1
EXHIBIT 10.5
AGREEMENT AND PLAN OF MERGER
AMONG
CORE LABORATORIES N.V.,
CORE ACQUISITION SUBSIDIARY, INC.,
RESERVOIRS, INC.
AND
THE STOCKHOLDERS OF
RESERVOIRS, INC.
JULY 26, 1999
2
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.01 THE MERGER......................................................................................1
1.02 EFFECTIVE TIME..................................................................................2
1.03 EFFECT OF THE MERGER............................................................................2
1.04 ARTICLES OF INCORPORATION; BYLAWS...............................................................2
1.05 DIRECTORS AND OFFICERS..........................................................................2
1.06 ACQUISITION CONSIDERATION; CONVERSION AND CANCELLATION OF SECURITIES............................2
1.07 PAYMENT FOR COMPANY STOCK; SURRENDER OF CERTIFICATES............................................5
1.08 NO FRACTIONAL SHARES............................................................................6
1.09 AGREEMENT TO VOTE SHARES........................................................................6
1.10 WITHHOLDING.....................................................................................6
1.11 CLOSING.........................................................................................6
1.12 ACTIONS AT CLOSING..............................................................................7
1.13 STOCK TRANSFER BOOKS............................................................................7
1.14 TAKING OF NECESSARY ACTION; FURTHER ACTION......................................................7
1.15 TAX CONSEQUENCES................................................................................7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES....................................................7
2.02 ORGANIZATIONAL DOCUMENTS........................................................................8
2.03 CAPITALIZATION..................................................................................8
2.04 AUTHORITY.......................................................................................9
2.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS......................................................9
2.06 PERMITS; COMPLIANCE............................................................................10
2.07 FINANCIAL STATEMENTS...........................................................................11
2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS...........................................................11
2.09 LITIGATION.....................................................................................11
2.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS..........................................................12
2.11 TAXES..........................................................................................14
2.12 TAX MATTERS....................................................................................15
2.13 AFFILIATES.....................................................................................15
2.14 CERTAIN BUSINESS PRACTICES.....................................................................15
2.15 ENVIRONMENTAL..................................................................................16
2.16 UNDISCLOSED LIABILITIES........................................................................16
-i-
3
2.17 CERTAIN AGREEMENTS.............................................................................17
2.18 CONTRACTS AND COMMITMENTS......................................................................17
2.19 AFFILIATE INTERESTS............................................................................17
2.20 INTELLECTUAL PROPERTY..........................................................................17
2.21 BROKERS........................................................................................18
2.22 INSURANCE......................................................................................18
2.23 PROPERTIES.....................................................................................18
2.24 GOOD TITLE.....................................................................................19
2.25 CERTAIN SECURITIES LAW MATTERS.................................................................19
2.26 AUTHORIZATION AND VALIDITY OF AGREEMENT........................................................20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
3.01 ORGANIZATION AND QUALIFICATION.................................................................20
3.02 CAPITALIZATION.................................................................................21
3.03 AUTHORITY......................................................................................21
3.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.....................................................21
3.05 REPORTS; FINANCIAL STATEMENTS..................................................................22
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS...........................................................22
3.07 TAX MATTERS...........................................................................23
3.08 BROKERS........................................................................................23
ARTICLE IV
COVENANTS OF THE SHAREHOLDERS
4.01 AFFIRMATIVE COVENANT...........................................................................23
4.02 NEGATIVE COVENANTS.............................................................................24
ARTICLE V
COVENANTS OF THE COMPANY
5.01 AFFIRMATIVE COVENANTS OF THE COMPANY...........................................................24
5.02 NEGATIVE COVENANTS OF THE COMPANY..............................................................25
ARTICLE VI
COVENANTS OF ACQUIROR
6.01 AFFIRMATIVE COVENANTS OF ACQUIROR..............................................................27
6.02 NEGATIVE COVENANTS OF ACQUIROR.................................................................27
-ii-
4
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 NOTIFICATION OF CERTAIN MATTERS................................................................28
7.02 ACCESS AND INFORMATION.........................................................................28
7.03 APPROPRIATE ACTION; CONSENTS; FILINGS..........................................................29
7.04 PUBLIC ANNOUNCEMENTS...........................................................................30
7.05 EXPENSES.......................................................................................30
7.06 EMPLOYEES OF COMPANY...........................................................................31
7.07 TAX-FREE REORGANIZATION........................................................................31
7.08 INFORMATION FOR TAX RETURNS....................................................................31
7.09 NO HEDGING TRANSACTIONS........................................................................32
7.11 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ARTICLE VIII
INDEMNIFICATION
8.01 IN GENERAL.....................................................................................33
8.02 NO EXHAUSTION OF REMEDIES......................................................................33
8.03 DEFENSE OF THIRD PARTY CLAIMS..................................................................33
8.04 PAYMENT; ARBITRATION...........................................................................34
8.05 SATISFACTION OF CLAIMS FROM ESCROW SHARES......................................................35
8.06 LIABILITY LIMITATIONS; SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................36
8.07 SUBROGATION....................................................................................36
ARTICLE IX
CONDITIONS
9.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR COMPANIES..................................36
9.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.............................................38
ARTICLE X
MISCELLANEOUS
10.01 TERMINATION....................................................................................39
10.02 EFFECT OF TERMINATION..........................................................................40
10.03 WAIVER AND AMENDMENT...........................................................................40
10.04 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES....................................................40
-iii-
5
10.05 ASSIGNMENT.....................................................................................40
10.06 CERTAIN DEFINITIONS............................................................................41
10.07 NOTICES........................................................................................42
10.08 GOVERNING LAW..................................................................................43
10.09 SEVERABILITY...................................................................................43
10.10 COUNTERPARTS...................................................................................43
10.11 HEADINGS.......................................................................................44
EXHIBITS
Exhibit A -- Escrow Agreement
Exhibit B -- Appointment of Shareholders' Representative
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of Employment Agreement
-iv-
6
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of July 26, 1999 by and among Core Laboratories N.V., a
Netherlands limited liability company ("Acquiror"), Core Acquisition Subsidiary,
Inc., a Texas corporation with its principal place of business in Houston, Texas
and a wholly owned subsidiary of Acquiror ("Acquisition Sub"), Reservoirs, Inc.,
a Texas corporation ("Reservoirs" or the "Company"), and the stockholders of the
Company set forth on the signature pages hereto (collectively, the
"Shareholders"). Acquiror and Acquisition Sub are sometimes collectively
referred to herein as the "Acquiror Companies."
RECITALS
The Shareholders own all of the outstanding capital stock of the
Company, and Acquiror owns all of the outstanding capital stock of Acquisition
Sub.
Acquisition Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the Texas Business Corporation Act (the
"TBCA"), will merge with and into the Company (the "Merger").
The Board of Directors of the Company has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of the
Company and is fair to, and in the best interests of, the Company and the
Shareholders and has approved and adopted this Agreement and the transactions
contemplated hereby, and recommended approval and adoption of this Agreement and
the Merger by the Shareholders.
This Agreement and the Merger have been approved and adopted by the
requisite vote of the Shareholders and of the sole shareholder of Acquisition
Sub as required by the TBCA.
For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization within the meaning of the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and will
not be taxable to the Shareholders under Section 367 of the Code.
NOW, THEREFORE, in consideration of the Recitals, the mutual
representations, warranties, covenants and agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the TBCA, at the Effective Time (as
defined in Section 1.02 of this Agreement), Acquisition Sub shall be merged with
and into the Company. As a result of the Merger, the separate corporate
existence of Acquisition Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation"). The name of
the Surviving Corporation shall be "Reservoirs, Inc." Acquiror shall not be
deemed to be a party to the Merger for purposes of Article 5.06 of the TBCA.
7
1.02 EFFECTIVE TIME. As promptly as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article IX of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
Articles of Merger with the Secretary of State of the State of Texas, in such
form as required by, and executed in accordance with the relevant provisions of,
the TBCA (the date and time of the completion of such filing being the
"Effective Time").
1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the TBCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property and assets of Acquisition Sub and the Company shall vest
in the Surviving Corporation, and all obligations and liabilities of Acquisition
Sub and the Company shall become the obligations and liabilities of the
Surviving Corporation.
1.04 ARTICLES OF INCORPORATION; BYLAWS. At the Effective Time, the
Articles of Incorporation and the Bylaws of Acquisition Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and the Bylaws of the Surviving Corporation, except that Article I of the
Articles of Incorporation thereof shall be amended to read "The name of the
corporation is Reservoirs, Inc.".
1.05 DIRECTORS AND OFFICERS. The directors of Acquisition Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Acquisition Sub immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
1.06 ACQUISITION CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of the Acquiror Companies, the Company or the holders of any
of the Company's securities:
(a) Subject to the other provisions of this Article I, each
share of the Company's common stock, par value $.01 per share ("Company
Stock"), issued and outstanding immediately prior to the Effective Time
(excluding any Company Stock described in Section 1.06(d) of this
Agreement), such shares being as shown on Schedule 1.06(a) to this
Agreement, shall be converted into 5.6375 shares of duly authorized,
validly issued, fully paid and nonassessable common shares, par value
NLG 0.03 per share ("Acquiror Shares"), of Acquiror (the "Exchange
Ratio"), subject to the escrow of a portion of such shares pursuant to
the terms and conditions set forth in Section 1.06(b).
(b) At the Effective Time, Acquiror will cause to be delivered
to, and directly deposited with, Bankers Trust Company or another
national bank acceptable to the Company and Acquiror (the "Escrow
Agent"), in escrow for the account and future potential benefit of the
Shareholders, a stock certificate representing 10% of the Acquiror
Shares issued at Closing pursuant to Section 1.06(a), which certificate
shall be registered as follows: "Bankers Trust Company, f/b/o the
Former Shareholders of the Common Stock of Reservoirs, Inc." All such
Acquiror Shares so delivered to the Escrow Agent, together with
-2-
8
all subsequent stock dividends or distributions of other Acquiror
Shares received in respect of such shares while deposited with the
Escrow Agent shall be referred to as "Escrow Shares." A pro rata number
of the Escrow Shares (determined on the basis of the relative amount of
Acquiror Shares each Shareholder is entitled to receive pursuant to
Section 1.06(a) of this Agreement, subject to adjustments by the Escrow
Agent to eliminate fractional shares) shall be subtracted from the
number of Acquiror Shares each Shareholder at the Effective Time is
entitled to receive pursuant to the Merger. The Escrow Shares shall be
held by the Escrow Agent pursuant to the terms and conditions of an
Escrow Agreement substantially in the form attached hereto as Exhibit A
(the "Escrow Agreement") between Acquiror, Acquisition Sub, the Company
and Randall S. Miller (the "Shareholders' Representative"). The
Shareholders will appoint Randall S. Miller as a Shareholders'
Representative pursuant to, and he shall have the rights and
obligations set forth in, the Appointment of Shareholders'
Representative, substantially in the form attached hereto as Exhibit B
(the "Appointment"). The Escrow Agreement and the Appointment shall
authorize the Shareholders' Representative to control the disposition
of such Escrow Shares pursuant to the terms of such documents. The
Shareholders' Representative shall have no personal liability as a
result of any actions taken in such position (i) to Acquiror or
Acquisition Sub, or (ii) to any holder of Company Stock at the
Effective Time, in either case with respect to the disposition of the
Escrow Shares or any other action taken by him as the Shareholders'
Representative, unless such actions constitute gross negligence or
willful misconduct by the Shareholders' Representative. The number of
Acquiror Shares each Shareholder shall be entitled to receive at the
Effective Time and the number of Escrow Shares attributable to such
Shareholder shall be as set forth on Schedule 1.06(a) to this
Agreement.
(c) As a result of their conversion pursuant to Section
1.06(a) of this Agreement, all shares of Company Stock shall cease to
be outstanding and shall automatically be canceled and retired, and
each certificate ("Certificate") previously evidencing Company Stock
outstanding immediately prior to the Effective Time (other than any
Company Stock described in Section 1.06(d) of this Agreement)
("Converted Shares") shall thereafter represent that number of Acquiror
Shares determined pursuant to the Exchange Ratio, rounded up or down to
the nearest whole share (the "Acquisition Consideration"). The holders
of Certificates previously evidencing Converted Shares shall cease to
have any rights with respect to such Converted Shares except the right
to receive the Acquisition Consideration and as otherwise provided
herein or by applicable federal, state, foreign or local law, statute,
ordinance, rule or regulation (collectively, "Laws"). Such Certificates
previously evidencing Converted Shares shall be exchanged for
certificates evidencing whole shares of Acquiror Shares upon the
surrender of such Certificates in accordance with the provisions of
Section 1.07 of this Agreement. No fractional shares of Acquiror Shares
shall be issued.
(d) Notwithstanding any provision of this Agreement to the
contrary, each share of Company Stock held in the treasury of the
Company and each share of Company Stock or other capital stock of the
Company owned by Acquiror or any direct or indirect wholly owned
subsidiary of Acquiror or of the Company immediately prior to the
Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
-3-
9
(e) In the event that on or after the date of this Agreement,
Acquiror shall establish a record date prior to the Closing Date for
all its shareholders entitled to receive any securities, rights or
property of Acquiror (other than regular dividends), by reason of the
issuance of rights or options to purchase its securities, stock
dividends or distribution, or any stock split or reverse stock split,
or if there shall occur any capital reorganization of Acquiror or
reclassification of its capital stock or such other similar transaction
which will not be adequately reflected in the number of Acquiror Shares
which will constitute the Acquisition Consideration, such number of
Acquiror Shares shall be fairly and proportionately adjusted to prevent
dilution, and to fully and completely carry out the intent of the
parties as contemplated by this Agreement.
(f) Each share of common stock, no par value per share, of
Acquisition Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, no
par value per share, of the Surviving Corporation.
(g) Each option to purchase Company Stock outstanding
immediately prior to the Effective Time (collectively, the "Company
Options"), all such options being as set forth on Schedule 1.06(a) to
this Agreement, shall be assumed by Acquiror and converted into an
option under the Core Laboratories N.V. 1995 Long-Term Incentive Plan
(as amended and restated as of May 29, 1997) (the "Long-Term Incentive
Plan") to purchase that number of Acquiror Shares determined by
multiplying the number of shares of Company Stock subject to such
Company Option immediately prior to the Effective Time by the Exchange
Ratio, at an exercise price per Acquiror Share equal to the exercise
price per share of such Company Option divided by the Exchange Ratio.
If the foregoing calculation results in an assumed Company Option being
exercisable for a fraction of an Acquiror Share, then the number of
Acquiror Shares subject to such option shall be rounded down to the
nearest whole number of shares, and the total exercise price for the
option will be reduced by the exercise price of the fractional share.
At the Closing, the agreements evidencing the Company Options shall be
amended and restated, effective as of the Effective Time, into the
standard form of nonstatutory stock option agreement used by Acquiror
under the Long-Term Incentive Plan; provided, however, that the Company
Options shall be fully vested and exercisable at any time immediately
after the Effective Time, and the term of the Company Options shall
continue to end no later than midnight on December 31, 2007.
(h) All obligations of the Company under the Company's 1997
Full Value Executive Stock Incentive Plan (the "Plan"), including with
respect to each and all rights granted under the Plan that have not
expired or been terminated prior to the Effective Time (the "Executive
Stock Rights"), shall, without further action on the part of the
Company or the holders of any Executive Stock Rights (collectively, the
"Plan Participants"), be assumed by Acquiror as of the Effective Time.
All terms and conditions of the Plan and Executive Stock Rights shall
be unchanged by the provisions of this Section 1.06(h) and the Plan
shall otherwise operate in accordance with its terms; provided,
however, that each Plan Participant's rights to receive payment under
the Plan with respect to all Executive Stock Rights shall be fully
vested and mature at the Effective Time, that such payment shall be
made to each Plan Participant no later than 60 days after the Effective
Time by delivery to the Plan Participant of the number of Acquiror
Shares determined by multiplying the number
-4-
10
of Executive Stock Rights held by the Plan Participant as of the
Closing (all such Executive Stock Rights being as set forth on Schedule
1.06(a) to this Agreement) by the Exchange Ratio, such shares to be
subject to the same restrictions as the Acquiror Shares issued pursuant
to Section 1.06(a), less the applicable withholding taxes required with
respect to such Plan Participant determined by multiplying the
applicable withholding tax rate by the number of the Acquiror Shares
such Plan Participant is entitled to herein, all to satisfy the
withholding obligations set forth in Section 14(b) of the Plan. The
Acquiror shall satisfy the payment of the withholding obligation by
determining the cash value of the withheld shares based on the closing
sale price of the Acquiror Shares on the trading day of the issuance of
the Acquiror Shares pursuant to this Section 1.06(h) and shall pay the
resulting amount to the appropriate governmental authority for such
Plan Participant's account. If the foregoing calculations result in a
fraction of an Acquiror Share being issued to the Plan Participant,
then the number of Acquiror Shares shall be rounded to the closest
whole numbers of shares and such shall be issued to the Plan
Participant.
1.07 PAYMENT FOR COMPANY STOCK; SURRENDER OF CERTIFICATES.
(a) Exchange Procedures. Promptly after the Effective Time,
Acquiror shall deliver to each record holder of Company Stock at the Effective
Time a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to Acquiror and shall be in such form and contain
such other provisions as the Company and Acquiror shall agree) (the "Letter of
Transmittal"). Upon surrender of a Certificate for cancellation to the Acquiror,
together with such Letter of Transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole Acquiror Shares that such holder has the right
to receive pursuant to the provisions of this Article I, less the Escrow Shares
attributable to such holder that will be issued and deposited with the Escrow
Agent for the account of such holder, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Stock
that is not registered in the transfer records of the Company, a certificate
evidencing the proper number of Acquiror Shares may be issued to the transferee
if the Certificate evidencing the Company Stock shall be surrendered to the
Acquiror, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered for exchange in accordance with the provisions of this
Section 1.07(a), each Certificate theretofore representing Converted Shares
(other than shares of Company Stock to be canceled pursuant to Section 1.06(d)
of this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the Acquisition Consideration as set forth in
this Agreement. If any holder of Converted Shares shall be unable to surrender
such holder's Certificates because such Certificates have been lost or
destroyed, such holder may deliver in lieu thereof an affidavit and indemnity
bond in form and substance and with surety reasonably satisfactory to Acquiror.
No interest shall be paid on any Acquisition Consideration payable to former
holders of Converted Shares.
(b) Distributions with Respect to Acquiror Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Acquiror Shares with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the Acquiror
Shares evidenced thereby, and no Acquisition Consideration shall be paid to any
-5-
11
such holder until the holder of such Certificate shall surrender such
Certificate. Subject to applicable Laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates evidencing
whole Acquiror Shares issued in exchange therefor, without interest, (i)
promptly following the surrender of such Certificate, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole Acquiror Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date occurring after
surrender payable with respect to such whole Acquiror Shares.
1.08 NO FRACTIONAL SHARES. Notwithstanding anything herein to the
contrary, no certificates or scrip evidencing fractional Acquiror Shares shall
be issued upon the surrender for exchange of Certificates and such fractional
share interests will not entitle the owner thereof to vote or to any rights as a
shareholder of Acquiror.
1.09 AGREEMENT TO VOTE SHARES. At any meeting of the Shareholders with
respect to any of the following, and at any adjournment thereof, and with
respect to any consent solicited with respect to any of the following, each
Shareholder who is a party to this Agreement hereby agrees to vote such
Shareholder's Company Stock (i) in favor of approval of the Merger and any
matter which could reasonably be expected to facilitate the Merger and (ii)
against approval of any proposal made in opposition to or in competition with
the Merger, against any merger, consolidation, sale of assets, reorganization or
recapitalization with any party, against any liquidation or winding up of the
Company and against any other matter which would, or could reasonably be
expected to, prohibit or discourage the Merger.
1.10 WITHHOLDING. Acquiror (or any affiliate thereof) shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of Converted Shares such amounts as Acquiror (or
any affiliate thereof) is required to deduct and withhold with respect to the
making of such payment under the Code (as hereinafter defined), or any other
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by Acquiror, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the former holder of the
Converted Shares in respect of which such deduction and withholding was made by
Acquiror.
1.11 CLOSING. The Closing shall take place at the offices of Vinson &
Elkins L.L.P., 1001 Fannin Street, 3600 First City Tower, Houston, Texas
77002-6760, at (a) 10:00 a.m., local time, effective as of August 2, 1999, or
(b) if the conditions set forth in Article IX of this Agreement have not been
satisfied or waived on or before August 2, 1999, at 10:00 a.m., local time, on
the second business day following the date on which the conditions set forth in
Article IX of this Agreement have been satisfied or waived or (c) at such other
place, time and date as the parties hereto may agree. At the conclusion of the
Closing, the parties hereto shall cause the Articles of Merger to be filed with
the Secretary of State of the State of Texas.
1.12 ACTIONS AT CLOSING. At the Closing, (a) the Company and the
Shareholders shall deliver to the Acquiror Companies the various certificates,
instruments and documents referred to in Section 9.01 of this Agreement, (b) the
Acquiror Companies shall deliver to the Company and the Shareholders the various
certificates, instruments and documents referred to in Section 9.02 of this
-6-
12
Agreement, and (c) the parties shall file with the Secretary of State of the
State of Texas the Articles of Merger.
1.13 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Stock thereafter on the records of the
Company.
1.14 TAKING OF NECESSARY ACTION; FURTHER ACTION. Acquiror and the
Company shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company or Acquisition Sub,
such corporations shall direct their respective officers and directors to take
all such lawful and necessary action.
1.15 TAX CONSEQUENCES. The parties to this Agreement intend for the
Merger to constitute a reorganization within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(E) of the Code and hereby adopt this Agreement as the
"plan of reorganization" with respect to the Merger for purposes of and within
the meaning of Section 1.368-2(g) and Section 1.368-3(a) of the United States
Treasury Regulations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and each of the Shareholders of the Company, jointly and
severally, hereby represent and warrant to Acquiror, as of the date hereof and
at the Closing Date, that:
2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company is a
corporation whose ownership is represented solely by the Company Stock, and the
Company is duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation or organization. Except as set forth in
Section 2.01 of the Company Disclosure Schedule (as hereinafter defined), each
of the Company's subsidiaries (as such term is defined in Section 10.06 herein)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, and each of the
Company and its subsidiaries has all requisite power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing could not
reasonably be expected to have a Company Material Adverse Effect. The term
"Company Material Adverse Effect" as used in this Agreement shall mean any
change or effect that would be materially adverse to the financial condition,
results of operations, business or prospects of the Company and its
subsidiaries, taken as a whole, at the time of such change or effect. Section
2.01 of the Disclosure Schedule delivered by the Company to Acquiror
concurrently with the execution
-7-
13
of this Agreement (the "Company Disclosure Schedule") sets forth, as of the date
of this Agreement, a true and complete list of all the Company's directly or
indirectly owned subsidiaries, together with the jurisdiction of incorporation
or organization of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company.
2.02 ORGANIZATIONAL DOCUMENTS. The Company has heretofore furnished or
made available to Acquiror complete and correct copies of the Articles of
Incorporation and the Bylaws (or equivalent organizational documents), in each
case as amended or restated to the date hereof, of the Company and each of its
subsidiaries. Neither the Company nor any of its subsidiaries is in violation of
any of the provisions of its Articles of Incorporation or Bylaws (or equivalent
organizational documents).
2.03 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of Common Stock, par value $.01 per share (the Company Stock),
and no shares of preferred stock. As of the date of this Agreement, 39,525
shares of Common Stock are issued and outstanding. As of the date of this
Agreement, there are 111,112 shares of Common Stock held by the Company in its
treasury, and 13,690 shares of Common Stock are reserved for issuance, including
7,400 shares for issuance under the Plan and 6,290 shares for issuance for
Company Options. Each of the issued shares of capital stock of, or other equity
interests in, each of the Company and its subsidiaries is duly authorized,
validly issued and, in the case of shares of capital stock, fully paid and
nonassessable, and has not been issued in violation of (nor are any of the
authorized shares of capital stock of, or other equity interests in, the Company
or any of its subsidiaries subject to) any preemptive or similar rights created
by statute, the Articles of Incorporation or Bylaws (or the equivalent
organizational documents) of the Company or any of its subsidiaries, or any
agreement to which the Company or any of its subsidiaries is a party or is
bound, and, except as set forth in Section 2.03(a) of the Company Disclosure
Schedule, all such issued shares or other equity interests owned by the Company
or a subsidiary of the Company are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations on the Company's or
such subsidiaries' voting rights, charges or other encumbrances of any nature
whatsoever.
(b) No bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on which
shareholders may vote ("Company Voting Debt") are issued or outstanding.
(c) Except as set forth in Section 2.03(c) of the Company
Disclosure Schedule, there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which the Company or any of its subsidiaries is a party relating to the
issued or unissued capital stock or other equity interests of the Company or any
of its subsidiaries or obligating the Company or any of its subsidiaries to
grant, issue or sell any shares of capital stock, Company Voting Debt or other
equity interests of the Company or any of its subsidiaries. Except as set forth
in Section 2.03(c) of the Company Disclosure Schedule, there are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries (i) to
repurchase,
-8-
14
redeem or otherwise acquire any shares of capital stock or other securities of
the Company or the capital stock or other equity interests of any subsidiary of
the Company or (ii) (other than advances to wholly owned subsidiaries in the
ordinary course of business) to provide material funds to, or to make any
material investment in (in the form of a loan, capital contribution or
otherwise), or to provide any guarantee with respect to the material obligations
of, any subsidiary of the Company or any other person. Except (i) as set forth
in Section 2.03(c) of the Company Disclosure Schedule or (ii) for subsidiaries
of the Company set forth in Section 2.01 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries (x) directly or indirectly owns,
(y) has agreed to purchase or otherwise acquire or (z) holds any interest
convertible into or exchangeable or exercisable for, any capital stock or other
equity interest of any corporation, partnership, joint venture or other business
association or entity. Except as set forth in Section 2.03(c) of the Company
Disclosure Schedule or for any agreements, arrangements or commitments between
the Company and its wholly owned subsidiaries or between such wholly owned
subsidiaries, there are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on, or calculated in accordance with, the
revenues or earnings of the Company or any of its subsidiaries. Except as set
forth in Section 2.03(c) of the Company Disclosure Schedule, there are no voting
trusts, proxies or other agreements or understandings to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound with respect to the voting of any shares of capital stock
or other equity interests of the Company or any of its subsidiaries.
2.04 AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by each of the Acquiror Companies, constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
2.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits, waivers,
approvals, authorizations, orders, filings and notifications contemplated by the
exceptions to Section 2.05(b) are obtained or made and except as disclosed in
Section 2.05(a) of the Company Disclosure Schedule, the execution and delivery
of this Agreement by the Company does not, and the performance by the Company of
its obligations hereunder, including consummation of the transactions
contemplated hereby, will not (i) conflict with or violate the Articles of
Incorporation or Bylaws, or the equivalent organizational documents, in each
case as amended or restated, of the Company or any of its subsidiaries, (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule or regulation (collectively, "Laws") in effect as of the date of
this Agreement, or any judgment, order or decree applicable to the Company or
any of its subsidiaries or by or to which any of their respective properties is
bound or subject or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a
-9-
15
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by or to which the Company or any of its subsidiaries or any of their
respective properties is bound or subject.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of its obligations
hereunder, including consummation of the transactions contemplated hereby, will
not, require the Company to obtain any consent, license, permit, waiver,
approval, authorization or order of, or to make any filing with or notification
to, any governmental or regulatory authority, federal, state, local or foreign
(collectively, "Governmental Entity"), except (i) the filing of Articles of
Merger with the Secretary of State of the State of Texas, (ii) the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
(iii) where the failure to obtain such consents, licenses, permits, waivers,
approvals, authorizations or orders, or to make such filings or notifications
could not reasonably be expected to cause a Company Material Adverse Effect or
to prevent the Company from performing its obligations under this Agreement and
(iv) as disclosed in Section 2.05(b) of the Company Disclosure Schedule.
2.06 PERMITS; COMPLIANCE. Except as disclosed in Section 2.06 of the
Company Disclosure Schedule, each of the Company and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted with
respect to which the failure of the Company or its subsidiaries to have
possession would constitute a Company Material Adverse Effect (collectively, the
"Company Permits"). Section 2.06 of the Company Disclosure Schedule sets forth a
list of each of the Company Permits and the jurisdiction issuing the same, all
of which are in good standing and not subject to meritorious challenge. Section
2.06 of the Company Disclosure Schedule also sets forth, as of the date of this
Agreement, all actions, proceedings, investigations or surveys pending or, to
the knowledge of the Company or the Shareholders, threatened against the Company
or any of its subsidiaries that could reasonably be expected to result in the
loss, suspension or revocation of a Company Permit. Except as set forth in
Section 2.06 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is in conflict with, in default under or in violation of , and
none of them has received, since June 30, 1997, from any Governmental Entity any
written notice with respect to any conflict with, default under or violation of,
(i) any Law applicable to the Company or any of its subsidiaries or by or to
which any of their respective properties is bound or subject, (ii) any judgment,
order or decree applicable to the Company or any of its subsidiaries or by or to
which any of their respective properties is bound or subject, or (iii) any of
the Company Permits.
2.07 FINANCIAL STATEMENTS. The Company has provided Acquiror with true,
correct and complete copies of its audited consolidated balance sheet, income
statement and statement of cash flows for the years ended June 30, 1996, 1997,
and 1998 and an unaudited consolidated balance sheet, income statement and
statement of cash flows for the 9 months ended March 31, 1999
-10-
16
(collectively, the "Company Financial Statements"). Each of the Company
Financial Statements (including, in each case, any related notes thereto) (a)
has been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except (i) to the extent disclosed therein or
required by changes in GAAP, and (ii) as may be indicated in the notes thereto),
and (b) fairly present the consolidated financial position of the Company and
its subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated (subject, in the case of
unaudited consolidated financial statements for interim periods, to adjustments,
consisting only of normal, recurring accruals, necessary to present fairly such
results of operations and cash flows).
2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by
this Agreement or as set forth in Section 2.08 of the Company Disclosure
Schedule, since June 30, 1998 the Company and its subsidiaries have conducted
their respective businesses only in the ordinary course and in a manner
consistent with past practice and there has not been: (i) any damage,
destruction or loss with respect to any assets of the Company or any of its
subsidiaries that, whether or not covered by insurance, would constitute a
Company Material Adverse Effect; (ii) any change by the Company or its
subsidiaries in their significant accounting policies; (iii) except for
dividends by a wholly owned subsidiary of the Company to the Company or to
another wholly owned subsidiary of the Company, any declaration, setting aside
or payment of any dividends or distributions in respect of shares of Company
Stock or the shares of stock of, or other equity interests in, any subsidiary of
the Company or any redemption, purchase or other acquisition of any of the
Company's securities or any of the securities of any subsidiary of the Company;
(iv) any material increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, performance awards (including, without limitation,
the granting of stock appreciation rights or restricted stock awards), stock
purchase or other employee benefit plan, or any increase in the compensation
payable or to become payable to any of the directors or officers of the Company
or the employees of the Company and its subsidiaries as a group; or (v) any
other Company Material Adverse Effect.
2.09 LITIGATION. Except as disclosed in Section 2.09 of the Company
Disclosure Schedule, there is no claim, action, suit, litigation, proceeding,
arbitration or investigation of any kind, at law or in equity (including actions
or proceedings seeking injunctive relief), pending or, to the knowledge of the
Company or any of the Shareholders, threatened against the Company or any of its
subsidiaries or any properties or rights of the Company or any of its
subsidiaries, and neither the Company nor any of its subsidiaries is subject to
any executory judgment, order, writ, injunction, decree or award of any
Governmental Entity, including without limitation any cease and desist order and
any consent decree, settlement agreement or other similar agreement with any
Governmental Entity.
2.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Each Benefit Plan (as hereinafter defined) is listed in
Section 2.10(a) of the Company's Disclosure Schedule. The Company has delivered
or made available to Acquiror a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the Internal Revenue Service (the "IRS")
for each Benefit Plan for which a Form 5500 is required to be filed, (ii) such
Benefit Plan and all amendments thereto, (iii) each trust agreement, if any,
relating to such Benefit
-11-
17
Plan, (iv) the most recent summary plan description for each Benefit Plan for
which a summary plan description is required, (v) the most recent determination
letter, if any, issued by the IRS with respect to any Benefit Plan qualified
under section 401 of the Code. "Benefit Plans" shall mean any employee pension
benefit plan (whether or not insured), as defined in Section 3(2) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any employee
welfare benefit plan (whether or not insured) as defined in Section 3(1) of
ERISA, any plans that would be employee pension benefit plans or employee
welfare benefit plans if they were subject to ERISA, such as foreign plans and
plans for directors, any stock bonus, stock ownership, stock option, stock
purchase, stock appreciation rights, phantom stock, or other stock plan or
agreement (whether qualified or nonqualified), and any bonus, supplemental
income, deferred compensation or incentive compensation plan or agreement
sponsored, maintained, or contributed to by the Company or any of its
subsidiaries for the benefit of any of the present or former directors,
officers, employees, agents, consultants, or other similar representatives
providing services to or for the Company or any of its subsidiaries in
connection with such services or any such plans which have been so sponsored,
maintained, or contributed to within six years prior to the date of this
Agreement; provided, however, that such term shall not include (x) routine
employment policies and procedures developed and applied in the ordinary course
of business and consistent with past practice, including wage, vacation,
holiday, and sick or other leave policies, (y) workers compensation insurance,
and (z) directors and officers liability insurance.
(b) With respect to each Benefit Plan, no event has occurred
and there exists no condition or set of circumstances in connection with which
the Company or any of its subsidiaries could be subject to any liability under
the terms of such Benefit Plan, ERISA, the Code, or any other applicable Law,
other than any condition or set of circumstances that could not reasonably be
expected to have a Company Material Adverse Effect.
(c) Each Benefit Plan intended to be qualified under section
401 of the Code (i) satisfies in form the requirements of such section except to
the extent amendments are not required by Law to be made until a date after the
Closing Date, (ii) has received a favorable determination letter from the IRS
regarding such qualified status, (iii) has not, since receipt of the most recent
favorable determination letter, been amended, and (iv) has not been operated in
a way that would adversely affect its qualified status.
(d) There has been no termination or partial termination of
any Benefit Plan within the meaning of section 411(d)(3) of the Code.
(e) There are no actions, suits, or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, threatened
against, or with respect to, any Benefit Plan or its assets that could
reasonably be expected to have a Company Material Adverse Effect.
(f) There is no matter pending (other than routine
qualification determination filings) with respect to any Benefit Plan before the
IRS, the United States Department of Labor, the Pension Benefit Guaranty
Corporation or other governmental authority.
(g) All contributions required to be made to Benefit Plans
pursuant to their terms and the provisions of ERISA, the Code, or any other
applicable Law have been timely made.
-12-
18
(h) With respect to each Benefit Plan, no event has occurred
and, to the knowledge of the Company or any of the Shareholders, there exists no
condition or set of circumstances in connection with which the Company or any of
its subsidiaries could be subject to any liability with respect to a violation
of the terms of such Benefit Plans, ERISA, the Code or any other applicable Law.
(i) There are no collective bargaining or other labor union
contracts to which the Company or its subsidiaries is a party applicable to
persons employed by the Company or its subsidiaries and no collective bargaining
agreement is being negotiated by the Company or any of its subsidiaries. There
is no pending or, to the knowledge of the Company or the Shareholders,
threatened labor dispute, strike or work stoppage against the Company or any of
its subsidiaries. None of the Company, any of its subsidiaries or any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the respective businesses of the Company or
its subsidiaries that could reasonably be expected to have a Company Material
Adverse Effect, and there is no pending or, to the knowledge of the Company or
any of the Shareholders, threatened charge or complaint against the Company or
any of its subsidiaries by the National Labor Relations Board or any comparable
state agency or any other governmental agency.
(j) Section 2.10(j) of the Company Disclosure Schedule
contains true and correct (i) copies of all employment agreements to which the
Company or any of its subsidiaries is a party; (ii) listings of all officers of
the Company who have executed a non-competition agreement with the Company or
any of its subsidiaries; (iii) copies of all severance agreements, programs and
policies of the Company or any of its subsidiaries with or relating to its, or
any of its subsidiaries, employees; and (iv) summary descriptions of all plans,
programs, agreements and other arrangements of the Company or any of its
subsidiaries with or relating to its, or any of its subsidiaries, employees.
Except as set forth in Section 2.10(j) of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries will owe a severance payment or
similar obligation to any of their respective employees, officers or directors
as a result of the Merger or the other transactions contemplated by this
Agreement, and none of such persons will be entitled to severance payments or
other benefits as a result of the Merger or the other transactions contemplated
by this Agreement in the event of the subsequent termination of their
employment.
(k) No Benefit Plan provides retiree medical or retiree life
insurance benefits, and neither the Company nor any of its subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide life
insurance or medical benefits upon retirement or termination of employment of
employees, other than as required by the provisions of Sections 601 through 608
of ERISA and section 4980B of the Code.
(l) Neither the Company nor any corporation, trade, business
or entity under common control with the Company, within the meaning of section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA ("Commonly
Controlled Entity"), contributes to or has an obligation to contribute to, and
has not within six years prior to the date of this Agreement contributed to or
had an obligation to contribute to, (i) a plan subject to Section 4.2 of the
Code or Section 302 of ERISA; (ii) a multi-employer plan within the meaning of
Section 3(37) of ERISA or (iii) a plan subject to Title IV of ERISA.
-13-
19
(m) Except as disclosed on Schedule 2.10(m), neither the
Company nor any Commonly Controlled Entity has maintained a Benefit Plan which
provides for the purchase of common stock of the Company.
(n) Except as disclosed in Section 2.10(n) of the Company
Disclosure Schedule, the Company has not taken any of the following or other
similar actions since June 30, 1998: the acceleration of vesting, waiving of
performance criteria or the adjustment of awards or any other actions permitted
upon a change in control of the Company with respect to any of the Benefit Plans
or any of the plans, programs, agreements, policies or other arrangements
described in Section 2.10(j) of this Agreement.
(o) In connection with the consummation of the transactions
contemplated by this Agreement, no payments of money or other property,
acceleration of benefits, or provision of other rights have been or will be made
hereunder, under any agreement contemplated herein, or under any Benefit Plans
or any of the programs, agreements, policies, or other arrangements described in
Section 2.10(j) of the Company Disclosure Schedule that would be reasonably
likely to be nondeductible under section 280G of the Code, whether or not some
other subsequent action or event would be required to cause such payment,
acceleration, or provision to be triggered.
2.11 TAXES. Except as set forth in Section 2.11 of the Company
Disclosure Schedule,
(a) (i) All returns and reports of or with respect to any Tax
which is required to be filed with respect to the Company or any its
subsidiaries on or prior to the date hereof ("Tax Return") have been duly and
timely filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been so
included and all information provided in each such Tax Return is true, correct
and complete in all respects (including, without limitation, documentation
relating to any reportable item of income, deduction, gain, loss or credit
maintained by the Company), (iii) all Taxes required to be paid with respect to
the period covered by each such Tax Return have been timely paid in full, (iv)
all withholding Tax requirements imposed on or with respect to Company or any of
its subsidiaries have been satisfied in all respects, and (v) no penalty,
interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) There is no claim against the Company or any of its
subsidiaries for any amount of Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of or
with respect to the Company or any of its subsidiaries other than those
disclosed (and to which are attached true and complete copies of all audit or
similar reports) in Section 2.11 of the Company Disclosure Schedule.
(c) The total amounts set up as liabilities for current and
deferred Taxes in the Company Financial Statements are sufficient to cover the
payment of all Taxes, whether or not assessed or disputed, which are, or are
hereafter found to be, or to have been, due by or with respect to the Company
and any of its subsidiaries up to and through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due,
no liens for Taxes exist upon any of the assets of the Company or any of its
subsidiaries.
-14-
20
(e) None of the transactions contemplated by this Agreement
will result in any Tax liability or the recognition of any item of income or
gain to the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries has made
an election under section 341(f) of the Code.
2.12 TAX MATTERS. None of the Company, its affiliates or the
Shareholders has taken or agreed to take any action that would prevent the
Merger from constituting a reorganization within the meaning of section 368(a)
of the Code. Without limiting the generality of the foregoing:
(a) Prior to and in connection with the Merger, (i) none of
the Company Common Stock has been or will be redeemed, (ii) no
extraordinary distribution has been or will be made with respect to
Company Common Stock, and (iii) none of the Company Common Stock has
been or will be acquired by any person related (as defined in Treas.
Reg. Section 1.368-1(e)(3) without regard to Section
1.368-1(e)(3)(i)(A)) to the Company.
(b) The Company and the Shareholders of the Company will each
pay their respective expenses, if any, incurred in connection with the
Merger.
(c) There is no intercompany indebtedness existing between the
Company and the Acquiror or between the Company and Acquisition Sub
that was issued, acquired, or will be settled at a discount.
(d) The Company is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) The Company is not under the jurisdiction of a court in a
title 11 or similar case within the meaning of section 368(a)(3)(A) of
the Code.
2.13 AFFILIATES. Section 2.13 of the Company Disclosure Schedule
identifies all persons who, to the knowledge of the Company, may be deemed to be
affiliates of the Company within the meaning of that term as used in Rule 145
promulgated pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), including, without limitation, all directors and executive officers of
the Company.
2.14 CERTAIN BUSINESS PRACTICES. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful purposes, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment.
-15-
21
2.15 ENVIRONMENTAL. Except as set forth in Section 2.15 of the Company
Disclosure Schedule, the Company and each of its subsidiaries is in full
compliance with all laws, rules, regulations, orders, judgments, decrees and
other legal requirements, foreign and domestic, relating to the prevention of
pollution and the protection of the environment, including, without limitation,
all such legal requirements pertaining to human health and safety (collectively,
"Environmental Laws"). Except as set forth in Section 2.15 of the Company
Disclosure Schedule, there is no physical condition existing on any property
ever owned, operated, leased or used by the Company or any of its subsidiaries
nor are there any physical conditions existing on any other property that may
have been impacted by the operations of the Company or any of its subsidiaries
that could give rise to any remedial obligation under any Environmental Laws or
that could result in any liability to any third party claiming damage to person
or property as a result or consequence of such physical conditions. Except as
set forth in Section 2.15 of the Company Disclosure Schedule, none of the
Company or any of its subsidiaries has caused or permitted its businesses,
properties or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce, or process any Hazardous
Substance (as defined below) except in compliance with all Environmental Laws,
and has not caused or permitted the Release (as defined below) or arrangement
for transport or disposal of any Hazardous Substance on or off the site of any
property of any of the Company or any of its subsidiaries. Except as set forth
in Section 2.15 of the Company Disclosure Schedule, there are no underground
storage tanks on, under, or about any property of the Company or any of its
subsidiaries, and to the knowledge of the Company and the Shareholders, no
underground storage tanks were previously located on such properties. The
Company does not know of, and has not received any written or oral notice or
other communications from any Governmental Entity or other third party relating
to Hazardous Substances or remediation thereof, of possible liability of or
enforcement against any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with properties of the Company or
any of its subsidiaries, or any actual or potential administrative or judicial
proceedings in connection with any of the foregoing. The term "Hazardous
Substance" shall mean, without limitation, any hazardous waste, as defined by 42
U.S.C. 6903(5), any hazardous substance, as defined by 42 U.S.C. 9601(14), any
pollutant or contaminant, as defined by 42 U.S.C. 9601(33), asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon, crude oil or
derivatives thereof, petroleum products, and all other toxic substances,
hazardous materials or chemical substances regulated by any Environmental Law.
The term "Release" shall have the meaning set forth in 42 U.S.C. 9601(22).
2.16 UNDISCLOSED LIABILITIES. Except (i) as and to the extent of the
amounts specifically reflected or accrued for in the balance sheet dated as of
December 31, 1998, included in the Company Financial Statements or to the extent
specifically disclosed as a liability in other representations in this Article
II, (ii) for liabilities or obligations incurred in the ordinary course of
business since such balance sheet date, or (iii) as set forth in Section 2.16 of
the Company Disclosure Schedule, none of the Company or any of its subsidiaries
has any liabilities or obligations of any nature whether absolute, accrued,
contingent or otherwise, and whether due or to become due. Neither the Company
nor any of the Shareholders knows of any basis for the assertion against the
Company or any of its subsidiaries of any liability or obligation not excepted
by the preceding clauses (i) through (iii) of this Section.
2.17 CERTAIN AGREEMENTS. Except as set forth in Section 2.17 of the
Company Disclosure Schedule, none of the Company or any of its subsidiaries is a
party to, or bound by, any contract,
-16-
22
agreement or organizational document which purports to restrict, by virtue of a
noncompetition, territorial exclusivity or other provision covering such subject
matter, the scope of the business or operations of any of the Company or any of
its subsidiaries geographically or otherwise.
2.18 CONTRACTS AND COMMITMENTS. Section 2.18 of the Company Disclosure
Schedule sets forth (i) a list of each contract or commitment to which the
Company or any of its subsidiaries is a party or by which its or their property
is bound that involves consideration or other expenditure in excess of $10,000
or performance over a period of more than twelve (12) months or that is
otherwise material to the business or operations of the Company and its
subsidiaries, taken as a whole ("Material Contracts"); (ii) a list of all real
or personal property leases to which any of the Company or any of its
subsidiaries is a party ("Leases"); (iii) a list of guarantees, or agreements to
indemnify or be contingently liable for, the payment or performance by any
person or business entity to which any of the Company or any of its subsidiaries
is a party ("Guarantees"); and (iv) a list of contracts or other formal or
informal understandings between the Company or any of its subsidiaries and any
of its officers, directors, employees, consultants, agents or shareholders (or
any of such shareholders' family members or affiliates) ("Affiliate
Agreements"). True and complete copies of each Material Contract, Leases,
Guarantee and Affiliate Agreement has been furnished to Acquiror prior to the
date hereof. Except as specifically disclosed in Section 2.18 of the Company
Disclosure Schedule, each of the Material Contracts, Leases, Guarantees and
Affiliate Agreements constitutes the valid and legally binding obligation of the
parties thereto and is in full force and effect without default on the part of
the Company, and to the knowledge of the Company and the Shareholders, any other
party thereto.
2.19 AFFILIATE INTERESTS. None of the Shareholders nor any employee,
consultant, officer or director, or former shareholder, employee, consultant,
officer or director, of the Company or any of its subsidiaries has any interest,
direct or indirect, in any property, tangible, or intangible, including, without
limitation, patents, trade secrets, other confidential business information,
trademarks, service marks or trade names used in or pertaining to the business
of the Company or any of its subsidiaries, except for the normal rights of a
shareholder and as set forth in Section 2.19 of the Company Disclosure Schedule.
2.20 INTELLECTUAL PROPERTY. The Company or one or more of its
subsidiaries own, or hold licenses under or otherwise have the right to use or
sublicense, all foreign and domestic patents, trademarks (common law and
registered), trademark registration applications, service marks (common law and
registered), service mark registration applications, trade names and copyrights,
copyright applications, trade secrets, know-how and other proprietary
information as are reasonably necessary for the conduct of the business of the
Company and its subsidiaries as currently conducted. A list of all such
intellectual property is set forth in Section 2.20 of the Company Disclosure
Schedule. Neither the Company nor any of its subsidiaries is currently in
receipt of any notice of infringement or notice of conflict with the asserted
rights of others in any patents, trademarks, service marks, trade names, trade
secrets and copyrights owned or held by other persons, except, in each case, for
matters that could not reasonably be expected to have a Company Material Adverse
Effect. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause a violation of,
breach of the terms of, or any cancellation of any material license held by the
Company or any of its subsidiaries with regard to any patent,
-17-
23
trademark, service mark, trade name, trade secret or copyright that reasonably
could be expected to have a Company Material Adverse Effect.
2.21 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 Company or any of the Shareholders.
2.22 INSURANCE. Section 2.22 of the Company Disclosure Schedule sets
forth a list of all policies of insurance currently in effect relating to the
business or operations of the Company and its subsidiaries (true and complete
copies of which have been furnished to Acquiror). Such insurance policies are in
full force and effect. The Company and each of its subsidiaries are presently
insured, and during each of the past five (5) calendar years have been insured,
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. Except as set
forth in Section 2.22 of the Company Disclosure Schedule, the policies of
general liability, malpractice or professional liability, fire, theft and other
insurance maintained with respect to the operations, assets or businesses of the
Company and its subsidiaries provide adequate coverage against loss. The Company
or its subsidiaries have given in a timely manner to their insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and no insurer has denied coverage of any such
claims or actions or reserved it rights in respect of or rejected any of such
claims. None of the Company or any of its subsidiaries has received any notice
or other communication from any such insurer canceling or materially amending
any of such insurance policies, and no such cancellation is pending or
threatened. The execution of this Agreement and the consummation of the
transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
2.23 PROPERTIES. Except as set forth in Section 2.23 of the Company
Disclosure Schedule, the Company and its subsidiaries have good and marketable
title, free and clear of all liens to all their material properties and assets
whether tangible or intangible, real, personal or mixed, reflected in the
Company Financial Statements as being owned by the Company and its subsidiaries,
as of the date thereof, other than (i) any properties or assets that have been
sold or otherwise disposed of in the ordinary course of business since the date
of such Company Financial Statements, (ii) liens disclosed in the notes to such
financial statements, (iii) statutory liens for current Taxes not yet due and
(iv) liens arising in the ordinary course of business. All buildings, and all
fixtures, equipment and other property and assets that are material to its
business on a consolidated basis, held under leases or subleases by the Company
or any of its subsidiaries, are held under valid instruments enforceable in
accordance with their respective terms, subject to applicable Laws of
bankruptcy, insolvency or similar Laws relating to creditors' rights generally
and to general principles of equity (whether applied in a proceeding in law or
equity). All of the Company's and its subsidiaries' equipment in regular use has
been reasonably maintained and is in serviceable condition, reasonable wear and
tear excepted.
2.24 GOOD TITLE. Each of the Shareholders is the sole record and
beneficial owner of, and has good and valid title to, the number of shares of
Company Stock set forth opposite such Shareholder's name on Schedule 1.06(a) to
this Agreement, free and clear of all liens, claims, encumbrances, options,
voting trusts or agreements, proxies or other claims or charges of any nature
-18-
24
whatsoever (other than resulting from this Agreement), except as disclosed in
Section 2.24 of the Company Disclosure Schedule.
2.25 CERTAIN SECURITIES LAW MATTERS.
(a) Each of the Shareholders, either alone or with his or its
purchaser representative as defined in Rule 501(h) under the Securities Act, if
any, has substantial experience in evaluating and investing in private placement
transactions so that such Shareholder is capable of evaluating the merits and
risks of his or its investment in the Acquiror Shares. Each of the Shareholders,
by reason of such Shareholder's business or financial experience, either alone
or with his or its purchaser representative as defined in Section 501(h) under
the Securities Act, if any, has the capacity to protect such Shareholder's own
interests in connection with the acquisition of the Acquiror Shares hereunder.
Each of the Shareholders who has designated himself, herself or itself, as the
case may be, (i) as an "accredited investor" on the signature page hereto is an
"accredited investor" as defined in Rule 501 of Regulation D promulgated
pursuant to the Securities Act or (ii) as a "nonaccredited investor" is not an
"accredited investor" and, either alone or with his purchaser representatives,
has such knowledge and experience in financial and business matters that he or
it is capable of evaluating the merits and risks of the transactions
contemplated by this Agreement. Acquiror has provided each of the Shareholders
or his or its purchaser representative, if any, with copies of the Acquiror SEC
Reports (as such term is defined in Section 3.05, as well as certain financial
and other information on the Acquiror). Each of the Shareholders or his or its
purchaser representative, if any, is familiar with the business and financial
condition, properties, operations and prospects of Acquiror and has had an
opportunity to discuss Acquiror's business and financial condition, properties,
operations and prospects with Acquiror's management. Each of the Shareholders or
his purchaser representative, if any, has also had an opportunity to ask
questions of officers of Acquiror, which questions were answered to such
Shareholder's satisfaction. Each of the Shareholders understands that such
discussion was intended to describe certain aspects of Acquiror's business and
financial condition, properties, operations and prospects, but were not a
thorough or exhaustive description.
(b) Each of the Shareholders understands that the Acquiror
Shares may be "restricted securities" under the applicable federal securities
laws and that the Securities Act and the rules of the Commission provide in
substance that such Shareholder may dispose of the Acquiror Shares only pursuant
to an effective registration statement under the Securities Act or an exemption
therefrom, and each Shareholder further understands that, and except as provided
under the Long- Term Incentive Plan, Acquiror has no obligation or intention to
register the Acquiror Shares, or to take action or not to take action so as to
permit or prevent sales pursuant to the Securities Act (including Rule 144)
thereunder which permits limited resales of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the issue, the resale occurring not
less than one (1) year after a party has purchased and paid for the security to
be sold, the sale being effected through a "broker's transaction" or in
transactions with a "market maker" and the number of shares being sold not
exceeding specified limitations. Accordingly, such Shareholder understands that
under the Commission's rules, such Shareholder may dispose of the Acquiror
Shares in transactions which are exempt from registration under the Securities
Act. As a consequence of all of the foregoing, each Shareholder understands that
such
-19-
25
Shareholder must bear the economic risk of the investment in the Acquiror Shares
for an indefinite period of time.
(c) Each of the Shareholders acknowledges and agrees that such
Shareholder is not relying upon Acquiror or the Company or their respective
officers, directors, employees or agents, as to the United States federal income
tax or any other tax consequences to such Shareholder of the transactions
contemplated by this Agreement. As to all such tax consequences, such
Shareholder hereby agrees and represents that such Shareholder has consulted
with such Shareholder's own legal and tax advisors to the extent that such
Shareholder has deemed such consultation necessary or appropriate, that such
Shareholder is making such Shareholder's own determination as to what the tax
consequences of the transactions contemplated hereby will be to such Shareholder
and that neither Acquiror nor the Company is making any representation, express
or implied, as to any such tax consequences.
2.26 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of the
Shareholders has the full power, legal right, capacity and authority to enter
into, execute and deliver this Agreement and to carry out and perform the
transactions contemplated hereby. This Agreement constitutes a valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to the Company and the
Shareholders that:
3.01 ORGANIZATION AND QUALIFICATION. Acquiror is a limited
liability company duly organized, validly existing and in good standing under
the laws of The Netherlands and Acquisition Sub is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Texas. Each
of the Acquiror Companies has all requisite power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing could not
reasonably be expected to have an Acquiror Material Adverse Effect. The term
"Acquiror Material Adverse Effect" as used in this Agreement shall mean any
change or effect that would be materially adverse to the financial condition,
results of operations, business or prospects of Acquiror and its subsidiaries,
taken as a whole, at the time of such change or effect.
3.02 CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of (i)
100,000,000 Acquiror Shares, of which, as of June 1, 1999 (A) 29,414,784 are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable and were not issued in violation of any preemptive or
similar rights created by statute, Acquiror's Articles of Association or Bylaws
(or the equivalent organizational documents) (collectively, the "Acquiror
Organizational Documents") or
-20-
26
any agreement to which Acquiror is a party or is bound; (B) no shares are held
in the treasury of Acquiror and (C) 1,785,000 shares are reserved for future
issuance pursuant to stock option plans of Acquiror and (ii) 3,000,000
Preference Shares, par value NLG 0.03, none of which were issued or outstanding.
The authorized capital stock of Acquisition Sub consists of 1,000 shares of
common stock, no par value per share, of which, as of the date hereof, 100
shares are issued and outstanding. All of the issued and outstanding capital
stock of Acquisition Sub is owned by Acquiror.
(b) The Acquiror Shares to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid and nonassessable.
3.03 AUTHORITY. Each of the Acquiror Companies has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Acquiror Companies
and the performance by each of the Acquiror Companies of its obligations
hereunder, including the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of either of the Acquiror Companies are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of the Acquiror Companies and, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes the legal, valid and
binding obligation of each of the Acquiror Companies enforceable against the
Acquiror Companies in accordance with its terms.
3.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits, waivers,
approvals, authorizations, orders, filings and notifications contemplated by the
exceptions to Section 3.04(b) are obtained or made and except as otherwise
disclosed in Section 3.04(a) of the Disclosure Schedule delivered by Acquiror to
the Company contemporaneously with the execution and delivery of this Agreement
(the "Acquiror Disclosure Schedule"), the execution and delivery of this
Agreement by the Acquiror Companies does not, and performance of their
respective obligations hereunder, including the consummation of the transactions
contemplated hereby, will not (i) conflict with or violate the Acquiror
Organizational Documents or the Articles of Incorporation or Bylaws of
Acquisition Sub, (ii) conflict with or violate any Laws in effect as of the date
of this Agreement or any judgment, order or decree applicable to Acquiror or any
of Acquiror's subsidiaries or by or to which any of their properties is bound or
subject or (iii) result in any breach of or constitute a default under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a lien or encumbrance on
any of the properties or assets of Acquiror or any of Acquiror's subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Acquiror
or any of Acquiror's subsidiaries is a party or by or to which Acquiror or any
of Acquiror's subsidiaries or any of their respective properties is bound or
subject.
(b) The execution and delivery of this Agreement by the
Acquiror Companies does not, and the performance of this Agreement by the
Acquiror Companies, including the consummation of the transactions contemplated
hereby, will not require Acquiror or Acquisition Sub to obtain any consent,
license, permit, waiver approval, authorization or order of, or to make any
-21-
27
filing with or notification to, any Governmental Entities, except (i) for the
filing of Articles of Merger with the Secretary of State of the State of Texas,
(ii) the applicable requirements of the HSR Act or the Exchange Act, (iii) the
applicable requirements of the New York Stock Exchange ("NYSE"), (iv) where the
failure to obtain such consents, licenses, permits, waivers, approvals,
authorizations or orders, or to make such filings or notifications could not
reasonably be expected to prevent Acquiror or Acquisition Sub from performing
their respective obligations under this Agreement and (v) as disclosed in
Section 3.04(b) of the Acquiror Disclosure Schedule.
3.05 REPORTS; FINANCIAL STATEMENTS.
(a) Since December 31, 1998, Acquiror has filed all forms,
reports, statements and other documents required to be filed with the
Commission, including without limitation (i) all Annual Reports on Form 10-K,
(ii) all Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to
meetings of shareholders (whether annual or special), (iv) all Current Reports
on Form 8- K and (v) all other reports, schedules, registration statements or
other documents (collectively referred to as the "Acquiror SEC Reports"). The
Acquiror SEC Reports were prepared in all material respects in accordance with
the requirements of applicable Law (including the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the Commission
thereunder applicable to the Acquiror SEC Reports) and the Acquiror SEC Reports
did not at the time they were filed 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 misleading.
(b) Each of the historical consolidated financial statements
(including, in each case, any related notes thereto) contained in the Acquiror
SEC Reports (i) have been prepared in accordance with the published rules and
regulations of the Commission and GAAP applied on a consistent basis throughout
the periods involved (except (A) to the extent disclosed therein or required by
changes in GAAP, (B) as may be indicated in the notes thereto and (C) in the
case of the unaudited financial statements, as permitted by the rules and
regulations of the Commission) and (ii) fairly present the consolidated
financial position of Acquiror and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated (subject, in the case of unaudited consolidated financial
statements for interim periods, to adjustments, consisting only of normal,
recurring accruals, necessary to present fairly such results of operations and
cash flows).
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Acquiror SEC Reports filed prior to the date of this Agreement or as
contemplated by this Agreement, since December 31, 1998, Acquiror and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been any
Acquiror Material Adverse Effect.
3.07 TAX MATTERS.
(a) Neither the Acquiror nor any of its affiliates has taken
or agreed to take any action that would prevent the Merger from constituting a
reorganization within the meaning of section 368(a) of the Code.
-22-
28
(b) Acquiror qualifies to be treated as a "party to a
reorganization" within the meaning of Section 368(b) of the Code in connection
with the Merger.
(c) Acquiror, or if applicable, any qualified subsidiary (as
defined in Section 1.367(a)-3(c)(5)(vii) of the United States Treasury
Regulations) or any qualified partnership (as defined in Section
1.367(a)-3(c)(5)(viii) of the United States Treasury Regulations) has been
engaged in an active trade or business outside the United States (as defined in
Section 1.367(a)-2T(b)(2) and (3) of the United States Treasury Regulations) for
the entire 36-month period immediately before the Effective Time of the Merger.
Acquiror (and, if applicable, any qualified subsidiary or qualified partnership
engaged in the active trade or business) has no intention to substantially
dispose of or discontinue such trade or business. At the Effective Time of the
Merger, the fair market value of the Acquiror is at least equal to the fair
market value of the Company as determined pursuant to Section
1.367-3(c)(3)(viii) of the United States Treasury Regulations.
(d) Stock representing fifty percent (50%) or less of both the
total voting power and total value of the stock of Acquiror will be issued in
the Merger.
(e) Fifty percent (50%) or less of each of the total voting
power and the total value of the stock of Acquiror will be owned, in the
aggregate, immediately after the Effective Time of the Merger by United States
persons that are either officers or directors of the Company or that are
shareholders of the Company who own at least five percent (5%) of either the
total voting power or total value of the Company immediately prior to the
Merger. For purposes of this representation, any stock of Acquiror owned by
United States persons immediately after the Effective Time of the Merger will be
taken into account, whether or not it was received in the Merger for stock of
the Company.
3.08 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 Acquiror.
ARTICLE IV
COVENANTS OF THE SHAREHOLDERS
4.01 AFFIRMATIVE COVENANT. Each of the Shareholders covenants and
agrees that, prior to the Closing Date, such Shareholder will take all
commercially reasonable actions necessary to ensure that the Company complies
with Articles V and VII hereof.
4.02 NEGATIVE COVENANTS. Each of the Shareholders covenants and agrees
that from the date of this Agreement until the Effective Time, such Shareholder
will not:
(a) take any action that reasonably could be expected to
result in (i) any of the representations and warranties of such
Shareholder and the Company set forth in Article II hereof becoming
untrue or (ii) any of the conditions set forth in Article IX hereof not
being satisfied; or
-23-
29
(b) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or
that may reasonably be expected to lead to, any Competing Transaction
(as hereinafter defined), or enter into discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to, or endorse, any Competing
Transaction, or authorize or permit any agent, investment banker,
financial advisor, attorney, accountant or other representative
retained by such Shareholder to take any such action, and such
Shareholder shall promptly notify Acquiror of all relevant terms of any
such inquiries or proposals received by such Shareholder or by any such
agent, investment banker, financial advisor, attorney, accountant or
other representative relating to any of such matters and if such
inquiry or proposal is in writing, such Shareholder shall promptly
deliver or cause to be delivered to Acquiror a copy of such inquiry or
proposal. For purposes of this Agreement, "Competing Transaction" shall
mean any merger, consolidation, share exchange, business combination or
similar transaction involving the Company or any of its subsidiaries or
the acquisition in any manner, directly or indirectly, of a material
interest in any voting securities of, or a material equity interest in
a substantial portion of the assets of, the Company or any of its
subsidiaries, other than the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Acquiror, the
Company will and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary course
consistent with past practices;
(b) use all reasonable efforts to preserve substantially
intact its business organization, maintain its rights and franchises,
retain the services of its respective officers and key employees and
maintain its relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted,
and maintain supplies and inventories in quantities consistent with its
customary business practice;
(d) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage
to that currently maintained;
(e) ensure that the cash on hand at the Company shall not be
less than $3,800,000 and the aggregate outstanding balance of long-term
and short-term debt for borrowed money (except as set forth in Section
7.10) shall not be greater than zero; and
-24-
30
(f) use its best efforts to ensure that the Shareholders'
Representative shall execute and deliver the Escrow Agreement.
5.02 NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Acquiror,
from the date of this Agreement until the Effective Time, the Company will not
do, and will not permit any of its subsidiaries to do, any of the following:
(a) (i) increase the compensation payable to or to become
payable to any director or executive officer; (ii) increase the
compensation payable or pay bonuses to employees of the Company other
than in the ordinary course of business, (iii) grant any severance or
termination pay (other than pursuant to the normal severance practices
of the Company or its subsidiaries as in effect on the date of this
Agreement) to, or enter into any employment or severance agreement
with, any director, officer or employee; (iv) except as set forth in
Section 2.10(a) of the Company Disclosure Schedule, establish, adopt or
enter into any Benefit Plan or (v) except as may be required by
applicable Law or as set forth in Section 2.10(a) of the Company
Disclosure Schedule, amend, or take any other actions (including,
without limitation, the acceleration of vesting, waiving of performance
criteria or the adjustment of awards or any other actions permitted
upon a "change in control" (as defined in the respective plans) of the
Company, with respect to any of the Benefit Plans or any of the plans,
programs, agreements, policies or other arrangements described in
Section 2.10(a) of this Agreement;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock or
other equity interests, except dividends by a wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of the
Company;
(c) (i) except as described in Section 2.03(c) of the Company
Disclosure Schedule, redeem, purchase or otherwise acquire any shares
of its or any of its subsidiaries' capital stock or any securities or
obligations convertible into or exchangeable for any shares of its or
its subsidiaries' capital stock (other than any such acquisition
directly from any wholly owned subsidiary of the Company in exchange
for capital contributions or loans to such subsidiary), or any options,
warrants or conversion or other rights to acquire any shares of its or
its subsidiaries' capital stock or any such securities or obligations;
(ii) effect any reorganization or recapitalization of the Company or
any of its subsidiaries; or (iii) split, combine or reclassify any of
its or its subsidiaries' capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its or its subsidiaries' capital stock;
(d) (i) except as set forth in Section 2.03(a) hereof or as
described in Section 2.03(c) of the Company Disclosure Schedule, issue
(whether upon original issue or out of treasury), sell, grant, award,
deliver or limit the voting rights of any shares of any class of its or
its subsidiaries' capital stock, any securities convertible into or
exercisable or exchangeable for any such shares, or any rights,
warrants or options to acquire, any such shares; (ii) amend or
otherwise modify the terms of any such rights, warrants or options the
-25-
31
effect of which shall be to make such terms materially more favorable
to the holders thereof; or (iii) take any action to accelerate the
vesting of any of the stock options;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets of any
other person (other than the purchase of assets from suppliers or
vendors in the ordinary course of business and consistent with past
practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, any of its assets or any
assets of any of its subsidiaries, except for pledges or dispositions
of assets in the ordinary course of business and consistent with past
practice;
(g) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or
that may reasonably be expected to lead to, any Competing Transaction,
or enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or
agree to, or endorse, any Competing Transaction, or authorize or permit
any of the officers, directors, employees or agents of the Company or
any of its subsidiaries or any agent, investment banker, financial
advisor, attorney, accountant or other representative retained by the
Company or any of the Company's subsidiaries to take any such action,
and the Company shall promptly notify Acquiror of all relevant terms of
any such inquiries or proposals received by the Company or any of its
subsidiaries or by any such officer, director, employee, agent,
investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and if such inquiry or
proposal is in writing, the Company shall promptly deliver or cause to
be delivered to Acquiror a copy of such inquiry or proposal;
(h) release any third party from its obligations under any
existing standstill agreement or arrangement relating to a Competing
Transaction or otherwise under any confidentiality or other similar
agreement relating to information material to the Company or any of its
subsidiaries;
(i) propose to adopt any amendments to its Articles of
Incorporation or its Bylaws that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement;
(j) (i) change any of its significant accounting policies or
(ii) make or rescind any express or deemed election relating to Taxes,
settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to Taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31 1997, except, in the case of clause (i) or clause
(ii), as may be required by Law or GAAP;
-26-
32
(k) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument or under any financing lease, whether pursuant to a
sale-and-leaseback transaction or otherwise, except in the ordinary
course of business consistent with past practice;
(l) enter into any material arrangement, agreement or contract
with any third party (other than customers in the ordinary course of
business); or
(m) agree in writing or otherwise to do any of the foregoing.
ARTICLE VI
COVENANTS OF ACQUIROR
6.01 AFFIRMATIVE COVENANTS OF ACQUIROR. Acquiror hereby covenants and
agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by the Company and the
Shareholders, Acquiror will:
(a) use all reasonable efforts to preserve substantially
intact its business organization;
(b) maintain and keep its properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted,
and maintain supplies and inventories in quantities consistent with its
customary business practice; and
(c) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage
to that currently maintained.
6.02 NEGATIVE COVENANTS OF ACQUIROR. Except as expressly contemplated
by this Agreement or otherwise consented to in writing by the Company and the
Shareholders, from the date of this Agreement until the Effective Time, Acquiror
will not do any of the following:
(a) amend any of the material terms or provisions of the
Acquiror Shares;
(b) knowingly take any action that would result in a failure
to maintain the listing of the Acquiror Shares on the New York Stock
Exchange;
(c) propose to adopt any amendments to the Acquiror
Organizational Documents that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement; or
(d) agree in writing or otherwise to do any of the foregoing.
-27-
33
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 NOTIFICATION OF CERTAIN MATTERS. The Company and each of the
Shareholders shall give prompt notice to Acquiror, and Acquiror shall give
prompt notice to the Company, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty of the party giving such notice contained
in this Agreement to be untrue or inaccurate at any time from the date hereof to
the Effective Time, (ii) any material failure of the party giving such notice to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder within the time specified therefor and
(iii) any change or event having, or which, insofar as can be reasonably
foreseen, could have, a material adverse effect on the financial condition,
results of operations, business or prospects of Acquiror or the Company.
7.02 ACCESS AND INFORMATION. Between the date hereof and the Closing
Date:
(a) The Company shall, and shall cause its subsidiaries to,
(i) afford to Acquiror and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Acquiror Representatives") access
during ordinary business hours and at other reasonable times, upon
reasonable prior notice, to the officers, employees, accountants,
agents, properties, offices and other facilities of the Company and its
subsidiaries and to the books and records thereof and (ii) furnish
promptly to Acquiror and the Acquiror Representatives such information
concerning the business, properties, contracts, records and personnel
of the Company and its subsidiaries (including, without limitation,
financial, operating and other data and information) as may be
reasonably requested, from time to time, by Acquiror or the Acquiror
Representatives.
(b) Notwithstanding the foregoing provisions of this Section
7.02, the Company shall not be required to grant access or furnish
information to the Acquiror Representatives to the extent that such
access or the furnishing of such information is prohibited by Law or
contract. No investigation by the Acquiror Representatives made
heretofore or hereafter shall affect the representations and warranties
of the Company that are contained herein and each such representation
and warranty shall survive such investigation.
(c) The Acquiror shall hold in confidence and not disclose,
except on a "need to know" basis to its respective Acquiror
Representatives, all nonpublic information received from the Company
("Confidential Information") until such time as such Confidential
Information is otherwise publicly available and, if this Agreement is
terminated, Acquiror will deliver to the Company all documents, work
papers and other materials (including copies) obtained by such party or
on its behalf from another party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution
hereof. The foregoing obligations of confidentiality and nondisclosure
shall be effective for a period of two (2) years after such
termination; provided, however, that such obligation shall terminate at
the Closing.
(d) In the event that the Acquiror, or anyone to whom it
supplies Confidential Information, receives a request to disclose all
or any part of the Confidential Information under the terms of a
subpoena or order issued by a Governmental Entity, Acquiror agrees
-28-
34
(i) to notify the Company immediately of the existence, terms and
circumstances surrounding such request, (ii) to consult with the
Company on the advisability of taking legally available steps to resist
or narrow such request, and (iii) if disclosure of such Confidential
Information is required to prevent Acquiror from being held in contempt
or subject to other penalty, to furnish only such portion of the
Confidential Information as the Acquiror is legally compelled to
disclose and to exercise its best efforts to obtain an order or other
reliable assurance that confidential treatment will be accorded to the
disclosed Confidential Information.
(e) In addition to the foregoing, the rights and obligations
under that certain Confidentiality Agreement by and between Acquiror,
the Company and Chisholm Energy Partners executed in December, 1998,
shall not be affected by this Agreement, and shall remain in full force
and effect; provided, however, such Confidentiality Agreement shall
terminate on the Closing.
7.03 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Acquiror shall each use, and shall cause
each of their respective subsidiaries to use, and each of the Shareholders shall
use, all reasonable efforts promptly (i) to take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, (ii) to obtain from any
Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained by the Company, Acquiror or any
of the Shareholders, respectively, or any of the Company's or Acquiror's
respective subsidiaries, in connection with the authorization, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, (iii) to make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
and the Merger required under (A) the Securities Act and the Exchange Act and
the rules and regulations thereunder, and any other applicable federal or state
securities laws, (B) the HSR Act and (C) any other applicable Law; provided that
Acquiror and the Company shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents to
the nonfiling party and its advisors prior to filing and, if requested, shall
accept all reasonable additions, deletions or changes suggested in connection
therewith. The Company and Acquiror shall furnish all information required for
any application or other filing to be made pursuant to the rules and regulations
of any applicable Law in connection with the transactions contemplated by this
Agreement.
(b) Acquiror, the Company and each of the Shareholders agree,
and Acquiror and the Company shall cause each of their respective subsidiaries,
to cooperate and to use all reasonable efforts to contest and resist any action,
including legislative, administrative or judicial action, and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) (an "Order") that is in effect and
that restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement, including, without
limitation, by vigorously pursuing all available avenues of administrative and
judicial appeal and all available legislative action. Acquiror, the Company and
each of the Shareholders also agree to take any and all reasonable actions,
including, without
-29-
35
limitation, the disposition of assets or the withdrawal from doing business in
particular jurisdictions, required by regulatory authorities as a condition to
the granting of any approvals required in order to permit the consummation of
the Merger or as may be required to avoid, lift, vacate or reverse any
legislative or judicial action that would otherwise cause any condition to the
Merger not to be satisfied; provided, however, that in no event shall any party
take, or be required to take, any action that could reasonably be expected to
have a Company Material Adverse Effect or an Acquiror Material Adverse Effect.
(c) The Company, Acquiror and each of the Shareholders shall
each promptly give (or shall cause their respective subsidiaries to give) any
notices regarding the Merger, this Agreement or the transactions contemplated
hereby to third parties required by Law or by any contract, license, lease or
other agreement to which such person is a party or by which such person is
bound, and use (and cause its subsidiaries to use) all reasonable efforts to
obtain any third party consents (i) necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, (ii) otherwise required under
any contracts, licenses, leases or other agreements in connection with the
consummation of the transactions contemplated by this Agreement or (iii)
required to prevent a Company Material Adverse Effect or an Acquiror Material
Adverse Effect, respectively, from occurring after the Effective Time.
(d) If any party shall fail to obtain any third party consent
described in subsection (c)(i) above, such party shall use all reasonable
efforts, and shall take any such actions reasonably requested by the other
parties, to limit the adverse effect upon the Company and Acquiror, their
respective subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
7.04 PUBLIC ANNOUNCEMENTS. Acquiror and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation;
provided, however, that a party may, without consulting with the other party,
issue such a press release or make such a public statement if required by
applicable Law or the rules of the NYSE or a national securities exchange if
such party has used commercially reasonable efforts to consult with the other
party but has been unable to do so in a timely manner.
7.05 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses. The Company shall have fully paid all outside
legal and accounting expenses incurred in connection with this Agreement on or
before the Closing.
7.06 EMPLOYEES OF COMPANY.
(a) As soon as reasonably practicable after the Effective
Time, but in any event not later than January 1, 2000, Acquiror shall provide
employee benefit plans and arrangements to employees of the Company and its
subsidiaries that are similar to the employee benefit plans and arrangements of
Acquiror for similarly situated employees of the Acquiror as then in effect.
-30-
36
(b) The Company acknowledges that any benefits plans of the
Acquiror that may be provided to the employees of the Company after the
Effective Time may be substantially different from those provided such employees
of the Company prior to the Merger.
(c) The employees of Company and its subsidiaries shall be
credited for their actual years of service with the Company for purposes of
eligibility, vesting and benefit accrual under all benefit plans provided by
Acquiror in accordance with this Section 7.07, including, but not limited to,
vacation, severance, retirement and disability plans, but excluding any defined
benefit plans.
(d) Such employee benefits under any medical plan provided by
Acquiror in accordance with this Section 7.07 shall not be subject to any
exclusions for any pre-existing conditions to the extent such exclusions did not
apply under the Company's medical plan, and credit shall be received for any
deductibles or out-of-pocket amounts previously paid by employees of the Company
and its subsidiaries for the current plan year under the medical plan maintained
by the Company.
(e) Nothing in this Agreement is intended to confer upon any
employee of the Company or its subsidiaries retained by Acquiror after Closing
("Retained Employees") any right to continued employment after evaluation by
Acquiror and its affiliates of their employment needs at any time after the
Closing.
(f) Notwithstanding any provision in this Agreement to the
contrary, Acquiror expressly reserves the right to amend, modify, or terminate
any benefit plan, program or policy established or maintained by Acquiror or any
of its affiliates (including, without limitation, the Company or its
subsidiaries) for the benefit of the Retained Employees.
7.07 TAX-FREE REORGANIZATION. Subject to the terms and conditions
hereof, Acquiror and the Company shall each use its best efforts to cause the
Merger to be treated as a reorganization within the meaning of section 368(a) of
the Code and to constitute a tax-deferred transaction for the Shareholders under
section 367 of the Code. Acquiror shall cause the Company to comply with all
applicable reporting requirements under section 367(a) of the Code and U.S.
Treasury Regulations issued thereunder, including, without limitation, the
reporting requirements set forth in section 1.367(a)-3(c)(6) of the U.S.
Treasury Regulations.
7.08 INFORMATION FOR TAX RETURNS. From and after the Closing, the
Acquiror Companies shall cooperate with the Shareholders by providing and
granting access to the Shareholders, promptly upon request, to such records,
documents and other information regarding the Company and its subsidiaries as
the Shareholders may reasonably request from time to time, in connection with
the preparation or audit of any Tax Returns of any of the Company, its
subsidiaries or the Shareholders, and for audits, disputes, refund claims, or
litigation or other proceedings relating thereto.
7.09 NO HEDGING TRANSACTIONS. The Shareholders acknowledge that the
entering into of or participation in hedging or other derivative transactions
that include Common Stock, or derivatives thereof, of the Acquiror may have an
effect in the overall market for Common Stock of the Acquiror and, further, that
Acquiror has a policy restricting executives and affiliates from
-31-
37
engaging or participating in such transactions. Accordingly, the Shareholders
agree that they will not enter into any hedging or similar transaction (whether
through use of a forward contract, swap agreement, option or other instrument)
that in any way involves Common Stock of Acquiror or any derivatives thereof
without the prior written consent of Acquiror in its sole discretion; provided,
however, that the limitations imposed by this Section 7.10 shall not apply to
the Estate of Paul J. Cernock, Deceased or the Estate of Elizabeth M. Cernock,
Deceased.
7.10 PAYMENT OF CERTAIN COMPANY DEBT. No more than 90 days after
the Closing, the Acquiror shall cause the Company and its subsidiaries to repay
in full all amounts due and owing, including, without limitation, all associated
principal, interest, and pre-payment penalties, if any, with respect to the
following Company loans that have been previously guaranteed by Paul J. Cernock,
Deceased:
ORIGINAL
LOAN BALANCE DUE
CREDITOR LOAN NUMBER AMOUNT AS OF 3/31/99
Sterling Bank 112596834 $ 60,000.00 $13,333.24
Sterling Bank 01596054 $100,000.00 $15,415.32
Bank of America, FSB 1002520 $275,000.00 $262,082.97
Denver, Colorado (SBA Loan)
SBA Lending Group
No. 51002
P. O. Box 98624
Las Vegas, Nevada
Denver Urban Economic CDC892888-30-09 $227,000.00 $212.879.13
Development Corporation (SBA Loan)
3003 Arapahoe Street
Denver, Colorado
TOTAL $662,000.00 $503,710.66
The Acquiror shall use reasonable efforts and cooperate with the Shareholders to
have each of the Shareholders released, as of the Closing Date, from all
Guarantees.
7.11 INDEMNIFICATION OF DIRECTORS AND OFFICERS. Acquiror and the
Company agree that the indemnification obligations set forth in the Articles of
Incorporation and Bylaws of the Company, in each case as of the date of this
Agreement, shall survive the Merger and after the Effective Time any amendment,
repeal or other modification of the Articles of Incorporation or Bylaws shall
not adversely affect the rights thereunder of the individuals who on or prior to
the Effective Time were directors, officers, employees or agents of the Company
or its subsidiaries.
-32-
38
ARTICLE VIII
INDEMNIFICATION
8.01 IN GENERAL. Subject to the terms and conditions of this Article
VIII, the Shareholders agree, jointly and severally, to indemnify, defend and
hold harmless Acquiror and its directors, officers, employees, consultants,
affiliates and controlling persons (collectively, and including the Company and
its subsidiaries after the Effective Time, the "Acquiror Indemnified Parties" or
an "Acquiror Indemnified Party"), from and against all Claims asserted against,
resulting from, imposed upon or incurred by Acquiror or any other Acquiror
Indemnified Party, directly or indirectly, by reason of, arising out of, or
resulting from (a) the inaccuracy or breach of any representation or warranty of
the Company or any of the Shareholders contained in or made pursuant to this
Agreement or (b) the breach of any covenant or agreement of the Company or any
of the Shareholders contained in or made pursuant to this Agreement. As used in
this Article VIII, the term "Claim" shall include (i) all debts, liabilities and
obligations, (ii) all losses, damages, costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated matter),
penalties, court costs and reasonable attorneys' fees and expenses), and (iii)
all demands, claims, actions, costs of investigation, causes of action,
proceedings, arbitrations, judgments, settlements and assessments, whether or
not ultimately determined to be valid.
8.02 NO EXHAUSTION OF REMEDIES. The Shareholders acknowledge that their
obligation under Section 8.01 of this Agreement is independent of the
obligations of the Company pursuant to this Agreement, and that the Shareholders
waive any right to require the Acquiror Indemnified Parties to (i) proceed
against the Company; or (ii) pursue any other remedy whatsoever in the power of
the Acquiror Indemnified Parties.
8.03 DEFENSE OF THIRD PARTY CLAIMS. The obligation of the Shareholders
to indemnify the Acquiror Indemnified Parties under this Article VIII with
respect to Claims relating to or arising from third parties (a "Third Party
Claim") shall be subject to the following terms and conditions:
(a) Notice and Defense. The Acquiror Indemnified Party will
give the other party or parties (whether one or more, the "Indemnifying
Party") prompt written notice (including all documents and other
nonprivileged information in the Acquiror Indemnified Party's
possession related thereto) of any such Third Party Claim, and the
Indemnifying Party may undertake the defense thereof by representatives
chosen by it upon written notice to the Acquiror Indemnified Party
provided within 20 days of receiving notice of such Third Party Claim
(or sooner if the nature of the Third Party Claim so requires). Failure
of the Acquiror Indemnified Party to give such notice shall not affect
the Indemnifying Party's duty or obligations under this Article VIII,
except to the extent the Indemnifying Party is materially prejudiced
thereby. The Acquiror Indemnified Party shall make available to the
Indemnifying Party or its representatives all records and other
materials required by the Indemnifying Party and in the possession or
under the control of the Acquiror Indemnified Party, for the use of the
Indemnifying Party and its representatives in defending any such claim,
and shall in other respects give reasonable cooperation in such
defense.
(b) Failure to Defend. If the Indemnifying Party, within 20
days after notice of any such Third Party Claim (or sooner if the
nature of any Third Party Claim so requires), fails to undertake the
defense of such Third Party Claim actively and in good faith, then the
-33-
39
Acquiror Indemnified Party will have the right to undertake the
defense, compromise or settlement of such Third Party Claim, or consent
to the entry of a judgment with respect thereto.
(c) Acquiror Indemnified Party's Rights. Anything in this
Article VIII to the contrary notwithstanding, (i) if there is a
reasonable probability that the Third Party Claim may adversely affect
the Acquiror Indemnified Party other than as a result of money damages
or other money payments in an aggregate amount of less than $25,000,
the Acquiror Indemnified Party shall have the right to defend,
compromise or settle such Third Party Claim (provided that the Acquiror
Indemnified Party shall not settle such Third Party Claim or consent to
any judgment without first obtaining the consent of the Indemnifying
Party, which shall not be unreasonably withheld), and (ii) the
Indemnifying Party shall not without the written consent of the
Acquiror Indemnified Party, settle or compromise any Third Party Claim
or consent to the entry of any judgment that does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Acquiror Indemnified Party of an unconditional release from all
liability in respect of such Third Party Claim.
8.04 PAYMENT; ARBITRATION. Upon the occurrence of a Claim (subject to
Section 8.03 with respect to a Third Party Claim) for which indemnification is
believed to be due hereunder, the Indemnified Party shall provide notice of such
Claim to the Indemnifying Party, stating in specific terms the circumstances
giving rise to the Claim, specifying the amount of the Claim and making a
request for any payment then believed due. Any Claim shall be conclusive against
the Indemnifying Party in all respects 30 days after receipt by the Indemnifying
Party of such notice, unless within such period the Indemnifying Party sends the
Indemnified Party a notice disputing the propriety of the Claim. Such notice of
dispute shall describe the basis for such objection and the amount of the Claim
as to which the Indemnifying Party does not believe should be subject to
indemnification. Upon receipt of any such notice of dispute, both the
Indemnified Party and the Indemnifying Party shall use all reasonable efforts to
cooperate and arrive at a mutually acceptable resolution of such dispute within
the next 30 days. If a mutually acceptable resolution cannot be reached between
the Indemnified Party and the Indemnifying Party with such 30-day period, either
party may submit the dispute for resolution by binding arbitration pursuant to
the provisions of this Section 8.04. If a party elects to submit such matter to
arbitration, such party shall provide notice to the other party of its election
to do so, and the parties shall attempt to appoint a single arbitrator. If the
parties are unable within 10 days after receipt of the notice to agree on a
single arbitrator, then each party shall appoint one arbitrator, and the two
arbitrators so appointed shall name a third arbitrator within a period of 10
days after their nomination. If the two arbitrators fail to appoint a third
arbitrator within such 10-day period, a third arbitrator shall be appointed
pursuant to the then existing Commercial Arbitration Rules (the "Rules") of the
American Arbitration Association. In all respects, such panel and the
arbitration proceeding shall be governed by the Rules, and the place of
arbitration shall be in a city mutually selected by the Indemnifying Party and
the Acquiror Indemnified Party (or, if no city can be mutually agreed upon
within 10 days, then in Houston, Texas). If it is finally determined that all or
a portion of such Claim amount is owed to the Indemnified Party, then such Claim
amount shall be satisfied in accordance with Section 8.05 of this Agreement and
the Acquiror Indemnified Party shall be entitled to recovery of all expenses,
including reasonable attorneys' fees, incurred in connection with enforcing its
rights under this Article VIII. Judgment upon the award resulting from
arbitration may be entered in any court having
-34-
40
jurisdiction for direct enforcement, or any application may be made to a court
for a judicial acceptance of the award and an order of enforcement, as the case
may be.
8.05 SATISFACTION OF CLAIMS FROM ESCROW SHARES.
(a) Except for any Claim for fraud shall not be so limited,
the indemnification obligations of the Shareholders under Section 8.01 of this
Agreement (including with respect to any Third Party Claims) shall be satisfied
solely from payments of the Escrow Shares by delivery to the Acquiror
Indemnified Party entitled to indemnification hereunder.
(b) Pursuant to the provisions of the Escrow Agreement, if the
Shareholders are determined to owe a Claim amount pursuant to the procedures set
forth in Section 8.04, then the amount due the Acquiror Indemnified Party
hereunder shall be satisfied by the delivery to the Acquiror Indemnified Party
pursuant to the Escrow Agreement of Escrow Shares equal in value to the amount
of the Claim to be satisfied, and the Claim shall be deemed paid and satisfied
upon receipt by the Acquiror Indemnified Party of certificates representing such
number of Escrow Shares duly endorsed for transfer to the Indemnified Party. The
per share value of the Escrow Shares for purposes of this Article VIII and the
Escrow Agreement with respect to a particular Claim shall be the Market Value
(as defined herein) of the Escrow Shares. The "Market Value" of an Escrow Share
shall be the actual closing trading price at the end of business as of the
Closing Date (regardless of the actual trading price for the Acquiror Stock),
with appropriate adjustment to take into account any stock split, reverse stock
split, stock dividend, recapitalization, stock exchanges or other similar
capital adjustments with respect (including by reason of merger, consolidation
or other business combination involving Acquiror) to the Escrow Shares. The
Market Value of the Additional Corpus (as such term is defined in the Escrow
Agreement) shall be determined by mutual agreement of the Shareholders'
Representative and the Acquiror. In the event that such parties cannot in good
faith agree on the market value of the Additional Corpus, the matter shall be
settled by binding arbitration in accordance with the procedures set forth
herein, except for any claims of fraud.
(c) The Shareholders' Representative shall have the power and
authority to make all decisions with regard to the settlement of Claims brought
pursuant to Section 8.01 of this Agreement from the Escrow Shares. If the
Shareholders' Representative is unable to carry out his duties as Shareholders'
Representative, then the person designated in the Appointment of Shareholders'
Representative, shall be designated and appointed as the Shareholders'
Representative, and shall assume all of the powers and duties of the
Shareholders' Representative under the Agreement and the Escrow Agreement. If
any successor Shareholders' Representative becomes unable to carry out his
duties as Shareholders' Representative, his replacement shall be the person
designated in the Appointment of Shareholders' Representative.
8.06 LIABILITY LIMITATIONS; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties, covenants and agreements of the Company and the
Shareholders in this Agreement or made pursuant hereto shall survive the
Closing, and any investigation thereof, until the first anniversary of the
Closing Date and, the Shareholders shall have no liability under this Article
VIII unless written notice of a Claim is provided within such period. After the
Effective Time, the Acquiror Indemnified Parties shall not be entitled to
indemnification for Claims from the Escrow Shares except to the extent the
aggregate amount for all claims exceeds $50,000. Once such
-35-
41
threshold is satisfied, the Shareholders, subject to the other limitations in
this Article VIII, shall be liable for all Claims of the Acquiror Indemnified
Parties in excess thereof. All Claims by the Acquiror Indemnified Parties
pursuant to this Agreement shall be limited to the Escrow Shares, except for any
claim of fraud.
8.07 SUBROGATION. Upon payment in full of any Third Party Claim or
other Claim, the Indemnifying Party shall be subrogated to the extent of such
payment to the rights of the Acquiror Indemnified Parties against any person
with respect to the subject matter and to the extent only of the Third Party
Claim or other Claim.
ARTICLE IX
CONDITIONS
9.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR COMPANIES. The
obligation of the Acquiror Companies to effect the transactions contemplated
hereby on the Closing Date shall be subject to the satisfaction at or prior to
the Closing Date of the following conditions, any or all of which may be waived
by Acquiror, in whole or in part, to the extent permitted by applicable law:
(a) Each of the representations and warranties of the Company
and each of the Shareholders contained in this Agreement shall be true
and correct in all material respects (without duplication of any
materiality exception contained in any individual representation and
warranty) as of the date of this Agreement and as of the Closing Date
as though made again as of the Closing Date. Acquiror shall have
received a certificate of the President and the Secretary of the
Company, dated the Closing Date, to such effect with respect to the
representations and warranties of the Company;
(b) The Company and each of the Shareholders shall have
performed or complied with all agreements and covenants required by
this Agreement to be performed or complied with by such person on or
prior to the Closing Date. Acquiror shall have received a certificate
of the President and the Secretary of the Company, dated the Closing
Date, to such effect with respect to the Company's performance and
compliance;
(c) Acquiror shall have received a certificate of the
President and Secretary or Assistant Secretary (or other authorized
corporate officer) of the Company certifying as true, accurate and
complete, as of the date of this Agreement and against as of the
Closing Date: (i) a copy of the resolutions of the Company's Board of
Directors authorizing the execution, delivery and performance of this
Agreement and the other documents contemplated hereby to which it is a
party and the consummation by the Company of the Merger; (ii) a copy of
the resolutions of the Company's shareholders authorizing the
execution, delivery and performance of this Agreement and the other
documents contemplated hereby to which it is a party and the
consummation by the Company of the Merger; (iii) a certified copy of
the Articles of Incorporation of the Company issued by the Secretary of
State; (iv) a copy of the Bylaws of the Company; and (v) the incumbency
of the officer or officers authorized to execute on behalf of the
Company this Agreement and the other documents contemplated thereby to
which it is a party;
-36-
42
(d) Acquiror shall have received a certificate of the
President and Secretary or Assistant Secretary (or other authorized
corporate officer) of each subsidiary of the Company certifying as
true, accurate and complete, as of the date of this Agreement and again
of the Closing Date: (i) a certified copy of the Articles of
Incorporation of the subsidiary issued by the Secretary of State of the
state of such subsidiary's incorporation; and (ii) a copy of the Bylaws
of such subsidiary;
(e) The resignations, effective at the Effective Time, of each
of the directors and officers of the Company shall have been delivered
to Acquiror on the Closing Date;
(f) No court or Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any Law (whether temporary,
preliminary or permanent) which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting consummation of
the Merger;
(g) The applicable waiting period under any applicable
competition Laws, Regulations or Orders of foreign Governmental
Entities, as set forth in the Acquiror Disclosure Schedule or the
Company Disclosure Schedule, shall have expired or been terminated;
(h) Acquiror shall have received the Escrow Agreement, duly
executed and delivered by the Shareholders' Representative and the
Escrow Agent;
(i) The Shareholders' Representative and each of the
Shareholders shall have executed and delivered the Appointment;
(j) Acquiror shall have received the Registration Rights
Agreement duly executed and delivered by the Shareholders to the
Acquiror, such agreement to be substantially in the form of Exhibit C;
(k) Randall S. Miller and Lawrence Bruno shall have duly
executed and delivered to Acquiror an Employment Agreement
substantially in the form of Exhibit D;
(l) All shares of the Company's Common Stock (or other equity
interests owned by the Company or a subsidiary of the Company) shall be
free and clear of all security interests, liens, claims, pledges,
agreements, limitations on the Company's or such subsidiaries' voting
rights, charges or other encumbrances of any nature whatsoever;
(m) The Acquiror shall have received the waiver or consent of
all persons holding options to purchase Company Stock of any notice of
change of control to consummate the Merger, and the amended and
restated option agreements pertaining to the Company Options as
contemplated in Section 1.06(g) shall have been duly executed and
delivered;
(n) Acquiror shall have received a certified copy of the
resolution of the Company's Board of Directors that the actions
regarding the Plan and the treatment of the Executive Stock Rights as
set forth in Section 1.06(h) are in compliance with the terms of the
Plan;
-37-
43
(o) The Company shall have paid prior to Closing all
accounting fees and expenses and all legal fees and expenses and shall
not be liable for any accounting fees or expenses or legal fees or
expenses of the Shareholders relating to the negotiation or
consummation of this Agreement or the transactions contemplated herein;
and
(p) Acquiror shall have received from each person entitled to
any benefits under the Company Long-Term Incentive Compensation Plan or
any Company Deferred Compensation Agreement a waiver or release of such
benefits, such documents to be in a form acceptable to Acquiror in its
sole discretion.
9.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company and the Shareholders to effect the transactions
contemplated hereby on the Closing Date shall be subject to the satisfaction at
or prior to the Closing Date of the following conditions, any or all of which
may be waived by the Company and the Shareholders, acting together, in whole or
in part, to the extent permitted by applicable Law:
(a) Each of the representations and warranties of Acquiror
contained in this Agreement shall be true and correct in all material
respects (without duplication of any materiality exception contained in
any individual representation and warranty) as of the date of this
Agreement and as of the Closing Date as though made again as of the
Closing Date. The Company shall have received a certificate of the
President and the Chief Financial Officer of the Acquiror (or the
organizational equivalent), dated the Closing Date, to such effect;
(b) The Acquiror Companies shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by each of them on or prior to the Closing
Date. The Company shall have received a certificate of the President
and the Chief Financial Officer of the Acquiror (or the organizational
equivalent), dated the Closing Date, to such effect;
(c) The Company and the Shareholders shall have received a
certificate of the Secretary or Assistant Secretary (or other
authorized corporate officer) of each of the Acquiror Companies
certifying as true, accurate and complete, as of the date of this
Agreement and again as of the Closing Date: (i) a copy of the
resolutions of the Board of Directors of each of the Acquiror Companies
(or the organizational equivalent) authorizing the execution, delivery
and performance of this Agreement and the other documents contemplated
hereby to which it is a party and the consummation by the Company of
the Merger; (ii) a copy of the resolutions of Acquisition Sub's
shareholder authorizing the execution, delivery and performance of this
Agreement and the other documents contemplated hereby to which it is a
party and the consummation by the Company of the Merger; (iii) a copy
of the Articles of Incorporation (or equivalent organizational
document) of each of the Acquiror Companies issued by The Netherlands
and the Secretary of State of the State of Texas, as the case may be;
(iv) a copy of the Bylaws (or equivalent organizational document) of
each of the Acquiror Companies; and (v) the incumbency of the officer
or officers authorized to execute on behalf of each of the Acquiror
Companies this Agreement and the other documents contemplated thereby
to which it is a party;
-38-
44
(d) The Estate of Paul J. Cernock and the Estate of Elizabeth
M. Cernock shall have been advised in writing by KPMG as of the Closing
Date to the effect that the Merger qualifies as a reorganization under
the provisions of Section 368(a) of the Code, and will not be taxable
to the Shareholders under Section 367 of the Code.
(e) No court or Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any Law (whether temporary,
preliminary or permanent) which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting consummation of
the Merger;
(f) The applicable waiting period under any applicable
competition Laws, Regulations or Orders of foreign Governmental
Entities, as set forth in Acquiror Disclosure Schedule or the Company
Disclosure Schedule, shall have expired or been terminated;
(g) The amendments to the Company Options contemplated in
Section 1.06(g) shall have been duly executed and delivered; and
(h) Randall S. Miller and Lawrence Bruno shall have received
from Acquiror a duly executed Employment Agreement substantially in the
form of Exhibit D.
ARTICLE X
MISCELLANEOUS
10.01 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) by mutual consent of Acquiror and the Company;
(b) by either Acquiror or the Company if the Effective Time
has not occurred on or before September 15, 1999;
(c) by Acquiror, upon a breach of any covenant or agreement on
the part of the Company or any of the Shareholders set forth in this
Agreement, or if any representation or warranty of the Company or any
of the Shareholders shall have become untrue, in either case such that
the conditions set forth in Section 9.01(a) or Section 9.01(b) would
not be satisfied (a "Terminating Company Breach"); provided that, if
such Terminating Company Breach is curable by the Company or any of the
Shareholders, as the case may be, through the exercise of reasonable
efforts and for so long as the Company or such Shareholder or
Shareholders continue to exercise such reasonable efforts, Acquiror may
not terminate this Agreement under this Section 10.01(c);
(d) by the Company, upon breach of any covenant or agreement
on the part of Acquiror set forth in this Agreement, or if any
representation or warranty of Acquiror shall have become untrue, in
either case such that the conditions set forth in Section 9.02(a) or
Section 9.02(b) would not be satisfied (a "Terminating Acquiror
Breach"); provided that, if
-39-
45
such Terminating Acquiror Breach is curable by Acquiror through the
exercise of its reasonable efforts and for so long as Acquiror
continues to exercise such reasonable efforts, the Company may not
terminate this Agreement under this Section 10.02(d); or
(e) by either Acquiror or the Company, if there shall be any
Order which is final and nonappealable preventing the consummation of
the Merger, unless the party relying on such Order has not complied
with its obligations under Section 7.03(b).
10.02 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 10.01, the Shareholders, the Company, Acquiror and
Acquisition Sub shall have no obligation or liability to each other except that
(i) the provisions of Sections 7.02(d), 7.02(e) and 7.06 shall survive any such
termination, and (ii) nothing herein and no termination pursuant hereto will
relieve any party from liability for any breach of this Agreement.
10.03 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto. The waiver by any
party hereto of any condition or of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other condition or
subsequent breach.
10.04 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the Schedules and Exhibits hereto) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both oral and
written, among the parties or any of them, with respect to the subject matter
hereof, and neither this nor any document delivered in connection with this
Agreement confers upon any person not a party hereto any rights or remedies
hereunder except as provided in Article VIII hereof.
10.05 ASSIGNMENT. This Agreement shall inure to the benefit of and will
be binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement shall not be assignable by any
party hereto without the consent of the other parties hereto, except that the
parties hereto agree that the rights and obligations of the Acquiror may be
assigned to an affiliate of the Acquiror by written notice to all other parties
hereto.
10.06 CERTAIN DEFINITIONS. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned person;
(b) "business day" means any day other than a day on which
banks in The Netherlands or the State of Texas are authorized or
obligated to be closed;
(c) "Closing" shall have the meaning set forth in Section 1.11
of this Agreement, of persons interested in the transactions
contemplated by this Agreement at which all documents deemed necessary
by the parties to this Agreement to evidence the fulfillment or
-40-
46
waiver of all conditions precedent to the consummation of the
transactions contemplated by the Agreement are executed and delivered;
(d) "Closing Date" shall mean the date of the Closing as
determined pursuant to Section 1.11 of this Agreement.
(e) "Competing Transaction" shall mean any proposal or offer
from any person or entity (other than Acquiror or an affiliate of
Acquiror) relating to any acquisition or purchase of all or (other than
in the ordinary course of business) any material portion of the assets
of, or any possible disposition or issuance of any Common Stock or any
capital stock or other equity interests in the Company or any of its
subsidiaries (or any rights or securities exercisable for or
convertible into Common Stock or any such capital stock or other equity
interests), or any merger or other business combination with, the
Company or any of its subsidiaries;
(f) "control" (including the terms "controlled," "controlled
by" and "under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause
the direction of the management or policies of a person, whether
through the ownership of stock or as trustee or executor, by contract
or credit arrangement or otherwise;
(g) "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated
organization, other entity or group (as defined in Section 13(d) of the
Exchange Act);
(h) "subsidiary" or "subsidiaries" of the Company, Acquiror or
any other person, means any corporation, partnership, joint venture or
other legal entity of which the Company, Acquiror or any such other
person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity;
(i) "Tax" or "Taxes" shall mean any and all taxes, charges,
fees, levies, assessments, duties or other amounts payable to any
federal, state, local or foreign taxing authority or agency, including,
without limitation, (i) income, franchise, profits, gross receipts,
minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license,
payroll, withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer and gains taxes, (ii) customs,
duties, imposts, charges, levies or other similar assessments of any
kind, and (iii) interest, penalties and additions to tax imposed with
respect thereto; and
(j) "Trading Day" shall mean each business day on which the
New York Stock Exchange Market is open for trading.
-41-
47
10.07 NOTICES. All notices, requests, demands, claims and other
communications that are required to be or may be given under this Agreement
shall be in writing and (i) delivered in person or by courier, (ii) sent by
telecopy or facsimile transmission, or (iii) mailed, certified first class mail,
postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
If to the Company: Reservoirs, Inc.
1151 Brittmore Road
Houston, Texas 77043
Attention: Randall S. Miller
Telecopy: (713) 932-0520
with a copy (which shall
not constitute notice) to: Chamberlain, Hrdlicka, White,
Williams & Martin
1200 Smith, 14th Floor
Houston, Texas 77002
Attention: Craig M. Bergez
Telecopy: (713) 658-2553
If to the Shareholders: Shareholders of Reservoirs, Inc.
c/o Randall S. Miller
22506 Wetherburn
Katy, Texas 77449
with a copy (which shall
not constitute notice) to: Chamberlain, Hrdlicka, White,
Williams & Martin
1200 Smith, 14th Floor
Houston, Texas 77002
Attention: Craig M. Bergez
Telecopy: (713) 658-2553
If to Acquiror: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Telecopy: 011-31-20-627-9886
Attention: Jacobus Schouten
and Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 744-6225
Attention: John D. Denson
-42-
48
with a copy (which shall
not constitute notice) to: Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Telecopy: (713) 615-5531
Attention: T. Mark Kelly
or to such other address as the parties hereto shall have furnished to the other
parties hereto by notice given in accordance with this Section 10.07. Such
notices shall be effective (i) if delivered in person or by courier, upon actual
receipt by the intended recipient, (ii) if sent by telecopy or facsimile
transmission, when the sender receives telecopier confirmation that such notice
was received at the telecopier number of the addressee, or (iii) if mailed, upon
the earlier of five (5) business days after deposit in the mail and the date of
delivery as shown by the return receipt therefor.
10.08 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive law of the State of Texas, without giving
effect to the principles of conflicts of law thereof.
10.09 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and shall
in no way be affected, impaired or invalidated 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,
provision, covenant or restriction is invalid, void or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, by original or facsimile signatures, each of which shall be an
original, but all of which together shall constitute one and the same agreement.
10.11 HEADINGS. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
-43-
49
IN WITNESS WHEREOF, the Company and each of the Acquiror Companies have
each caused this Agreement to be executed on its behalf by its officer thereunto
duly authorized, and each of the Shareholders has executed this Agreement, all
as of the date first above written.
CORE LABORATORIES N.V.
BY: CORE LABORATORIES INTERNATIONAL
B.V., its Sole Managing Director
By: /s/ Jacobus Schouten
--------------------
Jacobus Schouten
Managing Director
CORE ACQUISITION SUBSIDIARY, INC.
By: /s/ David M. Demshur
--------------------
David M. Demshur
President
RESERVOIRS, INC.
By: /s/ Randall S. Miller
---------------------
Name: Randall S. Miller
Title: President
SHAREHOLDERS' REPRESENTATIVE:
By /s/ Randall S. Miller
---------------------
Randall S. Miller
-44-
50
NUMBER OF SHARES
OF COMPANY NON-ACCREDITED ACCREDITED
SHAREHOLDERS: STOCK OWNED INVESTOR INVESTOR
--------------------------------------------------------------
(Please check one box)
/s/ Randall S. Miller 8,500 [ ] [ ]
- -------------------------------
RANDALL S. MILLER
ESTATE OF PAUL J. CERNOCK,
DECEASED
By: /s/ Christopher M. Cernock
--------------------------
Christopher M. Cernock
Independent Co-Executor 14,280 [ ] [ ]
By: /s/ Laura E. Cernock
--------------------
Laura E. Cernock
Independent Co-Executor
ESTATE OF ELIZABETH M.
CERNOCK, DECEASED
By: /s/ Robert L. Thomas
--------------------
Robert L. Thomas
Independent Executor 14,280 [ ] [ ]
/s/ Lawrence Bruno
- ------------------
LAWRENCE BRUNO 935 [ ] [ ]
/s/ John Zellmer
- ----------------
JOHN ZELLMER 1,530 [ ] [ ]
-45-
51
EXHIBIT A
ESCROW AGREEMENT
52
ESCROW AGREEMENT
This Escrow Agreement ("Escrow Agreement"), dated as of July 26, 1999
is entered into by and among Core Laboratories N.V., a Netherlands limited
liability company ("Acquiror"); Core Acquisition Subsidiary, Inc., a Texas
corporation with its principal place of business in Houston, Texas ("Acquisition
Sub"), Reservoirs, Inc., a Texas corporation (the "Company"), Randall S. Miller
(the "Shareholders' Representative") and Bankers Trust Company, as escrow agent
("Escrow Agent"). Defined terms used but not otherwise defined herein shall have
the meanings set forth in the Merger Agreement (as defined below).
WHEREAS, Acquiror, Acquisition Sub, the Company, the Shareholders of
the Company and the Shareholder's Representative have entered into an Agreement
and Plan of Merger, dated July 26, 1999 (the "Merger Agreement"), pursuant to
which Acquisition Sub is merging with and into the Company with the Company as
the surviving corporation of such merger (the "Merger"), with the result that
the surviving corporation will become a wholly-owned subsidiary of Acquiror and
all of the outstanding shares of common stock, $.01 par value of the Company
(the "Company Stock") will be converted into Acquiror Shares; and
WHEREAS, pursuant to the Merger Agreement, the Company and the
Shareholders have made certain representations, warranties, covenants and
agreements to and with Acquiror and the Shareholders have agreed to indemnify,
defend and hold harmless the Acquiror Indemnified Parties against Claims under
Article VIII of the Merger Agreement; and
WHEREAS, the parties to the Merger Agreement have agreed to establish
an escrow fund (the "Escrow Fund"), initially consisting of 22,282 Acquiror
Shares, from which they may, subject to the terms and conditions of the Merger
Agreement and this Escrow Agreement, satisfy the Shareholders' obligations to
indemnify against Claims; and
WHEREAS, the Escrow Agent has agreed to act as the agent and custodian
for the Escrow Fund for the benefit of the parties to the Merger Agreement; and
WHEREAS, pursuant to the Merger Agreement, the Appointment and the
terms and conditions hereof, the Shareholders' Representative is authorized to
serve as the representative and agent hereunder for each of the Shareholders
with full power and authority to execute, deliver and act on each such
Shareholder's behalf hereunder in all respects;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements, provisions and covenants contained in this Escrow Agreement and the
Merger Agreement, the parties hereby agree as follows:
ARTICLE 1
ESTABLISHMENT OF ESCROW
(a) Acquiror, Acquisition Sub, the Company and the Shareholders'
Representative each hereby appoint the Escrow Agent to act as agent and
custodian for the Escrow Fund for their
A-1
53
respective benefit pursuant to the terms of this Escrow Agreement, and the
Escrow Agent hereby accepts such appointment pursuant to such terms.
(b) Pursuant to the terms of Section 1.06 of the Merger Agreement,
Acquiror will cause to be delivered to, and directly deposited with, the Escrow
Agent for the account and future potential benefit of the Shareholders a stock
certificate representing 22,282 Acquiror Shares, which certificate shall be
registered as follows: "Bankers Trust Company f/b/o the Former Shareholders of
the Common Stock of Reservoirs, Inc." All such Acquiror Shares hereby initially
delivered to, and initially deposited with, the Escrow Agent, together with all
subsequent stock dividends or distributions of other Acquiror Shares received in
respect of such shares while deposited hereunder, shall be referred to herein as
the "Escrow Shares."
(c) The respective number of Escrow Shares to be initially deposited
with the Escrow Agent by Acquiror for the account of each Shareholder is set
forth on Exhibit A hereto.
(d) The Shareholders' Representative shall deliver to the Escrow Agent
simultaneously herewith five stock powers duly executed and endorsed in blank in
the form attached as Exhibit B with respect to each stock certificates
representing the Escrow Shares, and the Escrow Agent hereby acknowledges receipt
of the stock certificates representing the Escrow Shares and such executed stock
powers. The Shareholders' Representative agrees to execute in the future such
additional stock powers as may be required or requested by Acquiror or the
Escrow Agent to transfer any Escrow Shares required in accordance with the
provisions of the Merger Agreement and this Escrow Agreement.
(e) The Escrow Shares shall be retained, managed and disbursed by the
Escrow Agent subject to the terms and conditions of this Escrow Agreement and
Article VIII of the Merger Agreement. Each Shareholder shall have the full and
unencumbered right to vote all Escrow Shares held for his account in the Escrow
Fund on matters submitted to a vote of Acquiror's shareholders.
(f) All cash dividends and cash distributions on Escrow Shares, when
and if distributed by Acquiror, and all additional Acquiror Shares, property or
other securities, issued on or with respect to the Escrow Shares ("Additional
Corpus"), including as a result of stock splits, stock dividends or other
similar capital adjustments to, or recapitalizations on, or share exchanges with
(including by reason or merger, consolidation or other business combination
involving Acquiror), the Acquiror Shares, or other securities, shall be retained
in the Escrow Fund for the respective account of the Shareholders subject to the
terms hereof.
ARTICLE 2
CLAIMS AGAINST ESCROW SHARES
(a) If Acquiror is entitled to indemnification from the Shareholders
against a Claim pursuant to Section 8.01 (or any other section) of the Merger
Agreement, then such Claim shall be satisfied by the Escrow Agent's delivery to
Acquiror of the requisite number of Escrow Shares (determined in accordance with
Article VIII of the Merger Agreement). Any Claim by Acquiror against the
Shareholders shall be deemed to be paid and satisfied upon receipt by Acquiror
from the Escrow Agent of stock certificates representing the requisite number of
Escrow Shares (accompanied
A-2
54
by stock powers duly executed and endorsed in blank covering such shares in
accordance with Article 3 of this Escrow Agreement) and any Additional Corpus
allocable to such Escrow Shares. As used in this Escrow Agreement, the term
"Claim" shall have the same meaning as set forth in Section 8.01 of the Merger
Agreement as it shall apply to any claim for indemnification asserted by
Acquiror against the Shareholders pursuant to Section 8.01 (or any other
section) of the Merger Agreement. As used in this Escrow Agreement with respect
to entitlement to indemnification under the Merger Agreement, the term
"Acquiror" shall include all parties included in the definition of "Acquiror
Indemnified Parties" as set forth in Section 8.01 of the Merger Agreement.
(b) The delivery to Acquiror of Escrow Shares and Additional Corpus, if
any, applicable to such Escrow Shares, in satisfaction of an indemnification
claim hereunder shall be taken from the accounts of each Shareholder in the
Escrow Fund as nearly as practical on a pro rata basis based on the initial
ownership interest in all Escrow Shares initially deposited hereunder.
ARTICLE 3
PROCEDURE FOR CHARGE TO ESCROW
(a) Any Claim under the indemnification provisions of the Merger
Agreement to be satisfied under this Escrow Agreement shall be made by Acquiror
by notice to the Escrow Agent and the Shareholders' Representative, stating in
specific terms the circumstances giving rise to the Claim, specifying the amount
of the Claim and making a request for any payment then believed due. A Claim
shall be deemed to be finally resolved and appropriate for payment by the Escrow
Agent when the conditions specified in clause (b) below have been met with
respect thereto.
(b) For purposes of this Escrow Agreement, a "Final Instruction" shall
mean a written notice given to the Escrow Agent directing the disbursement from
the Escrow Fund of the amount of the Claim, and shall be signed both by Acquiror
and by the Shareholders' Representative except as otherwise provided in clause
(ii) or (iii) below. A Final Instruction shall be delivered to the Escrow Agent
under the following circumstances, and accompanied by the indicated
documentation:
(i) If the Shareholders' Representative disputes either the
validity, amount or calculation of the Claim, the Shareholders'
Representative shall give written notice of such dispute to Acquiror,
with a copy to the Escrow Agent, within 45 days after the delivery of
notice of the Claim by Acquiror. Such notice shall set forth the
reasons and basis for disputing such Claim and the amount in dispute.
In such circumstances, no Final Instruction may be given to the Escrow
Agent except as provided in clause (iii) below.
(ii) If the Shareholders' Representative fails to respond to
the Claim within 45 days after the delivery to the Shareholders'
Representative and the Escrow Agent of the notice of the Claim, or if
the Shareholders' Representative notifies the Escrow Agent that there
is no dispute with respect to the Claim, Acquiror shall have the right
to deliver to the Escrow Agent a Final Instruction, signed only by
Acquiror, with respect to the Claim.
(iii) In the case of a dispute, the Escrow Agent shall not
disburse any of the Escrow Fund in connection with the disputed amount
of such Claim until such time as the Escrow Agent receives a Final
Instruction with respect to such disputed Claim as set forth
A-3
55
below. Upon receipt of such notice of dispute by Acquiror, both
Acquiror and the Shareholders' Representative shall use all reasonable
efforts to cooperate and arrive at a mutually acceptable resolution of
such dispute within the next 30 days. If the Shareholders'
Representative and the Acquiror reach an agreement with respect to such
dispute, the Shareholders' Representative and the Acquiror shall give
to the Escrow Agent a Final Instruction, signed by both the
Shareholders' Representative and the Acquiror, with respect to the
Claim. If a mutually acceptable resolution cannot be reached between
Acquiror and the Shareholders' Representative within such 30-day
period, either party may submit the dispute for resolution by binding
arbitration pursuant to the provisions of this Article 3. If a party
elects to submit such matter to arbitration, such party shall provide
notice to the other party of its election to do so, and the parties
shall attempt to appoint a single arbitrator. If the parties are unable
within 10 days after receipt of the notice to agree on a single
arbitrator, then each party shall appoint one arbitrator, and the two
arbitrators so appointed shall name a third arbitrator within a period
of 10 days of their nomination. If the two arbitrators fail to appoint
a third arbitrator within such 10-day period, a third arbitrator shall
be appointed pursuant to the then existing Commercial Arbitration Rules
(the "Rules") of the American Arbitration Association ("AAA"). In all
respects, such panel and the arbitration proceeding shall be governed
by the Rules, and the place of arbitration shall be in a city mutually
selected by Acquiror and the Shareholders' Representative (or, if no
city can be mutually agreed upon within 10 days, then in Houston,
Texas). If it is finally determined that all or a portion of such Claim
amount is owed to an Acquiror Indemnified Party, the Acquiror
Indemnified Party shall be entitled to payment of such Claim upon
presentation of a Final Instruction signed by Acquiror and accompanied
by a copy of the arbitration order. Judgment upon the award resulting
from arbitration may be entered in any court having jurisdiction for
direct enforcement, or any application may be made to a court for a
judicial acceptance of the award and an order of enforcement, as the
case may be.
(c) Promptly after resolution of a Claim as provided in clause (b)
above, the Escrow Agent shall satisfy such Claim by delivering to Acquiror the
amount of the Escrow Fund calculated in accordance with Section 8.05 of the
Merger Agreement and Article 2 of this Escrow Agreement or, if the value of the
Escrow Fund held hereunder is less than the amount of such Claim, by delivering
to Acquiror all of the Escrow Fund then held hereunder. Any Escrow Shares
delivered to Acquiror in satisfaction of a Claim hereunder shall be accompanied
by duly executed blank stock powers (in the form attached as Exhibit B) therefor
and any such Escrow Shares so delivered shall be free and clear of any interest
of the Shareholders or Escrow Agent therein. If the amount of the Escrow Shares
to be delivered to Acquiror is not available in that specified certificate
denomination then the Escrow Agent should request the necessary denomination
from the stock transfer agent at the following address: American Stock Transfer
& Trust Company, 40 Wall Street, New York, NY 10005, Attention: Jennifer
Donnovan.
ARTICLE 4
DISPOSITION OF ESCROW FUND
(a) The Escrow Fund held hereunder shall be released by the Escrow
Agent to Shareholders the first anniversary of the Closing Date. The date the
event described in either of the preceding clauses (i) and (ii) occurs is
referred to herein as the "Distribution Date." Notwithstanding
A-4
56
any other provision hereof, if on the Distribution Date any unresolved Claim is
then pending hereunder, only the amount of the Escrow Fund having a value in
excess of the value required to satisfy such Claim (Escrow Shares being valued
for such purpose in accordance with Article VIII of the Merger Agreement) as
determined in good faith by Acquiror shall be released to the Shareholders.
(b) At such later time as all Claims have been finally resolved and the
amount of all such Claims has been paid to Acquiror, the balance of the Escrow
Fund then held hereunder, if any, shall be disbursed to the Shareholders. The
Shareholders' Representative shall have no personal liability as a result of any
actions taken in such position to Acquiror, Acquisition Sub or any of the
Acquiror Indemnified Parties or to any Shareholder in either case with respect
to the disposition of the Escrow Shares or any other action taken by him as the
Shareholders' Representative, unless such actions constitute gross negligence or
willful misconduct.
(c) The escrow established by this Escrow Agreement shall continue in
effect until release of the entire Escrow Fund pursuant to the provisions
hereof.
(d) No fractional Acquiror Shares shall be delivered at any time by the
Escrow Agent and the Escrow Agent shall be authorized to adjust shares between
the accounts of the Shareholders to eliminate fractional shares.
ARTICLE 5
PROVISIONS RELATING TO THE ESCROW AGENT
(a) The Escrow Agent shall have no duties or responsibilities
whatsoever with respect to the Escrow Fund except as are specifically set forth
herein. The Escrow Agent shall neither be responsible for or under, nor
chargeable with knowledge of the terms and conditions of, any other agreement,
instrument or document in connection herewith. The Escrow Agent may conclusively
rely upon, and shall be fully protected from all liability, loss, cost, damage
or expense in acting or omitting to act pursuant to any written notice,
instrument, request, consent, certificate, document, letter, telegram, opinion,
order, resolution or other writing hereunder without being required to determine
the authenticity of such document, the correctness of any fact stated therein,
the propriety of the service thereof or the capacity, identity or authority of
any party purporting to sign or deliver such document. The Escrow Agent shall
have no responsibility for the contents of any such writing contemplated herein
and may rely without any liability upon the contents thereof.
(b) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized
hereby or with the rights or powers conferred upon it hereunder, nor for action
taken or omitted by it in good faith, and in accordance with advice of counsel
(which counsel may be of the Escrow Agent's own choosing), and shall not be
liable for any mistake of fact or error of judgment or for any acts or omissions
of any kind except for its own willful misconduct or gross negligence.
(c) Each of the Acquiror and Shareholder's Representative agrees to
jointly and severally indemnify the Escrow Agent and its employees, directors,
officers and agents and hold each harmless
A-5
57
against any and all liabilities incurred by it hereunder as a consequence of
such party's action, and the parties agree jointly and severally to indemnify
the Escrow Agent and hold it harmless against any claims, costs, payments, and
expenses (including the fees and expenses of counsel) and all liabilities
incurred by it in connection with the performance of its duties hereunder and
them hereunder, except in either case for claims, costs, payments and expenses
(including the fees and expenses of counsel) and liabilities incurred by the
Escrow Agent resulting from its own willful misconduct or gross negligence.
(d) The Escrow Agent may resign as such following the giving of 60
days' prior written notice to Acquiror and the Shareholders' Representative.
Similarly, the Escrow Agent may be removed and replaced following the giving of
60 days' prior written notice to the Escrow Agent jointly by Acquiror and the
Shareholders' Representative. In either event, the duties of the Escrow Agent
shall terminate 60 days after the date of such notice (or at such earlier date
as may be mutually agreeable), except for its obligations to hold and deliver
the Escrow Fund to the successor Escrow Agent; and the Escrow Agent shall then
deliver the balance of the Escrow Fund then in its possession to such a
successor Escrow Agent as shall be appointed by Acquiror and the Shareholders'
Representative as evidenced by a written notice filed with the Escrow Agent. If
Acquiror and the Shareholders' Representative are unable to agree upon a
successor Escrow Agent by the effective date of such resignation or removal, the
then acting Escrow Agent may petition any court of competent jurisdiction for
the appointment of a successor Escrow Agent or other appropriate relief; and any
such resulting appointment shall be binding upon all of the parties hereto. Upon
acknowledgment by any successor Escrow Agent of the receipt of the then
remaining balance of the Escrow Fund, the then acting Escrow Agent shall be
fully released and relieved of all duties, responsibilities and obligations
under this Escrow Agreement.
(e) The Escrow Agent shall not be bound in any way by any agreement,
other than this Escrow Agreement. A copy of the Merger Agreement, together with
the Schedules and Exhibits thereto, has been provided to the Escrow Agent in
connection with the execution of this Escrow Agreement and the Escrow Agent
understands that the terms of the Shareholders' indemnification obligations are
set forth in Article VIII of the Merger Agreement. The Merger Agreement forms an
integral part of this Escrow Agreement and, therefore, Article VIII thereof is
hereby incorporated by reference herein.
(f) The Escrow Agent shall be under no duty to institute or defend any
arbitration or legal proceeding with respect to the Escrow Fund or under this
Escrow Agreement and none of the costs or expenses or any such proceeding shall
be borne by the Escrow Agent. The costs and expenses of any such proceeding
shall be borne as decided by the arbitrators or court and shall be direct
obligations of Acquiror or the Shareholders' Representative, as the case may be,
and shall not be satisfied in any way by the Escrow Fund.
ARTICLE 6
SECURITY INTEREST
The Shareholders' Representative hereby grants to Acquiror, in the name
of and on behalf of the Shareholders, a first priority security interest in each
of the Shareholder's respective rights, title to and interest in the Escrow Fund
held under this Escrow Agreement, for the purpose of
A-6
58
securing, or partially securing, each and all of their indemnification
obligations to Acquiror pursuant to Article VIII of the Merger Agreement. The
Shareholders' Representative agrees to execute and deliver any such further
instruments as Acquiror or Escrow Agent may request from time to time evidencing
such security interest.
ARTICLE 7
NOTICES
All notices, requests, demands, claims and other communications which
are required to be or may be given under this Escrow Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered in person
or by courier, (ii) sent by telecopy or facsimile transmission, answer back
requested, or (iii) mailed, by registered or certified mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
(a) If to Acquiror:
Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Telecopy: 011-31-20-627-9886
Attention: Jacobus Schouten
and
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 744-6225
Attention: John D. Denson
with a copy (which shall not constitute notice) to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Telecopy: (713) 615-5531
Attention: T. Mark Kelly
A-7
59
(b) If to the Escrow Agent:
Bankers Trust Company
4 Albany Street
New York, NY 10006
Telecopy: (212) 250-6392
Attention: Tom Hacker
(c) If to the Shareholders' Representative:
Randall S. Miller
22506 Wetherburn
Katy, Texas 77449
with a copy (which shall not constitute notice) to:
Chamberlain, Hrdlicka, White, Williams &
Martin
1200 Street Smith, 14th Floor
Houston, Texas 77002
Telecopy: (713) 658-2553
Attention: Craig M. Bergez
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Article 7. Such notices shall be effective,
(i) if delivered in person or by courier, upon actual receipt by the intended
recipient, (ii) if sent by telecopy or facsimile transmission, when the answer
back is received, or (iii) if mailed, upon the earlier of five business days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor.
ARTICLE 8
BINDING EFFECT; OTHER INTERESTS
This Escrow Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns. Nothing herein is intended or shall be construed to give
any other person (including, without limitation, any creditors of Escrow Agent,
Acquiror, the Company or the Shareholders' Representative) any right, remedy or
claim under, in or with respect to this Escrow Agreement or the Escrow Fund held
hereunder. The Escrow Agent shall not have a lien or adverse claim upon, or any
other right whatsoever to payment from, the Escrow Fund (or dividends or
distributions paid thereon) for or on account of any right to payment or
reimbursement hereunder or otherwise.
ARTICLE 9
GOVERNING LAW
This Escrow Agreement shall be construed and enforced in accordance
with the laws of the State of Texas, excluding any choice of law rules that may
direct the application of the laws of another jurisdiction.
A-8
60
ARTICLE 10
COMPENSATION; EXPENSES
The Escrow Agent shall be entitled to payment from Acquiror for
customary fees and expenses for all services rendered by it hereunder in
accordance with Exhibit C attached hereto (as such schedule may be amended from
time to time), payable on the closing date. The Escrow Agent shall also be
entitled to reimbursement on demand for all loss, liability, damage or expenses
paid or incurred by it in the administration of its duties hereunder, including,
but not limited to, all counsel, advisors' and agents' fees and disbursements
and all taxes or other governmental charges.
ARTICLE 11
TERM
This Escrow Agreement shall terminate on the later of (i) the
Distribution Date or (ii) the date on which all Claims, if any, asserted by
Acquiror pursuant to the terms of this Escrow Agreement and the Merger Agreement
shall have been conclusively resolved and paid pursuant to this Escrow Agreement
and the Merger Agreement. The rights of the Escrow Agent and the obligations of
the other parties hereto under Articles 5 and 10 shall survive the termination
thereof and the resignation or removal of the Escrow Agent.
ARTICLE 12
AMENDMENT AND MODIFICATION
Acquiror, Shareholders' Representative and the Escrow Agent may amend,
modify and/or supplement this Escrow Agreement as they may mutually agree in
writing.
ARTICLE 13
COUNTERPARTS
This Escrow Agreement may be executed in two or more counterparts or by
facsimile, each of which shall be deemed an original, but all of which together
shall constitute but one and the same instrument.
ARTICLE 14
HEADINGS
The headings used in this Escrow Agreement are for convenience only and
shall not affect the construction hereof.
ARTICLE 15
ASSIGNABILITY
Neither this Escrow Agreement nor any interest herein or in the Escrow
Fund may be assigned or transferred, voluntarily or by operation of law, by
Acquiror, the Shareholders' Representative or the Escrow Agent, except pursuant
to the laws of descent and distribution; provided, however, that Acquiror may
assign this Escrow Agreement and any or all interest herein
A-9
61
to any "affiliate" of Acquiror upon notice to all parties and, thereupon such
assignee shall fully assume and succeed to all of the assignors' rights,
benefits, obligations, duties and responsibilities hereunder.
Notwithstanding the foregoing, if the Shareholders' Representative is
unable to carry out his duties of or has been removed as Shareholders'
Representative, then a successor Shareholders' Representative shall be
designated and appointed pursuant to Section 8.05(c) of the Merger Agreement,
and shall assume all of the powers and duties of the Shareholders'
Representative under the Merger Agreement and the Escrow Agreement. If any
successor Shareholders' Representative becomes unable to carry out his duties as
Shareholders' Representative, his replacement shall be designated and appointed
pursuant to Section 8.05(c) of the Merger Agreement.
ARTICLE 16
TAX WITHHOLDING
Notwithstanding anything to the contrary set forth herein, the Escrow
Agent is authorized to withhold from any proposed distribution to the
Shareholders from the Escrow Fund such amount as is necessary for the purpose of
complying with the Escrow Agent's obligations under federal, state or local tax
provisions; provided, however, that such withholding shall not reduce the amount
of the Escrow Fund which may otherwise be required to be delivered to Acquiror
under Article 3 hereof. In the event that there are insufficient funds remaining
to pay any withholding obligations after distribution of the Escrow Funds to
Acquiror, such liability shall be the responsibility of the Shareholders.
ARTICLE 17
SEVERABILITY
If any term, provision, covenant or restriction of this Escrow
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Escrow Agreement shall continue in full force and effect and shall in no
way be affected, impaired or invalidated unless such an interpretation would
materially alter the rights and privileges of any party hereto or materially
alter the terms of the transactions contemplated hereby.
ARTICLE 18
DESIGNEES FOR INSTRUCTIONS
Acquiror may, by notice to the Escrow Agent, designate one or more
persons who will execute notices and from whom the Escrow Agent may take
instructions hereunder. Such designations may be changed from time to time upon
notice to the Escrow Agent from Acquiror. The Escrow Agent will be entitled to
rely conclusively on any notices or instructions from any person so designated
by Acquiror.
A-10
62
ARTICLE 19
MEDIATION AND ARBITRATION
(a) Except as provided in Article 3 of this Escrow Agreement for
disputes relating to claims against the Escrow Fund:
(i) Before the institution of any litigation between any
persons relating to this Escrow Agreement, including any dispute over
the application or interpretation of any provision hereof, if
negotiations and other discussions fail, at the election of any party
to this Escrow Agreement, such dispute shall be first submitted to
mediation in accordance with the provisions of the Commercial Mediation
Rules of the AAA before resorting to arbitration. The parties agree to
conduct the mediation in good faith and make reasonable efforts to
resolve their dispute by mediation. The place of the mediation shall be
in a city mutually selected by the parties (or, if no city can be
mutually agreed upon within ten (10) days, then in Houston, Texas).
(ii) If the dispute is not resolved by the mediation required
under the preceding subsection, such dispute shall, at the election of
any party to this Escrow Agreement, be subject to binding arbitration
in accordance with the provisions of the Rules, and judgment on the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitration shall be heard before a panel of
three (3) arbitrators selected in accordance with the procedures
therefor set forth in Article 3 of this Escrow Agreement. The parties
agree to use the Houston, Texas office of the AAA and the place of
arbitration shall be in a city mutually selected by the parties (or, if
no city can be mutually agreed upon within ten (10) days, then in
Houston, Texas).
(iii) The prevailing party in any mediation, arbitration or
litigation shall be entitled to recover from the other party reasonable
attorneys' fees, court costs and the administrative costs, fees and
expenses of the AAA, each as applicable, incurred in the same, in
addition to any other relief that may be awarded.
(b) If either party appeals the decision of the arbitrators, the
parties agree that the United States Judicial District including Harris County,
Texas, and the state courts within Harris County, Texas, shall have exclusive
venue and jurisdiction of same.
A-11
63
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Escrow Agreement as of the day and year first above written.
CORE LABORATORIES N.V.
BY: CORE LABORATORIES INTERNATIONAL
B.V., its Sole Managing Director
By:
--------------------------------
Jacobus Schouten
Managing Director
CORE ACQUISITION SUBSIDIARY, INC.
By:
--------------------------------
David M. Demshur
President
RESERVOIRS, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
SHAREHOLDERS' REPRESENTATIVE:
-----------------------------------------
Randall S. Miller
BANKERS TRUST COMPANY, as Escrow Agent
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
A-12
64
Exhibit A to
Escrow Agreement
ESCROW SHARES OF SHAREHOLDERS
SHAREHOLDER ESCROW SHARES
- ----------- -------------
Estate of Paul J. Cernock, Deceased 8,050
Estate of Elizabeth M. Cernock, Deceased 8,050
Randall S. Miller 4,792
John. F. Zellmer 863
Lawrence Bruno 527
--------
Total.............................. 22,282
A-13
65
Exhibit B to
Escrow Agreement
CORE LABORATORIES N.V.
COMMON STOCK
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________ __________________ (______) shares of the Common Stock of
Core Laboratories N.V., standing in my(our) name(s) on the books of said
Corporation represented by Certificate(s) No(s). _________ herewith, and do
hereby irrevocably constitute and appoint Bankers Trust Company attorney to
transfer the said stock on the books of said Corporation with full power of
substitution in the premises.
Dated:
----------------------
*By:
---------------------------------
*By:
---------------------------------
A-14
66
Exhibit C to
Escrow Agreement
BANKERS TRUST COMPANY
CORPORATE TRUST AND AGENCY SERVICES
SCHEDULE OF FEES FOR
CORE LABORATORIES & RESERVOIRS ESCROW
A. Annual Administration Fee: $4,000
(Payable at closing and each subsequent anniversary)
These fees cover the review and execution of the Escrow Agreement,
establishment of the appropriate custody account, the receipt and
distribution of the Escrowed Shares, and all normal administrative time
spent coordinating with other members of the working group.
Note: The fees set forth in this schedule are subject to review of
documentation. The fees are also subject to change should circumstances warrant.
Out-of-pocket expenses and disbursements, including counsel fees, incurred in
the performance of our duties will be added to the billed fees. Fees for any
services not covered in this or related schedules will be based upon our
appraisal of the services rendered.
We may place orders to buy/sell financial instruments with outside
broker-dealers that we select, as well as with BT or its affiliates. These
transactions (for which normal and customary spreads or other compensation may
be earned by such broker-dealers, including BT or its affiliates, in addition to
the charges quoted above) will be executed on a riskless principal basis solely
for your account(s) and without recourse to us or our affiliates. If you choose
to invest in any mutual fund, BT and/or our affiliates may earn investment
management fees and other service fees/expenses associated with these funds as
disclosed in the mutual fund prospectus provided to you, in addition to the
charges quoted above. Likewise, BT has entered into agreements with certain
mutual funds or their agents to provide shareholder services to those funds. For
providing these shareholder services, BT is paid a fee by these mutual funds
that calculated on an annual basis does not exceed 25 basis points of the amount
of your investment in these mutual funds. In addition, if you choose to use
other services provided by BT or its affiliates, Corporate Trust or other BT
affiliates may be allocated a portion of the fees earned. We will provide
periodic account statements describing transactions executed for your
account(s). Trade confirms will be available upon your request at no additional
charge. If a transaction should fail to close for reasons beyond our control, we
reserve the right to charge our acceptance fee plus reimbursement for legal fees
incurred.
Shares of mutual funds are not deposits or obligations of, or guaranteed by,
Bankers Trust Company or any of its affiliates and are not insured by the
Federal Deposit Insurance Corporation or any other agency of the U.S.
JUNE, 1998
A-15
67
EXHIBIT B
APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE
68
APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE
This Appointment of Shareholders' Representative, dated as of July 26,
1999 (the "Appointment"), is made and entered into by and among Randall S.
Miller, as the agent and attorney-in-fact (the "Shareholders' Representative"),
and the persons listed under the heading "Shareholders" on the signature page of
this Appointment, as the principals (individually, a "Shareholder", and
collectively, the "Shareholders"). This is the Appointment required by Section
1.06(b) of that certain Agreement and Plan of Merger, dated as of this date (the
"Merger Agreement"), entered into by and among Core Laboratories N.V., a
Netherlands limited liability company ("Acquiror"), Core Acquisition Subsidiary,
Inc., a Texas corporation ("Acquisition Sub"), Reservoirs, Inc., a Texas
corporation (the "Company"), and the Shareholders of Reservoirs, Inc.
Capitalized terms used but not defined in this Appointment shall have the
meanings given to them in the Merger Agreement. This Appointment is subject to
the terms and conditions of the Merger Agreement, the Escrow Agreement, and the
other transaction documents referenced in the Merger Agreement, each of which is
hereby incorporated by reference.
RECITALS
WHEREAS, the Shareholders collectively are the legal and beneficial
owners and holders of record of all 39,525 shares of the issued and outstanding
Company Stock; and
WHEREAS, pursuant to the Merger Agreement, Acquisition Sub will be
merged with and into the Company, with the Company as the surviving corporation
of the Merger, and the Company Stock of each Shareholder will be converted into
Acquiror Shares based on the Exchange Ratio, and certain of the Acquiror Shares
of each Shareholder will be deposited into escrow, upon the terms and subject to
the conditions of the Merger Agreement and Escrow Agreement; and
WHEREAS, each of the Shareholders desires to appoint Shareholders'
Representative as his agent and attorney-in-fact for the specific purposes set
forth herein in connection with the performance of the Escrow Agreement and
provisions of the Merger Agreement specifically relating thereto; and
WHEREAS, the parties acknowledge that Acquiror will be relying upon
this Appointment in entering into the Merger Agreement and Escrow Agreement, and
in consummating the Merger, and consent to such reliance.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, and covenants stated in this Agreement, and the
other good and valuable consideration exchanged between the parties, the receipt
and sufficiency of which is hereby acknowledged, the parties intending to be
legally bound agree as follows:
B-1
69
AGREEMENTS
1. APPOINTMENT. Each of the Shareholders hereby makes, constitutes, and
appoints Shareholders' Representative as it or his agent and true and lawful
attorney-in-fact, for it or him, and in it or his name, place, and stead, to do
any and all of the following upon the approval of Shareholders holding more than
sixty percent (60%) of the Escrow Shares (as reflected on Exhibit A of the
Escrow Agreement) pursuant to the Approval Procedures:
A. To execute, amend, deliver, acknowledge, file, certify,
waive, and perform pursuant to the terms of the Escrow Agreement, and to take
and perform all other acts and execute and deliver all other documents that are
necessary or advisable to give effect to and fully perform the Escrow Agreement;
B. To give and receive all notices and other communications,
whether written or oral, on such Shareholder's behalf with respect to the Escrow
Agreement;
C. To act and perform, or not act or perform with respect to
any notices or other communications, whether written or oral, received with
respect to the Agreement;
D. To control the disposition of the Escrow Shares of each
Shareholder in accordance with the terms of the Escrow Agreement, including, but
not limited to, paying or otherwise settling all Claims against such Escrow
Shares;
E. To execute, amend, deliver, acknowledge, file, certify,
waive, and perform all instruments, certificates, and other documents required
by or necessary or advisable to perform under this Appointment; and
F. To take, or not take, such other actions relating to the
foregoing which a person with the authority granted to Shareholders'
Representative hereunder could reasonably be expected to perform, or not
perform, as the case may be.
In performing under this Appointment, every act and performance, or
failure to act and perform, shall be with the same effect as if the Shareholders
were acting and performing, or not doing so, personally for themselves and in
their own names, and each Shareholder hereby agrees to be bound by and ratifies
and confirms as his own act all the Shareholders' Representative shall do, or
cause to be done, under this Appointment. Further, every act and performance, or
failure to act and perform, by Shareholders' Representative shall be conclusive
evidence of his determination that such act and performance, or refusal to do
so, was in the best interests of the Shareholders.
2. APPROVAL PROCEDURES. The following procedures (the "Approval
Procedures") shall be followed for purposed of obtaining the approval of
Shareholders required by Section 1 of this Appointment: (a) the Shareholders'
Representative shall give each Shareholder written notice of any matter
requiring approval of the Shareholders under Section 1 of this Appointment,
including a description of all material information associated with such matter;
(b) the Shareholders' Representative shall call a meeting of the Shareholders to
be held no less than three days after the notice required by Section 2(a) has
been given to the Shareholders for purposes of voting on the
B-2
70
approvals referenced in such notice; and (c) each Shareholder shall have one
vote for each Escrow Share held for the account of the Shareholder pursuant to
Exhibit A of the Escrow Agreement. Any such meeting may be held by means of
conference telephone or similar communications equipment that permits all
persons participating in the meeting to hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
Notwithstanding the foregoing, any action that could be taken at any such
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by Shareholders holding more than sixty percent
(60%) of the Escrow Shares (as reflected on Exhibit A of the Escrow Agreement).
3. LIMITATION OF LIABILITY. Notwithstanding any provision in this
Appointment to the contrary, the Shareholders' Representative shall have no
personal liability to any of the Shareholders, Acquiror, Acquisition Sub, or any
other person, as a result of any actions taken, or not taken, under this
Appointment, unless such actions constitute gross negligence or willful
misconduct by the Shareholders' Representative.
4. REVIEW OF TRANSACTION DOCUMENTS. Each of the Shareholders represents
and warrants to the Shareholders' Representative that he or its duly appointed
representative has read the Merger Agreement, the Escrow Agreement, and the
other transaction documents referenced in the Merger Agreement by which he or it
is bound, and understands his or its rights, liabilities, and obligations
thereunder. Each of the Shareholders agrees that, as to each liability or
obligation of the Shareholder under the Escrow Agreement, the Shareholder will
promptly perform all actions requested by the Shareholders' Representative with
respect thereto (including, but not limited to, making payment of or otherwise
settling any indemnification obligation under Article VIII of the Merger
Agreement).
5. COMPENSATION. The Shareholders' Representative shall not be entitled
to any compensation for performing under this Appointment.
6. IRREVOCABLE; TERMINATION.
a. The death or incapacity of any Shareholder shall not
terminate this Appointment. This Appointment is subject only to termination
pursuant to the following subsection. The appointment of Shareholders'
Representative is coupled with an interest in that Shareholders' Representative
is also a Shareholder, and thereby has a present, legal and beneficial interest
in the Company Stock.
b. This Appointment shall become effective at the Effective
Date and shall terminate, without any notice or further action on the part of
any party hereto, upon the natural expiration, or earlier termination, of the
Escrow Agreement (the "Termination Date"). From and after the Termination Date,
the Shareholders' Representative shall have no further liability or obligation
under this Appointment (except for any liability or obligation accruing prior to
the Termination Date).
7. SUBSTITUTE SHAREHOLDERS' REPRESENTATIVE. In the event the
Shareholders' Representative dies or earlier resigns from this Appointment or is
otherwise unable to carry out his duties as the Shareholders' Representative,
then Lawrence Bruno shall be designated and appointed
B-3
71
as the Shareholders' Representative, and shall assume all of the powers and
duties of the Shareholders' Representative under this Appointment. If Lawrence
Bruno becomes unable to carry out his duties or resigns as Shareholders'
Representative, his replacement shall be John F. Zellmer. If John F. Zellmer
becomes unable to carry out his duties or resigns as Shareholders'
Representative, the Shareholders shall appoint a Shareholders' Representative
upon the approval of Shareholders holding more than sixty percent (60%) of the
Escrow Shares (as reflected on Exhibit A of the Escrow Agreement) pursuant to
the Approval Procedures. A Shareholders' Representative may be removed at any
time upon the approval of Shareholders holding more than sixty percent (60%) of
the Escrow Shares (as reflected on Exhibit A of the Escrow Agreement) pursuant
to the Approval Procedures, in which case a successor Shareholders'
Representative shall be determined pursuant to the foregoing rules of
succession. Any successor Shareholders' Representative shall perform subject to
the terms and conditions of this Appointment as then in effect and have the
identical duties and functions of the Shareholders' Representative hereunder.
8. INDEMNIFICATION OF SHAREHOLDERS' REPRESENTATIVE. The Shareholders,
jointly and severally, agree to indemnify and hold the Shareholders'
Representative harmless from and against any loss, liability, damage, cost, or
expense (including, but not limited to, legal fees and expenses) incurred by him
arising out of or in connection with the Shareholders' Representative's
performance under this Appointment, except to the extent caused by actions
constituting gross negligence or willful misconduct of the Shareholders'
Representative.
9. NOTICES. Any notice required or permitted by this Appointment shall
be in writing and shall be sufficiently given if personally delivered, mailed by
certified or registered mail, return receipt requested, or sent by Federal
Express (or other guaranteed and receipted delivery service) to the
Shareholders' Representative at 22506 Wetherburn, Katy, Texas, 77449, and to
each Shareholder at the last known address on the Acquiror's records (or such
other addresses as specified by written notice timely given to the other
parties). Any notice given in accordance with this section is effective five (5)
business days after the date on which the same was delivered or deposited, as
applicable for the notice procedure used.
10. MEDIATION AND ARBITRATION.
a. Except as provided in Article 3 of the Escrow Agreement for
disputes relating to claims against the Escrow Fund:
(i) Before the institution of any litigation between any
persons relating to this Appointment including any dispute over the
application or interpretation of any provision hereof, if negotiations
and other discussions fail, at the election of any party to this
Appointment, such dispute shall be first submitted to mediation in
accordance with the provisions of the Commercial Mediation Rules of the
AAA before resorting to arbitration. The parties agree to conduct the
mediation in good faith and make reasonable efforts to resolve their
dispute by mediation. The place of the mediation shall be in a city
mutually selected by the parties (or, if no city can be mutually agreed
upon within ten (10) days, then in Houston, Texas).
B-4
72
(ii) If the dispute is not resolved by the mediation required
under the preceding subsection, such dispute shall, at the election of
any party to this Appointment, be subject to binding arbitration in
accordance with the provisions of the Rules, and judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitration shall be heard before a panel of
three (3) arbitrators selected in accordance with the procedures
therefor set forth in Article 3 of the Escrow Agreement. The parties
agree to use the Houston, Texas office of the AAA and the place of
arbitration shall be in a city mutually selected by the parties (or, if
no city can be mutually agreed upon within ten (10) days, then in
Houston, Texas).
(iii) The prevailing party in any mediation, arbitration or
litigation shall be entitled to recover from the other party reasonable
attorneys' fees, court costs and the administrative costs, fees and
expenses of the AAA, each as applicable, incurred in the same, in
addition to any other relief that may be awarded.
b. If either party appeals the decision of the arbitrators,
the parties agree that the United States Judicial District including Harris
County, Texas, and the state courts within Harris County, Texas, shall have
exclusive venue and jurisdiction of same.
11. MISCELLANEOUS.
a. ASSIGNABILITY; BINDING EFFECT. This Appointment is personal
to the Shareholders' Representative and the Shareholders. Except as otherwise
herein, no party may assign or delegate any rights or obligations under this
Appointment without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
b. WAIVER. There can be no waiver of any term, provision, or
condition of this Appointment which is not in writing signed by the party
against whom the waiver is sought to be enforced. Waiver by any party of the
default or breach of any provision of this Appointment by another shall not
operate or be construed as a waiver of any subsequent default or breach.
d. SEVERABILITY. If any one or more of the provisions of this
Appointment for any reason is held to be illegal, invalid, or unenforceable, the
illegality, invalidity, or unenforceability will not affect, impair, or
invalidate any other provision of this Appointment, which will be construed as
if the illegal, invalid, or unenforceable provision had not been contained in
the Appointment and, in lieu thereof, there will be added automatically as a
part of this Appointment a provision as similar in terms to the illegal,
invalid, or enforceable provision as possible and be legal, valid, and
enforceable.
d. FURTHER ASSURANCES. The parties agree to take such further
actions, including the execution and delivery of any documents, as may be
required, necessary, or desirable for the performance of this Appointment.
B-5
73
e. ENTIRE AGREEMENT; HEADINGS; INCORPORATION BY REFERENCE.
This Appointment, together with the other documents, exhibits, schedules, and
instruments referred to herein, constitutes the entire agreement between the
parties relating to the subject matter hereof, and supersedes all previous
agreements, written or oral. Except as provided otherwise in this Appointment,
this Appointment shall not be amended or modified except by an instrument in
writing signed by all parties. Headings are for convenience of reference only
and shall not affect the interpretation or construction of this Appointment. All
exhibits, schedules, documents, and instruments referred to in this Appointment
are incorporated by reference for all purposes.
f. GOVERNING LAW: ATTORNEY'S FEES. Any dispute between the
parties relating to this Appointment shall be construed under and in accordance
with the laws of the State of Texas, and applicable federal law. The prevailing
party in any litigation shall be entitled to recover from the other party
reasonable attorney's fees and court costs incurred in the same, in addition to
any other relief that may be awarded.
g. MULTIPLE COUNTERPARTS. This Appointment may be executed in
multiple counterparts, either by original or facsimile signatures, each of which
shall constitute an original and all of which shall constitute one document; and
furthermore, a facsimile signature shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Appointment and
caused the same to be duly delivered on their behalf on the date first written
above.
[signatures on following page]
B-6
74
SHAREHOLDERS' REPRESENTATIVE
---------------------------------------------
Randall S. Miller
SHAREHOLDERS
---------------------------------------------
RANDALL S. MILLER
ESTATE OF PAUL J. CERNOCK, DECEASED
By:
-----------------------------------------
Laura E. Cernock, Independent Co-Executor
By:
-----------------------------------------
Christopher M. Cernock,
Independent Co-Executor
ESTATE OF ELIZABETH M. CERNOCK, DECEASED
By:
-----------------------------------------
Robert L. Thomas, Independent Executor
------------------------------------------
LAWRENCE BRUNO
------------------------------------------
JOHN F. ZELLMER
B-7
75
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
76
COMMON STOCK
REGISTRATION RIGHTS AGREEMENT
This Common Stock Registration Rights Agreement ("Agreement"), dated as
of July ___, 1999, is made by and among Core Laboratories N.V., a Netherlands
limited liability company ("Company"), and those certain holders listed on the
signature page(s) hereto (individually a "Holder" and collectively the
"Holders"), who hereby agree as follows:
1. INTRODUCTION.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them below:
(i) "Common Stock" means the Company's common stock, par value
NLG $0.03 per share.
(ii) "Effective Time" shall have the meaning set forth in the
Agreement and Plan of Merger between the Company, the Holders,
Reservoirs, Inc. and Core Acquisition Subsidiary, Inc., dated July ___,
1999.
(iii) "Holder's Shares" means the number of shares of Common
Stock specified on Exhibit A to this Agreement.
2. PIGGYBACK REGISTRATION.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its Common Stock for its own account under the Securities Act of 1933, as
amended (the "Securities Act") (other than pursuant to a registration statement
relating to warrants, options or shares of capital stock granted, to be granted,
sold or to be sold exclusively to employees or directors of the Company, a
registration statement filed pursuant to Rule 145 under the Securities Act or a
shelf registration statement pursuant to Rule 415 under the Securities Act), the
Company will give prompt written notice to the Holders of its intention to
effect a registration and will, subject to Section 2(b) below, include in such
registration Holder's Shares with respect to which the Company has received
written requests for inclusion therein within 15 days after the giving of notice
by the Company. All registrations requested pursuant to this Section 2(a) are
referred to herein as "Piggyback Registrations."
(b) Priority on Piggyback Registrations. If a Piggyback Registration
involves the registration of shares of Common Stock offered in a firm commitment
underwritten offering and the managing underwriter(s) for the offering advise
the Company that in their opinion the number of shares of Common Stock requested
to be included in such registration exceeds the number of shares of Common Stock
which can be sold in such offering without adversely affecting the offering
price of the shares of Common Stock to be included therein, the Company will so
advise the Holders in writing and will include in such registration that number
of shares of Common Stock which the
C-1
77
managing underwriter(s) have advised the Company, in their opinion, will not
adversely affect the offering price of the shares of Common Stock to be offered
by the Company, such number of shares to be included in such registration in
accordance with the following priorities: (i) first, the Common Stock and other
securities, if any, that the Company proposes to sell; (ii) second, the Common
Stock and securities, if any, that First Britannia Mezzanine N.V. proposes to
sell; (iii) third, the Common Stock and securities, if any, that any person
(other than the Holders) having piggy-back registration rights granted prior to
the date hereof proposes to sell; and (iv) fourth, on a pro-rata basis, (A) the
Holder's Shares requested to be included in such registration pursuant to
Section 2(a) above and (B) any other Common Stock owned by persons other than
the Holders having rights to participate in an underwritten registered offering
of Common Stock and who have notified the Company of their intention to
participate in such registration.
(c) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the Company will select a managing underwriter(s) of
nationally recognized standing.
3. REGISTRATION PROCEDURES.
Whenever the Holders have requested that any Holder's Shares be
registered pursuant to this Agreement, and subject to Section 2(b) above, the
Company will use its reasonable efforts to effect the registration of such
Holder's Shares and pursuant thereto the Company will:
(a) prepare and file with the Securities and Exchange
Commission ("Commission") under the Securities Act a registration
statement with respect to such Holder's shares, which registration
statement will state that the Holders of Holder's Shares covered
thereby and the holders of any other shares of Common Stock to be
included therein may sell such Shares under such registration
statement, and use its reasonable efforts to cause such registration
statement to become effective and to remain effective as provided
herein;
(b) prepare and file with the Commission such amendments and
supplements, if any, to such registration statement and the prospectus
used in connection therewith as may be necessary to (i) keep such
registration statement effective for a period which is the earlier of
(A) 90 days or (B) until the completion of the distribution under such
registration statement and (ii) comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement in accordance with the intended
methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Holder's Shares such number of
copies of such registration statement (including exhibits), each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) as such
seller may reasonably request in order to facilitate the disposition of
such shares;
(d) use its reasonable efforts to register or qualify such
Holder's Shares under such securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions
of the Holder's Shares owned by such seller, provided that the Company
will not be required to (i) qualify generally
C-2
78
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection, (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction;
(e) notify each seller of Holder's Shares at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, when it becomes aware of the happening of any event as
a result of which the prospectus included in such registration
statement (as then in effect) contains any untrue statement of a
material fact or omits any fact necessary to make the statements
therein not misleading in light of the circumstances then existing,
and, as promptly as practicable thereafter, prepare in sufficient
quantities a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Holder's Shares, such
prospectus will not contain an untrue statement of a material fact or
omit to state any fact necessary to make the statements therein not
misleading in light of the circumstances then existing;
(f) enter into customary agreements relating to the
registration (including an underwriting agreement in customary form);
(g) subject to the execution of confidentiality agreements in
a form satisfactory to the Company, make reasonably available for
inspection by any seller of Holder's Shares, any underwriter
participating in any disposition pursuant to such registration
statement, the Representative Counsel (as hereinafter defined) and any
attorney, accountant or other agent retained by any such Representative
Counsel or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, Representative
Counsel, attorney, accountant or agent in connection with such
registration statement to the extent such information is reasonably
necessary to satisfy any of its obligations under applicable law;
(h) use reasonable efforts to obtain an appropriate opinion
from counsel for the Company and a cold comfort letter from the
Company's independent public accountants in customary form and covering
such matters of the type customarily covered by opinions of counsel and
cold comfort letters in similar registrations as the Holders of a
majority of the Holder's Shares covered by such registration statement
reasonably request; provided, however, that failure to provide such
opinion or letter, or the provision of any such opinion or letter in a
form not satisfactory to any Holder whose Holder's Shares are covered
by such registration statement shall not give rise to any action, at
law or in equity, for damages or injunctive or other relief , but
rather, shall only entitle such Holder to withdraw his Holder's shares
from such registration statement pursuant to Section 3(k) below;
(i) upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e), such
Holder will forthwith discontinue such Holder's disposition of Holder's
Shares pursuant to the registration statement covering such Holder's
shares until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) and, if so directed by
the Company, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in
C-3
79
such holder's possession of the prospectus covering such Holder's
Shares current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in Section
3(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the
date when each seller of any Holder's Shares and other shares of Common
Stock covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by
Section 3(e);
(j) in connection with the preparation and review pursuant to
this Agreement of any registration statement or prospectus or any
amendments or supplements thereto, the Holders of a majority of the
Holder's Shares included in such registration will choose one counsel
("Representative Counsel") who shall participate in the registration
process on their behalf, coordinate requests by sellers of Holder's
Shares for information from the Company and act as liaison between such
selling stockholders or their individual counsel, accountants and
agents and the Company; and
(k) if any Holder disapproves of the terms of any offering,
such Holder's sole remedy shall be to withdraw therefrom by written
notice to the Company and the underwriter (if any) and all other
participants in such offering, and the Holder's Shares so withdrawn
will also be withdrawn from registration.
4. REGISTRATION EXPENSES.
(a) Whether or not any registration pursuant to this Agreement shall
become effective, all expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, National Association of Securities Dealers' fees, fees and
expenses of compliance with state securities or blue sky laws, printing and
engraving expenses and fees and disbursements of counsel for the Company, the
Representative Counsel, the independent certified public accountants for the
Company, underwriters (excluding discounts and commissions) and other persons
retained by the Company (all such expenses being herein called "Registration
Expenses"), will be borne by the Company; provided, however, that (i) if other
holders of Common Stock who have included shares in the registration statement
are required to pro-rate any Registration Expenses which are to be paid by the
Holders hereunder, then each Holder will also pro-rate such Registration
Expenses with such other holders and (ii) each seller of Holder's Shares shall
pay (A) any underwriting discounts and selling commissions applicable to
Holder's Shares sold by the Holders and (B) all fees and disbursements of
counsel for the Holders (other than the Representative Counsel); provided,
however, that the Company's obligation to pay the fees, expenses and
disbursements of Representative Counsel on the Piggyback Registrations shall be
limited to reasonable fees, expenses and disbursements.
(b) Notwithstanding anything herein to the contrary, each seller of
Holder's Shares shall pay the Registration Expenses to the extent required by
applicable law.
C-4
80
5. INDEMNIFICATION.
(a) Indemnification by the Company. The Company agrees to indemnify,
with respect to any registration statement filed by it, to the full extent
permitted by law, each Holder, its officers, directors and agents and each
person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus or
preliminary prospectus, in the light of the circumstances under which they were
made) not misleading, except insofar as the same are caused by or contained in
any information with respect to such Holder furnished in writing to the Company
by such Holder expressly for use therein.
(b) Indemnification by Holders. In connection with any registration
statement in which a Holder is participating, each such Holder will furnish to
the Company in writing such information with respect to such Holder as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and agrees to indemnify, to the fullest extent permitted
by law, the Company, its directors and officers and each person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of a prospectus or
preliminary prospectus, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is caused by or contained in any information with respect
to such Holder so furnished in writing by such Holder expressly for use therein.
(c) Conduct of Indemnification Proceedings. Promptly after receipt by
an indemnified party under subsection (a) or (b) above of notice of the
commencement of any action, suit, proceeding, investigation or threat thereof
made in writing for which such person will claim indemnification pursuant to
this Agreement, such indemnified party shall notify the indemnifying party in
writing of the commencement thereof or of such involvement, as the case may be,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than under
such subsection. in case any such action referred to under subsection (a) or (b)
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. The indemnifying party
shall not be required to indemnify the indemnified party with respect to any
amounts paid in settlement of any action, proceeding or investigation entered
into without the written consent of the indemnifying party.
C-5
81
(d) Contribution. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect or as a result of any losses, claims,
damages, liabilities or expenses (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other hand, the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense and any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 5(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 5(d).
(e) Indemnification and Contribution of Underwriters. In connection
with any underwritten offering contemplated by this Section 5, the Company, with
respect to any registration statement filed by it, will agree to customary
provisions for indemnification and contribution in respect of losses, claims,
damages, liabilities and expenses of the underwriters by the Company.
6. PARTICIPATION IN UNDERWRITTEN REGISTERED OFFERINGS.
No person may participate in any underwritten offering hereunder unless
such person (a) agrees to sell such person's securities on the basis provided in
any underwriting arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
C-6
82
7. MISCELLANEOUS.
(a) Termination. This Agreement and all rights and obligations
hereunder with respect to any Holder's Shares (except for the indemnification
rights provided in Section 5 hereof which shall survive forever) will terminate
one year from the date of this Agreement.
(b) Waivers. Except as otherwise provided herein, the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
Holders of a majority of all of the Holder's Shares.
(c) Amendments. Except as otherwise provided herein, this Agreement may
be amended only with the written consent of the Company and the Holders of a
majority of all of the Holder's Shares.
(d) Subsequent Holders of Holder's Shares. This Agreement shall not be
assignable by the Holders.
(e) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of more
than one party, by facsimile or original signatures, but all counterparts taken
together will constitute one and the same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(h) Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement and the exhibits and schedules hereto will
be governed by the internal law, and not the law of conflicts, of the State of
Texas, United States of America.
(i) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications will
be sent to each of the Holders or subsequent holders of the Holder's Shares as
the case may be, at their respective addresses on the books of the Company, and
to the Company at the address indicated below:
C-7
83
If to Company: Core Laboratories, N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Telecopy: 011-31-20-627-9886
Attention: Jacobus Schouten
and Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 744-6225
Attention: John D. Denson
with a copy (which
shall not constitute
notice) to: Vinson & Elkins, L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Telecopy: (713) 615-5531
Attention: T. Mark Kelly
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(j) Benefit of Agreement. No person not a party to this Agreement shall
have rights under this Agreement as a third party beneficiary or otherwise.
[signatures on following page]
C-8
84
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the Effective Date.
CORE LABORATORIES N.V.
By: CORE LABORATORIES INTERNATIONAL B.V.
its Sole Management Director
By:
------------------------------------------
Jacobus Schouten
Managing Director
HOLDERS:
ESTATE OF PAUL J. CERNOCK, DECEASED
By:
------------------------------------------
Christopher M. Cernock
Independent Co-Executor
By:
------------------------------------------
Laura E. Cernock
Independent Co-Executor
ESTATE OF ELIZABETH M. CERNOCK, DECEASED
By:
------------------------------------------
Robert L. Thomas
Independent Executor
----------------------------------------------
RANDALL MILLER
----------------------------------------------
JOHN ZELLMER
----------------------------------------------
LAWRENCE BRUNO
C-9
85
EXHIBIT A
TOTAL ACQUIROR
NAME ESCROW SHARES CLOSING SHARES SHARES
- ---- ------------- -------------- --------------
Estate of Paul J. Cernock 8,050 72,454 80,504
Estate of Elizabeth M. Cernock 8,050 72,454 80,504
Randall Miller 4,792 43,126 47,918
John Zellmer 863 7,762 8,625
Lawrence Bruno 527 4,744 5,271
--- ----- -----
Total 22,282 200,540 222,822
C-10
86
EXHIBIT D
FORM OF EMPLOYMENT CONTRACT
87
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
effective as of August 2, 1999 (the "Effective Date") by and between Core
Laboratories, Inc., a Delaware corporation ("Company"), and _______________
("Employee").
R E C I T A L S :
A. The Company is a corporation duly organized under the laws of the
State of Delaware.
B. Employee has sold his shares in Reservoirs, Inc. to Company's parent
company, Core Laboratories N.V., and has benefited as a shareholder from the
acquisition by Company's parent company of all of the outstanding capital stock
of Reservoirs, Inc. pursuant to the Agreement and Plan of Merger dated July 26,
1999 among Core Laboratories N.V., Core Acquisition Subsidiary, Inc.,
Reservoirs, Inc. and the stockholders of Reservoirs, Inc. (the "Merger
Agreement").
C. The Company desires to employ Employee, and Employee desires to be
employed by the Company, to provide services for the Company and Company's
customers pursuant to the provisions of this Agreement.
A G R E E M E N T S :
NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements in this Agreement, the parties do agree and
covenant as follows, intending to be legally bound:
1. EMPLOYMENT.
1.1. Engagement. The Company employs Employee, and Employee accepts
employment with Company, as _______________ (and in such other positions to
which Employee may be assigned by Company) to render services to Company and to
the customers of Company, as determined by the Board of Directors of Company
(the "Board") and the appropriate authorized officers and agents of Company.
Employee shall maintain regular full-time office/work hours in accordance with
Company policies. Except as may be otherwise provided for in this Agreement,
during the term of this Agreement, Employee shall not, without the prior written
consent of Company, render compensable services except as an employee of Company
or directly or indirectly engage in any business activity that competes with the
business of Company, that duplicates a service provided by Company, or that is
adverse to the business of Company.
1.2. Right to Fees. Any and all Service Fees generated during the term
of this Agreement shall belong to Company. "Service Fees" shall include, but not
be limited to, fees or remuneration generated by the provision of services by
Employee in Employee's capacity as an employee of Company. It is specifically
understood and agreed that Employee shall have no right or claim to any portion
of Service Fees, except as otherwise provided in this Agreement or by policies
adopted by the Board or the authorized officers of Company.
D-1
88
1.3. Customer Agreements. From time to time Company may enter into
agreements with customers or suppliers that may require Company and/or Employee
to engage in certain activities. Employee will fully cooperate in such
activities and will comply with any and all requirements of any customer or
supplier agreement to which Company becomes a party. Employee shall have no
authority to, and shall not, execute agreements binding Company unless Employee
is a duly authorized officer or agent of Company acting as authorized.
1.4. Records of Company. During the term of this Agreement or any time
thereafter, Employee shall not induce, solicit, or encourage any customer who
has received or is receiving products or services from Company to seek such
products or services from another source, including Employee. All business,
financial, or other records, papers, and documents generated by Employee,
Company, or employees or agents of Company shall belong to Company, and Employee
shall have no right to keep or retain such records, papers, or documents after
this Agreement is terminated.
2. DUTIES.
2.1. Professional Duties. Employee shall provide services exclusively
for Company at facilities used by Company or at other locations as Company
determines. Employee shall not render compensable services except as an employee
of Company. Employee agrees to use Employee's best efforts in performing
Employee's duties. Employee's essential duties shall also include without
limitation:
2.1.1. Keeping and maintaining, or causing to be kept and
maintained, appropriate records, reports, claims, and
correspondence necessary and appropriate in
connection with all services rendered by Employee
under this Agreement, all of which records, reports,
claims, and correspondence shall belong to Company;
2.1.2. Promoting the business of Company;
2.1.3. Attending to the administrative duties of the
business of Company;
2.1.4. Performing all acts reasonably necessary to maintain
and improve Employee's skills;
2.1.5. Assisting Company in fulfilling its contractual
obligations, if any; and 2.1.6. Providing services to
customers of Company in accordance with standards
and policies adopted by Company from time to time.
D-2
89
3. COMPENSATION.
3.1. Base Salary. The annual base salary of Employee shall
be__________________ and ___/100 Dollars ($_______) during the first year of
this Agreement. After the first year of this Agreement, the base salary of
Employee may be adjusted by Company at its discretion. The base salary shall be
payable in accordance with Company's schedule and policies.
3.2. Employment Taxes. Company shall withhold on behalf of Employee
appropriate employment taxes.
3.3. Leave Time. Employee shall be entitled to vacation and other leave
time in accordance with Company's policies. Paid vacation and leave time shall
not increase the base salary or other compensation of Employee under this
Agreement. Employee shall schedule vacation and leave time with reasonable
notice to Company.
3.4. Other Benefits. Company may provide and make available to Employee
other benefits of employment as determined by the Board, such as health, group
disability, and group life insurance. Company does not guarantee or make any
warranties regarding the insurability of Employee.
3.5 Bonus. Employee shall be eligible to receive an annual incentive
bonus on or about March 31 of each calendar year in accordance with and subject
to the performance criteria approved by the Board or the appropriate authorized
officers or agents of the Company or his designee(s) and commensurate with those
applicable to senior management of the Company. The amount of any such incentive
bonus shall be limited to no more than _____% of Employee's then base salary
specified in Section 3.1.
4. TERM AND TERMINATION.
4.1. Term. The initial term of this Agreement shall commence on the
Effective Date and shall continue for a period of _____ year, unless sooner
terminated in accordance with the terms of this Agreement.
4.2. Termination For Cause.
4.2.1. By Company. Company may terminate this Agreement
immediately upon notice to Employee for any of the following reasons, which
shall be deemed to be "cause":
4.2.1.1. Employee's failure or refusal to perform the duties
required under this Agreement or to comply with the policies, standards, and
regulations of Company that may be established from time to time, that apply to
all Company employees;
4.2.1.2. Employee's conviction in a court of competent
jurisdiction of any felony offense or of any misdemeanor offense involving moral
turpitude;
D-3
90
4.2.1.3. The commission by Employee of (i) any criminal
offense other than minor traffic violations, (ii) any public or private conduct
that offends decency or morality, causes Employee to be held in public ridicule
or scorn, or causes a public scandal, or (iii) any conduct that may harm the
reputation or operations of Company or that is detrimental to the interests of
Company;
4.2.1.4. Employee, for reasons other than illness, disability,
family emergency, vacation scheduled in advance with reasonable notice to
Company, or holidays, devotes less than Employee's full time to Employee's
duties under this Agreement;
4.2.1.5. Employee takes any action, fails to take any action,
engages in any activity, the result of which is contrary to the interest of
Company, or in any way violates Company's ethics policy.
4.2.2. By Employee. Employee may terminate this Agreement
immediately upon written notice to Company, which notice shall describe the
reason for termination, for either of the following reasons:
4.2.2.1. Company dissolves;
4.2.2.2. Company materially fails to perform
its duties under this Agreement and such failure continues for thirty (30) days
after receipt of written notice.
4.3. Termination Without Cause. After the initial term, this Agreement
may be terminated immediately by Employee or Company without cause. In the event
of notice by either party of termination without cause, Company may limit
Employee's activities during the notice period or Company may impose any other
restrictions it deems necessary and reasonable.
4.4. Termination upon Death or Disability. This Agreement shall
automatically terminate upon Employee's death. Any salary, bonus, or fringe
benefits due at the time of death shall be paid on a pro rata basis. This
Agreement shall also be deemed to terminate upon the commencement date of
Employee's disability that does or is expected to continue for ninety (90) days.
For purposes of this Agreement, the term "disability" means a documented illness
or incapacity that keeps or is expected to keep Employee from resuming
Employee's full-time duties for at least ninety (90) days; provided, however,
that such ninety (90) day period shall not be deemed to be broken if Employee
returns to work for no more than three consecutive working days during any given
attempt to resume his or her regular work schedule.
4.5. Effect of Termination. Upon any termination of this Agreement,
Company shall pay Employee the compensation due through the date of termination
as full and final satisfaction of the terms of this Agreement, and Employee
shall have no further claims against Company for compensation.
D-4
91
5. OUTSIDE ACTIVITIES AND NONCOMPETITION.
5.1. Covenant Not to Compete. Employee recognizes that Company's
decision to enter into this Agreement is induced primarily because of the
covenants and assurances made by Employee in this Agreement, that such covenants
and assurances are a precondition to Employee's right to receive payments from
Company's parent company in the form of stock in exchange for his shares in
Reservoirs, Inc., that Employee's covenant not to compete is necessary to ensure
the continuation of the business of Company and the reputation of Company and
the receipt and enjoyment of the benefits of the purchase of Reservoirs, Inc.,
and that irrevocable harm and damage will be done to Company if Employee
competes with Company. Therefore, Employee agrees that for a period of _____
years following the Effective Date or for a period of _____ year after the
termination for any reason of Employee's employment with Company, whichever
period is greater, Employee shall not, directly or indirectly, as an employee,
employer, contractor, consultant, agent, principal, shareholder, corporate
officer, director, or in any other individual or representative capacity, engage
or participate in any business or enterprise in countries or locations where
Reservoirs, Inc. or Core Laboratories N.V. or any of their subsidiaries
currently conduct business, including, but not limited to Texas, the parishes of
Louisiana listed on Exhibit A, Oklahoma, or Colorado (the "Noncompetition
Territory") that is in competition in any manner whatsoever with the business of
Company or any affiliate of Company (including, without limitation, Core
Laboratories N.V. and its subsidiaries) without the prior written permission of
Company. The parties mutually acknowledge all of the following:
(a) Employee's covenant not to compete is reasonable and is
given as consideration for a portion of Employee's compensation and for
a portion of the sales price for the shares of Reservoirs, Inc.
(b) In exchange for Employee's covenants to Company in this
Agreement, Company is furnishing to Employee, in addition to Employee's
compensation, valuable consideration, including without limitation:
(i) full access to an established customer base;
(ii) the availability of expensive operating
equipment, office equipment, and a trained
and adequate staff; and
(iii) specialized training, as necessary, to
provide services according to Company's
standards.
(c) If Employee should render services within the
Noncompetition Territory in competition with the business of Company,
it would cause economic harm and loss of goodwill to Company resulting
in immediate and irreparable loss, injuries, and damage to Company.
Neither the public in general nor any customers will be
adversely affected by the enforcement of the noncompetition
covenant, in that other similar providers of similar services
are readily available within the restricted area.
D-5
92
5.2. Ancillary Agreement. This covenant not to compete shall be
construed as an agreement ancillary to the other provisions of this Agreement
and to the Merger Agreement, and the existence of any claim or cause of action
of Employee against Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Company of this covenant.
Without limiting other possible remedies to Company for breach of this covenant,
Employee agrees that injunctive or other equitable relief will be available to
enforce the covenants of this provision, such relief to be without the necessity
of posting a bond, cash or otherwise.
5.3. Enforcement. Company and Employee further agree that if any
restriction in this Article is held by any court to be unenforceable or
unreasonable, a lesser restriction will be enforced in its place and the
remaining restrictions in this Agreement will be enforced independently of each
other. Employee agrees to pay any attorney's fees, court costs, and expenses
incurred by Company if Company chooses, in its sole discretion, to enforce any
provision under this Article and Company prevails.
5.4. Survival. The provisions of this Article shall survive the
termination of this Agreement.
6. CONFIDENTIALITY OF INFORMATION.
Employee agrees to keep confidential and not to use or to disclose to
others during the term of this Agreement and for any time thereafter, except as
expressly consented to in writing by Company or as required by law, any secrets
or confidential technology, proprietary information, or trade secrets of
Company, or any matter or thing ascertained by Employee through Employee's
affiliation with Company, the use or disclosure of which matter or thing might
reasonably be construed to be contrary to the best interest of Company. Employee
further agrees that should Employee leave the employment of Company, Employee
will neither take nor retain, without prior written authorization from Company,
any papers, fee books, files, other documents, copies thereof, or other
confidential information of any kind belonging to Company pertaining to
Company's business, sales, financial condition, services, or products. Without
limiting other possible remedies to Company for the breach of this covenant,
Employee agrees that injunctive or other equitable relief shall be available to
enforce this covenant, such relief to be without the necessity of posting a
bond, cash, or otherwise. Employee further agrees that if any restriction in
this paragraph is held by any court to be unenforceable or unreasonable, a
lesser restriction shall be enforced in its place and the remaining restrictions
in this paragraph shall be enforced independently of each other.
D-6
93
7. MISCELLANEOUS.
7.1. Assignability. Company may assign this Agreement to a successor
business upon notice to Employee. Otherwise, neither party may assign its rights
or duties under this Agreement without the prior written consent of the other
party.
7.2. Notice. Any notice, demand, or communication required, permitted,
or desired to be given under this Agreement shall be deemed effectively given
when personally delivered or mailed by prepaid certified mail, return receipt
requested, addressed to the party at the primary business address of Company,
or, if appropriate, at the residence of Employee on file with Company, or to
another address and to the attention of another person or officer that either
party may designate by written notice.
7.3. Enforceability. Should any provision of this Agreement be held
invalid, unenforceable, or unconstitutional by any governmental body or court of
competent jurisdiction, that holding shall not diminish the validity or
enforceability of any other provision of this Agreement.
7.4. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Texas, and venue for any cause of
action arising under this Agreement shall lie in Harris County.
7.5. Construction. Common nouns and pronouns and all other terms shall
be deemed to refer to the masculine, feminine, neuter, and singular and/or
plural, as the identity of the person or persons, firm, or association may
require in the context.
7.6. Binding Effect. The provisions of this Agreement shall inure to
the benefit of and shall be binding upon the heirs, personal representatives,
successors, assigns, estates, and legatees of each of the parties.
7.7. Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to be, a waiver of any subsequent breach of the same or another
provision.
7.8. Entire Agreement; Amendments. This Agreement constitutes the
entire agreement in effect between the parties pertaining to the employment
relationship between Company and Employee and supersedes all prior or
contemporaneous agreements, understandings, or negotiations of the parties. THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. This Agreement shall not be modified, amended, or supplemented except
in a written instrument executed by both parties.
D-7
94
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals effective as of the Effective Date.
COMPANY:
CORE LABORATORIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EMPLOYEE:
---------------------------------------
(Name)
D-8