STOCK PURCHASE AGREEMENT
by and among
PRECISION TUBE HOLDING CORPORATION,
THE PERSONS LISTED ON THE
SELLERS SCHEDULE ATTACHED HERETO,
and
MAVERICK TUBE CORPORATION
Dated as of February 12, 2002
CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF STOCK.........................................1
1.01 Purchase and Sale of Stock.................................1
1.02 Aggregate Buyer Payment....................................1
1.03 The Closing................................................6
1.04 Registration Statement.....................................6
1.05 Obligations of Buyer and the Sellers.......................9
1.06 Registration on Transfer of Shares of
Maverick Stock.............................................10
ARTICLE II CONDITIONS TO CLOSING.............................................11
2.01 Conditions to Buyer's Obligations..........................11
2.02 Conditions to the Sellers' Obligations.....................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH SELLER....................15
3.01 Organization, Execution and Delivery: Valid
and Binding Agreements.....................................15
3.02 Authority: No Breach.......................................15
3.03 Ownership of the Stock.....................................15
3.04 Brokerage..................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
AND THE SUBSIDIARIES.......................................16
4.01 Organization and Authorization.............................16
4.02 Subsidiaries...............................................16
4.03 No Breach..................................................16
4.04 Capitalization.............................................17
4.05 Financial Statements.......................................17
4.06 Conduct of Business........................................18
4.07 Absence of Certain Developments............................18
4.08 Title to Properties........................................18
4.09 Tax Matters................................................20
4.10 Contracts and Commitments..................................22
4.11 Intellectual Property......................................22
4.12 Litigation.................................................23
4.13 Brokerage..................................................23
4.14 Employee Benefit Plans.....................................23
4.15 Employees..................................................24
4.16 Insurance..................................................24
4.17 Compliance with Laws.......................................24
4.18 Environmental Compliance and Conditions....................24
4.19 Powers of Attorney.........................................25
4.20 Governmental Authorizations................................26
4.21 Disclosure.................................................26
4.22 Accounts Receivable and Accounts Receivable Aging..........26
4.23 Inventory..................................................26
4.24 Books and Records..........................................26
4.25 No Material Adverse Change.................................26
4.26 No Other Representations and Warranties....................27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............................27
5.01 Organization and Corporate Power...........................27
5.02 Authorization..............................................27
5.03 No Violation...............................................27
5.04 Governmental Authorities, Consents.........................27
5.05 Litigation.................................................28
5.06 Brokerage..................................................28
5.07 Investment Representation..................................28
5.08 Employee Matters...........................................28
ARTICLE VI PRE-CLOSING COVENANTS.............................................29
6.01 Conduct of the Business....................................29
6.02 Access to Books and Records................................30
6.03 Notification...............................................30
6.04 HSR Act Compliance.........................................33
6.05 Other Regulatory Filings...................................34
6.06 Conditions.................................................34
6.07 Exclusive Dealing..........................................34
6.08 Contact with Customers and Suppliers.......................34
ARTICLE VII TERMINATION......................................................34
7.01 Termination................................................34
7.02 Effect of Termination......................................36
ARTICLE VIII SELLERS' REPRESENTATIVE.........................................36
8.01 Designation................................................36
8.02 Authority..................................................36
8.03 Exculpation................................................36
ARTICLE IX ADDITIONAL AGREEMENTS.............................................37
9.01 Survival...................................................37
9.02 Indemnification............................................37
9.03 Disclosure Generally.......................................40
9.04 Arbitration Procedure......................................40
9.05 Tax Matters................................................42
9.06 Further Assurances.........................................45
9.07 Access to Books and Records................................45
9.08 Director and Officer Liability and
Indemnification............................................45
9.09 Maintain Compensation and Employee Benefits................46
9.10 Worker Adjustment and Retraining Notification
Act ("WARN")...............................................46
ARTICLE X DEFINITIONS........................................................46
ARTICLE XI MISCELLANEOUS.....................................................53
11.01 Press Releases and Communications..........................53
11.02 Expenses...................................................53
11.03 Notices....................................................54
11.04 Assignment.................................................55
11.05 Severability...............................................55
11.06 No Strict Construction.....................................55
11.07 Amendment and Waiver.......................................55
11.08 Complete Agreement.........................................56
11.09 Counterparts...............................................56
11.10 No Third Party Beneficiary Status..........................56
11.11 Governing Law..............................................56
11.12 Disclaimer Regarding Estimates and Projections.............56
11.13 Post-Closing Liability.....................................57
11.14 Waiver and Termination Regarding Investors' Agreement......57
EXHIBITS
A-1 Company's Closing Certificate
A-2 Sellers' Closing Certificate
B Buyer's Closing Certificate
C-1 Unaudited Net Working Capital
C-2 Net Working Capital Items of Detail
D Authorized Capital Expenditure
E Release by Sellers
F-1 Opinion of Sellers' Counsel
F-2 Opinion of Buyer's Counsel
G Non-Competition Agreement of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
H Employment Term Sheet
SCHEDULES
A Sellers' Schedule
1.02(a)(i)(D) Proceeds Schedule
1.02(a)(i)(D) Equity Appreciation Units Plan Schedule
1.02(b) Company Bank Accounts Schedule
2.01(c) Required Third Party Consents Schedule
2.01(d) Required Governmental Consents Schedule
4.01 Organization and Authorization Schedule
4.02 Subsidiaries Schedule
4.03 Authorization Schedule
4.03(ii) Permitted Liens Schedule
4.04 Capitalization Schedule
4.05 Changes to Financial Statements Schedule
4.06 Conduct of Business Schedule
4.07 Developments Schedule
4.08(a) Owned Real Property Schedule
Annex A (to Schedule 4.08(a))
4.08(b) Leased Real Property Schedule
4.09 Taxes Schedule
4.10 Contracts Schedule
4.10(A) Employee Bonus Schedule.
4.11 Intellectual Property Schedule
4.12 Litigation Schedule
4.14 Employee Benefits Schedule
4.15 Employees Schedule
4.16 Insurance Schedule
4.17 Compliance with Laws Schedule
4.18 Environmental Compliance Schedule
4.18(b) Environmental Permits Schedule
4.20 Governmental Authorizations
4.22 Accounts Receivable/Accounts Receivable Aging Schedule
5.03 No Violation Schedule
5.04 Buyer Consents Schedule
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (which, together with all exhibits and
schedules hereto constitutes, the "Agreement") is made as of February 12, 2002,
by and among Maverick Tube Corporation, a Delaware corporation ("Buyer"),
Precision Tube Holding Corporation (the "Company"), and the Persons listed on
the Sellers' Schedule attached hereto (collectively referred to herein as the
"Sellers" and individually as a "Seller"). Unless otherwise provided,
capitalized terms used herein are defined in Article X below.
RECITALS
A. The Sellers own all of the common stock of the Company
(collectively, the "Stock"), which Stock constitutes all of the outstanding
capital stock of the Company. Subject to the terms and conditions set forth
herein, Buyer desires to acquire from the Sellers all of the Stock as of the
Closing Date, and the Sellers desire to sell to Buyer all of such Stock as of
the Closing Date.
B. The Company is a holding company, which owns the Subsidiaries listed
on the Subsidiaries Schedule.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.01 Purchase and Sale of Stock. At the Closing, upon the terms and
subject to the conditions set forth in this Agreement, the Sellers shall sell,
assign, transfer, and convey to Buyer, and Buyer shall purchase and acquire from
the Sellers, all of the Stock, free and clear of all Liens, in exchange for
payment of an aggregate amount equal to the Aggregate Buyer Payment (as defined
in Section 1.02(a)). The Aggregate Buyer Payment shall be paid to the Sellers in
accordance with the provisions of Section 1.02.
1.02 Aggregate Buyer Payment.
(a) Payments at Closing. Subject to the adjustment provisions
set forth in Section 1.02(e), and upon the terms and subject to the conditions
of this Agreement, at the Closing the Buyer shall deliver an aggregate of
$55,000,000 in immediately available funds, by wire transfer ("Maverick Cash
Payment") and 200,000 shares of $0.01 par value common stock of Maverick Tube
Corporation (the "Maverick Stock"). Together, the Maverick Cash Payment and the
Maverick Stock shall constitute the "Aggregate Buyer Payment." The Maverick Cash
Payment shall be paid as follows:
(i) The Buyer shall pay to the Company the amounts necessary
for the Company to pay off:
(A) the Company's Senior Debt (including all accrued
interest);
(B) the Company's Subordinated Debt (including all accrued
interest);
(C) the Company's Senior Debt Guarantee Fees;
(D) the amounts due to the holders of the Company's Equity
Appreciation Units Plan, as such total amount is set forth on the
Proceeds Schedule;
(E) the amounts due under any other employee incentive plan
directly associated with this transaction; and
(F) the total amount of all other Transaction Costs.
Collectively, these amounts set forth in Section 1.02(a)(i)(A)-(F)
shall be referred to as the "Capital Contribution."
(ii) All amounts remaining after payment of the Capital
Contribution shall be paid to and distributed among the owners of the
Company's Stock, as specified in the Proceeds Schedule (the "Sellers'
Distribution"). These amounts will be sent to one account, to be
designated in writing by Sellers' Representative (the "Designated
Account"), and will be distributed to each individual Seller by
Sellers' Representative. With respect to each Seller, such Seller's Pro
Rata Share of the Sellers' Distribution is referred to as the "Seller's
Closing Payment."
(b) Payment of Cash from the Company. Buyer acknowledges and
agrees that, in addition to the amounts specified in Section 1.02(a)(ii), the
Sellers are to receive at Closing an amount equal to all cash balances for each
of the Company's bank accounts as such accounts are listed on the Company Bank
Accounts Schedule hereto (the "Company Bank Account Balances") as of the date of
Closing (the "Company Cash Distribution"). The Company Cash Distribution will
not include any amounts paid to the Company or any of the other Acquired
Companies as the Capital Contribution. Sellers' Representative shall distribute
the Company Cash Distribution pro rata to each individual Seller.
(c) A physical inventory will be taken for the Company's
Houston plant and facilities no more than three (3) days before or after the
Closing Date, with representatives of Sellers and Buyer present.
(d) Post-Closing Audit.
(i) As soon as practicable, but no later than 90 days after
the Closing Date, the Company's accountants, KPMG Peat Marwick, the
Company, the Sellers' Representative, and, at the sole discretion and
expense of the Sellers, a second independent accounting firm selected
by the Sellers (the "Sellers' Accountant") (together, in the
appropriate combination, the "Post-Closing Representative") shall
prepare and deliver to the Buyer a consolidated balance sheet for the
Company (the "Preliminary Closing Date Balance Sheet"), and,
simultaneously, deliver a summary of capital expenditures made by the
Acquired Companies between February 1, 2002 and the Closing Date (the
"Capital Expenditure Summary"). The members of the Post-Closing
Representative shall negotiate in good faith to resolve any objections
to or disputes regarding the contents of the Preliminary Closing Date
Balance Sheet and Capital Expenditure Summary and to produce a
Preliminary Closing Date Balance Sheet and Capital Expenditure Summary
reflecting a resolution of all objectionable or disputed items.
However, if the members of the Post-Closing Representative do not reach
a final resolution within ten (10) days after such objections or
disputes are first raised by any member of the Post-Closing
Representative, then Buyer and the Sellers shall select an accounting
firm mutually acceptable to the Buyer and Sellers to resolve any
remaining questions regarding the Preliminary Closing Date Balance
Sheet and Capital Expenditure Summary. If the Buyer and Sellers are
unable to agree on the choice of an accounting firm (which accounting
firm shall not be the Company accountant nor the Sellers' Accountant),
Buyer and the Sellers shall select one of the remaining "big-five"
accounting firms (or any of their respective successors) by lot. The
decision of the accounting firm shall be conclusive, final, binding,
and non-appealable by both Sellers and the Post-Closing Representative
and shall be appealable by the Buyer only pursuant to Section
1.02(d)(ii).
(ii) The Post-Closing Representative shall prepare the
Preliminary Closing Date Balance Sheet in accordance with Generally
Accepted Accounting Principles ("GAAP") applied in a manner consistent
with past practices and the preparation of the Latest Balance Sheet.
Buyer and its accountants shall be entitled to observe and consult with
the Company and the Post-Closing Representative during the taking of
any physical inventories in connection with the preparation of the
Preliminary Closing Date Balance Sheet and to make objections thereto
to the extent Buyer believes that any information set forth therein is
not in accordance with GAAP applied in a manner consistent with past
practices and the preparation of the Latest Balance Sheet. The
Company's accountants shall make its work papers available to Buyer and
its accountants. If Buyer has any such objections to the Preliminary
Closing Date Balance Sheet or the Capital Expenditure Summary, Buyer
must deliver to the Post-Closing Representative within thirty (30) days
after delivery of the Preliminary Closing Date Balance Sheet a detailed
statement describing such objections thereto (the "Buyer's Statement").
If the Buyer's Statement is not delivered to the Post-Closing
Representative within thirty (30) days, or if the Buyer's Statement
does not set forth objections in excess of $150,000 in the aggregate,
the Preliminary Closing Date Balance Sheet shall immediately become the
Closing Date Balance Sheet (as defined below) and the Capital
Expenditure Summary shall become the Final Capital Expenditure Summary
and shall be final, binding, and non-appealable by the parties. The
parties shall negotiate in good faith to resolve any objections set
forth in the Buyer's Statement and to prepare a Closing Date Balance
Sheet and a Final Capital Expenditure Summary reflecting the resolution
of all disputed items, but if they do not reach a final resolution
within thirty (30) days after the Post-Closing Representative has
received the Buyer's Statement, Buyer and the Post-Closing
Representative shall select an accounting firm mutually acceptable to
both parties to resolve any remaining objections.
(iii) If such parties are unable to agree on the choice of an
accounting firm, they shall select a "big-five" accounting firm (or any
of their respective successors) by lot (after excluding their
respective regular outside accounting firms). The selection of the
accounting firm shall be conclusive, final, binding, and non-appealable
by the parties. The accounting firm so selected pursuant to this clause
(iii) (the "Accounting Firm") shall prepare a written report to the
parties which shall address its resolution of the disputed items in
accordance with this Section 1.02 and shall make any required
adjustments to the Preliminary Closing Date Balance Sheet and the
Capital Expenditure Summary to reflect the resolution of all disputed
items. The parties shall share the fees and expenses of the Accounting
Firm as follows: the percentage of such fees and expenses to be paid by
Buyer shall equal the portion of the contested amount not awarded to
Buyer divided by the full amount contested by Buyer, and the Sellers,
based on their respective Pro Rata Shares, shall pay the remainder.
For example, if:
the full amount contested by Buyer equals $200,000;
the amount awarded to Buyer equals $80,000; and
the fees and expenses of the Accounting Firm are $10,000;
then
Buyer would pay $6,000 of the fees and expenses of
the Accounting Firm ($120,000 / $200,000 x $10,000),
and the Sellers would pay the remaining $4,000.
(iv) The Preliminary Closing Date Balance Sheet, as adjusted
to reflect any changes agreed upon, or made by the Accounting Firm,
pursuant to this Section 1.02(d), is referred to herein as the "Closing
Date Balance Sheet," and shall be conclusive, final, binding, and
non-appealable by the parties; and
(v) The Authorized Capital Expenditure Summary, as adjusted to
reflect any changes agreed upon, or made by the Accounting Firm,
pursuant to this Section 1.02(d), is referred to herein as the "Final
Capital Expenditure Summary," and shall be conclusive, final, binding,
and non-appealable by the parties.
(e) Maverick Cash Payment Adjustments. Within five (5) days
after the date on which the Closing Date Balance Sheet is finally determined,
the following adjustment shall be made to the Maverick Cash Payment:
(i) Authorized Capital Expenditure Payment. Buyer shall pay to
Sellers the full amount of all capital expenditures made by the
Acquired Companies between February 1, 2002 and the Closing Date, for
which (A) Sellers have received the prior written consent of Buyer or
(B) capital expenditures are listed on Exhibit D to this Agreement,
Authorized Capital Expenditure, to which exhibit Buyer hereby consents,
which are listed on the Final Capital Expenditure Summary. Capital
expenditures shall mean only transactions paid for in cash and not
financed through indebtedness or by capital lease.
(ii) Company Cash Distribution Adjustment. If the Closing Date
Balance Sheet reflects an amount of cash in excess of the Company Cash
Distribution, then Buyer shall pay to Sellers the difference between
the cash reflected on the Closing Date Balance Sheet and the Company
Cash Distribution. If the Closing Date Balance Sheet reflects an amount
of cash less than the Company Cash Distribution, then Sellers shall pay
to Buyer the difference between the cash reflected on the Closing Date
Balance Sheet and the Company Cash Distribution.
(iii) Net Working Capital Adjustment. The Post Closing
Representative shall deliver to Buyer and Sellers a schedule of the
change in Net Working Capital of the Company from the balance sheet of
October 31, 2001 (as set forth on Exhibit C-1) to the Closing, as shown
on the Closing Date Balance Sheet (the "Net Working Capital
Adjustment"), which estimate shall be supported in reasonable detail by
delivery of the items set forth on Exhibit C-2. If the Net Working
Capital Adjustment is positive, Buyer shall pay to Sellers the amount
of the Net Working Capital Adjustment. If the Net Working Capital
Adjustment is negative, Sellers shall pay to Buyer the amount of the
Net Working Capital Adjustment.
(f) If the aggregate Maverick Cash Payment adjustments set
forth in Section 1.02(e)(i)-(iii) identifies Buyer as owing any money to the
Sellers, Buyer shall pay all such amounts plus simple interest from the Closing
Date at a per annum rate of 5% in immediately available funds to the Sellers as
additional Sellers' Distribution, to the Designated Account, as appropriate,
within five (5) business days after the date on which the Closing Date Balance
Sheet is finally determined.
(g) If the aggregate Maverick Cash Payment adjustments in
Section 1.02(e)(i)-(iii) identifies Sellers as owing any money to Buyer, the
Sellers' Representative shall pay all such amounts plus simple interest from the
Closing Date at a per annum rate of 5% in immediately available funds to Buyer,
as an adjustment to Sellers' Distribution, within five (5) business days after
the date on which the Closing Date Balance Sheet is finally determined.
1.03 The Closing.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gallop, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M., St.
Louis time, as soon as practicable after the signing of the Agreement but in no
event sooner than the second business day following full satisfaction or waiver
of all of the closing conditions set forth in Article II hereof (other than
those to be satisfied at the Closing). The parties agree to use their best
efforts to close the transaction contemplated by this Agreement as soon as
practicable after the signing of this Agreement, but no later than March 31,
2002. The date and time of the Closing are herein referred to as the "Closing
Date."
(b) Subject to the terms and conditions set forth in this
Agreement, the parties hereto shall consummate the following "Closing
Transactions" on the Closing Date:
(i) Each Seller shall deliver or cause to be delivered to the
Buyer a certificate or certificates representing the Stock being sold
by such Seller hereunder, duly endorsed for transfer, or accompanied by
duly executed assignments separate from such certificate or
certificates, transferring to the Buyer good and marketable title to
such Stock, free and clear of all Liens;
(ii) Buyer shall deliver to the Company the amount of the
Capital Contribution by wire transfer in immediately payable funds to
the account(s) designated by the Company prior to Closing;
(iii) Buyer shall deliver to one account, to be designated by
the Sellers' Representative, the amount of the Sellers' Distribution by
wire transfer of immediately available funds, which funds will be
distributed to each Seller by the Sellers' Representative in accordance
with the allocation set forth on the Proceeds Schedule;
(iv) There shall be no escrows or holdbacks on the Closing
Date for any purpose, including for post-closing or any other audits;
and
(v) Buyer, the Company, and the Sellers' Representative (on
behalf of the Sellers) shall make such other deliveries as are required
by and in accordance with Article II hereof.
1.04 Registration Statement.
(a) No later than February 25, 2002, Buyer will prepare and
file with the SEC a registration statement covering the total number of shares
of Maverick Stock delivered pursuant to Section 1.02 of this Agreement for an
offering to be made on a continuous basis pursuant to Rule 415 (or similar rule
that may be adopted by the SEC) under the Securities Act in accordance with the
intended method of distribution of the Sellers (the "Registration Statement").
(b) Buyer will use its best efforts to (1) have such
Registration Statement declared effective by the SEC no later than the Closing
Date and (2) keep such Registration Statement continuously in effect until the
later to occur of (i) the second anniversary of the date the Registration
Statement is declared effective, extended as necessary in accordance with the
provisions below relating to the suspension of the Registration Statement, and
(ii) the date on which all of the shares of Maverick Stock registered under such
Registration Statement are eligible to be sold by the current holders thereof
pursuant to Rule 144 under the Securities Act; provided, however, that, in the
event that, at any time after such Registration Statement is declared effective,
Buyer determines that an event or circumstance occurs and is continuing that (Y)
has not been publicly disclosed and, if not disclosed in the Registration
Statement, any related prospectus or any document incorporated therein by
reference as then amended or supplemented would, in the Buyer's reasonable
judgment, result in the Registration Statement, any related prospectus or any
such document containing an untrue statement of a material fact or omitting to
state a material fact required to be stated therein, or necessary in order to
make the statements therein not misleading under the circumstances under which
they were made or (Z) in the reasonable judgment of the Board of Directors of
Buyer, Buyer has a bona fide business purpose for not then disclosing the
existence of such event or circumstance, Buyer may suspend the effectiveness of
the Registration Statement; provided, further, however, that the number of days
that Buyer is required to maintain the effectiveness of the Registration
Statement pursuant to Section 1.04(b)(2) above shall be extended by the number
of days that the effectiveness of the Registration Statement is suspended.
Notwithstanding the foregoing, Buyer may not suspend the use of any Registration
Statement for more than 45 consecutive days and in no event for more than an
aggregate of 45 days during any 12-month period, unless the Board of Directors
of Buyer in its reasonable discretion determines that a longer period of
suspension is required and for so long as such longer period is required, in
order to prevent the disclosure of material information which would have a
material adverse effect on Buyer.
(c) The Sellers shall, upon receiving written notice from the
Buyer of the suspension of any Registration Statement in accordance with 1.04(b)
above, not effect or shall suspend sales of the Maverick Stock being sold
pursuant to such Registration Statement for a period beginning on the date of
receipt of such notice and expiring on the date upon which such information is
disclosed to the public or ceases to be material, and in either case as
evidenced by a notice from Buyer to the Sellers to that effect.
(d) Buyer will use its best efforts to cause any Registration
Statement or amendment, including any prospectus and any supplements thereto,
and each report or other document incorporated by reference therein, when filed,
(i) to comply as to form with the requirements of the Securities Act or the
Exchange Act, as applicable, in all material respects, and (ii) to not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that Buyer makes no representation or warranty in respect of any information
that any of the Sellers supply to Buyer for the express purpose of inclusion in
any Registration Statement.
(e) As to any shares of Maverick Stock registered or to be
registered pursuant this Section 1.04, Buyer covenants and agrees that:
(i) Prior to their filing with the SEC, Buyer shall furnish to
the Sellers or their designated counsel, for purposes of their review
thereof, copies of the Registration Statement and all amendments,
including any prospectus and any supplements thereto, and Buyer shall
permit Sellers and their counsel reasonable opportunity to comment upon
any such Registration Statement or amendment, including any prospectus
or supplements thereto;
(ii) It shall immediately advise the Sellers in writing of the
occurrence and time of occurrence of each of the following events: (A)
the issuance by the SEC of an order declaring a Registration Statement
effective, including any post-effective amendment thereto; (B) any
request by the SEC for an amendment of a Registration Statement as
originally filed or as amended or as effective or for any amendment or
supplement to the final prospectus or preliminary prospectus contained
therein, or for any additional information with respect to a
Registration Statement or such prospectus or any preliminary
prospectus; (C) any event, of which Buyer had Knowledge, during the
period of the effectiveness of a Registration Statement which requires
that such final prospectus included in such Registration Statement be
amended or supplemented in order to make the statements therein not
misleading; (D) the refusal to qualify or the suspension of the
qualification of such shares of Maverick Stock for offering or sale in
any jurisdiction, or for the institution of any proceedings for such
purpose; (E) the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or any order suspending or
preventing the use of such final prospectus or any such preliminary
prospectus, or the initiation of any proceedings for such purpose; (F)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Maverick Stock for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose;
(iii) It shall timely file all reports required by the
Exchange Act and, subject to the proviso in Section 1.04(b) hereof,
promptly amend or supplement a Registration Statement at any time
during the required period of its effectiveness in order to make the
statements therein not misleading, or as otherwise may be required by
the Securities Act and the rules and regulations promulgated
thereunder;
(iv) It shall make every reasonable effort to prevent the
issuance of any stop order or any suspension of the qualification (or
exemption from qualification) of any of the Maverick Stock for sale in
any jurisdiction described in Section 1.04(e)(v) below, and, if issued,
to obtain the withdrawal thereof at the earliest practicable moment;
(v) In the event the Maverick Stock is not deemed a "covered
security" pursuant to Section 18 of the Securities Act, it will make
every reasonable effort to qualify the shares of Maverick Stock for
offering and sale under the securities or "blue sky" laws of any states
in which the Sellers require such qualification and will continue such
qualifications in effect for so long as the Registration Statement is
in effect for the distribution of the shares of Maverick Stock;
provided, however, that Buyer shall not be required in connection
therewith to qualify to do business as a foreign corporation in any
such state;
(vi) All expenses of any Registration Statement, and all
amendments and supplements thereto, provided for in this Section 1.04
(including, without limitation, Buyer's legal fees, accounting fees,
printing costs, "blue sky," SEC filing fees, underwriting discounts,
commissions, brokerage fees, and fees of legal counsel for the Sellers
arising from or related to the registration or sale of the Maverick
Stock), will be borne by Buyer; provided that each Seller shall bear
any discounts, commissions, fees, or other amounts payable to
underwriters or Brokers in connection with its sale of the Maverick
Stock;
(vii) Buyer will furnish such number of copies of the
prospectus, including any amendments or supplements thereto, as the
Sellers reasonably request in order to facilitate their disposition of
the registered Maverick Stock; and
(viii) Buyer will cause the Maverick Stock to be listed or
included on each securities exchange on which similar securities are
then listed or included.
1.05 Obligations of Buyer and the Sellers.
(a) Buyer will indemnify each Seller, each of its directors,
officers, employees, partners and agents, and each person controlling such
Seller within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act, with respect to any registration, qualification or compliance
effected pursuant to Section 1.04, against any Loss (as such term is defined in
Section 9.02(a)), including any Loss incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading under the circumstances under which they were made, or
any violation by Buyer of the Securities Act, the Exchange Act or state
securities laws applicable to Buyer in connection with any such registration,
qualification or compliance, and shall reimburse each Seller, each of its
directors, officers, employees, partners and agents, and each person controlling
such Seller within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act, for legal and any other expenses that Seller may incur
in connection with investigating, preparing or defending any Third Party Claim
related thereto; provided, however, that the indemnity agreement contained in
this Section 1.05(a) shall not apply to amounts paid in settlement of any Loss
if such settlement is effected without the consent of Buyer (which consent shall
not be unreasonably withheld) nor shall Buyer be liable in any such case for any
loss caused by any untrue statement or omission (or alleged untrue statement or
omission) made in reliance upon and in conformity with written information
furnished for or in connection with such registration by Seller or its
directors, officers, employees, partners, or agents.
(b) Each Seller will, severally and not jointly, indemnify and
reimburse Buyer, each of its directors, officers, employees, partners, and
agents and each person controlling Buyer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
indemnity from the Buyer to each Seller set forth in Section 1.05(a) as though
in such Section 1.05(a) "Buyer" means "Sellers" and "Sellers" means "Buyer," but
only with respect to any Loss arising out of written information relating to
such Seller furnished to the Buyer by such Seller or its directors, officers,
employees, partners or agents in writing by such Seller or its directors,
officers, employees, partners, or agents expressly for use in or connection with
any registration, qualification or compliance effected pursuant to Section 1.04,
or any preliminary prospectus. Notwithstanding anything to the contrary in this
Section 1.05(b), the indemnity agreement contained in this Section 1.05(b) shall
not apply to amounts paid in settlement of any Loss if such settlement is
effected without the consent of the applicable Seller (which consent shall not
be unreasonably withheld). In addition, in no event shall any indemnity provided
by any Seller under this Section 1.05(b) exceed the net proceeds from the
offering received by such Seller.
(c) If the indemnification provided for in this Section 1.05
is held by a court of competent jurisdiction to be unavailable to any of the
parties entitled thereto under this Agreement with respect to any Loss, then the
indemnifying party, in lieu of indemnifying the party otherwise entitled to such
indemnification, shall contribute to the amount paid of such Loss or payable by
such parties in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party on the one hand and the
party entitled to such indemnification on the other but also the relative fault
of the indemnifying party on the one hand and of the party otherwise entitled to
such indemnification on the other in connection with the statements or omissions
or actions that resulted in Loss as well as any other relevant equitable
considerations; provided, however, that in any such case, no person or entity
liable for a fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) will be entitled to contribution from any person or
entity that was not liable for such fraudulent misrepresentation. The relative
fault of the indemnifying party and of the party otherwise entitled to
indemnification 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 party otherwise entitled to such indemnification and the relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission of or by the indemnifying party or the party
otherwise entitled to such indemnification.
1.06 Registration on Transfer of Shares of Maverick Stock.
(a) All certificates for shares of Maverick Stock delivered
under the terms of this Agreement shall bear the following legend:
"THE SHARES OF COMMON STOCK OF MAVERICK TUBE CORPORATION REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET
FORTH IN THE STOCK PURCHASE AGREEMENT, DATED AS OF FEBRUARY 12, 2002,
BY AND AMONG MAVERICK TUBE CORPORATION, PRECISION TUBE HOLDING
CORPORATION ("PRECISION") AND THE STOCKHOLDERS OF PRECISION. IN
ADDITION, THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION, AN OPINION OF COUNSEL FOR OR SATISFACTORY TO (OR OTHER
EVIDENCE SATISFACTORY TO) MAVERICK TUBE CORPORATION THAT REGISTRATION
IS NOT REQUIRED (E.G., COMPLIANCE WITH THE REQUIREMENTS OF RULE 144
PROMULGATED UNDER SUCH ACT), OR A NO-ACTION LETTER FROM THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION."
The legend required under this Section 1.06(a) shall remain in place until the
occurrence of the declaration by the SEC of the effectiveness of the
Registration Statement.
(b) An appropriate stop-transfer order shall be noted on the
records of Buyer's transfer agent with respect to the shares of Maverick Stock
issued pursuant to this Agreement, which stop-transfer order shall remain in
effect with respect to any shares of Maverick Stock so long as such shares are
subject to the legending requirements set forth in this Section 1.06.
ARTICLE II
CONDITIONS TO CLOSING
2.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
reasonable satisfaction of the following conditions as of the Closing Date:
(a) Each of the representations and warranties set forth in
Articles III and IV hereof shall be true and correct at and as of the Closing
Date as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout such representations and warranties, except to
the extent the failure of such representations and warranties to be true and
correct at and as of the Closing Date would not reasonably be expected to have a
Material Adverse Effect; provided, however, that the representations contained
in Article III and in Sections 4.01, 4.02, 4.03 and 4.04 must be true and
correct in all respects without regard to whether or not a failure to be true
and correct could not reasonably be expected to have a Material Adverse Effect;
(b) The Company and the Sellers shall have performed in all
material respects all of the covenants and agreements required to be performed
by them under this Agreement (including Section 1.03(b) hereof) at or prior to
the Closing;
(c) The consents set forth on the Required Third Party
Consents Schedule attached hereto that are required as a result of the
transactions contemplated by this Agreement in order to prevent a breach of or a
default under or a termination of any agreement to which the Company or any of
its Subsidiaries is a party or to which any material portion of the Company's or
any of its Subsidiaries' property is subject shall have been obtained, unless
the failure to obtain such consent would not reasonably be expected to result in
a Material Adverse Effect;
(d) The applicable waiting periods, if any, under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") shall have
expired or been terminated, and the material governmental filings, consents,
authorizations, and approvals set forth on the Required Governmental Consents
Schedule attached hereto that are required for the consummation of the
transactions contemplated hereby shall have been made and obtained, unless the
failure to obtain such consent would not reasonably be expected to result in a
Material Adverse Effect;
(e) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States or by any United States federal or state governmental or regulatory body,
nor any statute, rule, regulation, or executive order promulgated or enacted by
any United States federal or state governmental authority which restrains,
enjoins, or otherwise prohibits the transactions contemplated hereby shall be in
effect;
(f) Buyer shall have received from Sellers the completed
Proceeds Schedule, in the form attached to this Agreement, together with a
certificate of Sellers' Representative that the amounts set forth as the
component parts of the Capital Contributions constitute all amounts necessary to
pay in full the obligations described in such component parts.
(g) It is a further condition to Buyer's condition to close
that: (i) each Seller executes and delivers a stock power confirming that the
number of shares being transferred thereby and the number of shares represented
by the applicable stock certificate is the number of shares represented on
Schedule A of the Agreement as being owned by such Seller; and (ii) Buyer
receives at Closing a true copy of the resolutions (minutes or written consent,
in either case signed by the Board of Directors of the Company) approving and
ratifying the 10-for-1 stock split reflected by the number of shares listed on
Schedule A.
(h) The Sellers' Representative shall have delivered to Buyer
each of the following:
(i) a certificate of the Company dated the Closing Date (the
"Company's Closing Certificate") in a form substantially similar to
Exhibit A-1 hereto, stating that the conditions specified in
subsections (a) and (b) hereof, inclusive, as they relate to the
Company have been satisfied;
(ii) a certificate of the Sellers' Representative (on behalf
of the Sellers) dated the Closing Date (the "Sellers' Certificate") in
a form substantially similar to Exhibit A-2 hereto, stating that the
conditions specified in subsections (a) and (b) as they relate to the
Sellers have been satisfied;
(iii) copies of the third party and governmental consents
required by subsections (c) and (d) above;
(iv) the certificates evidencing the Stock referred to in
Paragraph 1.03(b)(i);
(v) all minute books, ledgers, and registers, corporate seals,
and other corporate records relating to the organization, ownership,
and maintenance of the Company;
(vi) resignations effective as of the Closing Date from all of
the directors of the Company;
(vii) a copy of the Company's Certificate of Incorporation,
certified by the Secretary of State of the State of Delaware, and
Certificates of Good Standing from the Secretary of State of each
jurisdiction in which the Company is qualified to do business each
dated within five business days of the Closing Date;
(viii) releases in the form of Exhibit E hereto executed by
the Sellers (collectively, "Sellers' Releases");
(ix) a written opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special legal
counsel to the Company and the Sellers, addressed to the Buyer, in
substantially the form attached as Exhibit F-1 hereto; and
(x) a noncompetition agreement in the form of Exhibit G hereto
properly executed by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
2.02 Conditions to the Sellers' Obligations. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement are
subject to the reasonable satisfaction of the following conditions as of the
Closing Date:
(a) The representations and warranties set forth in Article V
hereof shall be true and correct at and as of the Closing Date as though then
made and as though the Closing Date was substituted for the date of this
Agreement throughout such representations and warranties, except to the extent
the failure of such representations and warranties to be true and correct at and
as of the Closing Date would not reasonably be expected to have a Material
Adverse Effect; provided, however, that the representations set forth in Section
5.01, 5.02 and 5.03 must be true and correct in all respects without regard to
whether or not a failure to be true and correct could not reasonably be expected
to have a Material Adverse Effect;
(b) Buyer shall have performed in all material respects all of
the covenants and agreements required to be performed by it under this Agreement
(including Sections 1.02 and 1.03(b) hereof) at or prior to the Closing;
(c) The consents set forth on the Required Third Party
Consents Schedule that are required as a result of the transactions contemplated
by this Agreement in order to prevent a breach of or a default under or a
termination of any agreement to which the Company or any of its Subsidiaries is
a party or to which any material portion of the Company's or any of its
Subsidiaries' property is subject shall have been obtained, unless the failure
to obtain such consent would not reasonably be expected to result in a Material
Adverse Effect;
(d) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated, and the other material governmental
filings, consents, authorizations and approvals set forth on the Required
Governmental Consents Schedule attached hereto that are required for the
consummation of the transactions contemplated hereby shall have been made and
obtained, unless the failure to obtain such consent would not reasonably be
expected to result in a Material Adverse Effect;
(e) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States or by any United States federal or state governmental or regulatory body,
nor any statute, rule, regulation, or executive order promulgated or enacted by
any United States federal or state governmental authority which restrains,
enjoins, or otherwise prohibits the transactions contemplated hereby shall be in
effect;
(f) Buyer shall have delivered to the Sellers' Representative
(on behalf of the Sellers) a certificate dated the Closing Date (the "Buyer's
Certificate") in a form substantially similar to Exhibit B hereto, signed by its
Chief Executive Officer or its Chief Financial Officer, stating that the
conditions specified in subsections (a) and (b) hereof, inclusive, have been
satisfied;
(g) Buyer shall have delivered to the Sellers' Representative
(on behalf of the Sellers) copies of the third party and governmental consents
required by subsections (c) and (d) above;
(h) Buyer shall have delivered to the Sellers' Representative
a copy of Buyer's Certificate of Incorporation, certified by the Secretary of
State of Delaware, and a Certificate of Good Standing relating to Buyer from the
Secretary of State of Delaware each dated within five business days of the
Closing Date;
(i) Buyer shall have delivered to the Sellers' Representative
certified copies of the resolutions duly adopted by Buyer's board of directors
authorizing the execution, delivery, and performance of this Agreement;
(j) Buyer shall have caused the conditions described in
Section 1.02(a) to be satisfied as of the Closing;
(k) The Company shall have delivered to Sellers the Company
Cash Distribution as provided in Section 1.02(b); and
(l) Buyer shall have delivered a written opinion of Gallop,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇., legal counsel to the Buyer, addressed to the Sellers, in
substantially the form attached as Exhibit F-2 hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each Seller, solely for itself (on a several, and not joint-
and-several, basis), represents and warrants to Buyer as follows:
3.01 Organization, Execution and Delivery: Valid and Binding
Agreements. Such Seller, if not an individual, is validly existing and in good
standing under the laws of its state of organization. Such Seller:
(a) has duly executed and delivered this Agreement; and
(b) Assuming that this Agreement is the legal, valid, and
binding agreement of Buyer, then this Agreement is also the legal, valid, and
binding obligation of such Seller, enforceable in accordance with its terms.
When such Seller executes and delivers the Sellers' Release, such Sellers'
Release will constitute the legal, valid, and binding obligation of such Seller,
enforceable in accordance with its terms.
3.02 Authority: No Breach. Such Seller has the right, power, and
authority and full legal capacity to execute and deliver this Agreement and to
perform its obligations hereunder and under the Sellers' Release (including,
without limitation, all right, power, capacity, and authority to sell, transfer,
and convey its Stock as provided by this Agreement, subject to applicable
federal and state securities law restrictions). Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, if such Seller is a corporation, directly or indirectly
contravenes, conflicts with or results in a violation of any provision of such
Sellers' charter or bylaws or, if such Seller is a partnership, directly or
indirectly contravenes, conflicts with or results in a violation of any
provision of such Sellers' partnership agreement.
3.03 Ownership of the Stock. Such Seller is the record and beneficial
owner and holder of the Stock set forth opposite its name on the attached
Sellers' Schedule. On the Closing Date, such Seller shall transfer to Buyer good
title to such Stock, free and clear of all Liens, options, proxies, voting
trusts, or agreements, other than applicable federal and state securities law
restrictions, and other than any such restrictions created or suffered to exist
by Buyer.
3.04 Brokerage. There are no claims for brokerage commissions, finders'
fees, or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf of
such Seller, for which Buyer could be liable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY AND THE SUBSIDIARIES
The Sellers (on a several, and not joint-and-several, basis) represent
and warrant to Buyer that (except as set forth on the disclosure schedules that
are delivered to Buyer, and each disclosure schedule so provided shall be
applicable only to the specific Section cited on that schedule):
4.01 Organization and Authorization. Each Acquired Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use. Each Acquired Company is duly
qualified to do business and is in good standing in every jurisdiction in which
the nature of its business or its ownership of property requires it to be
qualified. The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
Assuming that this Agreement is a valid and binding obligation of Buyer, this
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms.
4.02 Subsidiaries. None of the Acquired Companies owns or holds the
right to acquire any stock, partnership interest or joint venture interest or
other equity ownership interest in any other Person. The Subsidiaries Schedule
sets forth the name of each Subsidiary, the jurisdiction of its incorporation
and the Persons owning the outstanding capital stock of such Subsidiary.
4.03 No Breach. The execution, delivery, and performance of this
Agreement by the Company and the Sellers and the consummation of the
transactions contemplated hereby do not (i) to Sellers' Knowledge, conflict with
or result in any breach of, constitute a default under, result in a violation
of, or give any Person the right to cancel, terminate or modify, any Material
Contract, (ii) to Sellers' Knowledge, result in the creation of any Lien (other
than Permitted Liens including those listed on the Permitted Liens Schedule)
upon any assets of the Company or any of its Subsidiaries, (iii) require any
authorization, consent, approval, exemption, or other action by or notice to any
court or other governmental body, under the provisions of any law, statute,
rule, or regulation (except for those laws that would not reasonably be expected
to have a Material Adverse Effect), or to Sellers' Knowledge, any order,
judgment, or decree to which any Acquired Company is subject, or (iv)
contravene, conflict with or result in a violation of (A) any provision of the
articles or certificate of incorporation, the bylaws, limited liability company
agreement or other organizational document of any of the Acquired Companies, or
(B) any resolution adopted by the board of directors, the stockholders, managers
or members of any Acquired Company.
To Sellers' Knowledge, except as set forth on the Required Third Party
Consent Schedule, no Seller or Acquired Company is or will be required to give
any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the transactions contemplated under this Agreement.
4.04 Capitalization. The authorized capital stock of the Company
consists of 1,600,000 Class A shares of its common stock having a par value of
$0.01 per share and 400,000 Class B shares of its common stock having a par
value of $0.01 per share, of which only 1,000,000 of the Class A shares of the
Stock are, and as of the Closing will be, issued and outstanding. All of the
Stock has been duly authorized and validly issued and is fully paid,
nonassessable and outstanding. With the exception of the Stock (which is owned
by the Sellers), all of the outstanding equity securities and other securities
of each Acquired Company are owned of record and beneficially by one or more of
the Acquired Companies free and clear of Liens. Except for the Stock owned by
the Sellers to be purchased by Buyer pursuant to this Agreement, and except for
the Precision Tube Technology 1996 Equity Appreciation Units Plan as Amended and
Restated on December 5, 1997 ("Equity Appreciation Units Plan"), none of the
Acquired Companies has any outstanding membership interests, equity securities,
or securities containing any equity features authorized, issued, or outstanding,
and there are no agreements, options, warrants, or other rights or arrangements
existing or outstanding which provide for the sale or issuance of any of the
foregoing by any of the Acquired Companies. None of the outstanding equity
securities or other securities of any Acquired Company was issued in violation
of the Securities Act of 1933, as amended or other applicable securities law.
4.05 Financial Statements. Except where non-compliance with this
Section 4.05 would not reasonably be expected to have a Material Adverse Effect,
the Company has furnished Buyer with true and complete copies of (i) the audited
consolidated balance sheet of the Acquired Companies as at March 31, 2000 and
the related audited consolidated statement of operations, change in
stockholders' equity, and cash flow for the fiscal year then ended, together
with the report thereon of KPMG LLP, independent certified public accountants,
(ii) the audited consolidated balance sheet of the Acquired Companies as at
March 31, 2001 (including the notes thereto, the "Balance Sheet"), and the
related consolidated statement of operations, change in stockholders' equity,
and cash flow for the fiscal year then ended, together with the report thereon
of KPMG LLP, independent certified public accountants, and (iii) the unaudited
consolidated balance sheet of the Acquired Companies as at December 31, 2001
(the "Latest Balance Sheet") and the related unaudited consolidated statements
of income and cash flow for the nine months then ended, including any notes
thereto. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Acquired Companies as of the respective dates of and for the
periods referred to in such financial statements and have been prepared in
accordance with GAAP applied on a consistent basis during the periods covered
thereby and prior periods (subject, in the case of interim financial statements,
to normal adjustments the effect of which will not, in the aggregate, be
materially adverse) and the absence of notes that, if presented, would not in
the aggregate differ materially and adversely from those included in the Balance
Sheet (and would be generally consistent with the amounts set forth in the
Latest Balance Sheet). The financial statements referred to in this Section have
been derived from the accounting records of the Acquired Companies. No financial
statements of any Person other than the Acquired Companies are required by GAAP
to be included in the consolidated financial statements of the Company.
4.06 Conduct of Business. Except as expressly contemplated by this
Agreement, since the date of the Latest Balance Sheet, the Acquired Companies
have conducted business only in the ordinary course.
4.07 Absence of Certain Developments. Since the date of the Latest
Balance Sheet the Acquired Companies have not done, and have not entered into
any binding material agreement, to do any of, the following:
(a) borrow any amount other than current liabilities in the
ordinary course of business and borrowings from banks (or similar financial
institutions) necessary to meet ordinary course working capital requirements;
(b) mortgage, pledge, or subject to any material Lien, any
material portion of its tangible assets, except for Permitted Liens;
(c) sell, lease, assign, transfer, license or otherwise
dispose of any material portion of its tangible assets (except for sales of
inventory in the Ordinary Course of Business);
(d) suffer any extraordinary losses;
(e) issue, sell or transfer any Stock or any warrants,
options, or other rights to acquire Stock or other equity securities, or any
bonds or debt securities;
(f) accelerate, terminate, modify, or cancel any Material
Contract;
(g) grant any increase in the base compensation of, or made
any other change in the employment terms for, any of its directors, officers,
and employees;
(h) adopt, amend, modify, or terminate any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees; or
(i) engage in any of the activities set out in Section 6.01(c)
or (e) of this Agreement, or made any capital expenditures (except for those
items in Exhibit D or as otherwise agreed to by the parties to this Agreement).
4.08 Title to Properties.
(a) Owned Real Property Schedule. None of the Acquired
Companies owns any Real Property except as set forth on the Owned Real Property
Schedule:
(i) the Company has, and immediately prior to Closing will
have, good, valid and marketable title in fee simple to each such
parcel of Real Property specified in the Owned Real Property Schedule,
in each case free and clear of all Liens, other than Permitted Liens
and such Real Property is not subject to any rights of way, building
use restrictions, exceptions, variances, reservations, or limitations
of any nature;
(ii) there are no leases, subleases, licenses, concessions, or
other agreements granting to any party or parties the right of use or
occupancy of any portion of such parcel of Real Property;
(iii) there are no outstanding options or rights of first
refusal to purchase any such parcel of Real Property, any portion
thereof or interest therein; and
(iv) Annex A to the Owned Real Property Schedule contains a
true and complete list of each parcel of Real Property described in the
Owned Real Property Schedule and a general description of each
Structure situated thereon.
(b) The Real Property demised by the leases or subleases
described on the attached Leased Real Property Schedule constitutes all of the
material Real Property leased or subleased by the Acquired Companies.
(c) Except as set forth in the Leased Real Property Schedule:
(i) each lease or sublease described on the Leased Real
Property Schedule is to Sellers' Knowledge, in full force and effect;
(ii) the Acquired Company that is a party to such lease holds,
to Sellers' Knowledge, a valid and existing leasehold interest under
each of the leases described on the Leased Real Property Schedule;
(iii) the Acquired Company that is a party to such lease has
received no written notice of default and is not, to Sellers'
Knowledge, in default under such leases;
(iv) the Company has delivered or made available to Buyer
complete and accurate copies of each of the leases or subleases
described on the Leased Real Property Schedule; and
(v) none of the leases or subleases have been modified.
(d) The Structures, machinery, equipment, and other tangible
assets ("Personal Property") that the Acquired Companies own or lease as shown
on the Latest Balance Sheet are fit for present uses and are in reasonable
repair (except for normal wear and tear), and the Acquired Companies have valid
title or a valid leasehold interest to all such Personal Property. Personal
Property owned by the Acquired Companies and leased by the Acquired Companies
pursuant to valid leases comprises substantially all of the Personal Property
used by each of the Acquired Companies in the conduct of its business. All
Personal Property used by each of the Acquired Companies in the conduct of its
business is free and clear of all Liens, except for Permitted Liens.
(e) All of the Real Property described in the Owned Real
Property Schedule and Leased Real Property Schedule, whether owned or pursuant
to leases and licenses, comprise all of the Real Property used by each of the
Acquired Companies in the conduct of its business.
(f) Except as set forth in the schedules referred to in this
Section 4.08:
(i) None of the Acquired Companies are, to Sellers' Knowledge,
in violation of, or default under, any Law pertaining to any of the
Real Property; no notice of a violation of any Law, or of any covenant,
condition, restriction, or adhesement affecting any Real Property with
respect to the use or occupancy thereof, has been given by any Person;
(ii) No condemnation proceeding is pending or, to Sellers'
Knowledge, threatened which would impair the occupancy, use or value of
any Real Property;
(iii) No Structure, nor the operations of the Acquired
Companies therein or thereon, (A) is located outside the boundary lines
of the described parcel of land in which it is located, (B) is in
violation of applicable setback requirements, zoning laws, or
ordinances, (C) is subject to "permitted non-conforming use" or
"permitted non-conforming Structure" specifications, or (D) encroaches
on any property owned by, or easement granted in favor of, any Person.
(iv) There are no (A) leases, subleases, licenses, concessions
or other agreements, written or oral, granting to any other Person the
right to acquire, use or occupy any portion of any Real Property, (B)
outstanding options or right of first refusal to purchase all or any
portion of Real Property or interest therein, and (C) Persons (other
than the Acquired Companies) in possession of any Real Property;
(v) Each parcel of Owned Real Property (A) is fully and
adequately described in the legal description therefor contained in the
deed thereof, (B) abuts a paved public right-of-way, (C) does not serve
any adjoining property for any purpose inconsistent with the use of the
law, and (D) is not located within a flood plain or subject to any
similar type restriction for which any permits or licenses necessary to
the use thereof have not been obtained, except as set forth on the
Owned Real Property Schedule or the Leased Real Property Schedule; and
(vi) With respect to each item of Leased Real Property, (A)
there is adequate ingress and egress (and a continuing right thereto),
without the need for an easement, between paved public rights of way
and such Leased Real Property, and (B) the Acquired Companies have not
sold, transferred or subjected to a Lien (except for Permitted Liens)
such Leased Real Property or any interest therein.
(g) The buildings, plants, Structures and equipment of the
Acquired Companies are sufficient for the continued conduct of the Acquired
Companies' business immediately as of the Closing.
4.09 Tax Matters.
(a) Except as set forth on the attached Taxes Schedule: (i)
the Acquired Companies have timely filed all material Tax Returns in all
jurisdictions in which such Tax Returns are required to be filed and such Tax
Returns are true, correct and complete; (ii) all Taxes due and owing on such
filed Tax Returns described in (i) have been properly accrued or fully paid to
the extent such Taxes have become due; (iii) each of the Acquired Companies has
duly and timely withheld all material Taxes required to be withheld, and such
Taxes have been either duly and timely paid to the relevant governmental
authority or properly set aside in accounts for such purpose; (iv) no request
has been made for any extension of time within which to file any Tax Returns in
respect of the Acquired Companies which have not since been filed; (v) there are
no outstanding agreements or waivers by the Acquired Companies that extend the
statutory period of limitations applicable to any Tax Returns or Taxes; (vi) the
provision for Taxes shown on the Closing Date Balance Sheet is sufficient to
satisfy all accrued and unpaid Taxes as of the date thereof; (vii) none of the
Acquired Companies has received any notice of any pending or threatened tax
audits with respect to the Company or any of its Subsidiaries; (viii) none of
the Acquired Companies has received any notice of material deficiency or an
assessment of proposed material deficiency from any taxing authority; (ix) no
claim has ever been made by an authority in a jurisdiction where any of the
Acquired Companies do not file Tax Returns that any of the Acquired Companies is
or may be subject to taxation by that jurisdiction; and (x) there are no Liens
on any of the assets of any of the Acquired Companies that arose in connection
with any failure (or alleged failure) to pay any Tax due and payable.
(b) Except as set forth on the attached Taxes Schedule (i)
none of the Acquired Companies has filed a consent under Code Section 341(f)
concerning collapsible corporations; (ii) none of the Acquired Companies has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G; (iii) none of the
Acquired Companies has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii); (iv) none of the Acquired Companies
is a party to any Tax allocation or sharing agreement; (v) none of the Acquired
Companies has been a member of an affiliated group (as defined in Code Section
1504(a)) filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company) or has any liability for the Taxes of
any person or entity (other than of the Acquired Companies) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(c) Except as set forth on the attached Taxes Schedule, none
of the Acquired Companies will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any: (A) change in
method of accounting for a taxable period ending on or prior to the Closing Date
under Code Section 481(c) (or any corresponding or similar provision of state,
local or foreign income Tax law); (B) "closing agreement" as described in Code
Section 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; (C) deferred
intercompany gain or any excess loss account described in Treasury Regulations
under Code Section 1502 (or any corresponding or similar provision of state,
local or foreign income Tax law); (D) installment sale or open transaction
disposition made on or prior to the Closing Date; or (E) prepaid amount received
on or prior to the Closing Date.
4.10 Contracts and Commitments.
(a) None of the Acquired Companies is a party to any: (A)
bonus, pension, profit sharing, retirement, or other form of deferred
compensation plan, other than as described in this Section 4.10, Section 4.14,
or the schedules to this Agreement including the Bonus Schedule; (B) stock
purchase, stock option, or similar plan; (C) contract for the employment of any
officer, individual employee, or other person on a full-time or consulting
basis; (D) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging, or otherwise placing a Lien (other than a Permitted Lien)
on any portion of the Acquired Companies' assets; (E) guaranty of any obligation
for borrowed money or other guaranty; (F) contract or option pursuant to which
any of the Acquired Companies have the right or the obligation to purchase,
lease, or otherwise acquire any interest in any Real Property; (G) lease or
agreement under which it is lessee of, or holds or operates any personal
property owned by any other party, for which the annual rental exceeds $250,000;
(H) except for steel contracts, a contract or group of related contracts with
the same party for the purchase of products or services, under which the
undelivered balance of such products and services has a selling price in excess
of $250,000; (I) except for Coiled Line Pipe Contracts, and Downhole Purchase
Orders, a contract or group of related contracts with the same party for the
sale of products or services under which the undelivered balance of such
products or services has a sales price in excess of $250,000; or (J) contract
which prohibits the Company from freely engaging in business anywhere in the
world.
(b) Buyer either has been supplied with, or has been given
access to, a true and correct copy of all written contracts which are referred
to on the Contracts Schedule, together with all material amendments, waivers or
other changes thereto.
(c) None of the Acquired Companies has received notice of
default nor, to Sellers' Knowledge, is in default under any contract listed on
the Contracts Schedule, except for those trade payables incurred in the ordinary
course of business consistent with past practices.
4.11 Intellectual Property. Set forth on the attached Intellectual
Property Schedule are the patents, trademarks, copyrights, and service marks
(and any registrations or applications therefor) and trade names, corporate
names, grants of a license or right to the Acquired Companies with respect to
the foregoing, both domestic and foreign, claimed by or used by the Acquired
Companies in the conduct of their businesses as now conducted (collectively, the
"Intellectual Property"). Except as set forth on the Intellectual Property
Schedule, (a) the Acquired Companies own or have the right to use the
Intellectual Property, and (b) the Company has not received any written notices
of infringement or misappropriation from any third party with respect to the
Intellectual Property and, to Sellers' Knowledge, has not infringed nor is it
currently infringing the Intellectual Property of any other Person.
4.12 Litigation. Except as set forth on the attached Litigation
Schedule:
(a) there are no actions, suits, or proceedings pending or to
the Sellers' Knowledge, threatened against any of the Acquired Companies, at law
or in equity, or before or by any federal, state, municipal, or other
governmental department or court, commission, board, bureau, agency, or
instrumentality, domestic or foreign, which if determined adversely to any of
the Acquired Companies would have a Material Adverse Effect; and
(b) none of the Acquired Companies is subject to any
outstanding judgment, order, or decree, award, stipulation, or injunction of any
governmental body.
4.13 Brokerage. Except for the Company's brokerage arrangement with
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., there are no claims for brokerage commissions, finders'
fees, or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf of
the Company or the Sellers.
4.14 Employee Benefit Plans.
(a) The Company, with respect to the employees, does not (i)
maintain or contribute to any nonqualified deferred compensation or retirement
plans, (ii) maintain or contribute to any qualified defined contribution
retirement plans, (iii) maintain or contribute to any qualified defined benefit
pension plans (the plans described in (ii) and (iii) are collectively referred
to as the "Pension Plans"), (iv) maintain or contribute to any welfare benefit
plans (the "Welfare Plans"), or (v) contribute to any multiemployer plans (as
defined in ERISA). The Pension Plans and the Welfare Plans are collectively
referred to as the "Plans." A determination letter has been issued by the
Internal Revenue Service with respect to each of the Pension Plans that is
intended to be qualified relating to the plan's qualified status under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and to
Sellers' Knowledge, the Company is not aware of any facts or circumstances that
present a material risk of any such letter being revoked. The Plans comply in
form and in operation in all material respects with the requirements of the Code
and the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) With respect to the Plans, (i) all required contributions
have been made or properly accrued, to the extent required by GAAP, (ii) there
are no actions, suits, or claims pending, other than routine claims for
benefits, and (iii) there have been no "prohibited transactions" (as that term
is defined in Section 406 of ERISA or Section 4975 of the Code).
(c) The Acquired Companies have made available to Buyer true
and complete copies of (i) the most recent determination letter, if any,
received from the Internal Revenue Service for each Plan and (ii) the latest
financial statements, if any, for each Plan and latest prepared actuarial
reports, if any, for each Plan.
(d) For purposes of this Section, the term "Company" includes
all entities under common control of the Company pursuant to Section 414 of the
Code.
4.15 Employees. Except as set forth on the Employees Schedule attached
hereto:
(a) None of the Acquired Companies is a party to or bound by
any collective bargaining agreement, and, to Sellers' Knowledge, none of the
Acquired Companies have experienced any strikes, material grievances, or other
collective bargaining disputes within the last five years. There is no
organizational effort presently being made or overtly, to Sellers' Knowledge,
threatened by or on behalf of any labor union with respect to employees of any
of the Acquired Companies.
(b) To Sellers' Knowledge, each of the Acquired Companies has
complied with all Laws relating to employment and labor, and no facts or
circumstances exist that could provide a reasonable basis for a claim of
wrongful termination by any current or former employee of any of the Acquired
Companies against any of the Acquired Companies.
4.16 Insurance.
(a) The attached Insurance Schedule lists each material
insurance policy maintained by the Company;
(b) All of such insurance policies are in full force and
effect;
(c) The Company is not in default with respect to its
obligations under any of such insurance policies; and
(d) No insurance policy under which any of the Acquired
Companies is an insured contains a provision that would allow the insurer to
retroactively charge or collect additional premiums from any Acquired Company.
4.17 Compliance with Laws. Except that which would not reasonably be
expected to have a Material Adverse Effect, each of the Acquired Companies has
not: (i) violated or conducted its business or operations in violation of, nor
used or occupied its properties or assets in violation of, any Law, (ii) been
alleged to be in violation of any Law, or (iii) received any notice of any
alleged violation of, or any citation for noncompliance with, any Law.
4.18 Environmental Compliance and Conditions. Except that which would
not reasonably be expected to have a Material Adverse Effect:
(a) To Sellers' Knowledge, the Acquired Companies are, and at
all times since January 30, 1995 have been, in compliance with all Environmental
Laws.
(b) To Sellers' Knowledge, the Acquired Companies have
obtained and currently possess all material Environmental Permits.
(c) The Company has not received any written notice of, and to
Seller's Knowledge, there are not any actual or alleged violations or
liabilities arising under Environmental Laws, including any investigatory,
remedial, or corrective obligations, relating to the Company or its Subsidiaries
and arising under Environmental Laws during the 12 months preceding the Closing
Date.
(d) There are no pending or, to Sellers' Knowledge, threatened
actions, suits, proceedings, claims, against any of the Acquired Companies
concerning any environmental health and safety matters or arising under any
Environmental Laws and there are no Liens, or other restrictions of any nature,
arising under or pursuant to any Environmental Laws with respect to or affecting
any of the properties and assets (whether real, personal, or mixed) in which any
Acquired Company has or had an interest.
(e) To Sellers' Knowledge, none of the following exists at any
property or facility owned by any Acquired Company: (1) underground storage
tanks, (2) asbestos-containing material in any form or condition, (3) materials
or equipment containing polychlorinated biphenyls; or (4) landfills, surface
impoundments, or disposal areas.
(f) To the Sellers' Knowledge, no Acquired Company has either
expressly or by operation of law assumed or undertaken any liability, including
without limitation any obligation for corrective or remedial action, of any
other Person relating to Environmental Laws.
(g) Sellers have delivered or made available to Buyer copies
and results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or any Acquired Company concerning compliance by, or
liabilities of, any Acquired Company or any other Person for whose conduct they
are or may be held responsible, with or under Environmental Laws.
(h) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,
THIS SECTION 4.18 CONTAINS THE EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE
SELLERS WITH RESPECT TO ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS, INCLUDING
WITHOUT LIMITATION ALL MATTERS ARISING UNDER ENVIRONMENTAL LAWS.
4.19 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or its Subsidiaries, except for those limited
powers of attorney that the Acquired Companies have executed and delivered to
their accounting firms, tax preparation consultants, or other professionals for
the exclusive, limited purpose of discussing, negotiating, resolving, or
settling tax matters for the Acquired Companies with governmental taxing
agencies and authorities.
4.20 Governmental Authorizations. Each of the Acquired Companies
possesses, and to the Sellers' Knowledge, is operating in compliance with, all
governmental authorizations necessary to (i) occupy, maintain, operate and use
the Real Property as it is currently used and proposed to be used, and (ii)
conduct its business as currently conducted. The consummation of the
transactions contemplated by this Agreement will not result in the revocation,
suspension or limitation of any Governmental Authorization and, no Governmental
Authorizations will require the consent of its issuing authority to or as a
result of the consummation of the transactions contemplated hereby.
4.21 Disclosure. No representation or warranty of any Seller in this
Agreement and no information contained in any schedule or other writing
delivered by or on behalf of the Sellers pursuant to this Agreement or at the
Closing contains any untrue statement of a material fact or omits to state a
material fact required to make the statements herein or therein not misleading.
4.22 Accounts Receivable and Accounts Receivable Aging. All accounts
receivable of the Acquired Companies reflected on the Latest Balance Sheet and
all accounts receivable of the Acquired Companies that have arisen since the
date of the Latest Balance Sheet (except such accounts receivable as have been
collected since such dates) are collectible, subject to the reserve set forth in
the Latest Balance Sheet, as adjusted for operations and transactions through
the Closing Date in accordance with the past custom and practice of the Acquired
Companies. Such accounts are set forth on the Accounts Receivable/Accounts
Receivable Aging Schedule attached hereto which schedules are true and complete
in all material respects.
4.23 Inventory. The inventory of the Acquired Companies consists of raw
materials and supplies, manufactured and processed parts, work in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured and manufactured, except for slow-moving, obsolete, damaged, or
defective inventory for which the reserves for inventory writedown are set forth
in the Latest Balance Sheet, as adjusted for operations and transactions through
the Closing Date in accordance with the past custom and practice of the Company
and in accordance with generally accepted accounting principles on a basis
consistent with that of preceding periods.
4.24 Books and Records. The books of account, minute books and stock
record books of the Acquired Companies, all of which have been made available to
Buyer, are complete and correct. The minute books of the Acquired Companies
present and record actions of the board that require a formal vote and the names
of those persons who were present at the board meetings.
4.25 No Material Adverse Change. Since the date of the Latest Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, assets or condition of any Acquired Company.
4.26 No Other Representations and Warranties. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III AND IN THIS ARTICLE IV,
NEITHER THE COMPANY NOR THE SELLERS MAKE ANY EXPRESS OR IMPLIED REPRESENTATION
OR WARRANTY, AND THE COMPANY AND THE SELLERS HEREBY DISCLAIM ANY SUCH
REPRESENTATION OR WARRANTY.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each of the Sellers and the Company
that:
5.01 Organization and Corporate Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with all corporate power and authority to enter into this Agreement
and perform its obligations hereunder.
5.02 Authorization. The execution, delivery, and performance of this
Agreement by Buyer and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action by
Buyer, and no other corporate proceedings on its part are necessary to authorize
the execution, delivery, or performance of this Agreement and the consummation
of the transactions contemplated hereby. Assuming that this Agreement is a valid
and binding obligation of the Sellers and the Company, this Agreement
constitutes a valid and binding obligation of Buyer, enforceable in accordance
with its terms.
5.03 No Violation. Except as set forth on the Buyer Consents Schedule,
Buyer is not subject to or obligated under any applicable law, or rule or
regulation of any governmental authority, or any provision of its charter or
bylaws, or any material agreement or instrument, or any license, franchise, or
permit, or subject to any order, writ, injunction, or decree, which would be
breached or violated in any material respect by Buyer's execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
5.04 Governmental Authorities, Consents. Except for the applicable
requirements of the HSR Act and except as set forth on the Buyer Consents
Schedule, Buyer is not required to submit any notice, report, or other filing
with any governmental authority in connection with the execution, delivery, or
performance by it of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth on the Buyer Consents Schedule, no
consent, approval, or authorization of any other party or Person is required to
be obtained by Buyer in connection with its execution, delivery, and performance
of this Agreement or the consummation of the transactions contemplated hereby.
5.05 Litigation. There are no actions, suits, or proceedings pending
or, to the Buyer's knowledge, overtly threatened against or affecting Buyer at
law or in equity, or before or by any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality,
domestic or foreign, which would adversely affect Buyer's performance under this
Agreement or the consummation of the transactions contemplated hereby.
5.06 Brokerage. There are no claims for brokerage commissions, finders'
fees, or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf of
Buyer that will become an obligation of the Company or the Sellers.
5.07 Investment Representation. Buyer is purchasing the Stock for its
own account with the present intention of holding the Stock for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in violation of any federal or state securities
laws. Buyer acknowledges that it has received all the information it deems
necessary and appropriate regarding the Company and the Stock and has the
opportunity to make inquiries of both the Company and Sellers, and has had the
opportunity to request additional information regarding the Company. Buyer
hereby certifies, represents, and warrants that the Buyer is an "Accredited
Investor" as such term is defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act"). Buyer understands that the Stock has
not been registered under the Securities Act and that any transfer or other
disposition of the Stock may not be made without registration under the
Securities Act or pursuant to an applicable exemption therefrom. Buyer has
substantial experience in evaluating and investing in companies similar to the
Company. Buyer is capable of evaluating the merits and risks of its investment
in the Company. Buyer is able financially to bear the risks of its investment in
the Company.
5.08 Employee Matters. The Buyer represents that it does not presently
contemplate a plant closing involving, or mass layoffs of, employees of the
Company and its Subsidiaries or any terminations that in the aggregate would
constitute a mass layoff of employees of the Company or its Subsidiaries, within
one year following the Closing Date. The Buyer shall indemnify and hold the
Sellers harmless from and against any liability, costs, and expenses which the
Sellers incur under the Worker Adjustment and Retraining Notification Act of
1988, as amended, ("WARN") or any similar state law arising out of or relating
to, any actions taken by the Buyer or the Company with respect to the employees
of the Company or its Subsidiaries on or after the Closing Date.
ARTICLE VI
PRE-CLOSING COVENANTS
During the period commencing on the date hereof and continuing through
the Closing Date, the Sellers covenant and agree (except as expressly
contemplated by this Agreement or the schedules thereto, or except to the extent
that Buyer shall otherwise expressly consent in writing) that:
6.01 Conduct of the Business.
(a) Each of the Acquired Companies shall conduct its business
in the Ordinary Course of Business and substantially in the same manner as
heretofore conducted, and shall make its best efforts to preserve intact its
current business organization and relationships with customers, suppliers and
others having business dealings with it.
(b) None of the Acquired Companies shall issue, sell or
deliver any Stock or other class of equity securities or issue or sell any
securities convertible into, or options with respect to, or warrants to purchase
or rights to subscribe for, any Stock or other class of equity securities.
(c) None of the Acquired Companies shall (i) amend its charter
or bylaws (or equivalent documents), (ii) enter into any partnership or joint
venture, (iii) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly or
indirectly, any shares of its capital stock, or (iv) liquidate or dissolve or
obligate itself to do so.
(d) None of the Acquired Companies shall incur any
Indebtedness, sell any debt securities or lend money to or guarantee the
Indebtedness of any person or enter into any capital lease, and shall not
restructure or refinance its existing Indebtedness or capital lease, except the
Company may (i) in the ordinary course of business draw on, renew, extend, or
replace its existing revolving line of credit and (ii) originate a capital lease
to finance the acquisition of the gantry crane listed in Exhibit D.
(e) None of the Acquired Companies shall make any change in
its accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates heretofore adopted by it, and
shall maintain its books, records and accounts in accordance with generally
accepted accounting principles applied on a basis consistent with that of prior
periods.
(f) None of the Acquired Companies shall sell, transfer,
license, lease or otherwise dispose of, or suffer or cause the encumbrance by,
any Lien upon any of its properties or assets, tangible or intangible, or any
interest therein, except for sales of inventory or assets in the Ordinary Course
of Business.
(g) None of the Acquired Companies shall (i) adopt or amend in
any material respect any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other plan, agreement, trust, fund or arrangement for the benefit
of employees (whether or not legally binding) other than to comply with any Law,
or (ii) pay, or make any accrual arrangement for payment of, any increase in
compensation, or any severance or termination pay to, or enter into any
employment or loan or loan guaranty agreement with, any current or former
officer, director, employee, consultant or any of the Acquired Companies.
(h) The Acquired Companies shall be permitted to make capital
expenditures as follows:
(i) as provided for in Section 1.02(e)(i) and Exhibit D (for
which Sellers shall be reimbursed);
(ii) any capital expenditures approved in writing by Buyer in
advance, in which case such capital expenditure shall be deemed
authorized by Buyer and Sellers will be reimbursed by Buyer; and
(iii) any other capital expenditures as determined by Sellers,
after giving notice to Buyer (but such expenditures will not be
reimbursed by Buyer).
6.02 Access to Books and Records. The Company shall provide Buyer and
its authorized representatives ("Buyer's Representatives") with full access, at
all reasonable times and upon reasonable notice, to the offices, properties,
personnel, books, and records of the Acquired Companies in order for Buyer to
have the opportunity to make such investigation as it shall reasonably desire to
make of the affairs of the Acquired Companies. Buyer acknowledges that it
remains bound by the Confidentiality Agreement, dated April 9, 2001 with the
Company (the "Confidentiality Agreement").
6.03 Notification.
(a) Updated Schedules.
(i) From the date of this Agreement until the Closing, the
Sellers may, in their sole discretion, disclose variances or changes to
the representations and warranties of Sellers contained in Article III
or Article IV of this Agreement by delivering to Buyer one or more
Updated Schedules setting forth in detail such variances or changes and
may, simultaneously, provide Buyer with Sellers' reasonable written
estimates of the value of such variances and changes and the basis for
such estimates.
(ii) Notwithstanding anything to the contrary herein, Buyer
shall not be obligated to accept any Updated Schedule which discloses
any variances or changes to the representations and warranties of
Sellers contained in Sections 3.01, 3.02, 3.03 or 4.04 and the
disclosure schedules relating thereto (the "Excluded Representations").
If Sellers present any Updated Schedule with variances or changes to
the Excluded Representations, Buyer shall have the right at any time
prior to Closing to terminate this Agreement as set forth in Section
6.03(c). Buyer will not be deemed to have accepted any variance or
change to the Excluded Representations unless (A) Buyer gives Sellers
written notice of such acceptance, or (B) the Closing occurs (in which
case the variance or change to the Excluded Representations shall be
deemed automatically accepted). Any Updated Schedule (or portion of
Updated Schedule) accepted by Buyer pursuant to this Section
6.03(a)(ii) shall be treated for all purposes of this Agreement as if
it was delivered on the date of this Agreement and any determination
pursuant to this Agreement as to whether there has occurred any breach
of the representation or warranty to which such Updated Schedule
relates shall be determined only after taking into account the Updated
Schedule (or portion of the Updated Schedule) accepted hereof and the
Updated Schedule (or portion of the Updated Schedule) accepted hereof
shall cure any breach which would have occurred except for the delivery
of the Updated Schedule (or portion of Updated Schedule) accepted
hereof (a "Cured Breach") and Buyer agrees that it will make no claim
against Sellers (under this Agreement or otherwise) for any loss,
liability, damage or expense arising out of such Cured Breach.
(b) Acceptance of Updated Schedules. Except for variances or
changes to the Excluded Representations which will be accepted only as set forth
in Section 6.03(a)(ii) of this Agreement, Updated Schedules shall be deemed
accepted by Buyer as follows:
(i) In the event that any Updated Schedule delivered pursuant
to Section 6.03(a)(i) discloses any matter that occurred or clearly
existed on or prior to the date of this Agreement, then the Updated
Schedule (or the portion of the Updated Schedule that disloses such
matter) shall be deemed accepted by Buyer as set forth in this Section
6.03(b)(i):
(A) if any change or variance disclosed on an Updated Schedule
is "non-material" (as defined below) then such change or variance shall
be deemed automatically accepted by Buyer (subject to Buyer's right to
aggregate all Non-Material Breaches under Section 6.03(b)(i)(B)(2)),
shall be treated for all purposes of this Agreement as if it was
delivered on the date of this Agreement and any determination pursuant
to this Agreement as to whether there has occurred any breach of the
representation or warranty to which such Updated Schedule relates shall
be determined only after taking into account the Updated Schedule (or
portion of the Updated Schedule) accepted hereof and the Updated
Schedule (or portion of the Updated Schedule) accepted hereof shall
cure any breach which would have occurred except for the delivery of
the Updated Schedule (or portion of Updated Schedule) accepted hereof.
A matter disclosed on an Updated Schedule will be deemed to be
"non-material" if such matters are either (1) not adverse to the
Acquired Companies or (2) are adverse to the Acquired Companies and
involve liability of the Acquired Companies which, in the reasonable
and good faith judgment of Buyer, has a value of less than $100,000
(each a "Non-Material Breach");
(B) if any change or variance disclosed on an Updated Schedule
is "material" (as defined below) then, subject to Sellers' rights under
Section 6.03(d), Buyer may, within seventy two (72) hours of receipt of
such Updated Schedule, terminate this Agreement as set forth in Section
6.03(c) and if Buyer has not terminated this Agreement within such time
then Buyer will be deemed to have waived its right of termination
hereunder with respect to such change or variance set forth on such
Updated Schedule and to have accepted such Updated Schedule (or portion
of Updated Schedule) and such Updated Schedule (or portion of Updated
Schedule) accepted hereof shall be treated for all purposes of this
Agreement as if it was delivered on the date of this Agreement and any
determination pursuant to this Agreement as to whether there has
occurred any breach of the representation or warranty to which such
Updated Schedule (or portion of Updated Schedule) accepted hereof
relates shall be determined only after taking into account the Updated
Schedule (or portion of the Updated Schedule) accepted hereof and the
Updated Schedule (or portion of the Updated Schedules) accepted hereof
shall cure any breach which would have occurred except for the delivery
of the Updated Schedule (or portion of Updated Schedule) accepted
pursuant hereto. A matter disclosed on an Updated Schedule will be
deemed "material" if (1) the matter involves liability of the Acquired
Companies which, in the reasonable and good faith judgment of Buyer,
has a value of $100,000 or more, or (2) if, taking into account all
other Non-Material Breaches and all other Updated Schedules (or
portions of Updated Schedules) previously accepted under this
6.03(b)(i)(A) and (B), the matters disclosed on all Updated Schedules
involve aggregate liability of the Acquired Companies which, in the
reasonable and good faith judgment of Buyer, has a value of $250,000 or
more.
(ii) In the event that any Updated Schedule delivered pursuant
to Section 6.03(a)(i) discloses any matter or matters occurring after
the date of this Agreement, then, except as specifically set forth in
this Section, the Updated Schedule (or the portion of the Updated
Schedule that disloses such matter) shall not be deemed accepted by
Buyer unless and until Buyer gives written notice to Seller that it is
accepting such Updated Schedules. If Buyer in its reasonable and good
faith judgment determines that the matter or matters (considered singly
or in the aggregate) disclosed on the Updated Schedules (or portions of
Updated Schedules) result in, or are reasonably likely to result in, a
Material Adverse Effect, then Buyer may, within 72 hours after it makes
such determination, terminate this Agreement as set forth in Section
6.03(c). Notwithstanding the foregoing, if Buyer does not terminate
this Agreement at or prior to Closing pursuant to this Section
6.03(b)(ii), then such Updated Schedules (or portions of Updated
Schedules) accepted hereof shall be deemed automatically accepted by
Buyer upon the occurrence of the Closing, shall be treated for all
purposes of this Agreement as if delivered on the date of this
Agreement and any determination pursuant to this Agreement as to
whether there has occurred any breach of the representation or warranty
to which such Updated Schedule relates shall be determined only after
taking into account the Updated Schedule (or portion of the Updated
Schedule) accepted hereof and the Updated Schedule (or portion of
Updated Schedule) accepted hereof shall cure any breach which would
have occurred except for the delivery of the Updated Schedule (or
portion of Updated Schedule) accepted pursuant hereto.
(c) Right to Terminate. Buyer may exercise its right to
terminate this Agreement pursuant to Section 6.03(a)(ii), Section 6.03(b)(i)(B)
or Section 6.03(b)(ii) by delivering, subject to the time limitations therein,
written notice of termination to the Sellers Representative. If Buyer chooses to
terminate this Agreement pursuant to this Section 6.03, it shall, after
termination, have only the rights set forth in Section 7.02.
(d) Sellers' Right to Override Termination. Notwithstanding
the provisions of Section 6.03(c), if Buyer exercises its right to terminate
this Agreement pursuant to Section 6.03(b)(i)(B), the notice required under
Section 6.03(c) shall also specify Buyer's reasonable and good faith
determination, and, in sufficient detail, the basis for such determination, of
the value of the item set forth on such Updated Schedule (or portion of Updated
Schedule) which has caused it to terminate this Agreement (the "Value"). Buyer
shall consult with Sellers in a reasonable, good faith effort to determine the
Value, and to resolve any differences between Buyer and Seller relating to the
Value. Notwithstanding anything to the contrary herein, any termination under
Section 6.03(b)(i)(B) shall not be effective if the Sellers, within 72 hours of
the delivery of notice of termination, deliver to Buyer, in writing, either (1)
their written agreement to either (x) deliver the Value to Buyer at Closing by
wire transfer of immediately available funds to an account specified by Buyer,
or (y) adjust the Maverick Cash Payment portion of the Aggregate Buyer Payment
downward at Closing by subtracting the Value from the Maverick Cash Payment, or
(2) their written agreement that Buyer shall be entitled to assert a right of
indemnification for such matter pursuant to Article IX of this Agreement without
giving effect to any "knowledge" of Buyer with respect to such matter and that
Sellers have the right to contest only the amount of the Actual Loss relating to
such matter.
6.04 HSR Act Compliance. Buyer and the Sellers shall each file or cause
to be filed with the Federal Trade Commission and the United States Department
of Justice any notifications required to be filed under the HSR Act with respect
to the transactions contemplated hereby (including a request for early
termination) and Buyer and the Sellers shall bear their respective costs and
expenses of preparing their respective filings; provided that Buyer shall pay
the filing fee in connection therewith. Buyer and the Sellers shall use their
respective best efforts to make such filings contemporaneously with the signing
of this Agreement (and in any event within five business days) following the
date thereof, to respond to any requests for additional information made by
either of such agencies and to cause the waiting periods under the HSR Act to
terminate or expire at the earliest possible date and to resist in good faith,
at each of their respective cost and expense (including the institution or
defense of legal proceedings), any assertion that the transactions contemplated
hereby constitute a violation of the antitrust laws, all to the end of
expediting consummation of the transactions contemplated hereby. Each of Buyer
and the Sellers' Representative shall consult with the other prior to any
meetings, by telephone or in person, with the staff of the Federal Trade
Commission or the United States Department of Justice, and each of Buyer and
Sellers' Representative shall have the right to have a representative present at
any such meeting.
6.05 Other Regulatory Filings. In addition to such filings and
submissions required under Section 6.04 hereof, each of the Sellers, the
Company, and Buyer shall use their reasonable best efforts to make or cause to
be made all filings and submissions under any Laws applicable to them for the
consummation of the transactions contemplated herein. The Sellers'
Representative and Buyer shall coordinate and cooperate in exchanging such
information and assistance as such party may reasonably request in connection
with all of the foregoing.
6.06 Conditions. Each of the Sellers, the Company, and Buyer shall use
reasonable best efforts to cause the conditions applicable to such party set
forth in Article II to be satisfied and to consummate the transactions
contemplated herein as soon as reasonably possible after the satisfaction of the
conditions set forth in Article II (other than those to be satisfied at the
Closing); provided that, except as otherwise set forth in Section 6.04, the
Sellers shall not be required to expend any material funds to obtain any
third-party or governmental consents required under Section 2.01(c) or (d).
6.07 Exclusive Dealing. During the period from the date of this
Agreement through the earlier of: (a) Closing, or (b) the earlier termination of
this Agreement pursuant to Section 7.01, no Seller shall take or permit any
other Person on its behalf to take, and the Company shall not take any action to
encourage, initiate, or engage in discussions or negotiations with, or provide
any information to, any Person (other than Buyer and Buyer's Representatives)
concerning any purchase of the Stock or any merger, sale of substantial assets,
or similar transaction involving the Company (other than assets sold in the
ordinary course of business).
6.08 Contact with Customers and Suppliers. Prior to the Closing, Buyer
and the Buyer's Representatives shall not contact or in any manner communicate
with the customers, lessors, and suppliers of the Acquired Companies in
connection with the transactions contemplated hereby, except with the prior
consent of the Company and the Sellers' Representative, or upon the request of
the Company and the Sellers' Representative.
ARTICLE VII
TERMINATION
7.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of Buyer and the Sellers'
Representative.
(b) by Buyer (taking into account the Updated Schedules
accepted by Buyer pursuant to Section 6.03 of this Agreement) if there has been
a material violation or breach by the Company or the Sellers of any covenant,
representation, or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of Buyer at the Closing and
such violation or breach has not been waived by Buyer or, in the case of a
covenant breach, cured by the Company or the Sellers within ten days after their
receipt of written notice thereof from Buyer.
(c) by Buyer as provided in Section 6.03 of this Agreement.
(d) by Buyer on or before 5:00 P.M. CST, on February 21, 2002,
if, after using its best efforts, Buyer has been unable to obtain a commitment
(the "Commitment Letter") for the financing necessary to complete the
transaction contemplated by this Agreement. After the expiration of this
termination option, Buyer may terminate this Agreement under this Section
7.01(d) if and only if Buyer's Lender notifies Buyer in writing that Buyer's
Lender is terminating or otherwise refusing to fund under the Commitment Letter.
(e) by the Buyer on or before 5:00 CST, on February 19, 2002,
if, after using its best efforts, Buyer has been unable to obtain an agreement
in principle with the persons listed on Exhibit H to an employment arrangement
with the Buyer; provided, however, this termination provision shall be of no
force and effect if Buyer is unable to reach an agreement in principle with the
employees referenced in Exhibit H because Buyer offered such employees
employment terms that are less favorable than the terms set forth in Exhibit H,
and the referenced employees did not accept employment or retention on such less
favorable terms.
(f) by the Sellers' Representative, if there has been a
material violation or breach by Buyer of any covenant, representation, or
warranty contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of the Sellers at the Closing and such violation or
breach has not been waived by the Sellers' Representative or, with respect to a
covenant breach, cured by Buyer within ten days after written notice thereof by
the Sellers' Representative or any Seller; provided that the failure to deliver
the Aggregate Buyer Payment at the Closing as required hereunder shall not be
subject to cure hereunder unless otherwise agreed to in writing by the Sellers'
Representative.
(g) by Sellers' Representative if:
(i) Buyer has not delivered to Sellers' Representative the
Commitment Letter on or before 8:00 P.M. CST, on February 21, 2002; or
(ii) within 24 hours of its receipt of such Commitment Letter
(a copy of which shall be delivered to the Sellers' Representative by
Buyer promptly upon its receipt) Sellers' Representative determines and
notifies Buyer that the terms of the Commitment Letter are not
reasonably satisfactory to Sellers.
(h) by either Buyer or the Sellers' Representative if the
transactions contemplated hereby have not been consummated by March 31, 2002;
provided that neither Buyer nor the Sellers' Representative shall be entitled to
terminate this Agreement pursuant to this Section 7.01(h) if such Person's (or
the Company's or any Sellers', in the case of the Sellers' Representative)
willful breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
7.02 Effect of Termination. In the event of termination of this
Agreement by either Buyer or the Sellers' Representative as provided above, the
provisions of this Agreement shall immediately become void and of no further
force and effect (other than this Section 7.02 and Article XI hereof which shall
survive the termination of this Agreement), and there shall be no liability on
the part of either Buyer, the Company, or the Sellers to one another, except for
willful breaches of this Agreement prior to the time of such termination.
ARTICLE VIII
SELLERS' REPRESENTATIVE
8.01 Designation. The Sellers' Representative is hereby designated by
each of the Sellers to be Continental Illinois Venture Corporation which will
serve as the representative of the Sellers with respect to the matters expressly
set forth in this Agreement to be performed by the Sellers' Representative.
8.02 Authority. Each of the Sellers, by the execution of this
Agreement, hereby irrevocably appoints the Sellers' Representative as the agent,
proxy, and attorney-in-fact for such Seller for all purposes of this Agreement
(including the full power and authority on such Sellers' behalf (i) to
consummate the transactions contemplated herein; (ii) to pay such Sellers'
expenses incurred on behalf of such Seller in connection with the negotiation
and performance of this Agreement (whether incurred on or after the date
hereof); (iii) to execute and deliver any certificates representing the Stock
and execution of such further instruments of assignment as Buyer shall
reasonably request; and (iv) to do each and every act and exercise any and all
rights which the Sellers' Representative is required to do or exercise under
this Agreement). Each of the Sellers agrees that such agency and proxy are
coupled with an interest, are therefore irrevocable without the consent of the
Sellers' Representative and shall survive the death, incapacity, bankruptcy,
dissolution, or liquidation of any Seller.
8.03 Exculpation. Neither the Sellers' Representative nor any agent
employed by it shall incur any liability to any Seller by virtue of the failure
or refusal of the Sellers' Representative for any reason to consummate the
transactions contemplated hereby or relating to the performance of its other
duties hereunder, except for actions or omissions constituting fraud or bad
faith.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.01 Survival. The representations and warranties of the Sellers
contained in Article III, except for Section 3.04 and the covenants of the
Sellers set forth herein shall survive indefinitely; the representations and
warranties of the Sellers contained in Section 4.09 (Tax Matters) shall survive
until the expiration of the applicable tax law statutes of limitations; the
representations and warranties of the Sellers contained in Section 4.18
(Environmental Compliance and Conditions) shall survive until 24 months after
the Closing; and all other representations and warranties in this Agreement
shall survive until 12 months after the Closing (the "Survival Period").
9.02 Indemnification.
(a) Subject to the provisions of Section 9.02(c) below, each
of Continental Illinois Venture Corporation; CIVC Partners I, L.L.C.; Tangram
Management, L.P.; and Norwest Equity Partners V ("Certain Sellers") shall solely
for itself (severally and not jointly and severally) indemnify Buyer and hold
Buyer harmless against any Actual Loss, liability, damage, or expense (including
reasonable attorneys' fees, accountants' and expert fees, and other reasonable
costs and expenses incurred pursuing indemnification claims under this Section
9.02, but excluding special, incidental, consequential, or punitive damages,
collectively, "Losses" and individually, a "Loss") which Buyer actually suffers,
sustains, or becomes subject to as a result of or arising out of (i) any breach
of any representation or warranty made by any Seller in this Agreement or in any
writing delivered pursuant to the Agreement and the Closing, or (ii) the failure
of the company or any Seller to perform or observe fully any covenant, agreement
or provision to be performed or observed by the Company or such Seller
hereunder; provided that (i) the Certain Sellers will not be liable to Buyer for
any Loss arising under this Section 9.02(a) unless the aggregate amount of all
such Losses relating to all such breaches exceeds one percent (1%) of the
Aggregate Buyer Payment minus $100,000 (the "Buyer's Deductible"), in which case
each Certain Seller shall be liable for its respective share of all such Losses
in excess of the Buyer's Deductible as follows: Continental Illinois Venture
Corporation 62.106 percent; CIVC Partners I, L.L.C. 8.000 percent; Tangram
Management, L.P. 17.523 percent; and Norwest Equity Partners V 12.371 percent
(the "Certain Seller Share"); (ii) the aggregate amount required to be paid by
each Certain Seller with respect to claims referred to in this Section 9.02(a)
shall not exceed its respective Certain Seller Share of ten percent (10%) of the
Aggregate Buyer Payment (the "Cap"); and (iii) the Certain Sellers will not be
liable to Buyer for any Loss resulting from any breach of which Buyer or Buyer's
Representatives had actual knowledge on or prior to the Closing Date. No
individual claim shall be brought for indemnification under this Agreement which
does not exceed $15,000 ("De Minimis Claim"). Notwithstanding any other
provision of this Agreement, in no event will any Certain Seller be liable in
respect of any Losses to Buyer in an amount in excess of its Certain Seller
Share of the amount by which all Certain Sellers are liable pursuant to this
Article IX (after taking into account the other limitations on their liability
set forth in this Agreement). For purposes of this Section 9.02(a), the Maverick
Stock included in the Aggregate Buyer Payment shall be valued at the average
closing price of the stock as reported by the New York Stock Exchange for the
ten (10) trading days immediately prior to the Closing.
(b) Subject to the provisions of Section 9.02(c) below, Buyer
shall indemnify each Seller and hold it harmless against any Loss which any such
Seller suffers, sustains, or becomes subject to as a result of any breach by
Buyer of its representations and warranties set forth herein. In addition, Buyer
shall indemnify each Seller and hold it harmless against any Loss which any such
Seller suffers, sustains, or becomes subject to as a result of or in connection
with (i) the breach by Buyer of any of its covenants set forth herein, (ii) the
operations of the Acquired Companies following the Closing, and (iii) any
violations by the Company or its Subsidiaries of, or liabilities of the Company
or its Subsidiaries arising following the Closing under, any Environmental Laws,
any investigatory, remediation, or corrective obligations of the Company or its
Subsidiaries thereunder (other than those violations and obligations with
respect to which Buyer is entitled to indemnification under 9.02(a) above).
(c) No Person shall be liable for any claim for
indemnification under subsection (a) or the first sentence of (b) above unless
written notice specifying in reasonable detail the nature of the claim for
indemnification is delivered by the Person seeking indemnification to the Person
from whom indemnification is sought within the applicable Survival Period with
respect to claims for indemnification relating to breaches of the
representations and warranties set forth in this Agreement. With respect to any
breach of or inaccuracy of any representation or warranty that survives the
Closing, if a Person entitled to indemnification delivers written notice during
the Survival Period, then such representation or warranty shall survive beyond
the Survival Period, to the extent of such claim only, until such claim is
resolved (whether or not the amount of the damages or expenses resulting from
such breach has finally been determined at the time the notice is given) if, and
only if, (i) in the case of a claim made by reason of a third party claim, the
written notice is accompanied by a copy of the written notice of the third party
claimant setting forth such claim or threatened claim in reasonable detail and
(ii) in the case of any claim made by a Person other than by reason of a third
party claim, the written notice contains specific facts setting forth the
alleged breach of or inaccuracy of the representation or warranty contained
herein giving rise to such claim.
(d) Promptly after the assertion by any third party of any
claim (a "Third Party Claim") against any Person entitled to indemnification
under this Section 9.02 (the "Indemnitee") that results or may result in the
incurrence by such Indemnitee of any Loss for which such Indemnitee would be
entitled to indemnification pursuant to this Agreement, such Indemnitee shall
promptly notify the parties from whom such indemnification could be sought (the
"Indemnitors") of such Third Party Claim; provided, however, that the failure to
provide such notice shall not relieve or otherwise affect the obligation of the
Indemnitors to provide indemnification hereunder, unless such notification to
Indemnitors is received more than 180 days after the assertion of a third party
claim against any Indemnitee; and further provided that Indemnitors shall have
no obligation to provide indemnification to the extent that any Loss or damages
to an Indemnitor directly results from or is caused by the failure of the
Indemnitee to provide timely notice. The Sellers may designate a representative
to act on behalf of all Indemnitors in the case of all Third Party Claims with
respect to which Buyer is seeking indemnification under subsection (a) above,
and such representative may, at its option, assume the defense of the Indemnitee
against such Third Party Claim (including the employment of counsel and the
payment of expenses). Any Indemnitee shall have the right to employ separate
counsel in any such Third Party Claim and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be an expense of the
Indemnitor unless (i) the Indemnitor shall have failed, within a reasonable time
after having been notified by the Indemnitee of the existence of such Third
Party Claim as provided in the preceding sentence, to assume the defense of such
Third Party Claim, or (ii) the employment of such counsel has been specifically
authorized by the Indemnitor and/or any representative designated by the Sellers
in the case of all Third Party Claims with respect to which the Buyer is
entitled to indemnification under subsection (a) above. In no event may the
Indemnitee consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of each
of the Indemnitors.
(e) The amount of any Loss subject to indemnification
hereunder or of any claim therefor shall be calculated net of any insurance
proceeds (net of direct collection expenses) received or receivable by Buyer,
the Company, its Subsidiaries, or any of their Affiliates on account of such
Loss. Buyer, the Company, and its Subsidiaries shall seek full recovery under
all insurance policies covering any Loss to the same extent as they would if
such Loss were not subject to indemnification hereunder, and Buyer, the Company,
and its Subsidiaries shall not terminate or cancel any insurance policies in
effect for periods prior to the Closing. In the event that an insurance recovery
is made by Buyer, the Company, its Subsidiaries, or any of their Affiliates with
respect to any Loss for which any such Person has been indemnified hereunder,
then Buyer shall promptly pay to each Seller an amount equal to such Sellers'
Pro Rata Share of the amount of the recovery (net of all direct collection
expenses).
(f) All indemnification payments made hereunder shall be
treated as an adjustment to the Aggregate Buyer Payment.
(g) The indemnification remedies set forth in this Section
9.02 shall be the exclusive remedies available under this Agreement for any
Losses sustained by Sellers or Buyer with respect to this Agreement, any exhibit
or schedule to the Agreement, or any certificate delivered hereunder, the
transaction contemplated by this Agreement, or the business, assets, or
operations of the Acquired Companies. Buyer hereby waives, to the fullest extent
permitted under applicable law, any and all rights, claims, and causes of action
it may have against Sellers relating to the subject matter of this Agreement,
any exhibit or schedule to the Agreement, or any certificate delivered
hereunder, or the business, assets, or operation of the Acquired Companies
arising under or based upon any federal, state, local, or foreign statute, law,
ordinance, rule, regulation, or order.
(h) Notwithstanding anything to the contrary in this Article
IX or elsewhere in this Agreement and notwithstanding any Updated Schedule
delivered to and accepted by Buyer, but subject to the limitations contained in
this Section 9.02, the Certain Sellers shall indemnify and hold Buyer harmless
from and against all Losses arising from the Acquired Companies' failure to pay
Taxes, including any liability for Taxes due and payable by the Acquired
Companies, to the State of Alaska and the State of Wyoming for any taxable year
or tax period ending on or prior to the Closing Date to the extent that such
Taxes are not reflected in the reserve for Tax liability (not counting any
liability for deferred Taxes established to reflect differences between book and
Tax income) shown on the Closing Date Balance Sheet without respect to whether
Buyer or Buyer's Representatives had actual knowledge of such matters on or
prior to the Closing Date. For the avoidance of doubt, in determining the amount
of any Loss arising from any failure of any Acquired Company to pay Taxes, there
shall be taken into account any Tax benefit to Buyer or the Acquired Companies
from the payment of any additional Tax. If Buyer in good faith believes that a
Tax, as set forth herein, will be due and payable, then Buyer will give notice
of such Tax to Sellers, and Sellers, in consultation with Buyer, shall have the
right to reasonably object to such proposed Tax, and to participate at their own
expense in any action or proceeding related to such Tax, including the defense
of any claim brought against the Acquired Companies related to such Tax. Buyer
agrees and acknowledges that Buyer will not settle, compromise, or otherwise
resolve any proceeding related to any Tax which would give rise to any Loss
without the prior written consent of Sellers, which consent will not be
unreasonably withheld. If, after completion of all proceedings or settlements
referenced in the preceding two sentences, there is an adverse final
determination regarding the subject Tax, then Sellers shall pay the amount of
any resulting Loss in accordance with the provisions of this Section 9.02.
9.03 Disclosure Generally. If and to the extent any information
required to be furnished in any schedule is contained in this Agreement or in
any schedule attached hereto, such information shall be deemed to be included in
all schedules in which the information is required to be included. The inclusion
of any information in any schedule attached hereto shall not be deemed to be an
admission or acknowledgment by the Company, its Subsidiaries, or the Sellers, in
and of itself, that such information is material to or outside the ordinary
course of the business of the Company or its Subsidiaries.
9.04 Arbitration Procedure.
(a) Buyer, the Company, and the Sellers agree that the
arbitration procedure set forth below shall be the sole and exclusive method for
resolving and remedying any and all disputes regarding claims for money damages
based upon, arising out of, or in any way connected with the Agreement or the
transactions contemplated herein, including any disputes regarding the
application of this Section 9.04 or the validity hereof (the "Disputes").
Nothing in this Section 9.04 shall prohibit a party hereto from instituting
litigation to enforce any Final Determination (as defined below). The parties
hereby agree and acknowledge that, except as otherwise provided in this Section
9.04 or in the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time, the arbitration procedures and any
Final Determination hereunder shall be governed by and shall be enforced
pursuant to the Uniform Arbitration Act as in effect in the State of Illinois.
(b) In the event that any party asserts that there exists a
Dispute, such party shall deliver a written notice to each other party involved
therein specifying the nature of the asserted Dispute and requesting a meeting
to attempt to resolve the same. If no such resolution is reached within 45 days
after such delivery of such notice, the party delivering such notice of Dispute
(the "Disputing Person") may, within 75 days after delivery of such notice,
commence arbitration hereunder by delivering to each other party involved
therein a notice of arbitration (a "Notice of Arbitration") and by filing a copy
of such Notice of Arbitration with the Chicago office of the American
Arbitration Association. Such Notice of Arbitration shall specify the matters as
to which arbitration is sought, the nature of any Dispute, the claims of each
party to the arbitration, and the amount and nature of damages or other relief
sought to be recovered as a result of any alleged claim and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included therein.
(c) Buyer and the Sellers each shall select one arbitrator
expert in the subject matter of the Dispute (the arbitrators so selected shall
be referred to herein as "Buyer's Arbitrator" and "Sellers' Arbitrator,"
respectively). In the event that either party fails to select an arbitrator as
set forth herein within 30 days after the delivery of a Notice of Arbitration,
then the Dispute shall be resolved by the arbitrator selected by the other
party. Sellers' Arbitrator and Buyer's Arbitrator shall select a third,
independent, neutral arbitrator expert in the subject matter of the Dispute, and
the three arbitrators so selected shall resolve the Dispute according to the
procedures set forth in this Section 9.04. All three of the arbitrators shall be
licensed lawyers, familiar with the applicable law and judicial precedent. If
Sellers' Arbitrator and Buyer's Arbitrator are unable to agree on a third
arbitrator within 20 days after their selection, Sellers' Arbitrator and Buyer's
Arbitrator shall each prepare a list of three independent arbitrators. Sellers'
Arbitrator and Buyer's Arbitrator shall each have the opportunity to designate
as objectionable and eliminate one arbitrator from the other arbitrator's list
within ten days after submission thereof, and the third arbitrator shall then be
selected by lot from the arbitrators remaining on the lists submitted by
Sellers' Arbitrator and Buyer's Arbitrator.
(d) The arbitrators selected pursuant to paragraph (c) shall
determine the allocation of the costs and expenses of arbitration based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party. For example, if Buyer
submits a claim for $1,000 and if the Sellers contest only $500 of the amount
claimed by Buyer, and if the arbitrators ultimately resolves the Dispute by
awarding Buyer $300 of the $500 contested, then the costs and expenses of
arbitration will be allocated 60% (i.e., $300 / $500) to the Sellers according
to their respective Pro Rata Shares and 40% (i.e., $200 / $500) to Buyer.
(e) The arbitration shall be conducted (i) at a neutral site
agreed upon by the parties, or (ii) if the parties are unable to agree, at a
neutral site selected by the arbitrators, under the Commercial Arbitration Rules
of the American Arbitration Association as in effect from time to time, except
as otherwise set forth herein or as modified by the agreement of Buyer and the
Sellers. The arbitrators shall conduct the arbitration such that a final result,
determination, finding, judgment, and/or award (the "Final Determination") is
made or rendered as soon as practicable, but in no event later than 120 days
after the delivery of the Notice of Arbitration nor later than ten days
following completion of the arbitration. The Final Determination shall be made
in writing, shall state in reasonable detail the basis for such determination,
and shall be agreed upon and signed by the sole arbitrator or by at least two of
the three arbitrators (as the case may be), shall be consistent with the
provisions of this Agreement (including Section 9.01 through Section 9.05
hereof), and shall be based on applicable law and judicial precedent. The Final
Determination shall be final and binding on all parties, and there shall be no
appeal from or reexamination of the Final Determination, except for fraud,
perjury, evident partiality, or misconduct by an arbitrator prejudicing the
rights of any party and to correct manifest clerical errors.
(f) Buyer and the Sellers may enforce any Final Determination
in any state or federal court having jurisdiction over the Dispute. For the
purpose of any action or proceeding instituted with respect to any Final
Determination, each party hereto hereby irrevocably submits to the jurisdiction
of such courts, irrevocably consents to the service of process by registered
mail or personal service and hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have as to
personal jurisdiction, the laying of the venue of any such action or
jurisdiction, the laying of the venue of any such action or proceeding brought
in any such court, and any claim that any such action or proceeding brought in
any court has been brought in an inconvenient forum.
9.05 Tax Matters.
(a) Transfer Taxes. Buyer shall pay or cause to be paid all
sales, use, transfer, and other similar Taxes, including any stock or asset
transfer stamp Taxes (but excluding any Taxes based upon net income) that are
payable in connection with the transactions contemplated by this Agreement.
(b) Tax Returns.
(i) Sellers (or the Sellers' Representative) shall file or
cause to be filed when due all Tax Returns that are required to be
filed by or with respect to the Company and the Subsidiaries for
taxable years or periods ending on or before the Closing Date. Buyer
shall file or cause to be filed when due all Tax Returns with respect
to the Company and the Subsidiaries other than those described in the
previous sentence.
(ii) All Straddle Period Tax Returns to be filed by Buyer
pursuant to Section 9.05(b)(i) shall be prepared in a manner consistent
with the past practices of the Company and the Subsidiaries and shall
be submitted to the Sellers' Representative no later than 30 days prior
to the due date for filing such Straddle Period Tax Returns (or if such
due date is within 45 days following the Closing Date, as promptly as
practicable following the Closing Date). The Sellers' Representative
shall have the right to review such Straddle Period Tax Returns and to
review all work papers and procedures used to prepare any such Tax
Returns. If the Sellers' Representative, within ten (10) business days
after delivery of such Straddle Period Tax Returns, notifies Buyer in
writing that it objects to any of the items in such Tax Returns, Buyer
shall make or cause to be made any changes that are reasonably
requested by the Sellers' Representative. Buyer shall file timely or
cause to be filed timely such Straddle Period Tax Returns, as so
modified. Sellers shall pay to Buyer within fifteen (15) days after the
date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such
taxable period ending on the Closing Date to the extent such Taxes are
not reflected in the reserve for Tax liability on the Closing Date
Balance Sheet (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income). In the case of
any Taxes that are imposed on a periodic basis and are payable for a
taxable period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date (x) in the case of any Taxes other
than Taxes based upon or related to income or receipts, shall be deemed
to be the amount of such Tax for the entire taxable period multiplied
by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which
is the number of days in the entire taxable period, and (y) in the case
of any Tax based upon or related to income or receipts shall be deemed
equal to the amount which would be payable if the relevant taxable
period ended on the Closing Date. Any credits relating to a taxable
period that begins before and ends after the Closing Date shall be
taken into account as though the relevant taxable period ended on the
Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Acquired Companies.
(iii) None of Buyer or any Affiliate of Buyer shall (or shall
cause or permit the Company or the Subsidiaries to) amend, refile,
carry back any losses, deductions, or credits to or otherwise modify
(or grant an extension of the statute of limitation with respect to)
any Tax Return relating in whole or in part to any of the Company or
the Subsidiaries with respect to any taxable year or period ending on
or before the Closing Date (or with respect to any Straddle Period)
without the prior written consent of the Sellers' Representative, which
consent will not be unreasonably withheld.
(c) Cooperation. Buyer, the Company, the Subsidiaries, the
Sellers' Representative, and the Sellers shall cooperate fully, as and to the
extent reasonably requested by one of the other parties, in connection with the
filing of Tax Returns pursuant to this Section 9.05 and in any audit,
litigation, or other proceeding with respect to Taxes. Such cooperation shall
include:
(i) assisting the other party in preparing any Tax Returns or
reports which such other party is responsible for preparing and filing
in accordance with this Section 9.05;
(ii) cooperating fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the
Company or the Subsidiaries;
(iii) retaining and providing (upon the other party's request)
any records and information which are reasonably relevant to any Tax
audit, litigation, or other Tax proceeding, and making employees
available on a mutually convenient basis to provide additional
information and the explanation of any material provided hereunder; and
(iv) providing timely notice to the other in writing of any
pending or threatened Tax audits or assessments of the Company or the
Subsidiaries for which the other party may have a liability under this
Agreement, and furnishing the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any taxable period.
(d) Retention of Records. Buyer, the Company, the
Subsidiaries, the Sellers' Representative, and the Sellers agree: (i) to retain
all books and records with respect to Tax matters pertinent to the Acquired
Companies relating to any taxable year or period beginning before the Closing
Date until the expiration of the applicable statute of limitations of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority; and (ii) to give the other party
reasonable written notice prior to transferring, destroying, or discarding any
such books and records and, if the other party so requests, Buyer, the Company,
and the Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
(e) Contest Provisions. Buyer shall give prompt written notice
to the Sellers of the commencement of any audit, administrative appeal,
litigation, or other contest relating to Taxes (a "Tax Contest") that results in
or may result in a Loss for which indemnification may be claimed from the
Sellers under this agreement (determined for this purpose without regard to the
Buyer's Deductible). The Sellers shall be entitled at anytime to conduct,
control, and settle ("Audit Control") any such Tax Contest; provided, however,
that the Sellers shall not have the right to agree to any assessment,
deficiency, settlement, or other adjustment or proposed adjustment of Taxes that
would adversely affect the interest of Buyer or the Acquired Companies without
the written consent of Buyer, which consent shall not be unreasonably withheld;
provided, further, that the Buyer shall have the right, at its own expense, to
participate in any such Tax Contest; provided, further, that Buyer may assume
Audit Control in the event Sellers shall fail to prosecute such Tax Contest.
Buyer shall cause the Company and/or the Subsidiaries (as applicable) (i) to
execute any powers of attorney necessary in order to allow the Sellers to
exercise its Audit Control and (ii) to cooperate fully with the Sellers in the
conduct of the Tax Contest. The Sellers shall keep the Buyer reasonably informed
as to the progress of any Tax Contest. Sellers shall not be responsible for any
attorney's fees of the Buyer, the Company, or its Subsidiaries incurred after
the Sellers assume control of the defense of a Tax Contest. In the event the
Sellers do not take Audit Control, the Buyer shall keep the Sellers reasonably
informed as to the progress of any Tax Contest and shall not enter into any
settlement or other disposition of such Tax Contest prior to receiving the
written consent of the Sellers, which consent may be withheld in the sole
discretion of the Sellers.
(f) If the Company's or its Subsidiaries' liability for Taxes
is increased for a period or partial period ending before Closing and the
Company or its Subsidiaries are entitled to a correlative reduction in a
subsequent period or partial period (whether before or after Closing) which
reduces the Company's or its Subsidiaries' liability for Taxes (or results in a
refund or credit of Taxes) for such subsequent period or partial period, Sellers
shall be entitled to offset any indemnification liability they may have with
respect to the earlier period by the present value (computed using a 6% interest
rate) of the amount of such reduction, refund, or credit (together with any
interest paid or payable thereon), and the amount treated as a Loss for purposes
of Section 9.02 shall be the net amount of the increase in Tax liability for
which Sellers may be liable to indemnify Buyer after reduction in respect of
such offset. Sellers shall have no indemnification obligation with respect to
Taxes to the extent of the amount reserved for Taxes on the Closing Date Balance
Sheet (whether or not a particular item of Tax was specifically reserved on such
balance sheet) and such Taxes shall not be taken into account for purposes of
the Buyer's Deductible.
(g) Other. Notwithstanding anything in this Agreement to the
contrary:
(i) any claim for breach of representation and/or
indemnification attributable to Taxes and Tax Returns shall be based
solely on a breach, if any, of the representations contained in Section
4.09;
(ii) the Sellers shall have no indemnification obligation with
respect to any Taxes of the Acquired Companies attributable to (A) any
taxable year or period (or partial taxable year or period) beginning
after the Closing, (B) operations of the Acquired Companies after the
Closing, or (C) actions taken or elections made by the Buyer or the
Acquired Companies after the Closing; and
(iii) All tax sharing agreements or similar agreements with
respect to or involving the Acquired Companies shall be terminated as
of the Closing Date and, after the Closing Date, the Acquired Companies
shall not be bound thereby or have any liability thereunder.
9.06 Further Assurances. From time to time, as and when requested by
any party hereto and at such party's expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
9.07 Access to Books and Records. From and after the Closing, Buyer
shall, and shall cause the Company to, provide the Sellers and their agents with
reasonable access (for the purpose of examining and copying), during normal
business hours, to the books and records of the Acquired Companies with respect
to periods or occurrences prior to the Closing Date in connection with any
matter whether or not relating to or arising out of this Agreement or the
transactions contemplated hereby. Buyer shall not permit the Company or its
Subsidiaries to, for a period of seven years following the Closing Date,
destroy, alter, or otherwise dispose of any of the books and records of the
Company or such Subsidiary for the period prior to the Closing Date without
first offering to surrender to the Sellers such books and records or any portion
thereof which Buyer or the Company or such Subsidiary may intend to destroy,
alter, or dispose of.
9.08 Director and Officer Liability and Indemnification. Buyer shall
not, and shall not permit the Company or its Subsidiaries to, amend, repeal, or
modify any provision in the Company's or such Subsidiary's organizational
documents relating to the exculpation or indemnification of former members,
directors, employees, or officers, it being the intent of the parties that the
members, directors, employees, or officers of the Company shall continue to be
entitled to such exculpation and indemnification for all periods prior to the
Closing to the fullest extent permitted under applicable law.
9.09 Maintain Compensation and Employee Benefits.
(a) Buyer agrees that each person who is an employee of the
Company or any of its Subsidiaries as of the Closing (individually, a
"Continuing Employee" and collectively, the "Continuing Employees") shall
continue to be an employee of the Company or applicable Subsidiary immediately
following the Closing. Any severance payments or other liabilities, including
the fiscal year 2002 bonus payments listed on Schedule 4.10A, associated with
the termination of any employees of the Acquired Companies either at Closing or
at any time after the Closing will be incurred by the Buyer.
(b) Following the Closing, Buyer shall cause the Company's and
its Affiliates' employee benefit plans, programs, and policies that cover the
Continuing Employees or any of their dependents or beneficiaries, including but
not limited to the Plans (collectively, "Company Plans"), to treat the
employment and service of the Continuing Employees with the Company, its
Affiliates, and any predecessor employers through the Closing Date as employment
and service with the Company and its Affiliates, for all purposes under the
Company Plans.
(c) Following the Closing, Sellers and their Affiliates shall
have no liability or obligation under or with respect to any Plan or any wages,
bonuses, commissions, employee withholdings, or taxes relating to the employment
of the Continuing Employees after the Closing.
9.10 Worker Adjustment and Retraining Notification Act ("WARN"). Buyer
or the Company shall comply with all notice and any other requirements under
WARN and any similar state statute so that the Sellers shall have no liability
or obligation under WARN or similar state statute as a result of any event
occurring on or after the Closing Date.
ARTICLE X
DEFINITIONS
"Accounting Firm" has the meaning set forth in Section 1.02(d)(iii).
"Acquired Companies" means the Company and its Subsidiaries,
collectively.
"Actual Loss" means actual losses suffered as a direct and proximate
result of a breach.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Aggregate Buyer Payment" has the meaning set forth in Section 1.02(a).
"Agreement" has the meaning set forth in the Preamble.
"Audit Control" has the meaning set forth in Section 9.05(e).
"Balance Sheet" has the meaning set forth in Section 4.05(ii).
"Buyer" has the meaning set forth in the Preamble.
"Buyer's Arbitrator" has the meaning set forth in Section 9.04(c).
"Buyer's Certificate" has the meaning set forth in Section 2.02(f).
"Buyer's Deductible" has the meaning set forth in Section 9.02(a)(i).
"Buyer's Lender" means ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇.
"Buyer's Representatives" has the meaning set forth in Section 6.02
hereof. "Buyer's Statement" has the meaning set forth in Section 1.02(d)(ii).
"Cap" has the meaning set forth in Section 9.02(a)(ii).
"Capital Contribution" has the meaning set forth in Section 1.02(a)(i).
"Capital Expenditure Summary" has the meaning set forth in Section
1.02(d)(i).
"Certain Seller Share" has the meaning set forth in Section 9.02(a)(i).
"Certain Sellers" has the meaning set forth in Section 9.02(a).
"Closing" has the meaning set forth in Section 1.03(a).
"Closing Date" has the meaning set forth in Section 1.03(a).
"Closing Date Balance Sheet" has the meaning set forth in Section
1.02(d)(iv).
"Closing Transactions" has the meaning set forth in Section 1.03(b).
"Code" has the meaning set forth in Section 4.14(a).
"Coiled Line Pipe" means the Company's specialty spooled line pipe
product that is sold for particular subsea applications, including but not
limited to flow lines, control lines, and service lines.
"Coiled Line Pipe Contracts" means contracts received by the Company
and backed by purchase orders received from specific customers related to orders
of Coiled Line Pipe, and includes the purchase contract, if any, under which
Coiled Line Pipe is ordinarily procured from the Company.
"Commitment Letter" has the meaning set forth in Section 7.01(d).
"Company" has the meaning set forth in the Preamble and, solely for
purposes of Section 4.14, the meaning set forth in Section 4.14(d).
"Company Bank Account Balance" has the meaning set forth in Section
1.02(b).
"Company Cash Distribution" has the meaning set forth in Section
1.02(b).
"Company Plans" has the meaning set forth in Section 9.09(b).
"Company's Closing Certificate" has the meaning set forth in Section
2.01(f)(i).
"Confidentiality Agreement" has the meaning set forth in Section 6.02.
"Continuing Employee" has the meaning set forth in Section 9.09(a).
"Cured Breach" has the meaning set forth in Section 6.03(a)(ii).
"De Minimis Claim" has the meaning set forth in Section 9.02(a).
"Designated Account" has the meaning set forth in Section 1.02(a)(ii).
"Disputes" has the meaning set forth in Section 9.04(a).
"Disputing Person" has the meaning set forth in Section 9.04(b).
"Downhole Purchase Orders" means orders received by the Company and
frequently backed by a customer purchase order or purchase agreement from a
customer for customer procurement of the Company's downhole tubing product.
"Environmental Laws" means all Laws which address, are related to, or
are otherwise concerned with environmental, health, or safety issues (including
occupational safety and health).
"Environmental Permit" means any Permit issued pursuant to any
Environmental Law.
"Equity Appreciation Units" refers to the equity units of the Company
as described in the Precision Tube Technology 1996 Equity Appreciation Units
Plan as Amended and Restated on December 5, 1997.
"Equity Appreciation Units Plan" has the meaning set forth in Section
4.04.
"ERISA" has the meaning set forth in Section 4.14(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Representations" has the meaning set forth in Section
6.03(a)(ii).
"Final Capital Expenditure Summary" has the meaning set forth in
Section 1.02(d)(v).
"Final Determination" has the meaning set forth in Section 9.04(e).
"GAAP" has the meaning set forth in Section 1.02(d)(ii).
"HSR Act" has the meaning set forth in Section 2.01(d).
"Indebtedness" means, when used with reference to the Acquired
Companies, without duplication: any material liability of such company created
or assumed by such company, or any Subsidiary thereof, (A) for borrowed money,
or (B) evidenced by written bond, note, debenture or similar instrument, except
in the Ordinary Course of Business and except as scheduled.
"Indemnitee" has the meaning set forth in Section 9.02(d).
"Indemnitors" has the meaning set forth in Section 9.02(d).
"Intellectual Property" has the meaning set forth in Section 4.11.
"Investors' Agreement" has the meaning set forth in Section 11.14(i).
"Knowledge" shall mean the actual knowledge of Sellers, and the
directors and senior officers of the Company, after reasonable inquiry (which
inquiry shall include the inquiry of certain persons and records appropriate and
related to the matters covered thereby).
"Latest Balance Sheet" has the meaning set forth in Section 4.05(iii).
"Laws" means all current and future United States and foreign, federal,
state, and local laws, statutes, rules, regulations, ordinances, codes,
requirements, rules of common law, standards, guidelines, and the like,
including any judicial and administrative interpretations thereof, and all
judicial and administrative orders, consents, decrees, writs, injunctions, and
judgments.
"Leased Real Property" means any real property leased or subleased
pursuant to the leases or subleases set forth on the Leased Real Property
Schedule.
"Lien" means any mortgage, pledge, security interest, easement,
servitude, encumbrance, lien, assessment, claim, or charge of any kind;
provided, however, that Lien shall also include, with respect to the Stock of
the Company, any right of first refusal or other restriction to which such Stock
may be subject.
"Loss" has the meaning set forth in Section 9.02(a).
"Material Adverse Effect" means a material adverse effect upon the
business operations, assets, financial condition, or operating results of the
Acquired Companies taken as a whole. A Material Adverse Effect shall not include
any factors, events, or conditions external to the Acquired Companies, including
but not limited to, wars, natural disasters, acts of terrorism, general economic
conditions and activities, Acts of God, or any similar act or condition
affecting the Acquired Companies.
"Material Contract" means any contract, indenture, mortgage, loan
agreement or other agreement set forth on the Contracts Schedule or lease or
sublease set forth on the Leased Real Property Schedule.
"Maverick Cash Payment" has the meaning set forth in Section 1.02(a).
"Maverick Stock" has the meaning set forth in Section 1.02(a).
"Net Working Capital" means the difference between certain current
assets and the certain current liabilities, as set forth in Exhibit C-1, and
shall not include any amount or payment associated with the termination of any
employee of the Acquired Companies at the Closing or any time after the Closing.
"Net Working Capital Adjustment" has the meaning set forth in Section
1.02(e)(iii).
"Non-Material Breach" has the meaning set forth in Section
6.03(b)(i)(A).
"Notice of Arbitration" has the meaning set forth in Section 9.04(b).
"Ordinary Course of Business" means, when used with reference to the
Acquired Companies, the ordinary course of each Acquired Company's business,
consistent with past practices.
"Owned Real Property" means the real property described on the Owned
Real Property Schedule.
"Pension Plans" has the meaning set forth in Section 4.14(a)(iii).
"Permit" means any permit, license, review, certification, approval,
registration, consent, or other authorization issued pursuant to any Law.
"Permitted Liens" means (i) statutory Liens for work performed or
materials supplied arising or incurred in the ordinary course of business with
respect to which the underlying obligations are not delinquent or the validity
of which is being contested in good faith by appropriate proceedings, (ii) Liens
for Taxes not yet delinquent or the validity of which is being contested in good
faith by appropriate proceedings, (iii) valid leases or subleases to third
parties in respect of the Owned Real Property or the Leased Real Property, (iv)
Liens on the interest of the lessors of properties in which the Company or one
of its Subsidiaries owns a leasehold interest, (v) Liens and defects in title on
real property that do not materially affect the Buyer's ability to continue to
use and operate any of the Owned Real Property or the Leased Real Property in
the same manner as presently used and operated without substantial additional
cost arising as a result of such Lien on real property or defect in title, (vi)
Liens of record and other Liens and defects in title set forth in title
insurance policies and title opinions issued to the Company or a Subsidiary,
(vii) matters which would be disclosed by an accurate survey of each parcel of
real property, (viii) public roads and highways and (ix) other encumbrances and
exceptions set forth on the Permitted Liens Schedule.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, and a governmental entity or any
department, agency or political subdivision thereof.
"Personal Property" has the meaning set forth in Section 4.08(d).
"Plans" has the meaning set forth in Section 4.14(a).
"Post-Closing Representative" has the meaning set forth in Section
1.02(d)(i).
"Preliminary Closing Date Balance Sheet" has the meaning set forth in
Section 1.02(d)(i).
"Property" means the Leased Real Property and the Owned Real Property,
including any fixtures, appurtenances, or personalty thereon.
"Pro Rata Share" means the percentage equal to the number of shares of
Stock owned by a Seller, divided by total number of shares of Stock outstanding.
"PTHC" refers to Precision Tube Holding Company, or the "Company," as
defined in the Preamble to this Agreement.
"Real Property" means the Owned Real Property and the Leased Real
Property, collectively.
"Registration Statement" shall have the meaning set forth in Section
1.04(a).
"Required Governmental Consents Schedule" has the meaning set forth in
Section 2.01(d).
"Required Third Party Consents Schedule" has the meaning set forth in
Section 2.01(c) and 2.02(c).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means a Person listed on the Sellers' Schedule attached
hereto.
"Sellers' Accountant" has the meaning set forth in Section 1.02(d)(i).
"Sellers' Arbitrator" has the meaning set forth in Section 9.04(c).
"Sellers' Certificate" has the meaning set forth in Section
2.01(f)(ii).
"Seller's Closing Payment" has the meaning set forth in Section
1.02(a)(ii).
"Sellers' Distribution" has the meaning set forth in Section
1.02(a)(ii).
"Sellers' Releases" has the meaning set forth in Section 2.01(f)(viii)
and Exhibit E.
"Sellers' Representative" means Continental Illinois Venture
Corporation as set forth in Section 8.01.
"Sellers' Schedule" has the meaning set forth in the Preamble.
"Senior Debt" means all amounts owing by Company to LaSalle National
Bank.
"Senior Debt Guarantee Fees" means the fees and charges the Company is
accruing for payment to the Company's equity holders in exchange for such
holders guaranteeing certain amounts of senior debt under the Company's senior
credit agreements.
"Stock" has the meaning set forth in the Recitals.
"Straddle Period" means any taxable year or period beginning on or
before the Closing Date and ending after the Closing Date.
"Structure" means any building, plant, factory, office, warehouse
structure, or other improvement owned or leased by the Company.
"Subordinated Debt" means (i) the January 20, 1995 subordinated debt
issued by PTHC to its shareholders in conjunction with the initial
capitalization of PTHC and simultaneous acquisition by PTHC of Precision Tube
Technology, Inc. and related real estate; and (ii) the subordinated debt issued
by PTHC to its shareholders on April 17, 1997.
"Subsidiaries" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Survival Period" has the meaning set forth in Section 9.01.
"Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, ad valorem/personal property, stamp,
excise, occupation, sales, use, transfer, value added, alternative minimum,
estimated or other tax, including any interest, penalty or addition thereto,
whether disputed or not.
"Tax Contest" has the meaning set forth in Section 9.05(e).
"Tax Returns" means any return, report, information return, or other
document (including schedules or any related or supporting information) filed or
required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
"Third Party Claim" has the meaning set forth in Section 9.02(d)
"Transaction Costs" means all of the costs, charges and expenses
incurred by or on behalf of the Company or the Sellers in connection with or
resulting from the transactions contemplated hereunder to the extent not accrued
and reflected on the Closing Date Balance Sheet, including, without limitation,
any bonus or other payment which results from the change in control of the
Company, the fees and expenses of their counsel, accountants and advisors, and
all other expenses to be borne by the Company or the Sellers as and to the
extent expressly provided for hereunder.
"Updated Schedules" has the meaning set forth in Section 6.03(a)(i).
"Value" has the meaning set forth in Section 6.03(d).
"WARN" has the meaning set forth in Section 5.08.
"Welfare Plans" has the meaning set forth in Section 4.14(a)(iv).
ARTICLE XI
MISCELLANEOUS
11.01 Press Releases and Communications. No press release or public
announcement related to this Agreement or the transactions contemplated herein
(or prior to the Closing, any other announcement or communication to the
employees, customers, or suppliers of the Company) shall be issued or made
without the joint approval of Buyer and the Sellers' Representative, unless
required by law (in the reasonable opinion of counsel) in which case Buyer and
the Sellers' Representative shall have the right to review such press release or
announcement prior to publication.
11.02 Expenses. Except as otherwise expressly provided herein, the
Sellers on the one hand and Buyer on the other hand shall pay all of their own
expenses (including attorneys' and accountants' fees and expenses) in connection
with the negotiation of this Agreement, the performance of their respective
obligations hereunder, and the consummation of the transactions contemplated by
this Agreement (whether consummated or not).
11.03 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers: Copy to:
------------------- --------
CIVC Partners, I, ▇.▇. ▇▇▇▇▇▇ & ▇▇▇▇▇▇
231 S. La Salle Street 7L ▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Tangram Partners, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Company Copy to:
------------------ --------
(prior to the Closing):
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Precision Tube Technology, Inc. ▇▇▇▇▇▇ & ▇▇▇▇▇▇
8615 Beltway 8 East 555 Twelfth St., N.W.
Houston, TX 77044 ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
If to the Buyer or the Company
(after the Closing):
Copy to:
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Maverick Tube Corporation Gallop, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Interco Corporate Tower
Suite 700 101 South ▇▇▇▇▇▇
Chesterfield, MO 63017 Suite 1600
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
President & CEO Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other party notice in the manner herein set forth.
11.04 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by Buyer without the prior written consent of the Sellers.
11.05 Severability. Whenever possible, each provision of this Agreement
shall 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 shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
11.06 No Strict Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
11.07 Amendment and Waiver. Any provision of this Agreement or the
schedules or exhibits hereto may be amended or waived only in writing signed by
Buyer, the Company, and the Sellers. No waiver of any provision hereunder or any
breach or default thereof shall extend to or affect in any way any other
provision or prior or subsequent breach or default.
11.08 Complete Agreement. This Agreement and the documents referred to
herein (including the Confidentiality Agreement) contain the complete agreement
between the parties hereto and supersede any prior understandings, agreements,
or representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
11.09 Counterparts. This Agreement maybe executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
11.10 No Third Party Beneficiary Status. Nothing contained herein,
either expressed or implied, is intended or shall be construed to confer any
rights or remedies hereunder upon any Person other than the Sellers, the
Company, and the Buyer.
11.11 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of Delaware.
11.12 Disclaimer Regarding Estimates and Projections. In connection
with the Buyer's investigation of the Acquired Companies, the Buyer has received
from or on behalf of the Sellers and/or the Company and its Subsidiaries certain
estimates, forecasts, plans, and financial projections. The Buyer acknowledges
that there are uncertainties inherent in attempting to make such estimates,
forecasts, plans, and projections, that the Buyer is familiar with such
uncertainties, that the Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, forecasts, plans, and
projections so furnished to it (including the reasonableness of the assumptions
underlying such estimates, forecasts, plans, and projections), and that Buyer
shall have no claim against the Sellers or the Company or its Subsidiaries with
respect thereto. Accordingly, neither the Sellers nor the Company or its
Subsidiaries make any representation or warranty with respect to such estimates,
forecasts, plans and projections (including any such underlying assumptions).
11.13 Post-Closing Liability. Except as solely provided in Section
9.02, Sellers shall not have any liability to the Buyer after the Closing,
whether such liability would arise from claims under this Agreement, or from
equitable, statutory, or common law causes of action.
11.14 Waiver and Termination Regarding Investors' Agreement. Each
Seller hereby (i) waives any notice requirements, rights of first offers or
other rights with respect to the Stock and such transfer of the Stock hereunder
that such Seller may be entitled to pursuant to that certain Investors'
Agreement made as of January 20, 1995, by and among the Company, Precision and
the Sellers (the "Investors' Agreement"), and (ii) agrees that such Investors'
Agreement shall be automatically terminated as of the Closing.
* * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BUYER:
MAVERICK TUBE CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: President & CEO
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COMPANY:
PRECISION TUBE HOLDING CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: President & CEO
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SELLERS:
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Title:
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TANGRAM MANAGEMENT, L.P.
By: TANGRAM PARTNERS, INCORPORATED,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Partner
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NORWEST EQUITY PARTNERS V, L.P.
By: ITASCA PARTNERS V, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Its Partner
CIVC PARTNERS, I, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Its General Partner
By:
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Title:
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JPF ▇▇▇ Trust, Bank of America, NA
as Trustee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Vice President
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
The ▇▇▇▇▇▇ First Family Limited Partnership
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its: General Partner