"Indemnity Notice" has the meaning specified in Section 9.02.
"IRS" means the Internal Revenue Service of the United States.
"Land" has the meaning specified in the Recitals to this Agreement.
"Law" or "Laws" means any United States federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, order, Permit, other
legal requirement or rule of law.
"Lease" means any and all leases, subleases, sale/leaseback agreements
or similar arrangements, whether or not capitalized.
"Leased Real Property" means the real property leased by the Company,
as tenant, together with, to the extent leased by the Company, all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of the
Company attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Losses" has the meaning specified in Section 9.02.
"Material Contracts" has the meaning specified in Section 3.17.
"Members" has the meaning specified in the preamble to this Agreement.
"Merger Agreement" means that certain Plan and Agreement of Merger by
and among NAPTech, Inc., the shareholders of NAPTech, Inc., the Parent and SAON,
Inc. dated as of August 5, 1996 as heretofore or hereafter amended, supplemented
or modified.
"NAPTech Lease" has the meaning specified in Section 3.19(c).
"Notice Period" has the meaning specified in Section 9.02.
"Occupational Safety and Health Law" means any law, rule or regulation
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any mandatory program designed to
provide safe and healthful working conditions.
- 5 -
"Owned Real Property" means the real property owned by the Company
prior to the Closing, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Parent" has the meaning specified in the preamble to this Agreement.
"Parent SEC Reports" has the meaning specified in Section 4.06.
"Parent's Common Stock" means the common stock, no par value, of the
Parent.
"Parent's Counsel" means Kantrow, Spaht, Weaver & Blitzer (A
Professional Law Corporation) and Fulbright & Jaworski L.L.P., legal counsel to
the Parent and Acquisition in connection with this Agreement and the
transactions contemplated hereby.
"Permits" has the meaning specified in Section 3.16.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable which are not in excess of $10,000 in the
aggregate; and (b) the Encumbrances identified on Exhibit 1.01.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization, governmental authority or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Plans" has the meaning specified in Section 3.24.
"Purchase Price" has the meaning specified in Section 2.02.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Regulations" means the Treasury Regulations (including, without
limitation, Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes.
"Release" means the release or threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migrating into the indoor or outdoor environment of any Hazardous Material.
"Returns" has the meaning specified in Section 7.01.
"SEC" means the Securities and Exchange Commission.
- 6 -
"Securities" has the meaning specified in Section 2(11) of the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"subsidiaries" means any and all other corporations, partnerships,
joint ventures, limited liability companies, associations and other entities
controlled by the Company directly or indirectly through one or more
intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, premiums, property,
sales, use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value added, or
gains taxes; license, registration and documentation fees; and customs duties,
tariffs, and similar charges.
"Tax Returns" has the meaning specified in Section 7.01.
"Third Party Claim" has the meaning specified in Section 9.02.
"Title Policy" has the meaning specified in Section 2.04(c).
ARTICLE II
AGREEMENT TO PURCHASE AND SELL, ETC.
SECTION 2.01 Agreement to Purchase and Sell, Etc. Subject to the terms
and conditions of this Agreement, the Company hereby agrees to sell, convey and
assign to Acquisition (in accordance with the Parent's direction), with full
warranty of title except for Permitted Encumbrances, and the Parent (with full
warranty of title to be conveyed directly to Acquisition) hereby agrees to
purchase and accept from the Company, in exchange for and in consideration of
the Purchase Price as set forth in Section 2.02, the Freeport Real Property.
SECTION 2.02 Purchase Price. (a) The aggregate purchase price (the
"Purchase Price") for the Freeport Real Property shall be (i) 83,333
unregistered shares of the Parent's Common Stock and (ii) assumption by the
Parent and Acquisition, as applicable, of that certain mortgage loan of the
Company to Research Industries secured by a first mortgage on the Freeport Real
Property having a present outstanding principal balance of $1,809,066 bearing
interest at 8 1/2% per annum, and being payable in monthly installments with a
due date of January 1, 2000 (the "Freeport Mortgage Loan"). The value of the
unregistered shares of the Parent's Common Stock for purposes of this Agreement
shall be $24.00 per share. In addition, the Parent and Acquisition estimate that
the acquisition costs including engineering, legal, accounting, title, and other
appropriate costs (including stock registration) shall be $125,000.
- 7 -
(b) The Purchase Price plus the acquisition costs for the Freeport
Real Property shall be allocated as follows:
Purchase Price Acquisition Costs Total Cost
Land $560,000 $18,375 $578,375
Improvements $3,249,058 $106,625 $3,355,683
$3,809,058 $125,000 $3,934,058
The value of the Freeport Real Property shall be that as described above
plus any additional consideration paid or liabilities assumed on the Closing
Date. The allocation of the Purchase Price plus the acquisition costs shall be
based on such determinations found reasonable by the Parent, the Company and
Acquisition, and subdivided in accordance with the principles set forth in
Treas. Reg. ss. 1.1060-1T. Because the Purchase Price (plus any additional
assumed liabilities on the Closing Date and any additional consideration) does
not exceed the fair market value of the Freeport Real Property, no amount will
be allocated to goodwill.
SECTION 2.03 Closing. Upon the terms and subject to the conditions of
this Agreement, the purchase and sale of the Freeport Real Property contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
the offices of Kantrow, Spaht, Weaver & Blitzer (A Professional Law
Corporation), Baton Rouge, Louisiana, at 10:00 A.M. Baton Rouge time on the same
day as the closing under the Merger Agreement, following the satisfaction or
waiver of all other conditions to the obligations of the parties set forth in
Article 8, or at such other place or at such other time or on such other date as
the Company and the Parent may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
SECTION 2.04 Closing Deliveries by the Company. At the Closing, the
Company shall, at the Parent's discretion, deliver or cause to be delivered to
Acquisition:
(a) A general warranty deed (the "Deed") in the form of Exhibit
2.04(a) duly executed by the Company;
(b) A bill of sale (the "Bill of Sale") in the form of Exhibit
2.04(b) duly executed by the Company;
(c) A title insurance policy (the "Title Policy") issued by Lawyers
Title Insurance Corporation in the amount of $9,155 in the form of Exhibit
2.04(c), the cost of which shall be paid by the Company;
(d) A receipt from the Company for the stock certificates evidencing
the number of unregistered shares of the Parent's Common Stock as provided in
Section 2.02 above; and
(e) the opinions, certificates and other documents required to be
delivered pursuant hereto.
- 8 -
SECTION 2.05 Closing Deliveries by Acquisition and the Parent. At the
Closing, Acquisition and the Parent, as applicable, shall deliver to the
Company: (a) the stock certificates evidencing the number of unregistered shares
of the Parent's Common Stock as provided in Section 2.02 above; (b) an agreement
assuming the Freeport Mortgage Loan in the form of Exhibit 2.05(b) (the
"Assumption Agreement"), and (c) the opinions, certificates and other documents
required to be delivered pursuant hereto.
SECTION 2.06 Deposit. At the Closing, the Company shall return to
NAPTech, Inc. the deposit in the amount of $23,200 previously remitted by
NAPTech, Inc. to the Company pursuant to the NAPTech Lease.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
MEMBERS AND THE COMPANY
Subject to the terms and conditions of this Agreement, each of the
Members and the Company hereby represents and warrants to the Parent and
Acquisition as of the date hereof, as set forth in Sections 3.01 through 3.31,
as follows:
SECTION 3.01. Capacity of the Members. The Members are individuals with
full legal capacity to enter into this Agreement, to carry out the Members'
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Members, and this
Agreement constitutes a legal, valid and binding obligation of the Members
enforceable against the Members in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity.
SECTION 3.02. Reserved.
SECTION 3.03. Reserved.
SECTION 3.04. Organization, Ownership, Authority and Qualification of
the Company.
(a) The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Utah and has all
necessary power and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to conduct its business. The Company is
duly licensed or qualified to do business and is in good standing in the State
of Utah which is the only jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or qualification
necessary. All of the foregoing registrations, licenses, and qualifications are
in full force and effect and the Company has not received any notice of any
event, inquiry, investigation or proceeding that could result in the suspension,
revocation or limitation of any such registration, license, qualification or
- 9 -
membership, and to the best knowledge of the Members and the Company, there is
no sustainable basis for any such suspension, revocation or limitation.
(b) All of the membership interests of the Company are owned by the
Members, and all membership interests of the Company are validly issued, fully
paid and nonassessable. The percentage membership interests of each Member in
the Company is set forth on Exhibit 3.04.
(c) All actions taken by the Company have been duly authorized or
ratified and the Company has not taken any action that in any respect conflicts
with, constitutes a default under or results in a violation of any provision of,
its articles of organization or operating agreement. Complete and accurate
copies of the articles of organization and operating agreement, in each case as
in effect on the date hereof, of the Company have been delivered by the Members
and the Company to the Parent.
SECTION 3.05. Reserved.
SECTION 3.06. No Conflict. The execution, delivery and performance of
this Agreement by the Members and the Company do not and will not (a) violate,
conflict with or result in the breach of any provision of the articles of
organization or operating agreement of the Company, (b) conflict with or violate
any Law or Governmental Order applicable to the Members, the Company, or any of
their respective assets, properties or businesses, or (c) conflict with, result
in any breach of, constitute a default (or event which with the giving of notice
or the lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Members or
the Company, pursuant to any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Members or the Company is a party or by which any of
such assets or properties is bound or affected.
SECTION 3.07. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other third party.
SECTION 3.08. Reserved.
- 10 -
SECTION 3.09. Certain Additional Representations.
(a) The Company and each of the Members represent and warrant that none
of them has any affiliation with Freeport Center Associates.
SECTION 3.10. No Undisclosed Liabilities or Indebtedness.
(a) There are no Liabilities or Indebtedness of the Company, and no
Liabilities or Indebtedness encumbering the Freeport Real Property other than
the Freeport Mortgage Loan and the Permitted Encumbrances
SECTION 3.11. Reserved.
SECTION 3.12. Sole Asset and Activity. Since its formation, the sole
asset owned by the Company has been the Freeport Real Property and the sole
activity of the Company has been the ownership of the Freeport Real Property and
the leasing thereof to NAPTech, Inc., a Delaware corporation.
SECTION 3.13. Litigation. There are no Actions (i) by or against the
Company, (ii) by or against the Members relating to the business of the Company,
or (iii) affecting the Freeport Real Property, pending before any Governmental
Authority (or, to the best knowledge of the Members and the Company, threatened
to be brought by or before any Governmental Authority). None of (i) the Company,
(ii) the Freeport Real Property or (iii) the Members (with respect to the
business of the Company) is subject to any Governmental Order (nor, to the best
knowledge of the Members and the Company, are there any such Governmental Orders
threatened to be imposed by any Governmental Authority).
SECTION 3.14. Reserved.
SECTION 3.15. Compliance with Laws. The Company has conducted and
continues to conduct the ownership and operation of the Freeport Real Property
in accordance with all material Laws and Governmental Orders applicable to the
Company and the Freeport Real Property, and neither the Company nor the
ownership and operation of the Freeport Real Property is in violation of any
such Law or Governmental Order. The Company has duly and validly filed or caused
to be filed all material reports, statements, documents, registrations, filings
or submissions that were required by applicable Laws to be filed; all such
filings complied with all applicable Laws in all material respects when filed,
and no material deficiencies have been asserted with respect to any such filings
which have not been satisfied.
SECTION 3.16. Environmental and Other Permits and Licenses; Related
Matters.
(a) The Members and the Company currently hold all the permits,
licenses, authorizations, certificates, consents, exemptions and approvals
required under any Law (collectively, "Permits"), including, without
limitation, Environmental Permits, necessary for the
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ownership, use, occupancy and operation of the Freeport Real Property, and all
such Permits are in full force and effect.
(b) (i) Each tenant and occupant of the Freeport Real Property holds
all Permits, including, without limitation, Environmental Permits, necessary for
the use, occupancy and operation of the Freeport Real Property by such tenant or
occupant, and all such Permits are in full force and effect; (ii) there is no
existing practice, action or activity of any tenant or occupant of the Freeport
Real Property which will give rise to any criminal liability or civil Liability
under, or violate or prevent compliance with, any applicable material Law,
including, without limitation, any applicable Environmental Law; (iii) no tenant
or occupant of the Freeport Real Property has received any notice from any
Governmental Authority revoking, cancelling, rescinding, materially modifying or
refusing to renew any Permit or providing written notice of violations under any
Law, including, without limitation, any applicable Environmental Law; (iv) each
tenant and occupant of the Freeport Real Property is in all respects in
compliance with its Permits, including, without limitation, Environmental
Permits; (v) there is no existing practice, action or activity of the Company or
the Members (relating to the business of the Company) which has given or will
give rise to any unresolved criminal liability or civil Liability under, or
violate or prevent compliance with, any applicable Law, including, without
limitation,any applicable Environmental Law; (vi) neither the Members nor the
Company has received any notice from any Governmental Authority revoking,
cancelling, rescinding, materially modifying or refusing to renew any Permit;
and (vii) the Company is in all respects in compliance with the Permits,
including, without limitation, Environmental Permits. Section 3.16(a) of the
Disclosure Schedule to the Merger Agreement completely and accurately identifies
all Permits, including, without limitation, Environmental Permits and indicates
by asterisk those that will require the consent of any Governmental Authority in
the event of the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement.
(c) (i) None of the Company nor the Members (with respect to the
business of the Company) has violated or is violating any applicable
Environmental Law; (ii) no tenant or occupant of the Freeport Real Property is
violating any applicable Environmental Law in connection with the ownership,
use, occupancy or operation of the Freeport Real Property; (iii) there has been
no Release of Hazardous Materials at, to, from, or under the Freeport Real
Property except (x) Releases which individually or collectively do not exceed
the applicable reportable quantity established pursuant to CERCLA, or (y)
Releases of petroleum or its derivatives which individually or collectively do
not exceed ten gallons; (iv) none of the Company nor the Members (with respect
to the business of the Company) has generated, transported or arranged for the
transport of, or disposed of any Hazardous Materials at any location, other than
amounts and types of Hazardous Materials normally present in ordinary office
trash or household waste; (v) no tenant or occupant of the Freeport Real
Property has generated at such Freeport Real Property any Hazardous Material,
other than amounts and types of Hazardous Materials normally present in ordinary
office trash or household waste other than the transportation set forth in
Section 3.16 of the Disclosure Schedule to the Merger Agreement; (vi) none of
the Company nor the Members (with respect to the business of the Company) has
any Liabilities in connection with the Release of any Hazardous Material at any
location; (vii) there is not present at any of the Freeport Real Property any
underground storage tanks or sumps, asbestos, or polychlorinated
- 12 -
biphenyls; (viii) no Environmental Lien has attached to any of the Freeport Real
Property; and (ix) there are no unresolved past, pending or threatened
Environmental Claims against the Company or the Members, nor are there any
circumstances that may form the basis of any such Environmental Claim.
SECTION 3.17. Material Contracts. (a) The Company is not a party to
any contract or agreement, and the Freeport Real Property is not subject to any
contract, agreement, lease or mortgage other than the following (collectively,
the "Material Contracts"):
(i) the Freeport Mortgage Loan; and
(ii) the NAPTech Lease.
(b) Each Material Contract is legal, valid, binding, enforceable and in
full force and effect, and will not cease to be in full force and effect on
terms identical to those currently in effect following the consummation of the
transactions contemplated by this Agreement, except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors, of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Material Contract. The Company is not in breach of,
or default under, any Material Contract.
(c) To the best knowledge of the Members and the Company, no other
party to any Material Contract is in breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting any
Person any right to purchase the Freeport Real Property other than this
Agreement.
(e) Complete and accurate copies of each of the Material Contracts have
previously been furnished by the Members and the Company to the Parent.
SECTION 3.18. Reserved.
SECTION 3.19. Real Property. (a) The only Owned Real Property, as of
the date hereof and at all times prior hereto, is the Freeport Real Property.
(b) There is, as of the date hereof, and was, at all times prior
hereto, no Leased Real Property.
(c) The Members have, or have caused to be, delivered to the Parent a
complete and accurate copy of the following Lease which is the only Lease now or
previously relating to the Freeport Real Property to which the Company is or was
a party (the "NAPTech Lease"): The Lease dated February 23, 1993, by and between
the Company and NAPTech, Inc. with respect to the Freeport Real Property.
- 13 -
(d) There are no condemnation proceedings or eminent domain proceedings
of any kind pending or, to the best knowledge of the Members and the Company,
threatened against the Freeport Real Property.
(e) Pursuant to Article II of the NAPTech Lease, the term thereof
terminated on February 28, 1996, but pursuant to Article III, Section 16, the
Company has agreed to permit NAPTech to holdover, on a month-to-month basis, at
an agreed upon monthly rental of $35,000 per month. Since March 1, 1996, the
actual monthly rental received by the Company pursuant to the NAPTech Lease has
been $35,000 per month.
SECTION 3.20. Tangible Personal Property. The Company owns no
equipment, inventory, supplies, furniture, personalty, vehicles or other
tangible personal property (the "Tangible Personal Property"), other than any
Tangible Personal Property being transferred hereby.
SECTION 3.21. Title, Condition, Etc. (a) The Company has good and
marketable title to the Freeport Real Property, free and clear of all
Encumbrances, except for Permitted Encumbrances. All buildings, plants,
structures and fixtures comprising the Improvements lie wholly within the
boundaries of the Land owned by the Company and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person.
(b) All the buildings, plants, structures, fixtures and equipment
comprising the Improvements are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and none of such buildings, plants, structures, fixtures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost.
SECTION 3.22. Reserved.
SECTION 3.23. Reserved.
SECTION 3.24. Employee Benefit Matters. The Company has, and previously
has had, no (i) employee welfare benefit and employee pension benefit plans as
defined in Sections 3(1) and 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including, but not limited to, any (1) plans that
provide retirement income or result in a deferral of income by employees for
periods extending to termination of employment or beyond, and plans that provide
medical, surgical, or hospital care benefits or benefits in the event of
sickness, accident, disability, death or unemployment, and (2) other employee
benefit agreements or arrangements, including without limitation deferred
compensation plans, incentive plans, bonus plans or arrangements, stock option
plans, stock purchase plans, stock award plans, golden parachute agreements,
severance pay plans, dependent care plans, cafeteria plans, employee assistance
programs, scholarship programs, employment contracts, vacation policies, or
other similar plans, agreements and arrangements for the benefit of directors,
officers, employees or former employees (or their beneficiaries) of the Company
or (ii) plan in respect of which the
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Company could reasonably be expected to incur liability under Section 4212(c) of
ERISA (collectively, the "Plans").
SECTION 3.25. Labor Matters. The Company has, and previously has had,
no employees.
SECTION 3.26. Reserved.
SECTION 3.27. Reserved.
SECTION 3.28. Reserved.
SECTION 3.29. Full Disclosure. (a) There are no facts pertaining to
the Company or the Freeport Real Property that are reasonably likely to have a
material adverse effect that have not been disclosed in this Agreement.
(b) No representation or warranty of the Members in this Agreement, nor
any certificate furnished or to be furnished by the Members to the Parent
pursuant to this Agreement, or in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 3.30. Investment Purpose; Etc.
(a) The Company hereby confirms that the Parent's Common Stock which it
will receive under this Agreement will be acquired for investment for the
Company's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Company has no present
intention of selling, granting any participation in or otherwise distributing
the Parent's Common Stock. By executing this Agreement, the Company further
represents that it has no present intention of selling, granting any
participation in or otherwise distributing the same in a manner contrary to the
Securities Act or applicable state law.
(b) The Company understands that the shares of the Parent's Common
Stock that it will receive under this Agreement are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Parent in a transaction not involving a public offering and
that under such laws and applicable regulations such shares of the Parent's
Common Stock may be resold without registration under the Securities Act only in
certain limited circumstances and in accordance with the terms and conditions
set forth in the legend described in Section 3.30(c). In this connection, the
Company represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
(c) To the extent applicable, each certificate evidencing any of the
shares of the Parent's Common Stock issued to the Company shall be endorsed with
a legend in substantially the form set forth below, and the Company covenants
that, except to the extent such restrictions
- 15 -
are waived by the Parent, the Company shall not transfer the shares represented
by any such certificate without complying with the restrictions on transfer
described in the legend endorsed on such certificate:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID
SECURITIES, OR (ii) THIS CORPORATION RECEIVES AN OPINION SATISFACTORY
TO THIS CORPORATION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES
ACCEPTABLE TO THIS CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION. THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS SET FORTH IN THAT CERTAIN REGISTRATION
RIGHTS AGREEMENT DATED AS OF JANUARY 27, 1997 (THE "REGISTRATION
AGREEMENT") AMONG SHAW AND FREEPORT PROPERTIES, L.C. A COPY OF THE
REGISTRATION AGREEMENT IS FILED WITH THE SECRETARY OF SHAW. BY
ACCEPTANCE OF THIS CERTIFICATE, THE HOLDER HEREOF AGREES TO BE BOUND BY
THE TERMS OF THE REGISTRATION AGREEMENT.
(d) Each of the Members and the Company is an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act.
(e) None of the Company, the Members or their Affiliates have purchased
or sold any shares of Parent's Common Stock since February 1, 1996.
SECTION 3.31. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement from the Company or the
Members based upon arrangements made by or on behalf of the Members or the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
Each of the Parent and Acquisition hereby represents and warrants to
the Members and the Company as follows:
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SECTION 4.01. Organization and Authority of the Parent and Acquisition.
Each of the Parent and Acquisition is a corporation duly organized, validly
existing and in good standing under the laws of the State of Louisiana and has
all necessary corporate power and authority to enter into this Agreement, to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. Upon the approval of this Agreement by the Board of
Directors of the Parent, the execution and delivery of this Agreement by the
Parent and Acquisition, the performance by the Parent and Acquisition of their
respective obligations hereunder and the consummation by the Parent and
Acquisition of the transactions contemplated hereby have been duly authorized by
all requisite corporate action on the part of the Parent. This Agreement has
been duly executed and delivered by the Parent and Acquisition, and (assuming
due authorization, execution and delivery by the Company and the Members) upon
receipt of the necessary approvals by Governmental Authorities, this Agreement
will constitute a legal, valid and binding obligation of the Parent and
Acquisition enforceable against the Parent and Acquisition in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of
creditors or by general principles of equity.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, except as may result from any facts or
circumstances relating solely to the Members or Acquisition, the execution,
delivery and performance of this Agreement by the Parent and Acquisition does
not and will not (a) violate, conflict with or result in the breach of any
provision of the articles of incorporation or by-laws of the Parent or
Acquisition, (b) conflict with or violate any Law or Governmental Order
applicable to the Parent or Acquisition which would have a material adverse
effect on the ability of the Parent or Purchaser to consummate the transactions
contemplated by this Agreement or (c) conflict with, or result in any breach of,
constitute a default (or event which with the giving of notice or the lapse of
time, or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Parent or Acquisition pursuant to, any
note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which the
Parent or Acquisition is a party or by which any of such assets or properties
are bound or affected which would have a material adverse effect on the ability
of the Parent or Acquisition to consummate the transactions contemplated by this
Agreement. The Parent's Common Stock to be issued pursuant to Section 2.02 will,
when issued, be duly authorized, validly issued, fully paid and nonassessable.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Parent and Acquisition do not
and will not require any consent, approval, authorization or other order of,
action by, filing with, or notification to, any Governmental Authority or any
other third party.
SECTION 4.04. Litigation. Except as disclosed in a writing given to
the Members by the Parent prior to the execution of this Agreement, no claim,
action, proceeding or investigation is pending or, to the best knowledge of the
Parent and Acquisition after due inquiry, threatened,
- 17 -
which seeks to delay or prevent the consummation of, or which could reasonably
be expected to materially adversely affect the Parent's or Acquisition's ability
to consummate, or which could otherwise affect the legality, validity or
enforceability of, the transactions contemplated by this Agreement.
SECTION 4.05. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Parent.
SECTION 4.06. Reports; Financial Statements.
(a) Copies of all reports, registration statements and other filings,
together with any amendments thereto, filed by the Parent with the Securities
and Exchange Commission (the "SEC") since December 8, 1993 through the date of
this Agreement (the "Parent SEC Reports"), have been heretofore delivered to the
Company and the Members by the Parent. As of the respective dates of their
filing with the SEC, the Parent SEC Reports complied, and all such reports,
registration statements and other filings to be filed by the Parent with the SEC
prior to the Closing Date will comply, in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations of the SEC promulgated thereunder, and did not at the time they
were filed with the SEC, or will not at the time they are filed with the SEC,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
materially misleading.
(b) The consolidated financial statements (including, in each case, any
related notes thereto) contained in the Parent SEC Reports and in any such
reports, registration statements and other filings to be filed by the Parent
with the SEC prior to the Closing Date (i) have been or will be prepared in
accordance with the published rules and regulations of the SEC and GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and (ii) fairly present or will fairly present
in all material respects the consolidated financial position of the Parent and
its subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated, except that any
unaudited interim financial statements were or will be subject to normal and
recurring year-end adjustments and may omit footnote disclosure as permitted by
regulations of the SEC.
(c) Since May 31, 1996, to the date hereof, there has been no material
adverse event relating to the Parent and its subsidiaries taken as a whole and
no material adverse change in the financial position or results of operations of
the Parent and its subsidiaries taken as a whole which, in either case, (i)
require a public disclosure or filing by the Parent with the SEC or (ii) will be
required to be included in a Parent SEC Report which report includes the period
from May 31, 1996, to the date hereof.
- 18 -
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business After the Closing; Liquidation. The
Company and the Members hereby covenant and agree that (i) following the
Closing, the sole business activity of the Company shall be the ownership of the
Parent's Common Stock, and (ii) no later than twelve months following the
Closing Date, the Company shall be liquidated and dissolved and the assets of
the Company distributed to the Members in accordance with their respective
membership interests.
SECTION 5.02. Voting Rights Regarding the Parent's Common Stock. The
Company and the Members hereby covenant and agree that the Operating Agreement
of the Company shall be amended to provide that the Members shall have the right
to vote the number of shares of the Parent's Common Stock received by the
Company pursuant to this Agreement in proportion to their membership interests
in the Company. The Company and the Members covenant and agree to comply with
such amendment, which amendment to the Operating Agreement of the Company may
not be amended, changed, waived or repealed, directly or indirectly.
ARTICLE VI
RESERVED
ARTICLE VII
TAX MATTERS
SECTION 7.01. Representations, Warranties and Covenants.
Each of the Members and the Company hereby represents and warrants, as
of the date hereof and as of the Closing Date, as follows:
(i) (A) all returns and reports in respect of Taxes ("Tax
Returns" or "Returns") required to be filed as of the date of this Agreement
with respect to the Company and the Freeport Real Property have been timely
filed; (B) all Taxes shown to be payable on such Returns and all assessments of
Tax made against the Company or the Freeport Real Property with respect to such
Returns have been paid; (C) all such Returns are true, correct, and complete in
all material respects; and (D) no adjustment relating to such Returns has been
proposed formally or informally by any Tax authority and, to the best knowledge
of the Members and the Company, no basis exists for any such adjustment;
- 19 -
(ii) there is no pending or, to the best knowledge of the
Members and the Company, threatened actions or proceedings for the assessment or
collection of Taxes against the Company or the Freeport Real Property;
(iii) Reserved.
(iv) there are no Tax liens on any assets of the Company
except liens for Taxes that are not yet due and payable;
SECTION 7.02. Form 8594. Because Section 1060(e) of the Code, which is
applicable to stock transfers, such as the transactions contemplated by the
Merger Agreement, does not currently require the completing and filing of Form
8594, the Parent, Acquisition and the Company do not intend to file Form 8594,
but they acknowledge that Form 8594 may be required to be filed by them. The
Parent, Acquisition and the Company hereby agree that Form 8594, should it be
required, shall be completed and filed by both of them using the information
described in Section 2.02(b). Further, the Parent, Acquisition and the Company
agree to cooperate with each other should there be supplemental information or
supplemental filings required.
SECTION 7.03. Further Assurances; Continuing Cooperation. The Parent,
Acquisition and the Company agree that from time to time hereafter and without
further consideration, they will execute and deliver such additional or further
certificates, agreements or instruments of conveyance, assignment and transfer,
and take such other actions as may reasonably be requested by any other party,
as may be necessary or appropriate to fully carry out their obligations
hereunder or the purpose of this Agreement. In furtherance thereof, each of the
Parent, Acquisition and the Company shall cooperate with the other party with
respect to, and shall make available to the other party on a reasonably timely
basis such tax data and other information as may be reasonably required for, the
preparation of any Tax Returns required to be prepared and filed with respect to
the Freeport Real Property or the Company, and for the conduct of any audits or
litigation with respect to Taxes of the Company or for the proper payment of any
Taxes for which such party is responsible under the Agreement.
SECTION 7.04. Reserved.
SECTION 7.05. Indemnity. The Members agree to indemnify and hold the
Parent and Acquisition harmless against any breach of a covenant contained in
this Article VII and the following Taxes: (i) Taxes imposed on the Company or
any one or more Members and (ii) Taxes imposed on the Freeport Real Property for
any period on or prior to the Closing.
SECTION 7.06. Reserved.
SECTION 7.07. Reserved.
SECTION 7.08. Reserved.
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SECTION 7.09. Reserved.
SECTION 7.10. Conveyance Taxes. Any real property transfer or gains,
sales, use, transfer, value added, stock transfer, stamp, recording,
registration, and any similar Tax or fee that becomes payable in connection with
any and all of the transactions contemplated by this Agreement shall be paid by
the Members who shall file such applications and documents as shall permit any
such Tax to be assessed and paid on or prior to the Closing Date in accordance
with any available pre-sale filing procedure. Each party hereto shall execute
and deliver all instruments and certificates necessary to enable the other to
comply with the foregoing.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Members and the Company.
The respective obligations of the Members and the Company to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Parent and Acquisition contained in this Agreement shall have
been true and correct as of the date they were deemed to have been made and
shall be true and correct in all material respects as of the Closing, with the
same force and effect as if made as of the Closing, except for such changes as
are permitted or contemplated by this Agreement, and other than such
representations and warranties as are made as of another date. The covenants and
agreements contained in this Agreement to be complied with by the Parent and
Acquisition on or before the Closing shall have been complied with. The Members
shall have received a certificate from the Parent to such effect signed by duly
authorized representatives thereof and dated as of the Closing Date;
(b) Reserved.
(c) No Proceeding or Litigation. No Action shall have been commenced or
threatened by or before any Governmental Authority against any of the Members,
the Company, Acquisition or the Parent, seeking to restrain or adversely alter
the transactions contemplated by this Agreement or which is likely to render it
impossible or unlawful to consummate such transactions; provided, however, that
the provisions of this Section 8.01(c) shall not apply if the Members or the
Company has directly or indirectly solicited or encouraged any such Action;
(d) Resolutions. The Members shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of the Parent and
Acquisition of the resolutions duly and validly adopted by the Board of
Directors of the Parent and the sole shareholder and the Board of Directors of
Acquisition evidencing its authorization of the execution and delivery of this
Agreement and the other agreements to be executed by the Parent as contemplated
hereby and the consummation of the transactions contemplated hereby;
- 21 -
(e) Incumbency Certificate. The Members shall have received a
certificate of the Secretary or an Assistant Secretary of the Parent and
Acquisition certifying the names and signatures of the officers of the Parent
and Acquisition authorized to sign this Agreement and theother documents to be
delivered hereunder;
(f) Legal Opinion. The Members shall have received from Parent's
Counsel a legal opinion, addressed to the Members and dated the Closing Date,
substantially in the form of Exhibit 8.01(f);
(g) Merger. The merger pursuant to the Merger Agreement shall
have been consummated.
(h) Related Agreements. The Registration Rights Agreement, in the
form of Exhibit 8.01(h)(1) shall have been duly executed and delivered by the
parties thereto; and
(i) Organizational Documents. The Members shall have received a copy of
(i) the Articles of Incorporation, as amended, of the Parent and of the
Acquisition, certified by the Louisiana Secretary of State, as of a date not
earlier than 10 Business Days prior to the Closing Date and accompanied by a
certificate of the Secretary or Assistant Secretary of the Parent, dated as of
the Closing Date, stating that no amendments have been made to such Articles of
Incorporation since such date and (ii) the By-Laws of the Parent and of
Acquisition, as amended, certified by the Secretary or Assistant Secretary of
the Parent.
(j) Reserved.
(k) No Material Adverse Event. Since May 31, 1996, to the Closing Date,
there has been no material adverse event relating to the Parent and its
subsidiaries taken as a whole and no material adverse change in the financial
position or results of operations of the Parent and its subsidiaries taken as a
whole which, in either case, (i) require a public disclosure or filing by the
Parent with the SEC or (ii) will be required to be included in a Parent SEC
Report which report includes the period from May 31, 1996, to the Closing Date.
(l) Freeport Mortgage Loan. The Freeport Mortgage Loan has been
paid in full by the Parent or Acquisition.
(m) Reserved.
(n) Reserved.
SECTION 8.02. Conditions to Obligations of the Parent and Acquisition.
The respective obligations of the Parent and Acquisition to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, any of which
may be waived by the Parent in writing, and the Company and the Members shall
use their best efforts to cause such conditions to be fulfilled; provided,
however, Parent's election to proceed with the Closing of the transactions
contemplated herein shall not be
- 22 -
deemed a waiver of any breach of any representation, warranty or covenant
herein, whether or not known to Parent or Purchaser or existing on the Closing
Date. For purposes of determining whether a breach of a representation or
warranty has occurred, and determining the amount of damage suffered by the
Parent or Acquisition or their Affiliates as a result thereof for purposes of
Section 9.02 hereof, the Members and the Company shall be deemed to have made
the agreements contained in this Agreement and the representations and
warranties set forth in Article III on the Closing Date as if they were made on
such date:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Members and the Company contained in this Agreement shall have
been true and correct as of the date as of which they were deemed to have been
made and shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing except for such
changes as are permitted or contemplated by this Agreement, other than such
representations and warranties as are made as of another date. The covenants and
agreements contained in this Agreement to be complied with by the Members and
the Company on or before the Closing shall have been complied with. The Parent
shall have received a certificate from the Members to such effect dated as of
the Closing Date;
(b) Reserved.
(c) No Proceeding or Litigation. No Action shall have been commenced or
threatened by or before any Governmental Authority against any of the Members,
the Company, Acquisition or the Parent, seeking to restrain or adversely alter
the transactions contemplated hereby or which is likely to render it impossible
or unlawful to consummate the transactions contemplated by this Agreement or
which could have a material adverse effect; provided, however, that the
provisions of this Section 8.02(c) shall not apply if the Parent or Acquisition
has directly or indirectly solicited or encouraged any such Action;
(d) Merger. The merger pursuant to the Merger Agreement shall
have been consummated.
(e) Reserved.
(f) Legal Opinions. The Parent and Acquisition shall have
received from Company's Counsel a legal opinion, addressed to the Parent and
Acquisition and dated the Closing Date, substantially in the form of Exhibit
8.02(f);
(g) Reserved.
(h) Reserved.
(i) Organizational Documents. The Parent shall have received a copy of
(i) the Articles of Organization of the Company, certified by the Secretary of
State of the State of its organization, as of a date not earlier than 10
Business Days prior to the Closing Date and accompanied by a certificate of the
Secretary or Assistant Secretary of such entity, dated as of the
- 23 -
Closing Date, stating that no amendments have been made to such Articles of
Organization since such date and (ii) the Operating Agreement of the Company, as
amended, certified by the Secretary or Assistant Secretary of such entity;
(j) Amendment to Operating Agreement. The Operating Agreement of
the Company shall have been amended in accordance with Section 5.02 of this
Agreement.
(k) Good Standing; Qualification to Do Business. The Parent shall have
received good standing certificates, certificates of compliance, or certificates
of existence, as applicable, for the Company from the secretary of state, or the
other applicable Governmental Authority, of the jurisdiction in which such
entity is organized.
(l) Escrow Agreement. The Members shall have executed and
delivered the Escrow Agreement substantially in the form of Exhibit 8.02(l) and
made the transfer to the escrow agreement as contemplated thereby;
(m) Resolutions. The Parent shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of the Company
resolutions duly and validly adopted by the Members of the Company evidencing
its authorization of the execution and delivery of this Agreement and the other
agreements to be executed by the Company as contemplated hereby and the
consummation of the transactions contemplated hereby;
(n) Reserved.
(o) Reserved.
(p) Reserved.
(q) Reserved.
(r) Reserved.
(s) Related Agreements. The Registration Rights Agreement and
Representation Letter by the Members in the respective forms of Exhibit 8.01(s)
(1) and Exhibit 8.02(s)(2), respectively, shall have been duly executed and
delivered by the parties thereto; and
(t) Reserved.
(u) Reserved.
(v) Reserved.
(w) Reserved.
(x) Reserved.
(y) Reserved.
- 24 -
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of the Members contained in this
Agreement, the Exhibits to this Agreement and any certificate, statement or
report or other document delivered pursuant to this Agreement (collectively, the
"Acquisition Documents"), shall survive the Closing until the first anniversary
of the Closing Date, or such earlier time as agreed to by the Parent. All
covenants of the Members shall survive the Closing until the first anniversary
of the Closing Date, or as otherwise specifically set forth herein. Neither the
period of survival nor the liability of the Members or the Parent with respect
to the Members' or the Parent's representations and warranties shall be reduced
by any investigation made at any time by or on behalf of the Parent or the
Members, as the case may be. If written notice of a claim has been properly
given in the manner required by Section 9.02(d) prior to the expiration of the
applicable representations and warranties, then the relevant representations and
warranties shall survive as to such claim until such claim has been finally
resolved.
(b) The representations and warranties of the Parent contained in the
Acquisition Documents shall survive the Closing until the first anniversary of
the Closing Date. All covenants of the Parent shall survive the Closing until
the first anniversary of the Closing Date or as otherwise specifically set forth
herein. If written notice of a claim has been properly given in the manner
required by Section 9.02(d) prior to the expiration of the applicable
representations and warranties, then the relevant representations and warranties
shall survive as to such claim until such claim has been finally resolved.
SECTION 9.02. Indemnification. (a) The Parent, Acquisition and the
Parent's other Affiliates, and each of their officers, directors, employees,
agents, consultants, successors and assigns shall be indemnified and held
harmless by the Members and the Company for any and all Liabilities, losses,
damages, claims, reasonable costs and expenses, interest, awards, judgments,
damages (including punitive damages), fines, fees and penalties (including,
without limitation, attorneys', experts and consultants' fees and expenses)
(collectively, "Losses") actually suffered or incurred by them (including,
without limitation, any Action brought or otherwise initiated by any of them),
arising out of or resulting from:
(i) the inaccuracy of any representation or warranty made
by the Members or the Company contained in any of the Acquisition Documents;
(ii) the breach of any covenant or agreement by the
Members or the Company contained in the Acquisition Documents;
(iii) as expressly provided by Article VII hereof; and
- 25 -
(iv) liabilities of the Company, any Affiliate of the Company,
or, with respect to the Freeport Real Property, the Members, arising out of or
relating to events occurring or circumstances or conditions existing at or prior
to the Closing under any Environmental Law or involving Hazardous Materials in
connection with the current or former assets and operations of the Company, or
any former business conducted by the Company or any current or former subsidiary
or Affiliate, including, without limitation, any business or activity conducted
on or in the Freeport Real Property prior to the Closing; and
(v) liabilities of the Company, any Affiliate of the Company,
or, with respect to the Freeport Real Property, the Members, arising out of or
relating to products sold or services rendered at or prior to the Closing in
connection with the current or former operations of the Company, or any former
business conducted by the Company or any current or former subsidiary or
Affiliate, including without limitation, any business or activity conducted on
or in the Freeport Real Property prior to the Closing.
(vi) any claims, damages or other liabilities of the Parent or
Acquisition, or any of their respective Affiliates, sustained or incurred by the
Parent or Acquisition, or any of their Affiliates, arising out of or in any way
related to the encroachment of the Improvements situated on the Property onto
any easement on the Property, including particularly, but not by way of
limitation, any such claims, damages or other liabilities (i) relating to the
financing of the Property, or (ii) by reason of any claim against the Parent or
Acquisition, or any of their Affiliates for the removal of any portion of said
Improvements that encroach on any easements on the Property, or for the removal
of said Improvements, including costs, attorneys' fees, and expenses incurred in
connection therewith that are not covered by the Title Policy. The foregoing
covenant shall survive the Closing until the earlier of the occurrence of any
one of the following: (A) the financing by the Parent or Acquisition of the
Property; (B) the removal from the Title Policy of any exception related to such
encroachment; or (C) payment by the Company or the Members for the removal from
the easement of any encroaching Improvements, up to but not exceeding $200,000.
Notwithstanding the foregoing, to the extent that items (A)-(C) of this Section
9.02(a)(vi) have not yet occurred within two (2) years following the Closing,
the covenant set forth in this Section 9.02(a)(vi) shall terminate upon payment
by the Company or the Members to Parent or Acquisition the cost not to exceed
$200,000, of removing any encroachments, as set forth in a bid by a firm,
acceptable to both Parent and the Company, engaged to estimate the cost of
removing said encroachments.
(b) The Members, the Company and their respective Affiliates, officers,
directors, employees, agents, consultants, successors and assigns shall be
indemnified and held harmless by the Parent for any and all Losses actually
suffered or incurred by any Indemnified Party (including, without limitation,
any Action brought or otherwise initiated by any of them), arising out of or
resulting from:
(i) the inaccuracy of any representation or warranty made
by the Parent and Acquisition contained in the Acquisition Documents; and
- 26 -
(ii) the breach of any covenant or agreement by the Parent
or Acquisition contained in the Acquisition Documents.
(c) To the extent that an Indemnifying Party's undertakings set forth
in this Section 9.02 may be unenforceable, such Indemnifying Party shall
contribute the maximum amount that it is permitted to contribute under
applicable law to the payment and satisfaction of all Losses incurred by an
Indemnified Party.
(d) All claims for indemnification against the Members, the Company,
the Parent or Acquisition, as the case may be (an "Indemnifying Party"), under
any provision of this Article IX shall be asserted and resolved as follows:
(i) In the event of any claim or demand for which an
Indemnifying Party would be liable for Losses to the Persons specified in
Section 9.02(a) or (b), as applicable, (each an "Indemnified Party") which is
asserted against or sought to be collected from such Indemnified Party by a
Person other than the Parent, Acquisition, the Company or the Members ("Third
Party Claim"), the Indemnified Party shall deliver a Claim Notice (as defined
below) with reasonable promptness to the Indemnifying Party after the
Indemnified Party has actual notice of the Third Party Claim. The failure by any
Indemnified Party to provide the Indemnifying Party with the Claim Notice
required by the preceding sentence shall not impair the Indemnified Party's
rights hereunder except to the extent that an Indemnifying Party demonstrates
that it has been materially prejudiced thereby. The Indemnifying Party shall
notify the Indemnified Party within thirty (30) days of receipt of the Claim
Notice ("Notice Period") whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
9.02(d), then the Indemnifying Party shall have the right to defend, at its sole
cost and expense, and, except as provided in the following sentence, through
counsel of its choice reasonably acceptable to the Indemnified Party such Third
party Claim by all appropriate proceedings, which proceedings shall be
diligently defended by the Indemnifying Party to a final conclusion or shall be
settled at the discretion of the Indemnifying Party (with the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld), so long as the Indemnified Party is fully released with respect to
such Third Party Claim. If there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable judgment
of the Indemnified Party for the same counsel to represent both the Indemnified
Party and the Indemnifying Party and the Indemnifying Party does not provide
separate counsel reasonably acceptable to the Indemnified Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party. Assumption by the
Indemnifying Party of the defense of such Third Party Claim will not constitute
an admission by the Indemnifying Party that the claim or litigation is one for
which the Indemnifying Party is required to indemnify the Indemnifying Party
under this Article IX. The Indemnifying Party shall have full control of such
defense and proceedings; provided, however,
- 27 -
that the Indemnified Party may at the sole cost and expense of the Indemnifying
Party, file during the Notice Period any motion, answer, or other pleadings that
the Indemnified Party may deem necessary or appropriate to protect its interests
and not irrevocably prejudicial to the Indemnifying Party (it being understood
and agreed that, except as provided in Section 9.02(d)(iii) hereof, if an
Indemnified Party takes any such action that is irrevocably prejudicial and
conclusively causes a final adjudication that is materially adverse to the
Indemnifying Party, the Indemnifying Party will be relieved of its obligations
hereunder with respect to the portion of such Third Party Claim prejudiced by
the Indemnified Party's action); and provided further, however, that if
requested by the Indemnifying Party, the Indemnified Party agrees, at the sole
cost and expense of the Indemnifying Party, to cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, or, if appropriate in the judgment of the Indemnified
Party and related to the Third Party Claim in question, in making any
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any Person (other than the Indemnified Party). The
Indemnified Party may, at its sole cost and expense, participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this Section 9.02(d)(ii).
(iii) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the Indemnifying Party desires
to defend the Indemnified Party pursuant to Section 9.03(d)(i), or if the
Indemnifying Party gives such notice but fails to defend the Third Party Claim,
then the Indemnified Party will have the right (but not the obligation) to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be vigorously
defended by the Indemnified Party or will be settled at the discretion of the
Indemnified Party. The Indemnified Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying Party
agrees, at the sole cost and expense of the Indemnifying Party, to cooperate
with the Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting, or, if appropriate and relating to
the Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any person
(other than the Indemnifying Party or any of its Affiliates). Notwithstanding
the forgoing provisions of this Section 9.02(d)(iii), if the Indemnifying Party
has notified the Indemnified Party with reasonable promptness that the
Indemnifying Party disputes, or reserves its rights to dispute, its liability to
the Indemnified Party with respect to such Third Party Claim and if such dispute
is resolved in favor of the Indemnifying Party, the Indemnifying Party will not
be required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this Section 9.02(d)(iii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all costs and expenses
incurred by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
9.02(d)(iii), but the Indemnifying Party will bear its own costs and expenses
with respect to such participation. Regardless of whether the Indemnifying Party
defends a Third Party Claim on behalf of the Indemnified Party or participates
in the defense thereof, the Indemnified Party and the Indemnifying Party shall
reasonably cooperate with each other in all material respects in connection with
the defense for such Third Party Claim. Each Indemnified Party shall furnish
- 28 -
such information regarding itself and the Third Party Claim as the Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense thereof. No Third Party Claim may be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld), unless such settlement
provides a release of the Indemnified Party for such claim.
(iv) In the event any Indemnified Party should have a claim
for Losses against any Indemnifying Party hereunder that does not involve a
Third Party Claim being asserted against or sought to be collected from the
Indemnified Party, the Indemnified Party shall deliver an Indemnity Notice (as
defined below) with reasonable promptness to the Indemnifying Party after the
Indemnified Party has actual notice of such claim. The failure by any
Indemnified Party to give the notice referred to in the preceding sentence shall
not impair such party's rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been irreparably prejudiced thereby.
The Indemnifying Party and the Indemnified Party agree to proceed in good faith
to negotiate a resolution of any dispute relating to such a claim for Losses
within sixty (60) days following receipt of any Indemnity Notice. If any such
claim is not resolved within the foregoing period, the parties may pursue any
available remedies.
(v) The term "Claim Notice" shall mean written notification of
a Third Party Claim by an Indemnified Party to an Indemnifying Party pursuant to
Section 9.02(d)(i), enclosing a copy of all papers served, if any, and
specifying the nature of and alleged basis for such Third Party Claim and, to
the extent then feasible, the alleged amount or the estimated amount of such
Third Party Claim.
(vi) The term "Indemnity Notice" shall mean written
notification of a claim for indemnity (which claim does not involve a Third
Party Claim) by an Indemnified Party to an Indemnifying Party pursuant to
Section 9.02(d)(iv) hereof, specifying the nature of and specific basis for such
claim and, to the extent then feasible, the amount or the estimated amount of
such claim.
(vii) Any estimated amount of a claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive of the final amount of
such claim.
(viii) Notwithstanding any other provision hereof, any contest
or claim for indemnification under Article VII shall be governed by the
procedures of such Article VII and not by the provisions of this Section 9.03.
(ix) In connection with each Third Party Claim, the
Indemnifying Party shall obligated to provide only one counsel to all
Indemnified Parties.
(e) (i) The terms and provisions set forth in this Section 9.02 shall
constitute the sole rights and remedies of the parties for money damages in
respect of any inaccuracies of representations or warranties or any breaches of
covenants or agreements contained in this Agreement.
- 29 -
(ii) In the event of a claim pursuant to Section 9.02(a)(v),
the Parent agrees, to the extent practical, to seek recovery for the related
Losses first from any products liability insurance providing coverage to the
Parent therefor, and then from the Escrow Shares (as defined in the Escrow
Agreement), prior to collection of such Losses from the Members; provided,
however, the foregoing provision shall in no way limit or restrict any actions
or proceedings by the Parent against any Indemnifying Party, including without
limitation the Members, to the extent the Parent deems, in its discretion, such
actions or proceedings to be necessary to preserve, maintain or enforce any of
its rights against any Indemnifying Party.
SECTION 9.03. Limits on Indemnification.
(a) No amount shall be payable by any Indemnifying Party pursuant to
Section 9.02(a) or (b) unless and until the aggregate amount of Losses
indemnifiable under Section 9.02(a) or (b) exceeds $300,000 and the Indemnifying
Party shall indemnify the Indemnified Party to the full extent of such Losses up
to but not to exceed $3,000,000.
(b) The limitations set forth in Sections 9.03(a) shall not apply with
respect to any Losses suffered or incurred by the Parent in connection with (i)
the representations contained in Sections 3.01, 3.04, 3.16, 3.21 and 3.24, and
(ii) the representations, covenants and indemnities contained in Article VII,
and the Members shall fully indemnify the Parent for any such Losses from the
first dollar of such Losses to the full extent of such Losses.
(c) The amount of any indemnification obligation of an Indemnifying
Party shall be reduced by an amount equal to the value of the net Tax benefit
actually received by the Indemnified Party (to be calculated at the highest
marginal rate then applicable to the Indemnified Party) with respect to any loss
or other item the payment of which by an Indemnified Party shall produce a
deduction or an addition to basis for federal income tax purposes, such benefit
to be offset to the extent that the payment is treated as taxable income or
results in a reduction in basis to the Indemnified Party. No Indemnified Party
shall take any action or omit to take any action the primary purpose of which is
to avoid the application of this Subsection 9.03(c); provided, however, that
each Indemnified Party shall be permitted to engage in its own tax planning,
notwithstanding that the effect of such tax planning is to cause this Subsection
9.03(c) to be inapplicable.
(d) Notwithstanding any provision of this Agreement to the contrary,
the amount of any indemnification obligation of the Parent under this Article IX
shall be paid by the Parent solely in shares of the Parent's Common Stock, which
for such purposes shall be valued at $24.00 per share.
(e) The $300,000 limitation set forth in Section 9.03(a) shall not
apply with respect to any Losses suffered or incurred by the Parent or
Acquisition or any of their respective Affiliates in connection with the claims,
damages or other liabilities described in Section 9.02(a)(vi) of this Agreement,
and the Company and the Members shall fully indemnify the Parent or Acquisition
for such Losses to the full extent of such Losses.
- 30 -
SECTION 9.04. Security for Members' Agreement to Indemnify. To secure
the Members' obligations to indemnify the Parent and Acquisition hereunder, at
the Closing, the Members shall deposit 10% of the shares of the Parent's Common
Stock received by them at the Closing with City National Bank of Baton Rouge (or
such other financial institution acceptable to the Parent), as escrow agent, to
be held and released in accordance with the terms of the Escrow Agreement. Such
escrowed funds and shares and right of set-off, however, shall not be the
Parent's exclusive remedies hereunder, and nothing herein shall preclude the
assertion by the Parent of any other right or remedies in respect of the
foregoing agreements on indemnity.
ARTICLE X
WAIVER
SECTION 10.01. Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Solidary Obligation of Members. The obligations of the
Members under this Agreement shall be solidary; provided the maximum liability
of each such Member shall not exceed a percentage of all amounts owing by the
Members hereunder equal to 125% of a fraction of which the numerator is the
percentage membership interest in the Company owned by such Member immediately
prior to the Closing Date and the denominator is 100%.
SECTION 11.02. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy (confirmed by telephone within 24
hours following receipt thereof), or by registered or
- 31 -
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 11.03):
(a) if to the Members or the Company:
Bradford J. Brower
851 South Freeport Industrial Parkway
Clearfield, Utah 84015
Telecopy: (801) 773-6185
Telephone: (801) 773-7300
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1000 Kearns Building
136 South Main Street
Salt Lake City, Utah 84101
Attention: Nolan S. Taylor, Esq.
Telecopy: (801) 359-8256
Telephone: (801) 320-6700
and
(b) if to the Parent or Acquisition:
The Shaw Group Inc.
11100 Mead Road
Baton Rouge, Louisiana 70816
Attention: Bret M. Talbot
Telecopy: (504) 296-1199
Telephone: (504) 296-1140
- 32 -
with a copy to:
Kantrow, Spaht, Weaver & Blitzer
(A Professional Law Corporation)
Suite 300, City Plaza
445 North Boulevard
P.O. Box 2997
Baton Rouge, Louisiana 70821-2997
Attention: J. Michael Robinson, Jr., Esq.
Telecopy: (504) 343-0637
Telephone: (504) 383-4703
and
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: William H. Caudill, Esq.
Telecopy: (713) 651-5246
Telephone: (713) 651-5151
SECTION 11.04. Public Announcements. Except to the extent that the
Members or Parent believes on the advice of counsel that public disclosure is
required by Law, no party to this Agreement shall make, or cause to be made, any
press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without prior notification to the other parties, and the parties shall cooperate
as to the timing and contents of any such press release or public announcement.
SECTION 11.05. Headings; Construction. The descriptive headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The
provisions of this Agreement were negotiated by the parties hereto and this
Agreement shall be deemed to have been drafted by all the parties hereto.
SECTION 11.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior
- 33 -
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof.
SECTION 11.08. Assignment. This Agreement may be assigned by any
party hereto, but such assignment shall not release or discharge the assigning
party from its obligations hereunder.
SECTION 11.09. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their successors
and assigns.
SECTION 11.10. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 10.01.
SECTION 11.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Louisiana, applicable to
contracts executed in and to be performed entirely within that state.
SECTION 11.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.14. Legal Advice. Each party hereto represents and
warrants to the other party that he, she or it has consulted attorneys,
accountants and tax advisors of their own choosing concerning the legal,
financial and tax consequences of this Agreement
SECTION 11.15. Remedies Not Exclusive. Subject to the provisions of
Section 9.02 (e), no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
IN WITNESS WHEREOF, the Members, the Company, the Parent and
Acquisition have caused this Agreement to be executed as of the date first
written above, the corporate parties represented herein by their respective
officers thereunto duly authorized.
- 34 -
THIS PURCHASE AND SALE AGREEMENT IS NOT A PROSPECTUS AND ANY OFFERING OF THE
SHARES OF COMMON STOCK OF THE SHAW GROUP INC., COVERED BY THIS AGREEMENT IS NOT
A PUBLIC OFFERING. RECIPIENTS OF SUCH SHARES WILL NOT BE ENTITLED TO BRING A
CAUSE OF ACTION FOR RESCISSION UNDER SECTION 12(2) OF THE SECURITIES ACT OF 1933
FOR AN UNTRUE STATEMENT OF A MATERIAL FACT OR FOR THE FAILURE TO STATE A
MATERIAL FACT.
COMPANY:
FREEPORT PROPERTIES, L.C.
By: -----------------------------
Name: Bradford J. Brower
Title:
MEMBERS:
---------------------------------
Bradford J. Brower (56%)
---------------------------------
Donald Robertson (18%)
---------------------------------
Robert Schroeder (16%)
---------------------------------
M. Russell Ballard (8%)
---------------------------------
Greg R. Cowley (2%)
PARENT:
THE SHAW GROUP INC.
By:______________________________
Name:_______________________
Title:______________________
ACQUISITION:
SAON PROPERTIES, INC.
By:______________________________
Name:_______________________
Title:______________________
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