--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
Dated as of December 18, 1997
By and Between
TIDEWATER INC.
and
TW ACQUISITION CORPORATION
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 18,
1997, by and between Tidewater Inc., a Delaware corporation (the "Seller"), and
TW Acquisition Corporation, a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller owns 4,910 shares (the "Shares") of common stock,
$10.00 par value per share ("Common Stock"), of Tidewater Compression Service,
Inc., a Texas corporation ("Compression"), which constitutes all of the issued
and outstanding capital stock of Compression;
WHEREAS, subject to the terms and conditions set forth herein, the
Buyer wishes to purchase, and the Seller wishes to sell, the Shares;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, each of the following terms
shall have the meanings set forth below:
An "Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, has
the right to control (in fact or by agreement), is controlled by, or is under
common control with, such Person.
"Adjustment Agreement" shall mean the Purchase Price Adjustment
Agreement substantially in the form of Exhibit A hereto, to be executed by and
between Buyer and Seller at the Closing.
"Benefit Arrangement" shall mean any employment, severance or similar
contract, or any other contract, plan, policy or arrangement providing for
compensation, bonus, profit-sharing, stock option or other stock related rights
or other forms of incentive or deferred compensation, insurance coverage
(including any self-insured arrangement), health or medical benefits, disability
benefits, and post-employment and retirement benefits, other than Employee
Plans.
The "Closing" means the closing of the Stock Sale.
The "Closing Date" means the date upon which the Closing occurs.
The "Closing Date Working Capital" means the Working Capital of
Compression as of the Closing.
-1-
The "Closing Date Working Capital Statement" has the meaning ascribed
in Section 2.4(a).
The "Closing Payment" means the payment made by Buyer to Seller at
Closing, consisting of (i) a cash payment in the amount of $360 million plus or
minus the amount by which the Estimated Working Capital, respectively, exceeds
or is less than $26.0 million and (ii) delivery of the Adjustment Agreement.
The "Code" means the Internal Revenue Code of 1986, as amended.
"Compression Financial Statements" means the audited balance sheets,
and related audited statements of earnings and cash flows, as of and for the
years ended March 31, 1995, 1996 and 1997, together with the unaudited balance
sheet and the related unaudited statements of earnings and cash flows as of and
for the six-month period ended September 30, 1997, all of which are attached
hereto as Exhibit B.
The "Compression Latest Balance Sheet" means the balance sheet of
Compression as of September 30, 1997 that is included among the Compression
Financial Statements.
"Confidentiality Agreement" means that certain Confidentiality
Agreement dated September 3, 1997 by and between Buyer and Seller.
"Current Assets" means any and all assets of Compression that are
categorized as such on the September 30 Net Asset Statement, including cash on
hand and securities representing cash, bank balances, accounts receivable,
inventory (in the case of inventory and receivables, net of reserves), and
short-term pre-paid expenses.
"Current Liabilities" means any liability of Compression, other than
Intercompany Indebtedness (which will be eliminated at Closing in accordance
with Section 2.3 hereof).
"Employee Plan" means (a) a plan or arrangement as defined in Section
3(3) of ERISA that (i) is maintained, administered or contributed to by
Compression, Seller or any ERISA Affiliate (ii) covers any employee or former
employee of Compression, the Seller or any ERISA Affiliate, and (b) a plan or
arrangement as defined in Section 3(37) and Section 4001(a)(3) of ERISA that
covers, or covered at any time during the five year period prior to the Closing
Date, any employee or former employee of Compression, Seller or any ERISA
Affiliate.
"Environmental Claim" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or written communication from any
governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental Laws or Releases of Hazardous
Materials from (i) any assets, properties or businesses of Compression or a
predecessor-in-interest; (ii) adjoining properties or businesses onto
Compression's properties or (iii) onto any facilities which received Hazardous
Materials generated by Compression or a predecessor-in-interest.
-2-
"Environmental Laws" mean the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") 42 USC 9601 et seq., as amended; the
Resource Conservation and Recovery Act ("RCRA"), 42 USC 6901, et seq., as
amended; the Clean Air Act ("CAA"), 42 USC 7401, et seq., as amended; the Clean
Water Act ("CWA") 33 USC 1251, et seq., as amended; the Occupational Safety and
Health Act ("OSHA"), 20 USC 655, et seq., as amended; and any other federal,
state, local or municipal laws, statutes, regulations, rules, or ordinances
imposing liability or establishing standards of conduct for the protection of
the environment, human health and safety.
"Environmental Liabilities" mean any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any governmental authority or any third party which
relate to any violations of Environmental Laws, Remedial Actions, Releases or
threatened Releases from or onto (i) any property owned or leased by Compression
or (ii) any facility which received Hazardous Materials generated by
Compression.
"Equipment Sales Proceeds" means the proceeds (in whatever form,
including without limitation, cash or receivables) from any sales of Compression
equipment on or after January 1, 1998.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person within the "controlled group" of
corporations with respect to Compression or Seller, as defined in Section 414(b)
of the Code and the regulations promulgated thereunder, and all trades or
businesses that are under "common control" with respect to Compression or
Seller, as defined in Section 414(c) of the Code and the regulations promulgated
thereunder.
"Estimated Working Capital Statement" means the statement prepared by
Seller and delivered to Buyer pursuant to and in accordance with Sections 2.4
and 2.5 of this Agreement.
"Estimated Working Capital" means the estimate of the Working Capital
of Compression that is set forth in the Estimated Working Capital Statement, it
being understood that the Net Assets of Compression included within Estimated
Working Capital will be stated as of the last day of the calendar month
immediately preceding the Closing Date (or, if the Closing is held before the
tenth day of a month, as of the last day of the second preceding month),
adjusted for any subsequent extraordinary items, and that the estimate of
Equipment Sales Proceeds and expenditures for New Compression Equipment that is
set forth in the Estimated Working Capital Statement shall be as of a date
within eight days of the Closing Date.
"Final Adjustment" means the adjustment provided for in Section 2.4(b).
"GAAP" means generally accepted accounting principles, consistently
applied.
-3-
"Hazardous Materials" means (a) any element, compound, or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls;
(d) any substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) any raw materials, building
components, excluding lead-based paint but including regulated
asbestos-containing materials and manufactured products containing Hazardous
Materials.
"Indebtedness" means all obligations of Compression (whether for
principal, interest, premium, fees or otherwise) for or arising under (i) all
indebtedness for borrowed money (including all notes payable and all obligations
evidenced by bonds, debentures, notes or other similar instruments but excluding
Intercompany Indebtedness), (ii) unpaid reimbursement obligations arising in
connection with guaranties, or (iii) any lease obligation that would be required
to be capitalized in accordance with GAAP.
"Intercompany Indebtedness" means (i) the entire net Indebtedness owed
or owing as of the Closing Date by Compression to Seller or any subsidiary of
Seller, (ii) any tax liability of Compression that is required to be paid by
Seller pursuant to Section 9.7, or (iii) any other liability, obligation or
commitment of Compression to Seller or any subsidiary of Seller as of the
Closing Date.
"Knowledge of Seller" means actual knowledge of (i) an executive
officer of Seller or Compression or a director of Compression, or (ii) those
persons identified on Schedule 1.1 hereto.
A "Lien" means, with respect to the Shares or any asset of Compression,
any title defect, lien, mortgage, easement, pledge, charge, transfer
restriction, right of first refusal, preemptive right, option, claim, security
interest, right of others or other encumbrance of any nature whatsoever, other
than restrictions imposed by federal or state securities laws.
A "Material Adverse Effect" means a material adverse effect on the
business, operations, results of operations, or financial condition of
Compression, or any adverse effect or material limitation on the ability of the
Seller to consummate the Stock Sale.
"Net Assets" means the amount, if any, by which Compression's Current
Assets exceeds its Current Liabilities.
"New Compression Equipment" shall mean any air or gas compressors that
are acquired by Compression for rental purposes on or after January 1, 1998.
"Offering Memorandum" means the Offering Memorandum of Compression
dated September 1997.
"Permits" shall have the meaning specified in Section 4.15.
-4-
A "Permitted Lien" means (i) Liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property that in the aggregate do not materially detract from the
value or interfere with the use of such real property or materially impair the
marketability thereof, (ii) Liens for current taxes or assessments on property
that are accrued but not yet payable, as long as adequate reserves for the
payment of such taxes have been accrued, and (iii) mechanic's, materialman's and
other liens for goods and services incorporated into or provided with respect to
the property encumbered thereby arising by operation of law in the ordinary
course of business, provided that the obligations secured by such Liens (A) are
not more than 30 days past due, (B) are fully reflected in the Compression
Latest Balance Sheet and (C) do not materially interfere with the use or
enjoyment of any of Compression's properties or assets and do not materially
impair the marketability thereof.
"Person" means any natural person, corporation, partnership, limited
liability company, trust and any other entity or organization of any kind,
including governmental or political subdivisions or agencies or
instrumentalities thereof.
"Purchase Price" means the Closing Payment plus or minus any amount
paid by Buyer to Seller, or Seller to Buyer, pursuant to Section 2.4(b).
"Release" means any spill, leak, emission, discharge, pump, empty,
injection, escape, leaching, migration, dumping or disposal of Hazardous
Materials (including the abandonment or discarding of barrels, containers or
other closed receptacles containing Hazardous Materials) into the environment.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment, (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (iii) perform post-remedial operation and
maintenance activities, or (iv) any other actions authorized by 42 U.S.C.
ss.9601.
"Returns" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes, and the term "Return"
means any one of the foregoing.
"Seller's Group" means, individually and collectively, Seller,
Compression or any other Person as to which Compression is liable for Taxes
incurred by such Person either as a transferee, pursuant to U.S. Treasury
Regulations Section 1.1502-6, or pursuant to any other provision of federal,
state, local or foreign law or regulation or otherwise.
The "September 30 Net Asset Statement" means the statement attached
hereto as Schedule 1.2.
The "Stock Sale" means the sale of the Shares by the Seller to the
Buyer in accordance with this Agreement.
-5-
"Taxes" means all federal, state, local, foreign or other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
property, withholding or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term "Tax" means any one of the
foregoing.
"Transition Services Agreement" means the Agreement between Seller and
Buyer that is required to be delivered at Closing pursuant to Section 7.1(d)
hereof.
"Working Capital" means the Net Assets of Compression plus capital
expenditures for New Compression Equipment (which shall include accruals and
payables for such capital expenditures to the extent such accruals and payables
are reflected in Net Assets, but shall not include cash payments for amounts
accrued or payable prior to January 1, 1998) by Compression on or after January
1, 1998 through the Closing Date and minus any Equipment Sales Proceeds on or
after January 1, 1998 through the Closing Date.
SECTION 2. PURCHASE AND SALE OF SHARES; CONDITION OF ASSETS
2.1 Purchase and Sale; Purchase Price. Subject to the terms and
conditions hereof, at the Closing the Seller will sell to the Buyer, and the
Buyer will purchase from the Seller, the Shares, free and clear of all Liens. In
consideration of its purchase of the Shares, Buyer shall pay to Seller the
Purchase Price in the manner provided in the remainder of this Section.
2.2 Capital Contribution. At the Closing, Seller will make a capital
contribution to Compression in an amount equal to the Intercompany Indebtedness
at the time of contribution thereby negating the Intercompany Indebtedness and,
to the extent that any item of Intercompany Indebtedness is not Indebtedness,
shall forgive such item of Intercompany Indebtedness, provided however that any
contractual obligation between Seller or a Seller Affiliate and Compression
relating to the support of foreign operations in Venezuela shall not be canceled
and appropriate arrangements with respect thereto shall be provided in the
Transition Services Agreement.
2.3 Closing Payment. At the Closing, Buyer shall pay or deliver to
Seller the Closing Payment. To facilitate the calculation of the Closing
Payment, Seller shall deliver to Buyer not less than three days in advance of
the Closing Date the Estimated Working Capital Statement, which statement shall
reflect the Estimated Working Capital.
2.4 Final Adjustment.
(a) As soon as practicable, but in no event later than 60 days
following the Closing Date, Seller shall determine Compression's Closing Date
Working Capital and Buyer shall afford Seller, or its representatives reasonable
access to the books, records and personnel of Compression for the purpose of
making such determination. Within such 60-day period, Seller shall deliver to
Buyer a written statement (the "Closing Date Working Capital Statement") setting
forth its determination of the Closing Date Working Capital. If Buyer
-6-
objects to the Closing Date Working Capital Statement, such objection shall be
made in writing and delivered to Seller within 15 days following Buyer's receipt
of the Closing Date Working Capital Statement, failing which such statement
shall be deemed to have been accepted by Buyer. Seller and Buyer shall promptly
meet and in good faith attempt to resolve any objections raised by Buyer. Any
objections that are not resolved between Seller and Buyer within 15 days
following Seller's receipt of Buyer's statement of objections shall be submitted
to binding arbitration to be conducted by a representative of Ernst & Young LLP,
which shall represent Seller, a representative of Deloitte & Touche, LLP which
shall represent Buyer, and another nationally recognized accounting firm (other
than KPMG Peat Marwick) mutually acceptable to Buyer and Seller and selected
within 30 days of the date of the submission of the statement of objections. The
fees of each accounting firm representative shall be paid by the party that it
represents, and responsibility for payment of the fees of the third party
accounting firm shall be divided equally between Buyer and Seller. Such
arbitrating body shall make its determination within 90 days of the date the
objections are first submitted for arbitration, and such determination shall be
final, non-appealable and binding upon the parties.
(b) If the Closing Date Working Capital determined pursuant to
Section 2.4(a) exceeds the Estimated Working Capital, then Buyer shall, within
five business days of the earlier of the date that Buyer accepts the Closing
Date Working Capital Statement or any disputes with respect to the Closing Date
Working Capital Statement have otherwise been resolved (the "Acceptance Date"),
pay Seller in cash the amount of such excess. If the Closing Date Working
Capital determined pursuant to Section 2.4(a) is less than the Estimated Working
Capital, Seller shall, within five business days of the Acceptance Date, pay
Buyer in cash the amount of such deficiency. Interest shall accrue and be due
with respect to any payments due by one party to the other hereunder at the rate
of 7% per annum beginning on the 91st day following the Closing Date, and any
such payments (including any interest accrued therein) shall be made by bank
wire transfer of immediately available funds to an account specified in writing
by payee to payor.
2.5 Basis of Preparation of Working Capital Statements. Seller agrees
that in preparing the Estimated Working Capital Statement and Closing Date
Working Capital Statement, it shall determine the Current Assets and Current
Liabilities of Compression as of the applicable date on a basis consistent with
GAAP and applying the same accounting policies and principles as were used in
preparing the September 30 Net Asset Statement, and shall accrue expenses
through the date that Net Assets are calculated in such statement as if such
date were at the end of an accounting period. Such statements shall be
accompanied by a certificate of the Chief Financial Officer of Seller to the
foregoing effect.
2.6 Condition of Assets: Intended Use. (a) Except for the
representations and warranties given in Section 4 hereof, no representation or
warranty, express or implied, has been made by or on behalf of Seller with
respect to the present condition of the assets and properties or the present or
future suitability thereof for any intended use by Buyer, and Buyer hereby
acknowledges that such assets and properties are otherwise being conveyed "as
is" and "where is."
-7-
(b) Except for any representations and warranties given in Section
4 hereof, Seller makes no warranty, express or implied, regarding the commercial
suitability of Compression's assets and properties for Buyer's intended use.
2.7 Certain Reserves and Liabilities. Buyer acknowledges that Seller
has established certain balance sheet reserves (the "Established Reserves") for
potential liabilities that may be incurred with respect to Compression employees
under (i) Seller's medical and dental program for employees, (ii) Seller's
retiree medical and life insurance programs, (iii) retiree pension benefits, and
(iv) worker's compensation programs. Buyer further acknowledges that the
Compression Financial Statements, to be delivered by Seller to Buyer, will not
include the Established Reserves. Buyer agrees that Seller has no obligation to
transfer the Established Reserves to Compression and that, following the
Closing, Seller will have no continuing liability or obligation to Compression
employees under such plans or programs except to the extent that an obligation
or liability arises under such plans and relates to any event or occurrence
prior to the Closing or an entitlement or right of an employee to participate in
such plan or program vested prior to the Closing. Seller agrees that Compression
has no obligation or commitment and that neither Compression nor Buyer will have
any obligation or commitment to any Compression employee or retiree under any
such plan or program or under any plan or program providing benefits relating to
comparable matters, save as provided in Section 10.3(c) hereof. Buyer agrees
that Seller shall have no obligation or commitment to any Compression employee
with respect to any Employee Plan or Benefit Arrangement adopted by Compression
or Buyer on or after the Closing Date.
2.8 Certain Other Liabilities. Seller agrees to assume, effective as of
the Closing Date, any liability of Compression that (i) is related to any
silicosis claim that has been filed by any third party, including without
limitation, any former or current employee of Compression as of the date of this
Agreement, or (ii) without being limited by clause (i), results from any act,
condition or occurrence that occurs prior to the Closing Date to the extent that
such liability (such liability to include, without limitation, any liability for
silicosis-based claims) is covered by one of Seller's occurrence-based insurance
policies and Seller agrees to absorb any self insurance or retention amounts in
connection with such liability. Seller warrants that all insurance policies
listed on Schedule 2.8 attached hereto are occurrence-based insurance policies
as of the date hereof. All information listed on Schedule 2.8 is complete and
accurate in all material respects.
SECTION 3. THE CLOSING
3.1 Closing. The closing of the transactions contemplated hereby shall
take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, commencing at 10:00 a.m. local time on or before March 6,
1998, provided all of the conditions set forth in Section 7 have been satisfied
or waived by the party entitled to grant such waiver, or at or on any other
mutually agreeable place, time or date, or if no date has been agreed to, on any
date specified by one party to the other upon five days' notice following
satisfaction of the latest to occur of the conditions set forth in Section 7.1;
provided that the other conditions set forth in Section 7 shall have been
satisfied or waived by the party entitled to grant such waiver.
-8-
3.2 Deliveries at Closing. If all conditions set forth in Section 7 are
satisfied or waived by each party entitled to grant such waiver, at the Closing
(i) the Buyer shall make the cash portion of the Closing Payment contemplated by
Section 2.3 by bank wire transfer of immediately available funds to an account
specified in writing by Seller to Buyer not less than two business days prior to
the Closing Date and shall deliver the Adjustment Agreement to Seller, (ii) the
Seller shall deliver or cause to be delivered to the Buyer certificates
evidencing the Shares, which certificates shall be properly endorsed for
transfer or accompanied by duly executed stock powers, in either case executed
in blank or in favor of the Buyer or its nominee as the Buyer may have directed
prior to the Closing Date, (iii) the Buyer and Seller shall each provide to the
other such proof or indication of satisfaction of the conditions set forth in
Section 7 as the parties whose obligations are conditioned upon such
satisfaction may reasonably request, and (iv) the Buyer and Seller shall each
provide to the other the certificates, opinions, agreements and resignations
required by Section 7 and take such other action as is required to consummate
the Stock Sale.
SECTION 4. REPRESENTATIONS OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
4.1 Corporate Organization. (a) The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder.
(b) Compression is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. Compression has full
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Compression is duly qualified or
licensed to do business as a foreign corporation in good standing in the
jurisdictions in which the ownership of its property or the conduct of its
business requires such qualification, except those jurisdictions, if any, in
which the failure to be so qualified would not have a Material Adverse Effect.
4.2 Capital Stock. Compression has an authorized capitalization
consisting of 5,000 shares of Common Stock, of which the Shares are the only
issued and outstanding shares of Common Stock. All such outstanding Shares have
been duly authorized and validly issued and are fully paid and nonassessable. No
shares of Common Stock are held in Compression's treasury. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or agreements of any character, whether absolute or
contingent, providing for the purchase, issuance or sale of any shares of the
capital stock of Compression other than as contemplated by this Agreement.
4.3 Ownership of Stock. (a) The Seller is the lawful, beneficial and
record owner of the Shares, all of which are owned by Seller free and clear of
any Liens, and upon Closing Buyer will acquire good and valid title to the
Shares free and clear of Liens.
-9-
(b) Compression has no subsidiaries and does not own or have the
right or obligation to acquire, directly or indirectly, any capital stock or
other equity or proprietary interest in any Person.
4.4 Authorization; Enforceability. The Board of Directors of the Seller
has duly approved and authorized the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and no other
corporate proceedings on the part of the Seller are necessary to approve and
authorize the execution and delivery of this Agreement by the Seller and the
consummation by the Seller of the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
4.5 No Approvals or Conflicts. Neither the execution, delivery or
performance by the Seller of this Agreement nor the consummation by the Seller
of the Stock Sale or the other transactions contemplated by this Agreement will
(a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of the Seller or Compression, (b)
violate, conflict with or result in a breach of any provision of, or constitute
a default under, or result in the termination or cancellation of, or accelerate
the performance required by, or result in the creation of any Lien upon any of
the properties of Compression or upon the Seller's interest in the Shares under,
any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or commitment or obligation to which the Seller or Compression
or any of their properties may be bound or affected, (c) violate any order,
writ, injunction, decree, judgment, ruling, law, rule or regulation of any court
or governmental authority, domestic or foreign, applicable to the Seller or
Compression or any of their respective properties, or (d) except for any
required filings under the HSR Act (as provided in Section 6.1(b)) or those that
have already been obtained, require any consent, approval or authorization of,
or notice to, or declaration, filing or registration with, any governmental or
regulatory authority in connection with the execution, delivery and performance
of this Agreement by the Seller.
4.6 Properties and Equipment. Compression has good, valid and
marketable title to all of its properties and assets, including all the
properties and assets reflected in the Compression Latest Balance Sheet, in each
case subject to no Liens other than Permitted Liens and except for any
dispositions permitted pursuant to the terms hereof, on the Closing Date will
have such title with respect to all of its properties and assets. Compression
owns or has valid leasehold interests in all properties and assets necessary for
the continued conduct of its business in the ordinary course consistent with
past practices. All properties or assets used by Compression that are held under
lease are held under valid and enforceable leases subject only to exceptions
that are not likely to have a Material Adverse Effect and do not interfere with
the use by Compression of such assets.
4.7 Material Contracts. (a) Except as set forth in Schedule 4.7,
Compression is neither a party to, nor is it or its assets bound by or subject
to, (i) any collective bargaining agreement or any other agreement relating to
the employment of any person by Compression,
-10-
(ii) any agreement, indenture or other instrument that contains restrictions
with respect to the payment of dividends or any other distribution in respect of
its capital stock, (iii) any agreement, contract or commitment relating to
capital expenditures of an amount or value in excess of $50,000, (iv) any
contract for the provision of supplies to Compression in excess of $50,000, (v)
any loan or advance to, or investment in, any other Person or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment of an amount or value in excess of $50,000, except for intercompany
loans to Seller, (vi) any guarantee, surety or other contingent liability in
respect of any indebtedness, liability or obligation of any other Person, (vii)
any agreement that in any way restricts or purports to restrict the business
activity of Compression or limits Compression's ability to engage in any line of
business or compete with any Person, (viii) any line of credit, whether drawn
upon or not, or any loan agreement obligating it to repay to any creditor,
whether secured or unsecured, (ix) any tax indemnity, tax sharing, tax payment
or tax allocation agreement, (x) any lease, except for leases of compressor
equipment in the ordinary course of business, or sublease, whether Compression
is lessor or lessee, involving annual payments in excess of $50,000, (xi) any
sales agency, distributorship or marketing and distribution agreements, other
than those that can be terminated without penalty upon 60 days or less notice,
(xii) any agreement that was not entered into in the ordinary course of
Compression's business and that involves annual payments in excess of $50,000,
(xiii) except as disclosed on Schedule 10.3(d) hereto, any agreement, plan
document, trust agreement, insurance contract or contract for services regarding
or with respect to any employee benefit plan, as defined in Section 3(3) of
ERISA, including any agreement, commitment, understanding or other arrangement
to deliver severance payments to any current or former employee of Compression,
(xiv) any employment, management, service, consulting or other similar contract,
including without limitation any such oral or written agreement between Seller
and Compression or between Compression and any affiliate of Seller or
Compression, (xv) any agreement that is or contains a power of attorney by or in
favor of Compression, except those made in the ordinary course of business.
(b) Except for the Intercompany Indebtedness or as set forth in
Schedule 4.7, the Seller is not a party to (i) any loan or advance to or from
Compression or any agreement or commitment relating to the making of any such
loan or advance or (ii) any guarantee or other contingent liability in respect
of any Indebtedness of Compression.
(c) Neither the Seller nor Compression nor any Affiliate has
entered into any agreement (other than this Agreement) or commitment, whether
absolute or contingent, obligating it to sell or otherwise dispose of any
substantial part of Compression's stock or assets to, or to enter into a
business combination with, any other Person.
(d) Each contract or agreement set forth in Schedule 4.7 (or
required to be set forth in Schedule 4.7) is in full force and effect and is
enforceable by Compression, and there exists no breach, default or event of
default or event, occurrence, condition or act (including the Stock Sale) which,
with the giving of notice, the lapse of time or the occurrence of any other
event or condition, would become a breach, default or event of default
thereunder, except for any such breach, default or event of default that is not
likely to have a Material Adverse Effect.
-11-
4.8 Litigation and Claims. (a) Except as set forth in Schedule 4.8,
there is no action, suit, investigation or proceeding at law or in equity, any
arbitration or any administrative or other proceeding by or before any court,
governmental instrumentality or agency, pending or, to the knowledge of the
Seller, threatened or contemplated in writing against or affecting Compression,
or any of its properties or rights, that is likely to have a Material Adverse
Effect. Compression is not currently subject to any judgment, order or decree
entered in any lawsuit or proceeding.
(b) Except as set forth in Schedule 4.8, there have been no
warranty claims made against Compression, or claims arising under any continuing
guarantee or indemnity issued by Compression in excess of $20,000 and no such
claims are currently pending or, to the Seller's knowledge, threatened.
4.9 Accounts Receivable. Set forth on Schedule 4.9 is a list and
description (including an aging report) as of September 30, 1997, of all
outstanding notes, drafts and accounts receivable, including without limitation,
accrued but unbilled receivables (which accrued but unbilled receivables are
identified by customer), of Compression. All receivables including accrued but
unbilled receivables that are outstanding as of the Closing Date will be valid
obligations of the persons obligated to pay such accounts receivable and will be
subject to no material counterclaim or set-off, and, subject only to
consistently recorded reserves for bad debts as reflected in the Closing Date
Net Assets Statement, all such receivables will be good and collectible in the
ordinary course of business, except (a) for accrued but unbilled receivables,
which will be collectible within 90 days from the date billed and (b) as
otherwise disclosed on Schedule 4.9. The representations and warranties
contained in this Section 4.9 shall terminate on the date that such Uncollected
Receivables (as defined in Section 10.4(b)) are repurchased by the Seller
pursuant to Section 10.4. There are no receivables outstanding as of the date
hereof for which Seller has failed on a timely basis to provide to the account
debtors therein the services or products contracted for, except for any such
receivables as to which a bad debt reserve has been established.
4.10 Employment Relations. There (a) is no unfair labor practice
complaint against Compression pending before the National Labor Relations Board,
(b) is no labor strike, slowdown or stoppage pending or, to the Seller's
knowledge, threatened against or involving the employees of Compression, (c) is
no labor union that claims to represent the employees of Compression, (d) is no
collective bargaining agreement currently being negotiated by Compression with
respect to its employees, (e) is pending no labor or labor related grievance
that is likely to be material and no arbitration proceeding arising out of or
under any collective bargaining agreement of Compression and no claim therefor
has been asserted, and (f) has not been any material labor difficulty
experienced by Compression during the past three years.
4.11 Employee Benefit Plans. Compression has no Employee Plans or
Benefit Arrangements other than through its participation, and the participation
of its employees in the Employee Plans and Benefit Arrangements of Seller and
other than the Severance Policy adopted by the Board of Directors of Compression
on November 19, 1997. To the extent that employees of Compression participate
in, or are entitled to participate in, or benefit from, or participated in or
were entitled to participate in or benefited from, any Benefit Arrangement or an
Employee Plan, Buyer will not incur any liability, or other obligation to, or
with respect
-12-
to, such Benefit Arrangement or Employee Plan, including any fine, tax or
penalty imposed by any federal, state or local government or governmental agency
or government-owned corporation, now or at any time in the future, except for
any severance benefits payable to Compression's employees in accordance with
Section 10.3(c) and the provisions of Schedule 10.3(c) hereto. None of the
assets of Compression is subject to any lien in favor of or asserted by the
Internal Revenue Service, the Pension Benefit Guaranty Corporation, the
Department of Labor or any other governmental authority, agency, department or
government-owned corporation. All group health plans of the Seller that are
subject to Sections 601, et seq. of ERISA or analogous state law and that cover
employees of Compression have at all times fully complied with the requirements
of such statutes, including without limitation the notification and continuation
of coverage of requirements thereof.
4.12 Interests in Clients and Suppliers. Neither Compression or the
Seller, nor any officer or director (or, to the Knowledge of Seller, any member
of the immediate family of a director or officer of Seller or Compression)
thereof, possesses, directly or indirectly, any financial interest in, or is a
director, officer or employee of, any Person that is a supplier, distributor,
customer, lessor, lessee or competitor of Compression. Ownership of less than 5%
of any class of securities of a company that has registered at least one class
of its securities under the Securities Exchange Act of 1934 shall not be deemed
a financial interest for purposes of this section.
4.13 Environmental Matters. (a) Compression possesses all necessary
Permits and authorizations that are required under Environmental Laws to operate
the facilities, assets and business of Compression. Except as disclosed on
Schedule 4.13 or in a Report referred to in Section 4.13(e), to the Knowledge of
Seller, the operations of Compression are in compliance with all Environmental
Laws, or such Permits or authorizations, including but not limited to all laws
and regulations imposing record-keeping, maintenance, testing, storage,
transportation, use, generation, collection, treatment, recovery, removal,
discharge, disposal, inspection, registration, notification and reporting
requirements with respect to Hazardous Materials. To the knowledge of Seller,
there are no pending penalties or announced changes in the manner that a
governmental or regulatory authority enforces the air emission requirements in
Environmental Laws that would have a Material Adverse Effect on Compression's
air emission compliance program.
(b) No Environmental Claims have been asserted within the past five
years against Seller, Compression or, to the Seller's knowledge and except as
included in the Environmental Reports on Schedule 4.13, a
predecessor-in-interest of Compression, regarding (i) the operations of
Compression or any predecessor-in-interest, (ii) Compression's assets, or (iii)
any properties now or previously owned or leased by Compression. To the
Knowledge of Seller, there are no threatened or pending Environmental Claims
against Seller, Compression or a predecessor-in-interest of Compression which
are reasonably likely to result in Environmental Liabilities regarding (i) the
operations of Compression, (ii) Compression's assets, or (iii) any properties
now or previously owned or leased by Compression. Seller has no knowledge of any
Environmental Claims that have been asserted against any facilities that may
have received Hazardous Materials generated by Compression or any
predecessor-in-interest that is reasonably likely to result in an Environmental
Liability.
-13-
(c) Except as disclosed on Schedule 4.13 or in an Environmental
Report referred to in Section 4.13(e), to the Knowledge of Seller, there are no
Hazardous Materials used, disposed of, discharged or stored by Compression, and
any Hazardous Materials disclosed on Schedule 4.13 as used, disposed of,
discharged or stored are and have been so used, disposed of, discharged or
stored in compliance with Environmental Laws. To the Knowledge of Seller, there
has been no Release (i) at any of the properties now or previously owned,
operated or leased by Compression, or except as included in the Environmental
Reports on Schedule 4.13, any predecessor-in-interest of Compression, (ii) from
any assets owned, leased or operated by Compression except as included in the
Environmental Reports on Schedule 4.13, any predecessor-in-interest of
Compression violating Environmental Laws or requiring Remedial Action, or (iii)
at any disposal, storage or treatment facility which received Hazardous
Materials generated by Compression or any predecessor-in-interest which is
reasonably likely to result in Environmental Liabilities.
(d) There are no disposal sites for Hazardous Materials located on
the real estate owned, leased or operated by Compression or any
predecessor-in-interest.
(e) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses (collectively, "Environmental Reports")
conducted by, or which are in the possession or control of, Compression or the
Seller in relation to any premises owned, operated or leased by Compression,
except for those Environmental Reports which have been made available to the
Buyer prior to the date hereof, which Environmental Reports are listed on
Schedule 4.13. Seller shall have no liability under Section 8.1(a)(i) with
respect to any matter fairly disclosed in an Environmental Report. Seller
represents that it has provided Buyer with complete copies of any Environmental
Reports referenced herein.
4.14 Compliance with Laws. (a) Compression is in material compliance
with, and is not in default or violation in any respect under, and has not
conducted its operations in material violation in any respect of, any law, rule,
regulation, decree or order applicable to it.
(b) Except as provided in Schedule 4.14, at no time during the last
five years has Compression been notified in writing that it was the subject of
any foreign, federal, state or local criminal investigation. Except as provided
in Schedule 4.14, at no time in the last five years has Compression been
notified in writing by any foreign, federal, state or local governmental
authority of any violation of any law, regulation, ordinance, rule or order
(including those described in other subsections of this Section 4).
4.15 Licenses and Permits. Compression possesses such federal, state,
local and foreign governmental licenses, permits and other authorizations
necessary for the continued conduct of its business in the ordinary course,
consistent with past practices, without material interruption, (collectively
"Permits"), and such Permits are in full force and effect and have been and are
being fully complied with by Compression in all material respects. None of the
governmental agencies or instrumentalities that have issued the Permits has
notified Compression in writing of its intent to modify, revoke, terminate or
fail to renew any such Permit, and, to the Knowledge of Seller, no such action
has been threatened. No Permit shall be modified, revoked or shall lapse as a
result of the Stock Sale.
-14-
4.16 Absence of Certain Changes. Except as set forth in Schedule 4.16
or as expressly provided for elsewhere herein, Compression has not, since the
date of the Compression Latest Balance Sheet: (a) incurred any Indebtedness
except Intercompany Indebtedness, (b) permitted any of its assets to be
subjected to any Lien, other than a Permitted Lien, (c) sold, transferred or
otherwise disposed of any assets, other than (i) sales of equipment on or after
the Compression Latest Balance Sheet Date and prior to December 31, 1997 that
are in the ordinary course of business and (ii) sales of Compression equipment
pursuant to the exercise (in accordance with their terms) of purchase options
under existing leases of Compression equipment, and except for sales or
trade-ins of vehicles in the ordinary course of business, (d) merged or
consolidated with any other entity, (e) made any material capital expenditure or
commitment therefor except in the ordinary course of business, (f) declared, set
aside, increased or paid any dividend or declared or made any distribution on
any shares of its capital stock, or redeemed, reclassified, purchased or
otherwise acquired any shares of its capital stock or authorized or issued any
shares of its capital stock or any option, warrant or other right to purchase or
acquire any such shares, (g) made any loan to any Person other than intercompany
loans that are included within Intercompany Indebtedness, (h) written off as
uncollectible any notes or accounts receivable, except for write-offs in the
ordinary course of business charged to applicable reserves, (i) waived any
rights or settled any claims, except for such waivers or settlements granted or
entered into in the ordinary course of business, (j) granted any increase in the
rate of wages, salaries or other compensation or benefits to any of its
employees, other than increases or payments in the ordinary course of its
business consistent with past practice, (k) made any change in any method of
accounting practice, (l) amended its certificate of incorporation or by-laws,
(m) suffered or incurred any damage, destruction, fire, explosion, accident,
flood, or other casualty loss or act of God (whether or not covered by
insurance) that has had a Material Adverse Effect, (n) amended or terminated, or
suffered any amendment or termination of, any Permit, contract, lease, license,
purchase order or similar commitment or right that is likely to have a Material
Adverse Effect, (o) amended or modified in any respect any Benefit Arrangement
or Employee Plan, (p) suffered any labor disturbances that is likely to have a
Material Adverse Effect, (q) otherwise failed to operate its business in the
ordinary course consistent with past practices so as to preserve its business
organization intact and to preserve the goodwill of its customers, suppliers,
employees and others with whom it has business relations, or (r) agreed to do
any of the foregoing.
4.17 Customers and Suppliers. Schedule 4.17 sets forth a list of the 25
largest suppliers of products and services to, and the 25 largest customers of
products and services of, Compression for the fiscal year ended March 31, 1997.
Other than as set forth on Schedule 4.17, since March 31, 1997, there has not
been any termination, cancellation or material limitation, modification or
change in the business relationship of Compression with any such customer or
supplier and Compression and the Seller are unaware of any threatened loss of
any such customer or supplier.
4.18 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Seller or Compression is, or will be, entitled to any
commission or broker's or finder's fees from any parties hereto, or any
Affiliate of the parties hereto, in connection with the Stock Sale, other than
fees to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. and ▇▇▇▇▇▇▇ & Company, International, the payment of
which shall be Seller's sole responsibility.
-15-
4.19 Warranties. Compression only provides product warranties with
respect to equipment and products sold primarily through its Tide Air & Gas
division that supplement warranties from manufacturers of individual components
of such products which are passed on to customers. With respect to its rental of
compression equipment, Compression's only service warranties are occasional
service warranties that relate to run time performance as is standard in the
industry. Fulfillment of such warranties is related to, and dependent upon,
service provided by Compression. There is no material outstanding liability or
claim or, to Seller's knowledge, threatened claim, relating to such warranties.
4.20 Asset Condition. Subject to those items disclosed on Schedule
4.20, the plant, equipment and machinery of Compression, taken as a whole, are
of an industry standard (including operating condition and state of repair) as
would be expected of a prudent operator in the compression business (usual wear
and tear excepted). During the past two years, there has not been any material
interruption in the operations of Compression due to inadequate maintenance.
4.21 Inventory. The inventory of Compression as set forth on the
Compression Latest Balance Sheet was, and the inventory of the Compression is,
in usable or salable condition in the ordinary course of business at the amounts
carried on the Compression Latest Balance Sheet, net of any obsolescence
reserve, other than items not material to the inventory taken as a whole. The
materials and supplies included in such inventory are of at least the standard
quality for such items in the gas compression industry and are not in excess of
the normal purchasing patterns of Compression. Seller has no knowledge that (i)
any material adverse condition affects the supply of materials available to
Compression, or (ii) that the costs associated with work-in-process exceed the
salable value of such work-in-process. The amounts of the inventories reflected
on the Compression Latest Balance Sheet and on the books and records of Seller
and/or Compression have been determined in accordance with GAAP applied on a
consistent basis.
4.22 Intellectual Property. Schedule 4.22 hereto sets forth all
patents, trademarks, service marks, trade names, copyrights, franchises, all
applications for any of the foregoing, and all permits, grants and licenses or
other rights running to or from Compression relating to any of the foregoing
which are used in or useful to the business of Compression. The rights of
Compression in all property set forth on Schedule 4.22 hereto are free and clear
of any Liens other than Permitted Liens. Seller has no notice of any adversely
held patent, trademark, service ▇▇▇▇, trade name, copyright or franchise of any
other person or notice of any claim of any other person relating to any of the
property set forth on Schedule 4.22 hereto, and Seller has no knowledge of any
basis for any such charge or claim.
4.23 Compression Financial Statements; Absence of Undisclosed
Liabilities. The Compression Financial Statements have been prepared in
accordance with GAAP applied on a basis consistent with prior periods and
present fairly the financial condition, results of operations and cash flows as
at the respective dates hereof and for the periods referred to therein. The
unaudited interim financial statements included within the Compression Financial
Statements reflect all adjustments which are necessary for a fair statement of
the results for the interim periods presented therein. Except as disclosed in
Schedule 4.23, Compression does not have, nor are any of its assets subject to,
any liability, commitment, indebtedness or obligation
-16-
(of any kind whatsoever, whether absolute, accrued, contingent, known, unknown,
matured or unmatured) ("Undisclosed Liabilities") except for Undisclosed
Liabilities that (i) are disclosed or required to be disclosed or are expressly
exempted from disclosure by another representation contained in this Section 4,
(ii) are contained or disclosed in the Compression Financial Statements, (iii)
arise under the economic terms and general provisions of any contract or
arrangement of Compression or (iv) could not be reasonably expected to have a
material impact on, or result in a material liability to, Compression.
4.24 Projections. To the Knowledge of Seller, the financial projections
attached hereto as Exhibit C have been prepared in good faith based upon
reasonable assumptions (it being understood that the projections are subject to
significant uncertainties and contingencies, many of which are beyond Seller's
control, and that no assurance can be given that such projections will be
realized).
4.25 Taxes. Except as set forth in Schedule 4.25, (i) each of Seller,
Compression and Seller's Group has filed all material federal, state, local and
foreign Returns and has paid all Taxes due with respect to the periods covered
by such Returns, (ii) Compression has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, (iii) no material Tax liens have been filed and no
material claims are being asserted with respect to any Taxes of Compression,
(iv) Compression has complied in all material aspects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and has
withheld all amounts required by law to be withheld from the wages or salaries
of employees and independent contractors and is not liable for any Taxes for
failure to comply with such laws, rules, and regulations, (v) Compression is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a change in accounting method initiated by Seller and Seller
does not have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change in accounting method, except that this representation
shall not be deemed to cover any change of accounting method undertaken by
Seller at the request of Buyer, (vi) the acquisition of the stock of Compression
will not be a factor causing any payments to be made by Compression to be
nondeductible (in whole or in part) pursuant to Section 280G of the Code, (vii)
no consent or election under Section 341 of the Code has been made for or with
respect to Compression, and (viii) no property of Compression is "tax exempt use
property" within the meaning of Section 168(h) of the Code, and Compression is
not a party to any lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended.
4.26 No Other Representations. Seller shall not be deemed to have made
to Buyer any representation or warranty other than as expressly made by Seller
in this Section 4. Without limiting the generality of the foregoing, and
notwithstanding any otherwise express representations and warranties made by
Seller in this Section 4, Seller makes no representation or warranty to Buyer
with respect to:
(a) any projections, estimates or budgets heretofore delivered to
or made available to Buyer of future revenues, expenses or expenditures or
future results of operations of Compression (except for such representations as
are given in Section 4.24); or
-17-
(b) except as expressly covered by a representation and warranty
contained in this Section 4 hereof, any description of the business or
operations of Compression or any other information or documents (financial or
otherwise) made available to Buyer or its counsel, accountants or advisers with
respect to Compression.
SECTION 5. REPRESENTATIONS OF THE BUYER
The Buyer represents and warrants to the Seller that:
5.1 Corporate Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the full corporate power and authority to enter into this Agreement and
to perform its obligations hereunder.
5.2 Authorization; Enforceability. The Board of Directors of the Buyer
has duly approved and authorized the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and no other
corporate proceedings on the part of the Buyer are necessary to approve and
authorize the execution and delivery of this Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
5.3 No Approvals or Conflicts. Neither the execution and delivery by
the Buyer of this Agreement nor the consummation by the Buyer of the Stock Sale
will (a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of the Buyer, (b) violate, conflict with
or result in a breach of any provision of, or constitute a default under, or
result in the termination or cancellation of, or accelerate the performance
required by, or result in the creation of any Lien upon any of the properties of
the Buyer under, any note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or commitment or obligation to which the Buyer or
any of its properties may be bound or affected, (c) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any court or
governmental authority, domestic or foreign, applicable to the Buyer or its
properties, or (d) except for any required filings under the HSR Act (as
provided in Section 6.1(b)) or those that have already been obtained, require
any consent, approval or authorization of, or notice to, or declaration, filing
or registration with, any governmental or regulatory authority in connection
with the execution, delivery and performance of this Agreement by the Buyer
other than those that, in the case of clauses (b), (c) and (d) above, are not
likely to have a Material Adverse Effect.
5.4 Purchase for Investment. Buyer represents and warrants that it will
acquire the Shares for investment and not with a view to, or for resale in
connection with, the distribution or other disposition thereof in violation of
the Securities Act of 1933, as amended. Buyer agrees that it will not, directly
or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose
of any of the Shares (or solicit offers to buy, purchase, or otherwise acquire
-18-
or take a pledge of any of the Shares), except in compliance with the Securities
Act, the rules and regulations promulgated thereunder and applicable state
securities laws.
5.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Buyer is, or will be, entitled to any commission or broker's or
finder's fees from the any parties hereto, or any Affiliate of the parties
hereto, in connection with the Stock Sale.
5.6 Proceedings. There is no action, suit or proceeding at law or in
equity, any arbitration or any administrative or other proceeding by or before
any governmental instrumentality or agency, pending or, to the knowledge of the
Buyer, threatened against or affecting the Buyer that could have a material
adverse effect on the ability of the Buyer to consummate the Stock Sale.
5.7 Investigation. (a) Buyer acknowledges that (i) it has had the
opportunity to visit with the Seller and Compression and meet with their
respective officers and other representatives to discuss the business and the
assets, liabilities, financial condition, cash flow and operations of
Compression; and (ii) it has made its own independent examination,
investigation, analysis and evaluation of Compression, including Buyer's own
estimate of the value of Compression's business.
5.8 ▇▇▇▇▇▇ ▇▇▇▇▇▇ III's Capacity to Fund Equity. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners
III, L.P. has and will have the ability to fund the equity of Buyer required
under the terms of the Commitment Letters (defined in Section 5.9) under the
terms of its partnership agreement.
5.9 Buyer's Financing Commitments. Buyer has obtained from Bankers
Trust Company binding and executed firm commitment letters (the "Commitment
Letters") dated the date hereof agreeing to facilitate the Stock Sale by
providing senior bank financing in an amount up to $210 million and, if
necessary, bridge financing in the aggregate principal amount of up to $100
million, copies of which letters have been provided to Seller.
SECTION 6. PRE-CLOSING COVENANTS
From the date hereof through the Closing Date, the parties covenant and
agree as follows:
6.1 Cooperation and Best Efforts; HSR Filing. (a) Each party will
cooperate with the other and use its best efforts to (i) procure all necessary
and appropriate consents and approvals, (ii) complete and file all necessary and
appropriate applications, notifications, filings and certifications, (iii)
satisfy all requirements prescribed by law for, and all conditions set forth in
this Agreement to, the consummation of the Stock Sale, (iv) effect the Stock
Sale at the earliest practicable date, and (v) before and after Closing,
cooperate with Compression to the extent necessary to conform the presentation
of the Compression Financial Information to the rules and regulations of the
U.S. Securities and Exchange Commission.
(b) Without limiting the generality of the foregoing; within ten
business days after the execution of this Agreement, Buyer and Seller shall each
file or cause to be filed any notification and report forms and related
materials that it or its Affiliates may be required
-19-
to file with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act").
6.2 Press Releases. Buyer will cooperate with the Seller in the
preparation of any press releases announcing the execution of this Agreement or
the consummation of the Stock Sale. Buyer, without the prior consent of Seller,
will not issue any press release or other written or oral statement for general
circulation relating to the transactions contemplated hereby. Seller agrees that
it will consult with Buyer prior to the issuance of any press release or other
written or oral statement for general circulation relating to the transactions
described hereby, except to the extent such consultation is not feasible for the
Seller to discharge its legal obligations.
6.3 Review of Compression; Availability of Management. (a) Prior to the
Closing Date, the Seller will afford the Buyer and its representatives, during
regular business hours and upon reasonable notice, such access to the
properties, personnel and books and records of Compression as the Buyer may
reasonably request in connection with the Stock Sale including the financing
thereof, in accordance with the terms of the Confidentiality Agreement, in
particular Section 7 thereof. To the extent the obligations hereunder would not
require the interruption of existing services, the unreasonable devotion of
managerial resources or attention, or materially interfere with customer
relations, Compression shall fully cooperate in locating and affording access to
all such properties, assets, books and records for the Buyer, and shall make
such properties and assets available for such inspection by Buyer. An employee
or representative of Compression shall be entitled to be present at any or all
inspections of Compression's properties, assets and records by Buyer or Buyer's
representatives.
(b) Seller will use commercially reasonable efforts to cause the
officers of Compression (and any other person holding a managerial position with
Compression) to, at the request of Buyer, aid Buyer or Buyer's representatives
in the marketing of securities to be issued by Buyer or Compression including,
without limitation, participation by such employees in "road shows" or other
similar events.
6.4 Conduct of Business of Compression Prior to the Closing Date. The
Seller shall cause Compression to conduct its operations in the ordinary and
usual course of business and preserve intact its business organizations,
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with it. Without the prior written consent
of the Buyer, the Seller shall not commit or omit to do any act, and shall cause
Compression not to commit or omit to do any act, that (i) would cause a breach
of any agreement, commitment or covenant of the Seller contained in this
Agreement in any material respect, (ii) would cause the representations and
warranties contained in Section 4 to become untrue in any material respect, or
(iii) would result in the sale or other disposition of Compression equipment,
other than sales of equipment pursuant to the exercise (in accordance with their
terms) of purchase options under existing leases of Compression equipment and
except for sales or trade-ins of vehicles in the ordinary course of business.
-20-
6.5 Notification of Changes. (a) Each of the Seller and the Buyer shall
promptly notify the other of any event that causes any representation or
warranty given by either of them, respectively, in Sections 4 and 5 to become
untrue.
(b) The Seller shall have the right until the Closing to supplement
or amend any of the Schedules described in Section 4 with respect to any matter
arising or discovered after the date of this Agreement which, if existing or
known on the date of this Agreement, would have been required to be set forth or
described in such Schedules. For all purposes of this Agreement, including for
purposes of determining whether the conditions set forth in Section 7 have been
fulfilled, the Schedules shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
all information contained in any supplement or amendment thereto, except to the
extent that they reflect an event or condition that would be beneficial to the
Buyer; provided, however, that if the Closing shall occur, then all matters
disclosed pursuant to any such supplement or amendment shall be deemed included
in the Schedules at Closing (without necessity of a written waiver or other
action on the part of any party) and to modify the applicable representations
and warranties for all purposes.
6.6 Confidentiality Agreement. The Confidentiality Agreement shall
remain in full force and effect until the earlier of (i) the Closing Date or
(ii) two years after the termination of this Agreement under Section 11.
6.7 Continued Effectiveness of Section 4.16. From the date hereof
through the Closing, Seller shall not, and shall cause Compression not to,
without the prior written consent of Buyer, undertake any actions specified in
Section 4.16.
6.8 Environmental Audit. (a) During the period from the date of this
Agreement through and including February 17, 1998 (the "Assessment Period"), the
Buyer shall have the right to make, or cause to be made, an environmental
assessment of the operations and physical premises of Compression by the
environmental firm of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, or another environmental firm selected by
Buyer and reasonably acceptable to Seller, and during the Assessment Period,
Buyer and its agents may (and Seller agrees to cooperate reasonably with Buyer
in this regard) enter and inspect the physical premises and conduct such Phase I
or Phase II assessments, tests, examinations, investigations and studies as may
be necessary or appropriate in Buyer's judgement to evaluate the environmental
condition of Compression's operations and properties now or previously leased
(the "Environmental Audit"). Prior to the Closing Date (or, in the event there
is no Closing, in perpetuity), Buyer shall keep any data or information acquired
through, or any reports or studies derived from, such Environmental Audit
strictly confidential and shall not disclose such data, information, reports or
studies to any third party except potential lenders, potential equity investors
and their respective advisors without the prior written approval of Seller.
Buyer shall perform such Environmental Audit at its sole cost and expense.
(b) Seller's agreement to grant Buyer access to the physical
premises pursuant to this Section 6.8 is subject to the following conditions:
-21-
(i) Buyer agrees to indemnify and hold harmless Seller, its
directors, officers, employees and agents from any claims or liabilities for the
injury or death of persons or damage to property, except that damage to property
that is reasonable and customary in performing Phase II assessments, arising
from the exercise of rights granted to Buyer pursuant to this Section 6.8. Buyer
shall indemnify and hold harmless Seller and its directors, officers, employees
and agents from and against any and all loss, cost, damage, expense, or
liability, including attorneys' fees, arising out of (A) any and all statutory
liens or other encumbrances for labor or materials furnished in connection with
such environmental audits as Buyer may conduct with respect to the physical
premises and (B) any injury to or death of persons or damage to property, except
for damage to property that is reasonable and customary in performing Phase II
assessments, as a result of such Environmental Audit (except where any such
injury or damage is caused solely by the gross negligence or willful misconduct
of Seller, its directors, officers, employees or agents). The indemnification
set forth in this Section 6.8 shall survive until the fifth anniversary of the
Closing Date.
(ii) Seller shall be provided with a certificate of insurance
or other appropriate evidence to the effect that the engineering firm retained
to conduct the procedures outlined by this Section 6 maintains adequate
liability and property damage insurance with respect to the exercise by Buyer
and its agents of the rights granted in this Section 6.8. Prior to any exercise
of the rights granted hereby, Buyer shall furnish, or shall cause to be
furnished to Seller a certificate of insurance evidencing the existence of the
insurance required hereunder, which certificate shall disclose the policy limits
of such insurance.
(c) The written reports of Buyer's environmental engineer with
respect to the Environmental Audit shall be made available to Seller as soon as
is practicable and, in no event later than the end of the Assessment Period. If
any condition is discovered which in the opinion of Buyer's environmental
engineer reveals (i) a Release or threatened Release, (ii) any condition giving
rise to a Remedial Action, (iii) actual or potential Environmental Claims, or
(iv) an instance of threatened or actual non-compliance with any Environmental
Law, including the presence of any Hazardous Materials, ("Environmental
Condition"), Buyer shall so advise Seller in writing ("Remediation Notice")
within five days following completion of the Environmental Audit, which shall
include the estimate of its environmental engineer of the reasonably anticipated
cost to remediate such Environmental Conditions ("Estimated Remediation Cost").
(d) If the Estimated Remediation Cost is estimated to exceed $20
million, Seller shall have the exclusive right to terminate this Agreement
within five days of its receipt of the Remediation Notice, following which
neither Buyer nor Seller shall have any further obligation or liability of any
kind under this Agreement or with respect hereto other than as provided in
Section 11.2 hereof. In the event of any such termination by Seller, Seller
agrees to pay up to $1 million of Buyer's expenses upon receipt of reasonable
documentation thereof.
(e) The cost of any remediation undertaken or caused to be
undertaken by Buyer or which Buyer becomes obligated to pay for, in each case to
the extent identified as part of the Estimated Remediation Cost shall be paid as
follows (the aggregate amount of such costs shall be referred to herein as the
"Actual Remediation Costs"):
-22-
(i) Seller shall pay 75% and Buyer shall pay 25% of the first
$4 million of Actual Remediation Costs;
(ii) Seller shall pay 83.33% and Buyer shall pay 16.67% of the
next $6 million of Actual Remediation Costs; and
(iii) Seller shall pay 100% of the amount by which the Actual
Remediation Costs exceed $10 million, but only to the extent the Actual
Remediation Costs do not exceed the Estimated Remediation Cost. Buyer shall pay
and be solely responsible for any Actual Remediation Costs that exceed the
Estimated Remediation Cost, except to the extent of a breach of Seller's
representations and warranties hereunder.
The environmental engineer that will conduct such remediation shall
be ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, or another environmental firm selected by Buyer and
reasonably acceptable to Seller.
(f) If, following its receipt of the report(s) from the
environmental engineer (which in no event shall be later than the last day of
the Assessment Period), Buyer concludes that there is a substantial possibility
of (i) significant financial liability to Compression or Buyer to third parties
or (ii) the imposition of significant fines, penalties or economic sanctions by
any governmental authority because of the Environmental Condition of
Compression's assets or properties, then Buyer shall have the right, within five
days of its receipt of such reports, to terminate this Agreement by notice to
the Seller.
(g) Notwithstanding the provisions of Section 8 or any other
provision of this Agreement, if Buyer and Seller consummate the Stock Sale, then
Seller shall have no liability with respect to any condition or state of facts
identified in the Remediation Notice as requiring remediation except as set
forth in Section 6.8(e).
6.9 Purchase of Compression Equipment; Repair and Maintenance of
Existing Compression Equipment. (a) Seller agrees that it shall not cancel any
orders for compression equipment that have heretofore been placed by
Compression. Seller further agrees that, upon one or more written requests made
by Buyer after the execution of this Agreement, it shall promptly place orders
for New Compression Equipment provided however that the maximum dollar amount of
any equipment so ordered shall not exceed $9.0 million.
(b) On and after the date hereof and through the Closing Date,
Seller agrees to continue to repair, maintain and overhaul Compression equipment
in the ordinary course of business consistent with prior practice.
6.10 Employees. Without the prior consent of Buyer, Seller agrees that
prior to the Closing Date it shall neither cause or permit Compression to
implement any changes in its current employment practices or practices nor
terminate the employment of any employee of Compression.
6.11 Covenant on Bonus and Other Incentive Payments. Seller agrees
that no later than the third day following the Closing Date, it shall pay or
provide funds to Compression for
-23-
it to pay any and all amounts due officers and employees of Compression for the
current fiscal year in accordance with the terms of all bonus and incentive
programs adopted by either Seller or Compression for the benefit of such
Compression officers and employees. If Seller provides funds to Compression for
it to pay such amounts, Seller shall indemnify and hold harmless Compression and
Buyer from and against all costs including without limitation taxes and
liabilities arising out of such payment and the obligations related thereto. To
the extent that Compression is to make such payments after the Closing, the
obligation to make such payments will be included in Current Liabilities.
SECTION 7. CONDITIONS TO CLOSING
7.1 Conditions Applicable to All Parties. The obligations of each of
the parties hereto to consummate the Stock Sale are subject to the satisfaction
(or the waiver by the Buyer and the Seller) of the following conditions at or
prior to the Closing:
(a) Restraining Action. No judgment, order or decree shall have
been issued or rendered by any court or other governmental body to restrain or
prohibit the Stock Sale.
(b) Statutory Requirements and Regulatory Approval. All statutory
requirements for the valid consummation of the Stock Sale shall have been
fulfilled and all appropriate orders, consents and approvals from all regulatory
agencies and other governmental authorities whose order, consent or approval is
required by law for the consummation of the Stock Sale shall have been received.
(c) HSR Act Proceedings. Any applicable waiting period under the
HSR Act shall have expired or been earlier terminated.
7.2 Additional Conditions Applicable to the Buyer's Obligations. The
obligations of the Buyer to consummate the Stock Sale are also subject to the
satisfaction (or waiver by the Buyer) of the following conditions at or prior to
the Closing:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Seller contained in Section 4 that are qualified as to
materiality shall be true and correct and such representations and warranties
that are not so qualified shall be true and correct in all material respects on
the Closing Date and the Seller shall have performed in all material respects
all covenants required by this Agreement to be performed by it at or prior to
the Closing. The Seller shall have delivered to the Buyer on the Closing Date a
certificate, dated the Closing Date and duly executed by the Seller, certifying
to the fulfillment of the conditions set forth in this paragraph.
(b) Capital Contribution. Seller shall have made the capital
contribution to Compression that is contemplated by Section 2.2.
(c) Transition Services Agreement. The parties shall have entered
into a Transition Services Agreement in substantially the form attached as
Exhibit D.
-24-
(d) Opinion of Counsel to Seller. Buyer shall have received the
favorable opinions of Jones, Walker, Waechter, Poitevent, Carrere & ▇▇▇▇▇▇▇,
L.L.P., and the General Counsel to Seller, respectively, dated the date of
Closing, addressed to Buyer, in the form of Exhibit E hereto.
(e) Financing Condition. Buyer shall have obtained funds
contemplated by its Commitment Letters, dated the date hereof, with Bankers
Trust in accordance with the terms of such Commitment Letters or such substitute
financing in the same amount as is reasonably acceptable to Buyer.
(f) Computer Software; Assignment of Rights. Seller shall have
delivered a (i) ▇▇▇▇ of sale to Buyer conveying to Compression, to the extent
the transfer thereof is not prohibited by any licensing restriction, any program
software, system software or database that is used by Compression as part of its
management information system, but specifically excluding any and all computer
hardware owned by Seller that is not residing on the physical premises or under
the control and possession of Compression or its employees, and (ii) an
assignment to Buyer of Seller's rights and benefits under (A) the
confidentiality agreements entered into in connection with Seller's efforts to
sell Compression and (B) any non-competition agreement or covenant restricting
any Person from engaging in conduct relating to Compression or its business.
Schedule 7.2(f) is a list of Seller's software licensing arrangements for
Compression that Seller, after due inquiry, has knowledge are subject to
transfer restrictions.
7.3 Additional Conditions Applicable to the Seller's Obligations. The
Seller's obligations to consummate the Stock Sale are also subject to the
satisfaction (or the waiver by the Seller) of the following conditions at or
prior to the Closing:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Buyer contained in Section 5 that are
qualified as to materiality shall be true and correct and such representations
and warranties that are not so qualified shall be true and correct in all
material respects on the Closing Date and the Buyer shall have performed in all
material respects all covenants required by this Agreement to be performed by it
at or prior to the Closing. The Buyer shall have delivered to the Seller on the
Closing Date a certificate, dated the Closing Date and duly executed by the
Buyer, certifying to the fulfillment of the conditions set forth in this
paragraph.
(b) Seller Guarantees. Buyer shall have either (i) caused Seller
to be relieved of all obligations as guarantor on any outstanding letters of
credit issued on behalf of Compression, or (ii) provided Seller with stand-by
letters of credit in the aggregate amount of such outstanding Compression
letters of credit.
SECTION 8. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
8.1 Indemnification. (a) After the Closing Date, subject to the terms
and conditions of this Section 8, including the limits on indemnity set forth in
Section 8.4, and further subject to the provisions of Section 9 regarding taxes,
which indemnification obligation shall be independent of this Section, the
Seller shall indemnify and hold harmless the Buyer
-25-
and its Affiliates, including Compression, and their respective officers,
directors, employees, agents and representatives (the "Buyer Indemnitees") from,
and will pay to the Buyer Indemnitees the amount (net of any proceeds received
by the Buyer Indemnitee from any form of insurance, indemnity by prior owner or
other source of reimbursement, or other actual, quantified and directly related
offsets or benefits, including quantifiable and tax benefits in the year
incurred (but giving effect to any tax detriment from receipt of indemnification
proceeds), obtained) of, any loss, liability, judgment, damage, cost or expense
(including interest, penalties, and the reasonable fees, disbursements and
expenses of attorneys, accountants and other professional advisors)
(collectively, "Losses") arising from or in connection with (i) any breach of
any representation or warranty of the Seller contained in Section 4, or (ii) a
breach of any agreement or covenant contained herein that by its terms is to be
performed by the Seller after the Closing Date.
(b) After the Closing Date, subject to the terms and conditions of
this Section 8, including the limits on indemnity set forth in Section 8.4, the
Buyer shall indemnify and hold harmless the Seller and its Affiliates and their
respective officers, directors and representatives (the "Seller Indemnitees")
from, and will pay to the Seller Indemnitees the amount (net of any proceeds
received by the Seller Indemnitee from any form of insurance, indemnity by prior
owner or other source of reimbursement, or other actual, quantified and directly
related offsets or benefits, including quantifiable and tax benefits in the year
incurred (but giving effect to any tax detriment from receipt of indemnification
proceeds) obtained) of, any Losses arising from or in connection with (i) any
breach of any representation or warranty of the Buyer contained in Section 5 or
(ii) a breach of any agreement or covenant contained herein that by its terms is
to be performed by the Buyer after the Closing Date.
8.2 Notice and Defense of Claims. (a) A Person seeking indemnification
under this Section 8 (the "Indemnified Person") shall give prompt written notice
to the indemnifying person or persons, or successors thereto (the "Indemnifying
Person"), of any matter with respect to which the Indemnified Person seeks to be
indemnified (the "Indemnity Claim"). Such notice shall state the nature of the
Indemnity Claim and, if known, the amount of the Loss. If the Indemnity Claim
arises from a claim of a third party, the Indemnified Person shall give such
notice within a reasonable time after the Indemnified Person has actual notice
of such claim, and in the event that a suit or other proceeding is commenced,
within 20 days after receipt of written notice by the Indemnified Person
thereof. Notwithstanding anything in this paragraph to the contrary, the failure
of an Indemnified Person to give timely notice of an Indemnity Claim shall not
bar such Indemnity Claim except and to the extent that the failure to give
timely notice has impaired materially the ability of the Indemnifying Person to
defend the Indemnity Claim.
(b) If the Indemnity Claim arises from the claim or demand of a
third party, the Indemnifying Person shall assume its defense, including the
hiring of counsel and the payment of all fees and expenses. The Indemnified
Person shall have the right to employ separate counsel and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless both the Indemnified Person and the
Indemnifying Person are named as parties and the Indemnified Person shall in
good faith determine that representation by the same counsel is inappropriate.
In the event that the Indemnifying Person, within 30 days after notice of any
such action or claim, fails to assume
-26-
the defense thereof, the Indemnified Person shall have the right to undertake
the defense, compromise or settlement of such action, claim or proceeding for
the account of the Indemnifying Person, subject to the right of the Indemnifying
Person to assume the defense of such action, claim or proceeding at any time
prior to the settlement, compromise or final determination thereof. Anything in
this Section 8 to the contrary notwithstanding, the Indemnifying Person shall
not, without the Indemnified Person's prior consent, settle or compromise any
action or claim or consent to the entry of any judgment with respect to any
action, claim or proceeding for anything other than money damages paid by the
Indemnifying Person. The Indemnifying Person may, without the Indemnified
Person's prior consent, settle or compromise any such action, claim or
proceeding or consent to entry of any judgment with respect to any such action
or claim that requires solely the payment of money damages by the Indemnifying
Person and that includes as an unconditional term thereof the release by the
claimant or the plaintiff of the Indemnified Person from all liability in
respect of such action, claim or proceeding.
(c) If the Indemnity Claim does not arise from the claim or demand
of a third party, the Indemnifying Person shall have 30 days after receipt of
written notice of such Indemnity Claim to object to such claim by giving written
notice to the Indemnified Person specifying the reasons for such objection or
objections. If the Indemnifying Person has not so objected to the Indemnity
Claim as of the close of business on such thirtieth day, the total amount of the
Indemnity Claim shall thereupon become chargeable to and payable by the
Indemnifying Person in accordance with the terms and conditions of this section.
If the Indemnifying Person objects to the Indemnity Claim and the parties are
unable to settle any such dispute, the parties shall have all rights and
remedies at law or in equity, and either the Indemnifying Person or the
Indemnified Person may commence an action or proceeding to resolve such dispute
and determine any amounts due hereunder from the Indemnifying Person.
8.3 Survival of Representations and Warranties. The right to
indemnification under Section 8.1 for any breach of the representations and
warranties made by each party herein shall survive until the date that is the
18-month anniversary date of the Closing Date, except that the representations
set forth in Section 4.13 shall survive until the fifth anniversary of the
Closing Date, and the representations set forth in Sections 4.2, 4.3, 4.11,
(and, to the extent any representations or warranties are given by Seller in
Section 2.7 and Section 2.8), shall survive indefinitely.
8.4 Limitations. Notwithstanding anything to the contrary in this
Agreement:
(a) Neither the Seller, on the one hand, nor the Buyer, on the
other hand, shall have any obligation to make indemnification payments with
respect to Indemnity Claims arising under Sections 8.1(a)(i) or 8.1(b)(i) until
the aggregate of all claims against it hereunder exceeds $2.0 million, and then
only to the extent the aggregate of such claims exceeds $1.0 million.
(b) Subject to paragraph (e), neither the Seller, on the one hand,
nor the Buyer, on the other hand, shall have any liability with respect to
Indemnity Claims arising under Sections 8.1(a)(i) or 8.1(b)(i) in excess of $100
million in the aggregate for all such Indemnity Claims.
-27-
(c) In no event shall any recovery under this Agreement include the
loss of anticipated profits, loss of managerial time, or lost opportunity.
(d) In the absence of common law fraud, this Section 8 shall serve
as the sole and exclusive remedy of the Buyer Indemnitees and the Seller
Indemnitees for Losses and for any other claims (other than those arising under
Section 6.8 and Section 10) in any way relating to this Agreement to the
exclusion of all other statutory or common law remedies (including rights under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended), whether based on contract, tort, strict liability or
otherwise.
SECTION 9. TAX MATTERS
9.1 Tax Sharing Agreements. Any Tax sharing agreement between
Compression and any other Person will be terminated as of the Closing Date and
will have no further effect for any taxable year (whether the current year, a
future year, or a past year) and Compression will not have any obligation or
liability with respect to any such agreement after the Closing Date.
9.2 Preparation of Returns and Payment of Taxes. The Seller and
Compression shall prepare and timely file (taking into account the extension of
any due date) all Returns and amendments thereto required to be filed by them
and the Seller's Group on or before the Closing Date. The Seller, Compression,
and each member of the Seller's Group shall pay and discharge all Taxes upon or
against it or any of its properties or assets before such Taxes shall become
delinquent and before penalties accrue thereon, except to the extent and as long
as: (a) such Taxes are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause any material
adverse effect upon the business, operations, results of operation, assets or
financial condition of Compression or any member of the Seller's Group; and (b)
Compression shall have set aside on its books reserves (segregated to the extent
required by sound accounting practice) in the amount of the demanded principal
imposition (together with interest and penalties relating thereto, if any).
9.3 Taxes and Returns for Periods Through the Closing Date. The Seller
will include, or cause to be included, the income of Compression on the Seller's
Group's consolidated federal and any consolidated, unitary or combined state and
local income Tax Returns for all periods through the Closing Date, the Seller
will file timely or cause to be filed timely such Returns and the Seller will
pay or cause to be paid any taxes attributable to such income, provided however
that to the extent that a liability for such taxes has been accrued and included
in Net Assets, then Seller shall have no obligation to make such tax payment.
Except as provided in Section 9.4, Seller also will timely prepare and file, or
cause to be prepared and filed, all other income Tax Returns of Compression for
all periods that end on or before the Closing Date and will pay or cause to be
paid all Taxes related thereto, provided however that to the extent that a
liability for such taxes has been accrued and included in Closing Date Net
Assets, then Seller shall have no obligation to make such tax payment.
Compression will furnish Tax information in its possession and reasonably
requested by Seller for inclusion in such Tax Returns for the Seller's Group for
the period ending on the Closing Date. The Seller will not take, or cause to be
taken, any position on such returns that relate to Compression that
-28-
would adversely affect Compression after the Closing Date, unless such position
would be reasonable in the case of a Person that owned Compression both before
and after the Closing Date and the Seller indemnifies Compression for any Tax
payable by Compression for the period after the Closing Date as a result of such
settlement. The income of Compression will be apportioned to the period up to
and including the Closing Date and to the period after the Closing Date by
closing the books of Compression as of the end of the Closing Date. The Buyer
and the Seller agree that, if Compression is permitted under any applicable
state or local income tax law to treat the Closing Date as the last day of a
taxable period, the Buyer, the Seller and Compression shall treat the Closing
Date as the last day of such taxable period.
9.4 Taxes and Returns for Transactions That Occur After the Closing
Date. The Buyer shall be responsible for all Taxes of Compression for taxable
periods after the Closing Date. The Buyer shall be responsible for any Taxes
that result from, any action or election made by the Buyer or Compression at the
direction of the Buyer on or after the Closing Date. If such an action or an
election results in an increase in the Seller's liability for Taxes under this
Agreement, the Buyer shall pay to the Seller an amount equal to the increase in
such Taxes. Notwithstanding the preceding two sentences, Buyer shall not be
responsible for, and shall not pay, any Taxes that result from, any increase in
Seller's liability for Taxes (i) imposed as a result of any election permitted
by Section 9.9 hereof or (ii) any election to forego any carryback period
permitted with respect to net operating losses or other Tax items attributable
to periods after the Closing Date.
9.5 Tax and Returns for Periods Commencing Before the Closing Date and
Ending After the Closing Date. The Buyer shall prepare or cause to be prepared
and file or cause to be filed any Tax Return of Compression for taxable periods
that begin before the Closing Date and end after the Closing Date. At least
fifteen (15) business days before the filing of any such Tax Returns with
respect to income Taxes, the Buyer shall submit copies of such Returns to the
Seller for the Seller's approval, which approval shall not be unreasonably
withheld. The Seller shall pay to the Buyer within fifteen (15) days after the
date on which Taxes are paid by the Buyer with respect to such periods an amount
equal to the excess of (i) the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date (the "Pre-Closing
Period") over (ii) the amount of any Taxes (including estimated Tax payments)
paid by the Seller prior to the Closing Date with respect to such taxable
periods, provided however that to the extent that a liability for such taxes has
been accrued and included in Closing Date Net Assets, then Seller shall have no
obligation to make such tax payment. In the event that the amount described in
(ii) of the immediately preceding sentence exceeds the amount described in (i)
of same sentence, the Buyer shall pay the excess to the Seller within fifteen
(15) days after the date on which such Taxes are paid by the Buyer with respect
to such periods. For purposes of this Section, 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 Taxes which relates
to the Pre-Closing Period shall (i) in the case of any personal property and
real property Taxes, 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 Pre-Closing Period and the denominator of which is the number of
days in the entire taxable period, and (ii) in the case of all other Taxes, be
determined based on the actual operations of Compression through the Closing
Date.
-29-
9.6 Audits. The Seller will allow, or cause to be allowed, Compression
or its representatives to participate at Compression's own expense in any audits
of the consolidated federal and consolidated, unitary or combined, income tax
Returns of the Seller and the Seller's Group to the extent that such audits
relate to Compression. The Seller will not settle, or cause to be settled, any
such audit in a manner that would adversely affect Compression after the Closing
Date unless (i) such settlement would be reasonable in the case of a Person that
owned Compression both before and after the Closing Date and the Seller
indemnifies Compression for any additional Tax payable by Compression for the
period after the Closing Date as a result of such settlement or (ii) the Seller
obtains the prior written consent of the Buyer, which consent shall not
unreasonably be withheld.
9.7 Indemnification for Taxes. (a) From and after the Closing Date, the
Seller shall protect, defend, indemnify and hold harmless the Buyer and
Compression from any and all Taxes (including any obligation to contribute to
the payment of any Taxes determined on a consolidated, combined or unitary basis
with respect to a Seller's Group of corporations that includes or included
Compression) which are (i) imposed on the Seller or any member (other than
Compression) of the consolidated, unitary or combined Seller's Group which
includes or included Compression or (ii) imposed on Compression in respect of
its income, business, property or operations or for which Compression may
otherwise be liable (A) for any taxable period ending on or before the Closing
Date (except for those periods described in Section 9.4) and for any Pre-Closing
Period (as defined and determined in Section 9.5), provided however that to the
extent that a liability for such taxes has been accrued and included in Closing
Date Net Assets, then Seller shall have no obligation to make such tax payment,
(B) resulting by reason of the several liability of Compression pursuant to
Treasury Regulations section 1.1502- 6 or any analogous state, local or foreign
law or regulation or by reason of Compression having been a member of any
consolidated, combined or unitary Seller's Group on or prior to the closing
Date, or (C) resulting from Compression ceasing to be a member of the affiliated
Seller's Group (within the meaning Section 1504(a) of the Code) that includes
the Seller.
(b) In the case of any audit, examination or other proceeding
("Proceeding") with respect to Taxes for which the Seller is or may be liable
pursuant to this Agreement, the Buyer shall promptly inform the Seller, and
shall afford the Seller, at the Seller's expense, the opportunity to control the
conduct of such Proceedings, provided that the Buyer shall retain the right to
control all proceedings for all periods that end after the Closing Date. The
Buyer shall execute or cause to be executed powers of attorney or other
documents necessary to enable the Seller to take all actions desired by the
Seller with respect to such Proceeding to the extent such Proceeding may affect
the amount of Taxes for which the Seller is liable pursuant to this Agreement.
The Seller shall have the right to control any such Proceedings, and, if there
is substantial authority therefor, to initiate any claim for refund, file any
amended Return or take any other action which it deems appropriate with respect
to such Taxes. Notwithstanding the foregoing, the Seller shall not agree to any
settlement concerning Taxes for any taxable period ending on or before the
Closing Date which may result in a material increase in Taxes for any taxable
period ending after the Closing Date without the prior written consent of the
Buyer. By written notice to the Seller, the Buyer shall have the right to
instruct the Seller to forego Proceedings with respect to one or more items for
which the Seller may be liable to indemnify the Buyer. Such notice shall
constitute a waiver of the right of the Buyer to indemnification
-30-
for any Taxes arising out of such item for the period or periods involved, but
shall not otherwise waive any rights of the Buyer under this Section.
(c) If the Buyer receives, or is entitled to receive, any refund of
Taxes (either by actual receipt or by application against future Taxes of
Compression), then the Buyer shall pay to the Seller the portion of such refund
that (i) relates to the Pre-Closing Period of any taxable period that begins
before and ends after the Closing Date (as defined and determined pursuant to
Section 9.5) or (ii) relates to any taxable period that ends prior to or on the
Closing Date, provided however that to the extent an anticipated refund has been
included in Net Assets, then Buyer shall not be required to pay over such refund
to Seller. Any payment described in this Section 9.7(c) shall be made by the
Buyer to the Seller within thirty (30) days of the date on which the Buyer
receives the refund of Taxes.
9.8 Cooperation on Tax Matters. The Buyer and the Seller and
Compression shall cooperate fully, and to the extent reasonably requested by the
other party, in connection with the filing of Returns pursuant to this Section
and in connection with any audit, litigation or other Proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision, of records and information which are reasonably relevant
to any such Return, audit, litigation or other Proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer and the Seller agree
to retain all books and records with respect to Tax matters pertinent to
Compression relating to any taxable period beginning before the Closing Date
until the expiration of the applicable statute of limitation (and to the extent
notified by the Buyer or the Seller, any extensions thereof) of the respective
taxable periods and to abide by all record retention agreements entered into
with any taxing authority.
9.9 338(h)(10) Election. If requested by the Buyer, Buyer and Seller
shall join in an election to have the provisions of Code Section 338(h)(10) and
similar provisions of state law (the "Election") apply to the acquisition of
Compression. Buyer shall be responsible for the preparation and filing of the
Election. The allocation of the purchase price among the assets of Compression
shall be made in accordance with Code Section 338 and any comparable provisions
of state, local or foreign law, as appropriate. Seller shall, unless it would be
unreasonable to do so, accept Buyer's determination of such purchase price
allocations and shall report, act and file in all respects and for all purposes
consistent with such determination of Buyer. Seller shall execute and deliver to
Buyer such documents or forms (including Section 338 Forms, as defined below) as
Buyer shall request or as are required by applicable law for an effective
Election. "Section 338 Forms" shall mean all returns, documents, statements, and
other forms that are required to be submitted to any federal, state, county or
other local taxing authority in connection with the Election.
9.10 Transfer Taxes. Seller shall pay and hold Buyer and Compression
harmless from and against any sales, use or transfer tax assessed with respect
to the assets of Compression as a result of the elections made pursuant to
Section 9.9.
-31-
9.11 Survival. The indemnities set forth in this Section 9 shall
survive the Closing Date and shall terminate on the date that is 30 days after
the expiration of the applicable statute of limitations.
SECTION 10. OTHER POST-CLOSING COVENANTS
After the Closing Date, the parties covenant and agree as follows:
10.1 Record Retention. The Buyer agrees that, for a period of five
years following the Closing, it shall not, and shall cause Compression not to,
destroy, discard, deface or otherwise alter any of the books, records or other
data of Compression in its possession covering or prepared during the period
ending on the Closing Date, without furnishing prior notice to the Seller and a
reasonable opportunity for the Seller, at its cost, to take custody of such
books, records or other data.
10.2 Further Assurances. The parties hereto agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, (c) cause to be delivered to the Buyer any
payments received by Seller or an Affiliate that arises from the business of
Compression and (d) to do such other acts and things, all as the other party
hereto may at any time reasonably request for the purpose of carrying out the
intent of this Agreement including, without limitation, financing of the Stock
Sale.
10.3 Covenants Concerning Benefit Plans.
(a) Participation in Seller's Plans. (i) Effective as of the
Closing Date, Compression shall cease to be a participating employer in all
Seller's Employee Plans or Benefit Arrangements and the Seller shall take all
such action as is necessary to effect such cessation of participation.
(ii) Effective as of the Closing Date, the accrual of benefits
of employees of Compression under the Tidewater Retirement Plan and the New
Pension Plan for Employees of Tidewater Inc. shall cease.
(iii) Effective as of the Closing Date, active participation of
employees of Compression in the Tidewater 401(k) Savings Plan ("Seller's Savings
Plan") and Seller's obligation to make contributions to Seller's Savings Plan
with respect to such employees shall cease. Notwithstanding the preceding
sentence, the Seller shall be responsible for making all matching contributions
that relate to employee contributions made to the Seller's Savings Plan prior to
Closing and shall insure that all benefit payments due under the terms of the
plan with respect to employees or former employees of Compression shall be made
on or after the Closing Date in accordance with the terms of such Plan.
(iv) Effective as of the Closing Date, Compression's employees
shall cease to participate in the Seller's Amended and Restated Employees'
Supplemental Savings Plan and Amended and Restated Supplemental Executive
Retirement Plan.
-32-
(v) Effective as of the Closing Date, Compression's employees shall
cease to participate in the Seller's non-pension benefit arrangements (the
"Welfare Benefit Plans"). The Seller shall retain responsibility under the
Welfare Benefit Plans for all cost of coverage and all amounts payable by reason
of claims incurred by Compression's employees prior to the Closing Date
including claims which are not submitted until after the Closing Date. A claim
shall be deemed to have been incurred on the date of the occurrence of (i) death
or dismemberment in the case of claims under life insurance and accidental death
and dismemberment benefits, (ii) the date of the initial disability in the case
of claims under disability benefits, or (iii) the date on which the charge or
expense giving rise to such claim is incurred in the case of all other claims.
For purposes of Section 10.3(a)(v)(iii), a claim shall be deemed to have been
incurred on the date that the first charge or expense in a course of treatment
giving rise to such claim has been incurred.
(vi) As soon as practicable after the Closing Date, at the
option of the Buyer, the Seller shall cause to be transferred all vested and
non-vested assets of Tidewater Savings Plan that are held for or attributable to
the account balances of the employees of Compression to a plan and trust newly
established by the Buyer as is necessary for the purpose of holding such assets,
which plan shall credit such employees with service as recognized under the
Tidewater Savings Plan for purposes of eligibility and vesting and further such
plan shall maintain the protected benefits provided in the Tidewater Savings
Plan to the extent required by Code section 411(d)(6), and shall also arrange
for the transfer, onto the books and records of such newly established trust, of
the balances and other information pertaining to all participant loans with
respect to such employees.
(vii) The Seller shall remain responsible for all record keeping
and welfare benefits with respect to any Compression employees or former
employees who are, as of the Closing Date: (i) on COBRA continuation coverage or
(ii) on long term disability leave and covered under Seller's welfare benefit
plans.
(b) Post-Closing Benefits. Except as may otherwise be provided in
the Transition Services Agreement, following consummation of the Stock Sale, the
Buyer shall cause all employees of Compression to be eligible to participate in
an "employee welfare benefit plan" and "employee pension benefit plan" (within
the meaning of Section 3(1) and Section 3(2) of ERISA, respectively) of the
Buyer or subsidiary or affiliate of the Buyer, or such other benefit plan, fund
or program that the Buyer may wish to establish for such employees on or after
the Closing Date, provided that nothing herein shall prevent the Buyer from
terminating the employment of any such employee or modifying or terminating such
plans from time to time. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which such an employee may be eligible after
Closing, the Buyer shall ensure that service by such employee with Compression
prior to the Closing shall be deemed to be service with the Buyer, shall waive
any waiting period for participation or coverage in any welfare benefit plans or
policies and, to the extent such employee was a participant in Seller's medical
benefits plan and such condition was covered under such plan, shall waive any
pre-existing medical condition provision of such plan or policy.
-33-
(c) Severance Policy. Buyer shall honor and not revoke all terms
of the severance policy for Compression's employees that was adopted by the
Board of Directors of Compression on November 19, 1997, as set forth on Schedule
10.3(c).
(d) Indemnification for Seller Benefit Plans. In addition to its
obligations under Section 8, From and after the Closing Date, Seller shall
indemnify and hold harmless Buyer and Compression from any and all liabilities
that either Buyer or Compression incurs or that arises with respect to Seller's
Employee Plans or Benefit Arrangements.
10.4 Collection and Repurchase of Accounts Receivable.
(a) Collection of Compression's Accounts Receivable. On the
Closing Date, Seller shall deliver to Buyer the most recent listings available
of invoices and the unpaid amount of each, unbilled receivable amounts by
customer (showing the contract, type of charge and period covered), the invoices
and amounts which comprise unearned revenue, and other items making up the total
accounts receivable of Compression's business (the "Closing Date Receivables").
During the ninety (90) day period following the Closing or until 30 days after
the expiration of the payment period for receivables with payment terms in
excess of ninety (90) days (the "Collection Period") and subject to the
provisions of Section 10.4(c) hereof, Buyer shall use its commercially
reasonable efforts (but in no event shall Buyer be obligated to file or perfect
any liens or file or prosecute any suit as part of its collection effort) to
collect all invoice amounts, notes and drafts receivable, and unbilled
receivable amounts and other receivable items in respect of Compression's
business (subject to the provisions of 10.4(b) regarding Contested Receivables
(as defined below)) as of the Closing Date which are included in Closing Date
Receivables (subject to the requirements of Section 10.4(c), such efforts to be
commercially reasonable if Buyer has pursued the collection of such receivables
with the same degree of diligence as it pursues its other receivables in the
ordinary course of Buyer's business). Buyer shall prepare and send invoices to
the customers relating to the unbilled receivables as soon as practicable after
the Closing. Any payments received by Buyer from any person who is the account
debtor on any of the Closing Date Receivables (a "Customer") shall be applied as
provided in Section 10.4(d). Seller shall promptly remit to Buyer any payments
which it may receive in respect of any of the Closing Date Receivables. Seller
grants to Buyer the authority, coupled with an interest, to receive, endorse,
cash, deposit, and receipt for any checks, drafts, documents and instruments
evidencing Closing Date Receivables which are in the name of Seller or
Compression. Buyer shall make and keep detailed records of amounts collected in
respect of the Closing Date Receivables until such time as any Uncollectible
Receivables are assigned to Seller pursuant to paragraph (b) below, and shall
make such records available for review by Seller when a statement of Uncollected
Receivables is delivered to Seller.
(b) Repurchase of Accounts Receivable. Within 10 days following
the expiration of the Collection Period, Buyer shall deliver to Seller one or
more statements setting forth a list of Closing Date Receivables (which has
clearly identified thereon the names of the customers, invoice numbers and
uncollected amounts by invoice, together with copies of all invoices and, if
required, supporting documentation) that were not collected during the
Collection Period and the total of such uncollected amounts. Such statement
shall not include the amount of any balances owed on notes or accounts
receivable that have been paid down
-34-
in accordance with their terms but the statement shall reflect as a deduction
from total uncollected amounts shown thereon (i) the total amount of any credit
balances included in the Closing Date Receivables not applied against invoices
for the same customer included in the Closing Date Receivables and (ii) the
amount of the reserve for bad debts determined as of the Closing Date. The net
amount set forth on the statement remaining, after giving effect to the
exclusions, if any, and deductions set forth in the preceding sentence, shall be
the net amount of receivables to be repurchased by the Seller (the "Uncollected
Receivables"); provided that, with respect to those Closing Date Receivables
that Buyer made a good faith effort to collect but were not collected because
Buyer reasonably concluded that the customer may have a bona fide claim with
respect thereto (the "Contested Receivables"), Buyer shall have the option to
sell such Closing Date Receivable to Seller for 75% of the amount thereof,
provided that Seller shall immediately cancel and not at any time make any
efforts to collect such Closing Date Receivable. Within ten (10) business days
following Seller's receipt of such statement, Seller shall pay to Buyer, by wire
transfer of immediately available funds, to the account specified in writing by
Buyer to Seller, the amount of the Uncollected Receivables. Upon receipt of such
payment, Buyer shall assign to Seller, without recourse to the Buyer and subject
to the second previous sentence, the claims included in the Uncollected
Receivables, including any lien or other rights related thereto.
(c) Collection Cooperation. Buyer shall keep Seller's credit
personnel reasonably informed with respect to Buyer's efforts to collect the
Closing Date Receivables during the Collection Period. Seller shall make
available their credit personnel to work with Buyer during the Collection Period
to assist in resolving any disputes or questions concerning the Closing Date
Receivables.
(d) Allocation of Payments Received After Closing. Notwithstanding
any contrary directions received from a customer, any payments received by
Seller or the Buyer after the Closing Date from a customer that owed money to
Compression for Closing Date Receivables shall (i) be applied to the Closing
Date Receivables owed by such customer bearing the earliest invoice date first
(excluding Contested Receivables) and (ii) be promptly paid to Seller or the
Buyer whichever of them then owns such Closing Date Receivable (as provided in
this Section 10.4) until such Closing Date Receivable is satisfied in full;
provided, however, that if such customer has a bona fide claim with respect to
such Closing Date Receivable that it does not owe the full amount thereof
because of an act or failure to act on the part of Seller prior to the Closing
Date, then, to the extent of the amount of such claim, Buyer need not pay over
to Seller any such payment Buyer receives from such customer after the Closing
Date as payment for services provided by Buyer to such customer. Any funds to be
paid over to Seller or Buyer pursuant to this Section 10.4(d) shall be paid in
the same manner as specified in Section 10.4(b). Seller and Buyer shall provide
each other with complete information concerning such payments in the same manner
as provided hereinabove in this Section 4.9.
(e) Remedy for Uncollected Receivables. The provisions of Section
8 notwithstanding, Seller's indemnity obligation for such Uncollected
Receivables shall be satisfied by making the payment provided for in Section
10.4(b) above, and no other remedy shall be available with respect to such
Uncollected Receivables or the representations set forth in Section 4.9.
-35-
10.5 WARN Act Notice. Buyer shall be solely responsible for providing
any notice required under the Worker Adjustment and Retraining Notification Act
(the "WARN Act") by virtue of any actions taken by Buyer following the Closing,
and shall indemnify and hold Seller harmless from any liability arising from any
failure of the Buyer to fully comply with the requirements of such Act. Seller
shall be solely responsible for complying with any applicable provisions of the
WARN Act with respect to any actions taken by it prior to Closing and shall
indemnify and hold Buyer harmless from any liability arising from the failure of
Seller to comply with this covenant.
10.6 Use of Tidewater Name. Seller shall convey to Buyer at the
Closing, the names, trade names and trademarks set forth on Schedule 10.6. Buyer
shall use its reasonable best efforts (a) to remove the Tidewater name and any
associated trade or service marks from all assets of Compression within 90 days
of the Closing Date and (b) to take all other steps reasonably necessary to
avoid any public use of the Tidewater name in connection with the operation of
Compression's business following the Closing, including the removal of the
Tidewater name from the corporate name of Compression as soon as practicable but
in no event later than 30 days after the Closing Date. It is understood that
Buyer may refer to the name Tidewater Compression Service Inc. in any securities
offerings and securities law filings that it or an affiliate undertakes,
provided that neither Tidewater Compression Service, Inc. nor Tidewater is
identified as the name of the issuer of such securities, and that Buyer shall
indemnify Seller against any and all liabilities, damages or costs (including
reasonable counsel fees) incurred by Seller by virtue of the use of the name
Tidewater Compression in such offering.
10.7 Non-Competition; Non-Solicitation. (a) For a period of five years
after the Closing Date, neither Seller nor any of its Affiliates shall engage,
directly or indirectly in any capacity, whether as promotor, investor, owner,
officer, director, employee, partner, lessee, lender, agent, consultant or
otherwise in any business that engages in the business of renting and selling
air and natural gas compressors in any place in the world, provided however that
this covenant shall not preclude Seller or its Affiliates from indirectly
engaging in such activities by reason of its acquisition of an enterprise that
has less than 10% of its revenues derived from the business of selling or
renting air and natural gas compressors.
(b) For a period of five years after the Closing Date, neither
Seller nor any of its Affiliates shall directly or indirectly (i) employ or seek
to employ any person who is as of the Closing Date, or was at any time within
the six-month period preceding such date, an employee of Compression or any of
its subsidiaries or otherwise solicit, encourage, cause or induce any such
employee of Compression or any of its subsidiaries to terminate such employee's
employment with Compression or such subsidiary for the employment of another
company (including for this purpose the contracting with any person who was an
independent contractor of Compression during such period). Notwithstanding the
foregoing, the provisions of this Section 10.7(b) shall not preclude Seller from
offering employment to the person set forth on Schedule 10.7.
Seller acknowledges that Buyer will be irrevocably damaged if
such covenants are not specifically enforced. Accordingly, Seller agrees that,
in addition to any other relief to which Buyer may be entitled, Buyer will be
entitled to seek and obtain injunctive
-36-
relief (without the requirement of any bond) from a court of competent
jurisdiction for the purposes of restraining Seller or any of its Affiliates
from any actual or threatened breach of such covenants.
SECTION 11. TERMINATION
11.1 Termination. This Agreement may, by notice given at or prior to the
Closing, be terminated:
(a) By the mutual written consent of the Seller and the Buyer.
(b) By the Buyer or Seller if there has been a material breach by
the other of any covenant contained in this Agreement that is not or cannot be
cured within 45 days after written notice of such breach is given to the party
committing such breach, provided that the right to effect such cure shall not
extend beyond the date set forth in subparagraph (c) below.
(c) By the Buyer or Seller if (i) any condition to Closing required
by Section 7 has not been met or waived by each party entitled to grant such
waiver by ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇) any such condition cannot be met by such date and
has not been waived by each party in whose favor such condition runs or (iii)
the Stock Sale has not occurred by such date; provided, however, that the right
to terminate this Agreement pursuant to this paragraph shall not be available to
a party if its failure to fulfill or perform any obligation under this Agreement
has been a substantial cause of, or has substantially resulted in, the failure
of the Closing to occur or be capable of occurring on or before such date.
(d) By the Buyer no later than January 30, 1998 if as a result of
its "Pre- Closing Review," the Buyer reasonably concludes that the assets,
businesses or operations of Compression, taken as a whole, are materially and
adversely different than the description of such assets, business and operations
set forth in the Offering Memorandum, provided, however, that Buyer shall be
deemed to have accepted any matter disclosed in the Disclosure Schedule attached
to this Agreement, and further provided that any matter covered under Tab VI
(Projections) of the Offering Memorandum shall not be considered to be a
description of the assets, business and operations of Compression. As used
herein, the term "Pre-Closing Review" shall mean the Buyer's physical inspection
of the assets, properties and operations of Compression.
(e) By Seller under the circumstances set forth in Section 6.8(d).
(f) By Buyer under the circumstances set forth in Section 6.8(f).
11.2 Effect of Termination; Survival. Upon termination of this
Agreement pursuant to this Section 11, this Agreement shall be void and there
shall be no liability by reason of this Agreement, or the termination thereof,
on the part of any party or their respective directors, officers, employees,
agents or shareholders except for any liability of a party hereto arising out of
a material breach of its representations and warranties contained herein or
arising out of a material breach of any covenant in this Agreement prior to the
date of termination or
-37-
any covenant that survives pursuant to the following sentence. The following
provisions shall survive any termination of this Agreement: Sections 6.6, 6.8
and Section 12.
SECTION 12. MISCELLANEOUS
12.1 Notices. Any notice, communication, request, reply, consent, advice
or disclosure notice ("notice") required or permitted to be given or made by any
party to the other in connection with this Agreement must be in writing and may
be given or served by depositing such notice in the United States mail, postage
prepaid and registered or certified with return receipt requested, or by hand
delivering such notice, or by sending such notice by a national commercial
courier service for next business day delivery, in each case properly addressed
as provided below. Notice deposited in the mail in the manner described above
shall be effective 72 hours after such deposit, notice hand delivered in person
or delivered by commercial courier shall be effective at the time of delivery
and notice given by facsimile shall be effective when such facsimile is
transmitted to the facsimile number specified in this Section 12.1 and
confirmation of transmission is received by the giver of such notice (provided
that a confirmation copy is sent no later than the next Business Day by
documented overnight delivery service). For purposes of notice, the addresses of
the parties shall, until changed as hereinafter provided, be as follows:
If to the Seller:
Tidewater Inc.
Tidewater Place
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No: ▇▇▇-▇▇▇-▇▇▇▇
With copy to: Cliffe ▇. ▇▇▇▇▇▇▇
and to:
Jones, Walker, Waechter, Poitevent, Carrere & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No: ▇▇▇-▇▇▇-▇▇▇▇
If to the Buyer:
TW Acquisition Corporation
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No: ▇▇▇-▇▇▇-▇▇▇▇
-38-
With copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile No: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Director
or such substituted persons or addresses of which any of the parties may give
notice to the other in writing.
12.2 Waiver. The failure by any party to enforce any of its rights
hereunder shall not be deemed to be a waiver of such rights, unless such waiver
is an express written waiver which has been signed by the waiving party. Waiver
of any one breach shall not be deemed to be a waiver of any other breach of the
same or any other provision hereof.
12.3 Expenses. Regardless of whether the transactions contemplated by
this Agreement are consummated, all expenses, including fees for legal,
accounting, investment banking, financial and other advisory services, incurred
in connection with this Agreement and the transactions contemplated hereby shall
be borne by the party hereto incurring them, except as provided on Schedule
12.3; provided that the Buyer shall bear all stock transfer taxes, recording
charges and filing fees, if any, that may be imposed in connection with the
transfer of the Shares from the Seller to the Buyer.
12.4 Interpretation. (a) The table of contents and section headings
contained herein are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement. Each of the parties has
participated substantially in the negotiation and drafting of this Agreement and
each party hereby disclaims any defense or assertion in any litigation or
arbitration that any ambiguity herein should be construed against the draftsman.
(b) References to "Sections" or "Schedules" shall be to
Sections of or Schedules to this Agreement unless otherwise specifically
provided.
(c) Wherever the words "include", "includes", and "including"
are used herein, such words shall be deemed to be followed by the words "without
limitation."
12.5 Integrated Agreement. This Agreement (along with the Exhibits and
Schedules referenced herein), the Confidentiality Agreement, the Transition
Services Agreement, and the Adjustment Agreement constitute the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof, and there are no agreements, covenants or
-39-
understandings, among the parties other than those set forth herein or therein,
all prior agreements and understandings being superseded hereby. Except and as
to the extent set forth in Sections 4 and 5, any schedule hereto or any
certificate delivered pursuant to Section 7, neither party makes any
representations or warranties whatsoever, and disclaims all liability and
responsibility for any representation or warranty made or communicated orally or
in writing to the other party (including any information, opinion or advice that
may have been provided to the other party by any officer, director or employee
of such party, such party's counsel or accountants, or any other agent,
consultant or representative of such party, none of which has been relied upon
by the other party). Without limiting the generality of the foregoing, this
Agreement shall not be governed by the warranties provided by Article 2 of the
Uniform Commercial Code or any similar laws adopted in any jurisdiction.
12.6 Choice of Law. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
in accordance therewith shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed wholly within such State. Each of Buyer and Seller consents to the
exclusive jurisdiction of the state courts of and federal courts located in the
City of Wilmington in the State of Delaware for the enforcement of the
obligations evidenced by this Agreement and any dispute arising out of this
Agreement, and expressly waives any defense based upon venue or forum non
conveniens.
12.7 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
no party hereto may assign its rights or obligations hereunder without the prior
written consent of the other party, except that the Buyer may assign its rights
to a wholly-owned subsidiary hereunder as long as Buyer is not relieved of its
obligations hereunder. Nothing in this Agreement is intended or shall be
construed to confer upon or to give any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.
12.8 Amendment. Unless otherwise provided herein, this Agreement may be
amended only by an agreement in writing signed by each party hereto.
12.9 Counterparts. This Agreement may be executed by the parties in one
or more counterparts, all of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
-40-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
TIDEWATER INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
TW ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
-41-
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................-1-
SECTION 2. PURCHASE AND SALE OF SHARES; CONDITION OF ASSETS................-6-
2.1 Purchase and Sale; Purchase Price...............................-6-
2.2 Capital Contribution............................................-6-
2.3 Closing Payment.................................................-6-
2.4 Final Adjustment................................................-6-
2.5 Basis of Preparation of Working Capital Statements..............-7-
2.6 Condition of Assets: Intended Use...............................-7-
2.7 Certain Reserves and Liabilities................................-8-
2.8 Certain Other Liabilities.......................................-8-
SECTION 3. THE CLOSING.....................................................-8-
3.1 Closing.........................................................-8-
3.2 Deliveries at Closing...........................................-8-
SECTION 4. REPRESENTATIONS OF THE SELLER...................................-9-
4.1 Corporate Organization..........................................-9-
4.2 Capital Stock...................................................-9-
4.3 Ownership of Stock..............................................-9-
4.4 Authorization; Enforceability...................................-9-
4.5 No Approvals or Conflicts......................................-10-
4.6 Properties and Equipment.......................................-10-
4.7 Material Contracts.............................................-10-
4.8 Litigation and Claims..........................................-11-
4.9 Accounts Receivable............................................-12-
4.10 Employment Relations...........................................-12-
4.11 Employee Benefit Plans.........................................-12-
4.12 Interests in Clients and Suppliers.............................-13-
4.13 Environmental Matters..........................................-13-
4.14 Compliance with Laws...........................................-14-
4.15 Licenses and Permits...........................................-14-
4.16 Absence of Certain Changes.....................................-14-
4.17 Customers and Suppliers........................................-15-
4.18 Broker's or Finder's Fees......................................-15-
4.19 Warranties.....................................................-15-
4.20 Asset Condition................................................-16-
4.21 Inventory......................................................-16-
4.22 Intellectual Property..........................................-16-
4.23 Compression Financial Statements; Absence of Undisclosed
Liabilities..................................................-16-
4.24 Projections....................................................-17-
4.25 Taxes..........................................................-17-
4.26 No Other Representations.......................................-17-
Page
SECTION 5. REPRESENTATIONS OF THE BUYER...................................-17-
5.1 Corporate Organization.........................................-18-
5.2 Authorization; Enforceability..................................-18-
5.3 No Approvals or Conflicts......................................-18-
5.4 Purchase for Investment........................................-18-
5.5 Broker's or Finder's Fees......................................-18-
5.6 Proceedings....................................................-18-
5.7 Investigation..................................................-19-
5.8 ▇▇▇▇▇▇ ▇▇▇▇▇▇ III's Capacity to Fund Equity....................-19-
5.9 Buyer's Financing Commitments..................................-19-
SECTION 6. PRE-CLOSING COVENANTS..........................................-19-
6.1 Cooperation and Best Efforts; HSR Filing.......................-19-
6.2 Press Releases.................................................-19-
6.3 Review of Compression; Availability of Management..............-20-
6.4 Conduct of Business of Compression Prior to the Closing Date...-20-
6.5 Notification of Changes........................................-20-
6.6 Confidentiality Agreement......................................-21-
6.7 Continued Effectiveness of Section 4.16........................-21-
6.8 Environmental Audit............................................-21-
6.9 Purchase of Compression Equipment; Repair and Maintenance of
Existing Compression Equipment.................................-23-
6.10 Employees......................................................-23-
6.11 Covenant on Bonus and Other Incentive Payments.................-23-
SECTION 7. CONDITIONS TO CLOSING..........................................-24-
7.1 Conditions Applicable to All Parties...........................-24-
7.2 Additional Conditions Applicable to the Buyer's Obligations....-24-
7.3 Additional Conditions Applicable to the Seller's Obligations...-25-
SECTION 8. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS...................-25-
8.1 Indemnification................................................-25-
8.2 Notice and Defense of Claims...................................-26-
8.3 Survival of Representations and Warranties.....................-27-
8.4 Limitations....................................................-27-
SECTION 9. TAX MATTERS....................................................-28-
9.1 Tax Sharing Agreements.........................................-28-
9.2 Preparation of Returns and Payment of Taxes....................-28-
9.3 Taxes and Returns for Periods Through the Closing Date.........-28-
9.4 Taxes and Returns for Transactions That Occur After the Closing
Date...........................................................-29-
9.5 Tax and Returns for Periods Commencing Before the Closing Date
and Ending After the Closing Date..............................-29-
9.6 Audits.........................................................-29-
9.7 Indemnification for Taxes......................................-30-
-ii-
Page
9.8 Cooperation on Tax Matters......................................-31-
9.9 338(h)(10) Election.............................................-31-
9.10 Transfer Taxes..................................................-31-
9.11 Survival........................................................-31-
SECTION 10. OTHER POST-CLOSING COVENANTS....................................-31-
10.1 Record Retention................................................-31-
10.2 Further Assurances..............................................-32-
10.3 Covenants Concerning Benefit Plans..............................-32-
10.4 Collection and Repurchase of Accounts Receivable................-33-
10.5 WARN Act Notice.................................................-35-
10.6 Use of Tidewater Name...........................................-35-
10.7 Non-Competition; Non-Solicitation...............................-36-
SECTION 11. TERMINATION.....................................................-36-
11.1 Termination.....................................................-36-
11.2 Effect of Termination; Survival.................................-37-
SECTION 12. MISCELLANEOUS...................................................-37-
12.1 Notices.........................................................-37-
12.2 Waiver..........................................................-39-
12.3 Expenses........................................................-39-
12.4 Interpretation..................................................-39-
12.5 Integrated Agreement............................................-39-
12.6 Choice of Law...................................................-40-
12.7 Parties in Interest.............................................-40-
12.8 Amendment.......................................................-40-
12.9 Counterparts....................................................-40-
-iii-
EXHIBITS
Exhibit A - Form of Purchase Price Adjustment Agreement
Exhibit B - Compression Financial Statements
Exhibit C - Financial Projections
Exhibit D - Form of Transition Services Agreement
Exhibit E - Form of Legal Opinion of Jones, Walker, Waechter,
Poitevent, Carrere & ▇▇▇▇▇▇▇, L.L.P.
SCHEDULES
-iv-