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EXHIBIT 4.19
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ASSET PURCHASE AGREEMENT
BY AND AMONG
ECD/NORTHWEST, INC.,
CLEARWATER HOLDINGS, INC.,
THE SHAREHOLDERS OF CLEARWATER HOLDINGS, INC.,
WEATHERFORD U.S., L.P.
AND
▇▇▇▇▇▇▇▇▇▇▇ INTERNATIONAL, INC.
MARCH 30, 1999
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TABLE OF CONTENTS
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ARTICLE 1
PURCHASE AND SALE OF ASSETS...................................................1
1.1 Transferred Assets...............................................1
1.2 Excluded Assets..................................................2
1.3 Closing..........................................................2
1.4 Purchase Price for the Assets....................................2
1.5 Cash Payment Adjustment..........................................3
1.6 Weatherford Share Adjustments....................................4
1.7 Contingent Payment...............................................4
1.8 Liabilities Not Assumed by the Buyer.............................6
1.9 Transfer Taxes; Recording Fees...................................6
1.10 Allocation of Purchase Price.....................................6
1.11 Prorations of Property Taxes and Certain Expenses................7
1.12 Adjustments for Changes in Capitalization........................7
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER AND THE SHAREHOLDERS.......................................7
2.1 Corporate and Shareholder Matters................................8
2.2 Validity of Agreement and Conflict with Other Instruments........8
2.3 Approvals, Licenses and Authorizations...........................8
2.4 Title to and Condition of Properties.............................9
2.5 Contracts and Commitments.......................................10
2.6 Financial Statements............................................10
2.7 No Adverse Change...............................................11
2.8 Taxes...........................................................11
2.9 Environmental Matters...........................................11
2.10 No Litigation...................................................12
2.11 Warranties and Product Liability................................12
2.12 Employee Matters................................................13
2.13 Finder's Fees...................................................13
2.14 Insurance.......................................................13
2.15 Securities Law Matters..........................................13
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND WEATHERFORD..................15
3.1 Corporate Matters...............................................15
3.2 Approvals, Licenses and Authorizations..........................15
3.3 Finder's Fees...................................................15
3.4 Authorization for the Weatherford Shares........................16
3.5 SEC Documents...................................................16
ARTICLE 4
REGISTRATION RIGHTS..........................................................16
4.1 Registration Rights.............................................16
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4.2 Procedure.......................................................17
4.3 Indemnification.................................................18
4.4 Termination.....................................................19
4.5 Put Option......................................................19
ARTICLE 5
ADDITIONAL AGREEMENTS........................................................19
5.1 Access to Information...........................................19
5.2 Conduct of the Business.........................................20
5.3 Negotiation with Others.........................................21
5.4 Information.....................................................21
5.5 Delivery of Business Documents..................................21
5.6 Further Assurances..............................................21
5.7 Nondisclosure of Proprietary Information........................22
5.8 Covenant Not to Compete With the Business.......................22
5.9 Use of Names....................................................23
5.10 Employee Matters................................................23
5.11 HSR Filing......................................................23
5.12 Continuation of Business by the Buyer...........................24
5.13 Saipem Contract.................................................24
ARTICLE 6
BUYER'S AND ▇▇▇▇▇▇▇▇▇▇▇'▇ CONDITIONS.........................................25
6.1 Representations, Warranties and Covenants.......................25
6.2 Good Standing...................................................25
6.3 Instruments of Transfer.........................................25
6.4 No Litigation...................................................25
6.5 Other Legal Matters.............................................25
6.6 Licenses, Consents and Approvals by the Seller..................26
6.7 Consents of Third Persons.......................................26
6.8 Consents and Release of Liens...................................26
6.9 No Material Adverse Event.......................................26
6.10 Resolutions.....................................................26
6.11 Employment Agreement............................................26
6.12 Supply Agreement................................................26
6.13 License Agreement...............................................26
6.14 Representation Agreement........................................26
6.15 Repayment of Indebtedness.......................................26
6.16 Stock Exchange Approval.........................................27
6.17 Approvals for Issuance of Weatherford Shares....................27
6.18 Assumed Trade Payables..........................................27
ARTICLE 7
SELLER'S AND SHAREHOLDERS' CONDITIONS........................................27
7.1 Representations and Warranties..................................27
7.2 No Litigation...................................................27
7.3 Licenses, Consents and Approvals................................27
7.4 Resolutions.....................................................27
7.5 Other Legal Matters.............................................28
7.6 Representation Agreement........................................28
7.7 Employment Agreement............................................28
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7.8 Supply Agreement................................................28
ARTICLE 8
INDEMNIFICATION..............................................................28
8.1 Indemnification by the Seller and the Shareholders..............28
8.2 Indemnification by the Buyer and Weatherford....................28
8.3 Procedure.......................................................29
8.4 Payment.........................................................29
8.5 Failure to Pay Indemnification..................................29
8.6 Right of Offset.................................................29
8.7 Adjustment of Liability.........................................30
8.8 Express Negligence..............................................30
8.9 Indemnification Limitations.....................................30
ARTICLE 9
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES AND AGREEMENTS..........................31
ARTICLE 10
TERMINATION..................................................................31
10.1 Termination.....................................................31
10.2 Liability Upon Termination......................................32
10.3 Notice of Termination...........................................32
ARTICLE 11
DEFINITIONS OF CERTAIN TERMS.................................................32
ARTICLE 12
MISCELLANEOUS................................................................39
12.1 Representative..................................................39
12.2 Expenses........................................................39
12.3 Notices.........................................................39
12.4 Arbitration.....................................................40
12.5 Successors......................................................41
12.6 Entire Agreement................................................41
12.7 Governing Law...................................................41
12.8 Waiver..........................................................41
12.9 Severability....................................................41
12.10 No Third Party Beneficiaries....................................41
12.11 Counterparts....................................................42
12.12 Headings........................................................42
12.13 Negotiated Transaction..........................................42
LIST OF DISCLOSURE SCHEDULES
Section 1.1(a)(i) - Equipment
Section 1.1(a)(ii) - Inventories
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Section 1.1(a)(iii) - Accounts Receivable
Section 1.1(a)(iv) - Proprietary Information
Section 1.1(a)(v) - Real Property
Section 1.1(a)(vi) - Entitlements
Section 1.2 - Excluded Assets
Section 1.4(c) - Trade Payables
Section 1.4(d) - Assumed Liabilities
Section 1.10 - Purchase Price Allocations
Section 2.1 - Corporate and Shareholder Matters
Section 2.2(b) - Conflict with Other Instruments
Section 2.4(b) - Inventory Location
Section 2.5 - Contracts and Commitments
Section 2.6 - Financial Statements
Section 2.9(a) - Environmental Matters
Section 2.11 - Product Warranties
Section 2.13 - Finder's Fees
Section 2.14 - Insurance
Section 11.61 - Permitted Liens
Section 11.85 - Services
LIST OF EXHIBITS
Exhibit A-1-Form of ▇▇▇▇ ▇▇▇▇▇▇ Employment Agreement
Exhibit A-2-Form of ▇▇▇ ▇▇▇▇▇▇ Employment Agreement
Exhibit B-Form of Supply Agreement
Exhibit C-Form of License Agreement
Exhibit D-Form of Agency Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 30th day of March, 1999, by and among ECD/Northwest, Inc., a Delaware
corporation (the "Seller"), Clearwater Holdings, Inc., a Delaware corporation
and the sole shareholder of the Seller ("CHI"), the shareholders of CHI listed
on the signature pages hereto ( the "CHI Shareholders", and together with CHI,
the "Shareholders"), ▇▇▇▇▇▇▇▇▇▇▇ U.S., L.P., a Louisiana limited partnership
(the "Buyer"), and ▇▇▇▇▇▇▇▇▇▇▇ International, Inc., a Delaware corporation
("Weatherford").
WITNESSETH:
WHEREAS, the Seller desires to transfer to the Buyer the Business and
certain properties, assets and certain of the liabilities related to the
Business, and the Buyer desires to acquire such Business, properties and assets
and assume such liabilities, all upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and agreements, all as more fully set forth below.
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Transferred Assets.
(a) Subject to the terms and conditions of this Agreement
and in consideration of the obligations of the Buyer as provided herein, and
except as otherwise provided in Section 1.2 hereof, at the Closing, the Seller
shall sell, assign, transfer, grant, bargain, deliver and convey, and CHI shall
cause to be sold, assigned, transferred, granted, bargained, delivered and
conveyed, to the Buyer, free and clear of all Liens, except Permitted Liens,
the Seller's and the Affiliated Company's entire right, title and interest in,
to and under the Business, as a going concern, and all assets owned or used by
the Seller or the Affiliated Company (other than Excluded Assets) in connection
with, relating to or arising out of the Business of every type and description,
tangible and intangible, wherever located and whether or not reflected on the
books and records of the Seller (all of such assets, properties, rights and
business collectively referred to as the "Transferred Assets"), including, but
not limited to:
(i) all Equipment, including the Equipment set
forth in Section 1.1(a)(i) of the Disclosure Schedule;
(ii) all Inventories, including the Inventories set
forth in Section 1.1(a)(ii) of the Disclosure Schedule;
(iii) all Accounts Receivable, including the
Accounts Receivable set forth in Section 1.1(a)(iii) of the
Disclosure Schedule;
(iv) all Proprietary Information, including the
Proprietary Information set forth in Section 1.1(a)(iv) of
the Disclosure Schedule;
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(v) all Real Property, including the Real Property
set forth in Section 1.1(a)(v) of the Disclosure Schedule;
(vi) subject to Section 1.1(b) hereof, the benefit
of all unfilled or outstanding purchase orders, sales or
service contracts, other commitments, contracts, engagements
and leases to which the Seller is entitled at the Closing and
which relate to the Business (the "Entitlements"), all of
which Entitlements are set forth in Section 1.1(a)(vi) of the
Disclosure Schedule;
(vii) all of the Seller's and its Affiliates' rights
to and interest in the Saipem Contract and the Project;
(viii) all prepaid expenses and deposits made by the
Seller and its Affiliates relating to the Business; and
(ix) any goodwill associated with the Business.
(b) The Seller and each of the Shareholders shall use
their best efforts to obtain such consents of third parties as are necessary
for the assignment of the Transferred Assets. To the extent that any of the
Transferred Assets are not assignable by the terms thereof or consents to the
assignment thereof cannot be obtained as provided herein, the Transferred
Assets shall be held by the Seller in trust for the Buyer and shall be
performed by the Buyer in the name of the Seller and all benefits and
obligations derived thereunder shall be for the account of the Buyer; provided,
however, that where entitlement of the Buyer to such Transferred Assets
hereunder is not recognized by any third party, the Seller and the Shareholders
shall, at the request of the Buyer, enforce in a reasonable manner, at the cost
of and for the account of the Buyer, any and all rights of the Seller against
such third party.
(c) Within three days of the Closing Date, the Seller and the
Shareholders shall notify each Person which may have possession of any of the
Transferred Assets at the Closing Date, whether by consignment or otherwise, of
the transfer of such Transferred Assets to the Buyer.
1.2 Excluded Assets. Anything in Section 1.1(a) to the contrary
notwithstanding, there shall be excluded from the assets, properties, rights
and business to be transferred to the Buyer hereunder those assets of the
Seller listed or described in Section 1.2 of the Disclosure Schedule
(collectively, the "Excluded Assets").
1.3 Closing. Subject to the conditions set forth in this
Agreement, the closing shall take place at such time, date and place as the
parties hereto shall mutually agree upon in writing (the "Closing Date").
Failure to consummate the transactions contemplated hereby on such date shall
not result in a termination of this Agreement or relieve any party hereto of
any obligation hereunder. Title to, ownership of, control over and risk of loss
of the Transferred Assets shall pass to the Buyer at the Closing.
1.4 Purchase Price for the Assets. In consideration of the
transfer to the Buyer of the Transferred Assets, the Buyer shall, on the
Closing Date, (a) pay to the Seller an aggregate amount equal to $12,000,000 in
immediately available funds by wire transfer to a bank account or accounts to
be designated by the Seller (the "Cash Payment"), (b) cause Weatherford to
issue to the Seller the Weatherford Shares, (c) assume the obligations of the
Seller to pay the Trade Payables of the Business incurred in the ordinary
course of the Business (the "Assumed Trade Payables"), and (d) assume the
obligations of the Seller under the express written terms of the Entitlements
to the extent and only to the extent such obligations are not Pre-Closing
Obligations (collectively, the "Assumed Liabilities"), all of which Assumed
Liabilities are listed in Section 1.4(d) of the Disclosure Schedule, which
shall be updated and delivered by the Seller to the Buyer as of and on the
Closing Date. The Cash Payment, as adjusted by Section 1.5, the Weatherford
Shares, the
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Assumed Trade Payables and the Assumed Liabilities are herein collectively
referred to as the "Purchase Price".
1.5 Cash Payment Adjustment.
(a) The Buyer shall within 60 calendar days after the
Closing Date prepare or cause to be prepared a statement reflecting the Closing
Date Working Capital and the calculation thereof (the "Closing Statement") and
shall deliver such Closing Statement to the Representative. The Buyer shall
provide the Representative with access to copies of all work papers and other
relevant documents to verify the information contained in the Closing
Statement. The Representative shall have a period of 30 calendar days after
delivery to him of the Closing Statement to review it and make any objections
in writing to the Buyer. If written objections to the Closing Statement are
delivered to the Buyer within such 30-day period, then the Buyer and the
Representative shall attempt to resolve the matter or matters in dispute. If no
written objections are made within the time period provided above, the Closing
Statement shall become final and binding on the parties hereto and the Cash
Payment shall be adjusted as described in clause (c) below.
(b) If disputes with respect to the Closing Statement
cannot be resolved by the Buyer and the Representative within 15 calendar days
after the delivery of the objections to the Closing Statement, then either
party with notice to the other party may submit the specific matters in dispute
to Price Waterhouse Coopers LLP or such other recognized independent accounting
firm as may be approved by the Buyer and the Representative, which firm shall
render its opinion as to such matters. Based on such opinion, such accounting
firm will then send to the Buyer and the Representative its determination in
writing on the specific matters in dispute, including any resulting revisions
to the Closing Statement, which determination shall be final and binding on the
parties hereto. The Closing Statement, including revisions, if any, made by
such accounting firm, shall then become final and binding on the parties hereto
and the Cash Payment shall be adjusted as described in clause (c) below. The
fees and other costs charged by the independent accounting firm shall be borne
by the Buyer and the Seller equally.
(c) At the time the Closing Statement becomes final and
binding on the parties hereto, the Cash Payment will be:
(i) reduced by the amount, if any, by which the
Target Working Capital exceeds the Closing Date Working Capital; and
(ii) increased by the amount, if any, by which the
Closing Date Working Capital exceeds the Target Working Capital.
If the Cash Payment, as adjusted, is less than $12,000,000, the Seller shall,
within five days of the date that the Closing Statement becomes final and
binding on the parties hereto, pay to the Buyer the amount of such difference.
If the Cash Payment, as adjusted, is more than $12,000,000, the Buyer shall,
within five days of the date that the Closing Statement becomes final and
binding on the parties hereto, pay to the Seller the amount of such difference.
(d) All payments made pursuant to this Section 1.5
shall be paid in immediately available funds by wire transfer to a bank account
or accounts to be designated by the party to receive the payments. All payments
made pursuant to this Section 1.5 shall be deemed to be adjustments to the
Purchase Price.
(e) For purposes of preparing the Closing Statement, (i)
there shall be no increases in the carrying value of any assets of the Business
by virtue of any adjustments made after December 31, 1998, and (ii) there shall
be no increases in the assets of the Business due to any increase in assets as
a result of unrealized gains, translation adjustments, reversals of accruals
for contingent liabilities, except to the extent such accruals related to
specific liabilities that were paid, changes of accounting principles or
methods,
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adjustments to the carrying value of inventory due to standard cost or other
similar adjustments or other similar increases in the carrying value of assets
due to non-cash items.
1.6 Weatherford Share Adjustments. If (a) any of the Seller Group
sells any Weatherford Shares on or before the first anniversary of the Closing
Date in a bona fide open market transaction to a non-Affiliate of any of the
Seller, the Seller Group or the Shareholders (a "Resale") at a gross sales
price per share that is less than an amount equal to $9,900,000 divided by the
number of Weatherford Shares issued to the Seller at Closing (the "First Share
Floor Price"), Weatherford and the Buyer agree to pay such selling member of
the Selling Group an amount equal to the number of Weatherford Shares sold in
the Resale multiplied by the difference between the First Share Floor Price and
the gross sales price per share received in the Resale, or (b) any of the
Seller Group sells any Weatherford Shares after the first anniversary and on or
before the second anniversary of the Closing Date in a Resale at a gross sales
price per share that is less than an amount equal to $10,450,000 divided by the
number of Weatherford Shares issued to the Seller at Closing (the "Second Share
Floor Price"), Weatherford and the Buyer agree to pay such selling member of
the Selling Group an amount equal to the number of Weatherford Shares sold in
the Resale multiplied by the difference between the Second Share Floor Price
and the gross sales price per share received in the Resale (each payment
referred to in clauses (a) and (b) above is referred to herein as an
"Additional Payment"). On the third Business Day following the receipt by
Weatherford of adequate documentation of a Resale, including a copy of the
broker's transaction report for the Resale which shall include the gross sales
price per Weatherford Share sold in the Resale, an Additional Payment shall be
paid by the Buyer or Weatherford to the appropriate selling member of the
Seller Group by wire transfer of same day funds (as designated by such Person).
Notwithstanding the foregoing, if for any period of 20 consecutive trading days
subsequent to the date the Registration Statement is declared effective by the
Commission (excluding trading days occurring during any period of deferral or
suspension pursuant to Section 4.1), the closing sales price of the Common
Stock, as reported by the New York Stock Exchange, is greater than the Target
Price, Weatherford and the Buyer shall be obligated to make Additional Payments
only with respect to a maximum aggregate of 137,500 of the Weatherford Shares,
including all Weatherford Shares previously sold by any member of the Seller
Group.
1.7 Contingent Payment.
(a) If the VTC is less than the Final Value, the Buyer
and Weatherford shall pay to the Seller an amount equal to the Final Value
minus the VTC (the "Contingent Payment"); provided, however, that if any of the
Weatherford Shares are sold, transferred or disposed of by any member of the
Seller Group prior to the Contingent Payment Date, the Contingent Payment shall
be reduced by a percentage equal to the percentage which the number of
Weatherford Shares sold, transferred or otherwise disposed of by the Seller
Group represents to the total number of Weatherford Shares issued to the Seller
at Closing; provided further, however, if after the date the Registration
Statement is declared effective by the Commission and prior to the Contingent
Payment Date, the closing sales price of the Common Stock, as reported by the
New York Stock Exchange, is greater than the Target Price for any period of 20
consecutive trading days (excluding trading days occurring during any period of
deferral or suspension pursuant to Section 4.1), Weatherford and the Buyer
shall not be obligated to make the Contingent Payment. The Contingent Payment
may be made in cash or in shares of Common Stock, in the sole discretion of the
Buyer and Weatherford. If the Contingent Payment is made in shares of Common
Stock, (i) the number of shares to be issued shall be an amount equal to the
Contingent Payment divided by the average of the closing sales price per share
of the Common Stock for the five consecutive trading days immediately preceding
the Contingent Payment Date, as reported by the New York Stock Exchange and
(ii) Weatherford and the Seller shall enter into a registration rights
agreement on terms substantially similar to those set forth in Article 4.
(b) The value allocated to the Business at the end of the
Performance Period (the "Final Value") shall be determined as follows:
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(i) If Adjusted Gross Margin Per Commissioned
Compressor during the Performance Period is less than 100% of
the Projected Performance, the Final Value shall be
$22,450,000;
(ii) If Adjusted Gross Margin Per Commissioned
Compressor during the Performance Period is equal to or
greater than 100% but less than 120% of the Projected
Performance, the Final Value shall be $25,000,000; and
(iii) If Adjusted Gross Margin Per Commissioned
Compressor during the Performance Period is equal to or
greater than 120% of the Projected Performance, the Final
Value shall be $27,000,000.
(c) The projected Adjusted Gross Margin Per Commissioned
Compressor during the Performance Period (the "Projected Performance") shall be
determined as follows:
(i) If Capital Expenditures during the Performance
Period are less than or equal to $4,900,000, the Projected
Performance shall be equal to $352,000;
(ii) If Capital Expenditures during the Performance
Period are greater than $4,900,000 but less than or equal to
$6,500,000, the Projected Performance shall be equal to
$356,000; and
(iii) If Capital Expenditures during the Performance
Period are greater than $6,500,000, the Projected Performance
shall be equal to (A) $356,000 less (B) $1,780 for every
$100,000 of Capital Expenditures in excess of $6,500,000.
For purposes of determining the Final Value and the Projected Performance,
"Adjusted Gross Margin Per Commissioned Compressor" shall mean an amount equal
to (i) Net Revenues from the provision of the Services utilizing the technology
acquired from the Seller hereunder less cost of goods sold or services provided
before depreciation, interest and amortization, divided by (ii) the Average
Number of Commissioned Compressors during the Performance Period. "Capital
Expenditures" shall mean the manufacturing costs or purchase price of the
commissioned compressors used by the Buyer in its underbalanced drilling
compressor services during the Performance Period. Adjusted Gross Margin Per
Commissioned Compressor and Capital Expenditures shall be calculated in
accordance with the historical accounting practices of the Seller applied on a
consistent basis. "Average Number of Commissioned Compressors" shall mean an
amount, based upon the total number of compressors Available For Use by the
Buyer in rendering the Services at any time during the Performance Period,
resulting from (i) the sum of the total number of months that each compressor
was used or Available For Use by the Buyer in rendering the Services during the
Performance Period, divided by (ii) 24. If the Services, including charges for
chemicals, are provided to a customer as part of an overall package, only that
portion of the revenues attributable to the Services, including the chemicals,
shall be included in revenues.
(d) Within 60 calendar days following the Contingent
Payment Date, the Buyer shall prepare and deliver to the Representative a
statement reflecting the Final Value and Adjusted Gross Margin Per Commissioned
Compressor and Capital Expenditures during the Performance Period, and the
calculations thereof (the "Contingent Payment Statement"). The Buyer shall
provide the Representative with access to copies of all work papers and other
relevant documents to verify the information contained in the Contingent
Payment Statement. The Representative shall have a period of 30 calendar days
after delivery to him of the Contingent Payment Statement to review it and make
any objections the Representative may have in writing to the Buyer. If written
objections to the Contingent Payment Statement are received by the Buyer within
such 30-day period, then the Buyer and the Representative shall attempt to
resolve the matter or matters in dispute. If no written objections are made
within the time period provided above, the Buyer shall pay to the
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Seller the Contingent Payment, if any, within five calendar days after the end
of such 30-day period. If disputes with respect to the Final Statement cannot
be resolved by the Buyer and the Representative within 15 calendar days after
the receipt by the Buyer of the objections to the Contingent Payment Statement,
then either party with notice to the other party may submit the specific
matters in dispute to Price Waterhouse Coopers LLP, or such other recognized
independent accounting firm as may be approved by the Buyer and the
Representative, which firm shall render its opinion as to such matters. Based
on such opinion, such accounting firm will then send to the Buyer and the
Representative its determination on the specific matters in dispute, together
with a revised Contingent Payment Statement reflecting such resolution, which
determination shall be final and binding on the parties hereto. Within five
calendar days after delivery of such opinion to the Buyer and the
Representative, the Buyer shall pay to the Seller the Contingent Payment, if
any. The fees and other costs charged by the independent accounting firm shall
be borne equally by the Buyer and the Seller. All payments made pursuant to
this Section 1.7 shall be paid in immediately available funds by wire transfer
to a bank account or accounts to be designated by the Representative.
1.8 Liabilities Not Assumed by the Buyer. Except for the Assumed
Liabilities, the Seller and the Shareholders shall pay and discharge in due
course all liabilities, debts and obligations relating to the Seller, the
Shareholders, the Transferred Assets or the Business, whether known or unknown,
now existing or hereafter arising, contingent or liquidated, including, without
limitation, (i) any Tax liabilities pertaining to any of the Seller, the
Shareholders, the Transferred Assets or the Business for periods prior to and
including the Closing Date, (ii) any Debt Obligations of any Person, (iii) all
liabilities and obligations relating to any products manufactured, sold or
distributed or services provided by or on behalf of the Seller or with respect
to any claims made pursuant to warranties to third Persons in connection with
products manufactured, sold or distributed or services provided by or on behalf
of the Seller, the Shareholders or any Affiliate of the Seller or the
Shareholders, (iv) all Pre-Closing Obligations, (v) all liabilities and
obligations of any Person arising prior to the Closing or related to the
conduct or operation of the Transferred Assets or the Business on or prior to
the Closing Date and (vi) all obligations, liabilities and expenses of the
Seller, the Shareholders or any Affiliate of the Seller or the Shareholders,
including investment banking, legal and accounting fees and expenses, relating
to the transactions contemplated herein (collectively, the "Retained
Liabilities"), and the Buyer shall not assume, or in any way be liable or
responsible for, any of such Retained Liabilities.
1.9 Transfer Taxes; Recording Fees. The Buyer and the Seller
acknowledge and agree that any and all sales, use, value added, stamp, transfer
or other similar Taxes imposed as a result of the consummation of the
transactions contemplated by this Agreement shall be borne equally by the
Buyer, on the one hand, and the Seller and the Shareholders, on the other hand,
including, without limitation, any liability to which any of the parties may
become subject as a result of the fact that the transactions contemplated by
this Agreement are effected without compliance with the bulk sales provisions
of the Uniform Commercial Code as in effect in any state or any similar statute
as enacted in any jurisdiction. The Buyer shall pay any and all recording,
filing or other fees relating to the conveyance or transfer of the Transferred
Assets from the Seller to the Buyer. The Buyer shall deliver to the Seller on
the Closing Date a certificate certifying that the Inventories are being
purchased for resale to the extent stated therein.
1.10 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Transferred Assets by the Buyer and the Representative
within 60 days following the Closing Date subject to the following: (i) such
allocation will be in accordance with the allocations set forth in Section 1.10
of the Disclosure Schedule; (ii) such allocation of the Purchase Price will be
reflected in Form 8594 that will be filed by the Buyer and the Seller in
accordance with Section 1060 of the Code, with such adjustments as may be
necessary pursuant to Section 1.5; and (iii) the Buyer and the Seller agree to
treat and report in filings under the Code (and, if necessary, to cause each of
their respective Affiliates to so treat and report) the transactions
contemplated by this Agreement in a manner consistent with one another.
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1.11 Prorations of Property Taxes and Certain Expenses.
(a) The Seller and each of the Shareholders warrant
that the Transferred Assets are not, and on the Closing Date will not be,
subject to or liable for any special assessments or similar types of
impositions. Any general property Tax assessed against or pertaining to the
Transferred Assets for the taxable period that includes the Closing Date shall
be prorated between the Buyer and the Seller as of the Closing Date. In the
event the amount of any such general property Tax cannot be ascertained as of
the Closing Date, proration shall be made on the basis of the preceding year,
the Buyer shall receive a credit against the Cash Payment for the Seller's pro
rata portion of such general property Taxes, and to the extent that such
proration may be inaccurate, the Seller and the Buyer agree to make such
payment to the other after the tax statements have been received as is
necessary to allocate such general property Tax properly between the Seller and
the Buyer as of the Closing Date.
(b) Except as otherwise provided in this Agreement, the
Seller and the Buyer agree that amounts payable with respect to utility charges
and other items of expense attributable to the conduct of the Business shall be
prorated as of the Closing Date to the extent the charges and expenses cannot
be identified as to the party that received the benefits to which such charges
and expenses relate. The Buyer shall receive a credit against the Cash Payment
for the Seller's pro rata portion of such charges and expenses. To the extent
such amounts are estimated on the Closing Date and such prorations are
inaccurate, the Seller and the Buyer agree to make such payment to the other
after such amounts are correctly computed as is necessary to allocate such
charges properly between the Seller and the Buyer as of the Closing Date.
(c) The Seller shall receive a credit, to be paid at
Closing, for the amount of prepaid expenses and deposits relating to the
Entitlements, to the extent and only to the extent that such prepaid expenses
and deposits are Transferred Assets and are not reflected on the Financial
Statements.
1.12 Adjustments for Changes in Capitalization. For purposes of this
Article 1, references to the Common Stock and ▇▇▇▇▇▇▇▇▇▇▇ Shares shall include
any stock, securities, cash or other property that may be received by a
stockholder who held a share of Common Stock on the Closing Date in respect of
such share and all references to the market value of the Common Stock as of any
date shall mean the sum of the market value of Common Stock and such other
stock, securities, cash or other property that may be received by a holder of
Common Stock in respect of a share of Common Stock as of the date of the
Closing. The determination of the value of any security shall be based on the
closing sale price of that security on the principal stock exchange on which it
is listed if that security is traded on a national securities exchange. If the
principal market in which a security is traded is an automated trading system,
such as NASDAQ, the market value on any day shall be the average of the high
and low bid price for that security on that day. If any other security or
property is received, its value shall be determined by agreement by a
nationally recognized investment banking firm selected in good faith by
▇▇▇▇▇▇▇▇▇▇▇. In the event of a reclassification of the Common Stock into a
greater or lesser number of shares of Common Stock, all references to numbers
of shares of Common Stock and all market prices for the Common Stock shall be
appropriately adjusted to reflect such reclassification.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER AND THE SHAREHOLDERS
The Seller and each of the Shareholders hereby jointly and severally
represent and warrant to the Buyer and ▇▇▇▇▇▇▇▇▇▇▇ and covenant and agree as
follows:
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2.1 Corporate and Shareholder Matters. Each of the Seller and CHI
is a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware. Each of the Seller and CHI is duly authorized, qualified
and licensed and has all requisite power and authority under all applicable
laws, ordinances and orders of public authorities to own, operate and lease its
properties and assets and to carry on its business in the places and in the
manner currently conducted. The Seller is qualified to transact business as a
foreign corporation and is in good standing in the jurisdictions, if any,
specified in Section 2.1 of the Disclosure Schedule, and there is no other
jurisdiction in which the nature and extent of the Business or the character of
the Seller's assets makes such qualification necessary. Each of the Seller and
CHI has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement. Each of the CHI
Shareholders has all requisite legal capacity, power and authority to enter
into this Agreement and to perform his obligations under this Agreement. Other
than Permitted Liens, CHI owns beneficially and of record all of the issued and
outstanding stock of the Seller free and clear of all Liens. Other than
Permitted Liens, the CHI Shareholders collectively own beneficially and of
record all of the issued and outstanding stock of CHI free and clear of all
Liens.
2.2 Validity of Agreement and Conflict with Other Instruments.
(a) This Agreement, and all transactions contemplated
hereby, have been duly authorized and approved by the boards of directors and
the shareholders of each of the Seller and CHI. No further corporate action is
necessary on the part of either the Seller or CHI to execute and deliver this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Seller and each of the Shareholders
and is a legal, valid and binding obligation of the Seller and each of the
Shareholders enforceable against them in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect creditors' rights generally and by legal and equitable limitations on
the availability of specific remedies.
(b) The execution, delivery and performance of this
Agreement and the other agreements and documents to be delivered by the Seller
and each of the Shareholders to the Buyer, the consummation of the transactions
contemplated hereby or thereby, and the compliance with the provisions hereof
or thereof, by the Seller and each of the Shareholders will not, with or
without the passage of time or the giving of notice or both: (i) conflict with,
constitute a breach, violation or termination of any provision of, or, subject
to the receipt of all required third-party consents set forth in Section 2.2(b)
of the Disclosure Schedule (the "Required Consents"), give rise to any right of
termination, cancellation or acceleration, or loss of any right or benefit or
both, under, any of the Entitlements to which the Seller is a party or by which
it is bound; (ii) conflict with or violate the certificate of incorporation or
by-laws of either the Seller or CHI; (iii) result in the creation or imposition
of any Lien on any of the Transferred Assets; (iv) except as set forth in
Section 2.2(b) of the Disclosure Schedule, result in an acceleration or
increase of any amounts due with respect to any of the Assumed Liabilities or
the Trade Payables; (v) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other restriction of any
kind or character applicable to the Seller or any of the Shareholders or any of
their respective properties or assets; or (vi) conflict with, constitute a
breach, violation or termination of any agreement or understanding, whether
written or otherwise, to which the Seller or any of the Shareholders is a party
or by which it or he is bound.
2.3 Approvals, Licenses and Authorizations.
(a) Except for the filing of a pre-merger notification
and report form under the HSR Act and the receipt of all Required Consents, no
order, license, consent, waiver, authorization or approval of, or exemption by,
or the giving of notice to, or the registration with, or the taking of any
other action in respect of, any Person not a party to this Agreement, including
any Governmental Entity, and no filing, recording, publication or registration
in any public office or any other place is now, or under existing law in the
future will be, necessary on behalf of the Seller or any of the Shareholders to
authorize the execution, delivery and
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performance of this Agreement or any other agreement contemplated hereby to be
executed and delivered by the Seller or any of the Shareholders and the
consummation of the transactions contemplated hereby or thereby (including, but
not limited to, assignment of the Transferred Assets), or to effect the
legality, validity, binding effect or enforceability thereof.
(b) All licenses, permits, concessions, warrants,
franchises and other governmental authorizations and approvals of all
Governmental Entities required or necessary for the Seller to carry on the
Business in the places and in the manner currently conducted have been duly
obtained and are in full force and effect. No violations have been recorded or,
to the knowledge of the Seller and each of the Shareholders, are in existence
with respect to such licenses, permits or other authorizations and no
proceeding is pending or, to the best knowledge of the Seller and each of the
Shareholders, threatened with respect to the revocation or limitation of any of
such licenses, permits or other authorizations. The Seller has complied in all
material respects with all laws, rules, regulations and orders applicable to
the Business, and all rules, regulations and orders respecting the provision of
services by the Seller.
2.4 Title to and Condition of Properties.
(a) The Seller has good and marketable title to all
Equipment free and clear of all Liens, except Permitted Liens. All of the
Equipment is in the Seller's possession and control.
(b) The Seller has good and marketable title to all
Inventories free and clear of all Liens, except Permitted Liens. All
Inventories are in the Seller's possession and control except as set forth on
Section 2.4(b) of the Disclosure Schedule.
(c) The Accounts Receivable are owned by the Seller free
and clear of all Liens. All Accounts Receivable were generated in the ordinary
course of business and are believed to be collectable within 90 days following
the Closing Date, subject to any applicable reserves included on the Financial
Statements.
(d)(i) The Seller or the Affiliated Company owns, free and
clear of all Liens, other than Permitted Liens, or possesses licenses or other
rights to use all rights to all Proprietary Information necessary for the
conduct of the Business as currently conducted. At the Closing, the Seller, the
Shareholders and the Affiliated Company will transfer or cause to be
transferred all Proprietary Information necessary for the conduct of the
Business as currently conducted. Set forth in Section 1.1(a)(iv) of the
Disclosure Schedule is a complete and accurate list of all patents, trademarks
and licenses the Seller or the Affiliated Company owns or possesses or
otherwise has rights to use and that pertain to the Business. All Proprietary
Information that is licensed by the Seller from third parties is licensed
pursuant to valid and existing license agreements and such interests are not
subject to any Liens other than those under the applicable license agreements.
The consummation of the transactions contemplated by this Agreement will not
result in the loss of any Proprietary Information and will not conflict with,
constitute a breach, violation or termination of any agreement or
understanding, whether written or otherwise, relating to any Proprietary
Information necessary for the conduct of the Business as currently conducted.
(ii) No licenses, sublicenses, covenants or agreements
have been granted or entered into by the Seller or any of the Shareholders in
respect of the items listed in Section 1.1(a)(iv) of the Disclosure Schedule
except as noted thereon. None of the Seller or any of the Shareholders has
received any notice of infringement, misappropriation or conflict from any
other Person with respect to such Proprietary Information and the conduct of
the Business has not infringed, misappropriated or otherwise conflicted with
any Proprietary Information of any such Person. The Seller has not given any
indemnification for patent, trademark, service ▇▇▇▇ or copyright infringements
except to licensees or customers in the ordinary course of business. All of the
Proprietary Information that is owned by the Seller is owned free and clear of
all Liens and all such Proprietary Information will be transferred to the Buyer
free and clear of all Liens, including any claims by any claimed or alleged
co-inventors or co-owners.
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(e) All Real Property is set forth in Section 1.1(a)(v)
of the Disclosure Schedule. All leases of Real Property leased for the use or
benefit of the Seller and to which it is a party, and all amendments and
modifications thereof, are in full force and effect and there exists no default
under the leases by the Seller, nor any event that with notice or lapse of time
or both would constitute a default thereunder by the Seller.
(f) The Transferred Assets include all assets used in
connection with or relating to the Business of every type and description,
tangible and intangible, wherever located and whether or not reflected on the
books and records of the Seller (but not including Excluded Assets). To the
extent that any of the Transferred Assets are not in the possession (actual or
constructive) of the Seller, the Seller and the Shareholders shall cause the
holder thereof to transfer and assign such assets to the Buyer at the Closing.
2.5 Contracts and Commitments.
(a) Except as set forth in Section 2.5 of the Disclosure
Schedule, none of the Transferred Assets is subject to and the Seller is not a
party to or bound by: (i) any agreement, contract or commitment requiring the
expenditure or series of related expenditures of funds in excess of $10,000
(other than purchase orders in the ordinary course of business for goods
necessary for the Seller to complete then existing contracts or purchase
orders); (ii) any agreement, contract or commitment requiring the payment for
goods or services whether or not such goods or services are actually provided
or the provision of goods or services at a price less than the Seller's cost of
producing such goods or providing such services; (iii) any loan or advance to,
or investment in, any Person or any agreement, contract, commitment or
understanding relating to the making of any such loan, advance or investment;
(iv) any Debt Obligations; (v) any management service, employment, consulting
or other similar type contract or agreement; (vi) any agreement, contract or
commitment that, by its terms, would limit the freedom of the Buyer or any of
its Affiliates following the Closing Date to engage in any line of business, to
own, operate, sell, transfer, pledge or otherwise dispose of or encumber any of
the Transferred Assets or to compete with any Person or to engage in any
business or activity in any geographic area; (vii) any agreement, lease,
contract or commitment or series of related agreements, leases, contracts or
commitments not entered into in the ordinary course of business or, except for
agreements to purchase or sell goods and services entered into in the ordinary
course of business of the Seller, not cancelable by the Seller without penalty
to the Seller within 30 calendar days; (viii) any agreement or contract
obligating the Seller or that would obligate or require any subsequent owner of
the Business or any of the Transferred Assets to provide for indemnification or
contribution with respect to any matter; (ix) any sales, distributorship or
similar agreement relating to the products sold or services provided by the
Seller; or (x) any license, royalty or similar agreement.
(b) The Seller is not in breach of any provision of, or
in default (and neither the Seller nor any of the Shareholders has any
knowledge of any event or circumstance that with notice, or lapse of time or
both, would constitute an event of default) under the terms of any of the
Entitlements that constitute a part of the Transferred Assets, except for such
breaches or defaults that would not materially and adversely affect the Seller,
the Business or the Transferred Assets. All of the Entitlements that constitute
a part of the Transferred Assets are in full force and effect. Neither the
Seller nor any of the Shareholders is aware of any pending or threatened
disputes with respect to any of the Entitlements. The enforceability of the
Entitlements that constitute a part of the Transferred Assets will not be
affected in any manner by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.6 Financial Statements. Attached as Section 2.6 of the Disclosure
Schedule are true, correct and complete copies of (i) the unaudited balance
sheets of the Seller as of December 31, 1998, and (ii) the unaudited statement
of income of the Seller for the year ended December 31, 1998 (collectively, the
"Financial Statements"). The Financial Statements (i) fairly present the
financial position of the Seller as of their respective dates and the results
of operations of the Business for the periods indicated therein, (ii) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent
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basis throughout the periods covered by the Financial Statements and (iii) have
not been rendered untrue, incomplete or unfair as representations of the
financial condition of the Transferred Assets or the Business by events
subsequent to the date of the Financial Statements. The unaudited balance
sheets of the Seller as of December 31, 1998, are the most recently available
balance sheets of the Seller.
2.7 No Adverse Change. Since December 31, 1998, (a) no material
business segment of the Business has been adversely affected in any material
way as the result of any fire, explosion, accident, riot, civil or labor
disturbance, strike, boycott, lockout, flood, drought, storm, earthquake,
embargo or other casualty or act of God or the public enemy, and (b) there has
been no material adverse change in the condition of any material business
segment of the Business or in the condition of the assets of the Seller nor has
any event or condition occurred that could reasonably result in such a material
and adverse change.
2.8 Taxes.
(a) All Tax Returns that are required to be filed (taking
into account all extensions) on or before the Closing Date for, by, on behalf
of or with respect to the Seller, including, but not limited to, those relating
to the Business, the Transferred Assets and the Assumed Liabilities, and those
which include or should include the Seller, the Transferred Assets or the
Assumed Liabilities, have been or will be timely filed with the appropriate
foreign, federal, state and local authorities on or before the Closing Date,
and all Taxes shown to be due and payable on such Tax Returns or related to
such Tax Returns have been or will be timely paid in full on or before the
Closing Date.
(b) None of such Tax Returns are now under audit or
examination by any foreign, federal, state or local authority and there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment or collection of any Tax or deficiency of any
nature against the Seller, the Business or the Transferred Assets, or with
respect to any such Tax Return, or any suits or other actions, proceedings,
investigations or claims now pending or threatened against the Seller, the
Business or the Transferred Assets with respect to any Tax, or any matters
under discussion with any foreign, federal, state or local authority relating
to any Tax, or any claims for any additional Tax asserted by any such
authority.
2.9 Environmental Matters.
(a) Except as set forth in Section 2.9(a) of the
Disclosure Schedule, neither the Seller nor, to the knowledge of the Seller and
each of the Shareholders, any prior owner or operator of the business conducted
by the Seller has caused or allowed the generation, use, treatment, storage, or
disposal of Hazardous Materials at any site or facility owned, leased or
operated by the Seller except to the extent the same would not, under current
laws, result in any liability, contingent or otherwise, to the Buyer or its
Affiliates.
(b) The Seller neither owns nor leases nor has
previously owned or leased any real property, improvements or related assets
that have been subject to the release of any Hazardous Materials.
(c) The Seller has secured all Environmental Permits
necessary to the conduct of the Business, all such Environmental Permits are
subsisting and in good standing, and the Seller is in compliance with such
permits.
(d) Neither the Seller nor any of the Shareholders has
received any notice, nor is the Seller or any of the Shareholders aware, of any
proposal to amend, revoke or replace any Environmental Permit, or requiring the
issuance of any additional Environmental Permit, the Transferred Assets or the
Business.
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(e) Neither the Seller nor any of the Shareholders has
received or is aware of any inquiry or notice of any actual or potential
proceedings, claims, lawsuits or losses related to or arising under any
Environmental Law and relating to the Seller.
(f) The Seller is not currently operating or required to
be operating under any compliance order, schedule, decree or agreement, any
consent decree, order or agreement, or corrective action decree, order or
agreement issued or entered into under any federal, state, provincial or local
statute, regulation or ordinance regarding the environment or health or safety
in the work place.
(g) To the best knowledge of the Seller and each of the
Shareholders, the Seller is in material compliance in all respects with all
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements and obligations established under Environmental Laws.
(h) There are no underground storage tanks located on
any of the Transferred Assets.
(i) None of the Transferred Assets is encumbered by a
Lien arising or imposed under Environmental Laws.
(j) No notice or other filing, consent or approval is
required under any Environmental Law as a prerequisite to the transfer of the
Business and the Transferred Assets to the Buyer.
(k) The Seller and the Shareholders have provided the
Buyer with copies of all environmental audits, assessments or other evaluations
of the Business or any of the Transferred Assets that are in the possession of
the Seller or any of the Shareholders or any of their respective Affiliates,
consultants, agents or representatives.
2.10 No Litigation. Except as set forth in Section 2.10 of the
Disclosure Schedule, there is no action, suit, claim, judgment, investigation
or legal, administrative, arbitration or other proceeding, or governmental
investigation or examination, pending or, to the knowledge of the Seller and
each of the Shareholders, threatened against or affecting the Seller, the
Business or any of the Transferred Assets, at law or in equity, before or by
any Governmental Entity and, to the best knowledge of the Seller and each of
the Shareholders, no basis exists for any such action, suit, claim,
investigation or proceeding. To the knowledge of the Seller and each of the
Shareholders, there is no change in any zoning or building ordinance pending or
threatened against or affecting the Seller, the Business or any of the
Transferred Assets.
2.11 Warranties and Product Liability.
(a) Except for (i) warranties implied by law and (ii)
warranties disclosed in Section 2.11 of the Disclosure Schedule, the Seller has
not given or made any warranties in connection with the sale or rental of goods
or services on or prior to the Closing, including, without limitation,
warranties covering the customer's consequential damages. Neither the Seller
nor any of the Shareholders is aware of any state of facts or the occurrence of
any event forming the basis of any present claim against the Seller with
respect to warranties relating to products manufactured, sold or distributed by
the Seller or services performed by or on behalf of the Seller on or prior to
the Closing.
(b) To the knowledge of the Seller and each of the
Shareholders, there is no state of facts or any event forming the basis of any
present claim against the Seller, the Business or the Transferred Assets not
fully covered by insurance, except for deductibles and self-insurance
retentions, for personal injury or property damage alleged to be caused by
products shipped or services rendered by or on behalf of the Seller.
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2.12 Employee Matters.
(a) Except as set forth in Section 2.12(a) of the
Disclosure Schedule, there are no collective bargaining or other labor union
agreements to which the Seller is a party or by which it is bound. To the best
knowledge of the Seller and each of the Shareholders, the Seller has not
encountered any labor union organizing activity or had any actual or threatened
employee strikes, work stoppages, slowdowns or walkouts.
(b) Except as set forth in Section 2.12(b) of the
Disclosure Schedule, none of the Seller nor any corporation, trade, business or
entity under common control with the Seller (within the meaning of Section
414(b), (c) or (m) of the Code or Section 4001 of ERISA) currently sponsors,
maintains or contributes to, or during the last six years has sponsored,
maintained or contributed to, any employee benefit plan (within the meaning of
Section 3(3) of ERISA).
(c) The Seller does not contribute to or have an
obligation to contribute to, and has not at any time within six years prior to
the Closing Date contributed to or had an obligation to contribute to, a
multi-employer plan within the meaning of Section 3(37) of ERISA.
2.13 Finder's Fees. Except as set forth on Section 2.13 of the
Disclosure Schedule, none of the Seller or any of the Shareholders or any of
their respective Affiliates has employed or retained any investment banker,
broker, agent, finder or other party, or incurred any obligation for brokerage
fees, finder's fees or commissions, with respect to the sale by the Seller of
any of the Transferred Assets or with respect to the transactions contemplated
by this Agreement, or otherwise dealt with anyone purporting to act in the
capacity of a finder or broker with respect thereto whereby any party hereto
may be obligated to pay such a fee or commission. The Seller and each of the
Shareholders agree that they are responsible and liable for and will pay any
fees resulting from matters set forth on Section 2.13 of the Disclosure
Schedule and that any of such fees are not and will not be included in the
accrued liabilities on the Financial Statements. The Seller and each of the
Shareholders agree to indemnify and hold the Buyer and its Affiliates harmless
from and against any and all claims, liabilities or obligations with respect to
all fees, commissions or expenses asserted by any Person on the basis of any
act, statement, agreement or commitment alleged to have been made by the Seller
or any of the Shareholders or any Affiliate of the Seller or any of the
Shareholders with respect to any such fee, commission or expense.
2.14 Insurance. Section 2.14 of the Disclosure Schedule sets forth
all existing insurance policies held by the Seller relating to the Business or
the Transferred Assets. Copies of all such policies have been provided to the
Buyer. Each such policy is in full force and effect and is with responsible
insurance carriers. There is no dispute with respect to such policies, and all
claims arising from events or circumstances occurring prior to the date hereof
have been paid in full or adequate reserves therefor are recorded in the
Financial Statements.
2.15 Securities Law Matters.
(a) The Seller and each of the Shareholders recognize and
understand that the ▇▇▇▇▇▇▇▇▇▇▇ Shares to be issued to the Seller (the
"securities") will not, except as expressly provided in Article 4, be
registered under the Securities Act, or under the securities laws of any state
(the "securities laws"). The securities are not being so registered in reliance
upon exemptions from the Securities Act and the securities laws which are
predicated, in part, on the representations, warranties and agreements of the
Seller and the Shareholders contained herein.
(b) The Seller and each of the Shareholders represent
and warrant that (i) the Seller has business knowledge and experience, such
experience being based on actual participation therein, (ii) the Seller is
capable of evaluating the merits and risks of an investment in the ▇▇▇▇▇▇▇▇▇▇▇
Shares and the suitability
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thereof as an investment therefor, (iii) the ▇▇▇▇▇▇▇▇▇▇▇ Shares to be acquired
by the Seller will be acquired solely for investment and not with a view toward
resale or redistribution in violation of the securities laws, (iv) the Seller
is a corporation whose principal corporate offices are in Grand Junction,
Colorado, (v) in connection with the transactions contemplated hereby, no
assurances have been made concerning the future results of the Buyer or
▇▇▇▇▇▇▇▇▇▇▇ or as to the value of the Weatherford Shares and (vi) the Seller is
an "accredited investor" within the meaning of Regulation D promulgated by the
Commission pursuant to the Securities Act. The Seller understands that neither
▇▇▇▇▇▇▇▇▇▇▇ nor the Buyer is under any obligation to file a registration
statement or to take any other action under the securities laws with respect to
any such securities except as expressly set forth in Article 4 hereof.
(c) The Seller and each of the Shareholders have
consulted with their own counsel in regard to the securities laws and are fully
aware (i) of the circumstances under which the Seller is required to hold the
securities, (ii) of the limitations on the transfer or disposition of the
securities, (iii) that the securities must be held indefinitely unless the
transfer thereof is registered under the securities laws or an exemption from
registration is available and (iv) that no exemption from registration is
likely to become available for at least one year from the date of acquisition
of the securities. The Seller and each of the Shareholders have been advised by
their counsel as to the provisions of Rules 144 and 145 as promulgated by the
Commission under the Securities Act and have been advised of the applicable
limitations thereof. The Seller and each of the Shareholders acknowledge that
▇▇▇▇▇▇▇▇▇▇▇ and the Buyer are relying upon the truth and accuracy of the
representations and warranties in this Section 2.15 by the Seller and each of
the Shareholders in consummating the transactions contemplated by this
Agreement without registering the securities under the securities laws.
(d) The Seller and each of the Shareholders have been
furnished with the SEC Documents. The Seller and each of the Shareholders have
been furnished with a summary description of the terms of this Agreement, the
▇▇▇▇▇▇▇▇▇▇▇ Shares and ▇▇▇▇▇▇▇▇▇▇▇, and the Buyer and ▇▇▇▇▇▇▇▇▇▇▇ have made
available to the Seller and each of the Shareholders the opportunity to ask
questions and receive answers concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain any additional
information which they possess or could reasonably acquire for the purpose of
verifying the accuracy of information furnished to the Seller and the
Shareholders as set forth herein or for the purpose of considering the
transactions contemplated hereby. ▇▇▇▇▇▇▇▇▇▇▇ has offered to make available to
the Seller and each of the Shareholders upon request at any time all exhibits
filed by ▇▇▇▇▇▇▇▇▇▇▇ with the Commission as part of any of the reports filed
therewith.
(e) The Seller and each of the Shareholders agree that
the certificates representing the ▇▇▇▇▇▇▇▇▇▇▇ Shares will be imprinted with the
following legend, the terms of which are specifically agreed to:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, OR THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS
FROM REGISTRATION REQUIREMENTS. WITHOUT SUCH REGISTRATION, SUCH SHARES
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED,
EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED FOR SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER OR THE
SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH SALE, PLEDGE,
HYPOTHECATION OR TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.
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The Seller and each of the Shareholders understand and agree that appropriate
stop transfer notations will be placed in the records of ▇▇▇▇▇▇▇▇▇▇▇ and with
its transfer agents in respect of the securities which are to be issued to the
Seller. ▇▇▇▇▇▇▇▇▇▇▇ agrees that any ▇▇▇▇▇▇▇▇▇▇▇ Shares sold pursuant to an
effective registration statement, including a registration statement filed
pursuant to Article 4 hereof, shall have the above legend removed to permit the
closing of the sale within three Business Days of written notice of the sale
and certification by the Seller that the sale was made pursuant to the plan of
distribution described in the registration statement and the prospectus
delivery requirements under the Securities Act were fully complied with in
connection with the sale.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND ▇▇▇▇▇▇▇▇▇▇▇
The Buyer and ▇▇▇▇▇▇▇▇▇▇▇, jointly and severally, represent and
warrant to the Seller and the Shareholders as follows:
3.1 Corporate Matters. The Buyer is a limited partnership validly
existing and in good standing under the laws of Louisiana. ▇▇▇▇▇▇▇▇▇▇▇ is a
corporation validly existing and in good standing under the laws of Delaware.
Each of ▇▇▇▇▇▇▇▇▇▇▇ and the Buyer has all requisite power and authority to
enter into this Agreement and to perform its obligations under this Agreement.
This Agreement has been duly authorized, executed and delivered by each of
▇▇▇▇▇▇▇▇▇▇▇ and the general partner of the Buyer (the "Buyer General Partner")
and is a legal, valid and binding obligation of each of ▇▇▇▇▇▇▇▇▇▇▇ and the
Buyer, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect that affect creditors' rights
generally and by legal and equitable limitations on the availability of
specific remedies. The execution and delivery of this Agreement by each of
▇▇▇▇▇▇▇▇▇▇▇ and the Buyer General Partner and the consummation of the
transactions contemplated hereby by ▇▇▇▇▇▇▇▇▇▇▇ and the Buyer will not violate
any provision of, or constitute a default under, any contract or other
agreement to which either of ▇▇▇▇▇▇▇▇▇▇▇ or the Buyer is a party or by which it
is bound, or conflict with its organizational documents, other than violations,
defaults or conflicts that would not materially and adversely affect the
ability of ▇▇▇▇▇▇▇▇▇▇▇ or the Buyer to consummate the transactions provided for
in this Agreement.
3.2 Approvals, Licenses and Authorizations. Except for the filing
of a pre-merger notification and report form under the HSR Act, no order,
license, consent, waiver, authorization or approval of, or exemption by, or the
giving of notice to, or the registration with, or the taking of any other
action in respect of, any Person not a party to this Agreement, including any
Governmental Entity, and no filing, recording, publication or registration in
any public office or any other place is now, or under existing law in the
future will be, necessary on behalf of the Buyer or ▇▇▇▇▇▇▇▇▇▇▇ to authorize
its execution, delivery and performance of this Agreement or any other
agreement contemplated hereby to be executed and delivered by the Buyer or
▇▇▇▇▇▇▇▇▇▇▇ and the consummation by the Buyer and ▇▇▇▇▇▇▇▇▇▇▇ of the
transactions contemplated hereby or thereby, or to effect the legality,
validity, binding effect or enforceability thereof.
3.3 Finder's Fees. Neither the Buyer, ▇▇▇▇▇▇▇▇▇▇▇ nor any of their
respective Affiliates has employed or retained any investment banker, broker,
agent, finder or other party, or incurred any obligation for brokerage fees,
finder's fees or commissions, with respect to the transactions contemplated by
this Agreement, or otherwise dealt with anyone purporting to act in the
capacity of a finder or broker with respect thereto whereby any party hereto
may be obligated to pay such a fee or a commission. The Buyer and ▇▇▇▇▇▇▇▇▇▇▇,
jointly and severally, agree to indemnify and hold the Seller and the
Shareholders and their Affiliates harmless from and against any and all claims,
liabilities or obligations with respect to all fees, commissions or expenses
asserted by any Person on the basis of any act, statement, agreement or
commitment
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alleged to have been made by the Buyer or any Affiliate of the Buyer with
respect to any such fee, commission or expense.
3.4 Authorization for the ▇▇▇▇▇▇▇▇▇▇▇ Shares. ▇▇▇▇▇▇▇▇▇▇▇ has
taken, or will have taken prior to Closing, all necessary action to permit it
to issue the ▇▇▇▇▇▇▇▇▇▇▇ Shares. The ▇▇▇▇▇▇▇▇▇▇▇ Shares issued pursuant to the
terms of this Agreement will be validly issued, fully paid and nonassessable
and not subject to preemptive rights. The ▇▇▇▇▇▇▇▇▇▇▇ Shares will be listed on
the New York Stock Exchange.
3.5 SEC Documents. Weatherford has made available to the Seller
and each of the Shareholders all of the SEC Documents. The SEC Documents
represent each report filed by ▇▇▇▇▇▇▇▇▇▇▇ with the Commission since March 27,
1998. As of their respective dates, the SEC Documents (i) were prepared in all
material respects in accordance with the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder applicable to such documents and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading except for such
statements, if any, as have been modified by subsequent filing with the
Commission prior to the date hereof. The consolidated financial statements of
▇▇▇▇▇▇▇▇▇▇▇ included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of
▇▇▇▇▇▇▇▇▇▇▇ and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Since December 31, 1997, other than as discussed in the SEC Documents,
there has been no material adverse change in the business of ▇▇▇▇▇▇▇▇▇▇▇ and
its Subsidiaries, taken as a whole.
ARTICLE 4
REGISTRATION RIGHTS
4.1 Registration Rights.
(a) ▇▇▇▇▇▇▇▇▇▇▇ will use its best efforts to register
under the Securities Act the ▇▇▇▇▇▇▇▇▇▇▇ Shares pursuant to a non-underwritten
offering having a period of distribution not to exceed one year from the
Closing Date. In furtherance of such obligation, ▇▇▇▇▇▇▇▇▇▇▇ shall file, within
30 Business Days after the Closing Date, with the Commission a registration
statement on the appropriate form seeking the registration for resale of the
▇▇▇▇▇▇▇▇▇▇▇ Shares (the "Registration Statement"), pursuant to a
non-underwritten offering in accordance with the plan of distribution described
therein. References in this Article 4 to the ▇▇▇▇▇▇▇▇▇▇▇ Shares shall be deemed
to include any shares of Common Stock or other securities received by the
Seller Group on account of any stock split, stock dividend or merger of
▇▇▇▇▇▇▇▇▇▇▇.
(b) Notwithstanding anything to the contrary contained
in this Section 4.1, ▇▇▇▇▇▇▇▇▇▇▇ shall not be obligated to prepare and file the
Registration Statement pursuant to this Section 4.1, or prepare or file any
amendment or supplement thereto, at any time when ▇▇▇▇▇▇▇▇▇▇▇ reasonably
believes that the filing thereof, or the offering of securities pursuant
thereto, would adversely affect a pending or proposed public offering of
securities of Weatherford, an acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction relating to ▇▇▇▇▇▇▇▇▇▇▇ or
negotiations, discussions or pending proposals with respect thereto or require
premature disclosure of information not otherwise required to be disclosed to
the potential detriment of ▇▇▇▇▇▇▇▇▇▇▇.
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(c) Notwithstanding anything to the contrary contained
in this Section 4.1, ▇▇▇▇▇▇▇▇▇▇▇ shall be permitted, on written notice to the
Seller Group, to suspend the period of sale or distribution of the ▇▇▇▇▇▇▇▇▇▇▇
Shares at any time when ▇▇▇▇▇▇▇▇▇▇▇ reasonably believes that the sale or
distribution thereof would adversely affect a pending or proposed public
offering of securities of Weatherford, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction relating
to ▇▇▇▇▇▇▇▇▇▇▇ or negotiations, discussions or pending proposals with respect
thereto or require premature disclosure of information not otherwise required
to be disclosed to the potential detriment of ▇▇▇▇▇▇▇▇▇▇▇.
(d) The filing of the Registration Statement, or any
amendment or supplement thereto, by ▇▇▇▇▇▇▇▇▇▇▇ may not be deferred pursuant to
Section 4.1(b), and the sale and distribution of the ▇▇▇▇▇▇▇▇▇▇▇ Shares may not
be suspended pursuant to Section 4.1(c), for more than 60 days after the
abandonment or consummation (or the completion of the distribution of
securities in the case of a public offering) of any of the proposals or
transactions described therein or, in any event, for more than 120 days in any
twelve-month period.
(e) The Seller Group agrees and covenants to fully
cooperate with and assist ▇▇▇▇▇▇▇▇▇▇▇ and its counsel and representatives in
connection with ▇▇▇▇▇▇▇▇▇▇▇'▇ obligations under this Article 4, including
providing such information as reasonably requested by ▇▇▇▇▇▇▇▇▇▇▇ in connection
the preparation of the Registration Statement and the resale of the ▇▇▇▇▇▇▇▇▇▇▇
Shares.
4.2 Procedure. ▇▇▇▇▇▇▇▇▇▇▇ will, subject to the provisions of
Sections 4.1, 4.2 and 4.4 hereof:
(a) seek to cause the Registration Statement to become
and remain effective;
(b) as expeditiously as reasonably practicable, prepare
and file with the Commission such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep the Registration Statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of the
▇▇▇▇▇▇▇▇▇▇▇ Shares covered by the Registration Statement in accordance with the
intended method of distribution set forth therein;
(c) as expeditiously as reasonably practicable, furnish
to the Seller Group such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the Securities Act, and
such other documents as the Seller Group may reasonably request, in order to
facilitate the public sale or other disposition of the ▇▇▇▇▇▇▇▇▇▇▇ Shares owned
by the Seller Group; provided, however, that the obligation of ▇▇▇▇▇▇▇▇▇▇▇ to
deliver copies of prospectuses or preliminary prospectuses to the Seller Group
shall be subject to the receipt by ▇▇▇▇▇▇▇▇▇▇▇ of reasonable assurances from
the Seller Group that it will comply with the applicable provisions of the
Securities Act and of such other securities laws as may be applicable in
connection with any use by it of any prospectuses or preliminary prospectuses;
(d) as expeditiously as practicable, use its best
efforts to register or qualify the ▇▇▇▇▇▇▇▇▇▇▇ Shares under such other
securities laws of such United States jurisdictions as the Seller Group shall
reasonably request (considering the nature and size of the offering) and do any
and all other acts and things which may be necessary or desirable to enable the
Seller to consummate the public sale or other disposition in such jurisdictions
of the ▇▇▇▇▇▇▇▇▇▇▇ Shares; provided, however, that ▇▇▇▇▇▇▇▇▇▇▇ shall not be
required to qualify to transact business as a foreign corporation in any
jurisdiction in which it would otherwise not be required to be so qualified or
to take any action which would subject it to general service of process in any
jurisdiction in which it is not then so subject;
(e) bear all Registration Expenses (as defined below) in
connection with the registration hereunder; provided, however, that all Selling
Expenses (as defined below) of the ▇▇▇▇▇▇▇▇▇▇▇ Shares and all fees and
disbursements of counsel for the Seller Group shall be borne by the Seller
Group. For purposes of this Section 4.2, expenses incurred by ▇▇▇▇▇▇▇▇▇▇▇ in
complying with this Agreement include (i) all
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registration and filing fees; (ii) all printing expenses, (iii) all fees and
disbursements of counsel for ▇▇▇▇▇▇▇▇▇▇▇, (iv) all blue sky fees and expenses,
and (v) all fees and expenses of accountants for ▇▇▇▇▇▇▇▇▇▇▇ are herein
referred to as "Registration Expenses". All brokerage and selling commissions
and fees and expenses of counsel for the Seller Group in connection with any
such registration or resale are herein referred to as "Selling Expenses"; and
(f) keep the registration pursuant to Section 4.1 hereof
effective for a period of up to one year following the Closing Date or such
shorter period of time until the transfer or sale of all the ▇▇▇▇▇▇▇▇▇▇▇ Shares
has been completed.
4.3 Indemnification.
(a) In the event of a registration of the ▇▇▇▇▇▇▇▇▇▇▇
Shares under the Securities Act pursuant to this Agreement,
▇▇▇▇▇▇▇▇▇▇▇ will indemnify and hold harmless the Seller Group and any other
Person, if any, who controls the Seller Group within the meaning of Section 15
of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which the Seller Group or such controlling Person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities or actions in respect thereof arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in the Registration Statement,
any preliminary prospectus distributed with the consent of ▇▇▇▇▇▇▇▇▇▇▇ or final
prospectus contained therein, or any amendment thereof or supplement thereto,
including all documents incorporated by reference therein, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will, unless ▇▇▇▇▇▇▇▇▇▇▇ assumes the defense as provided in
Section 4.3(c), promptly following request and receipt of reasonable supporting
documents, such as invoices, reimburse the Seller Group and each such
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that ▇▇▇▇▇▇▇▇▇▇▇ will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement, including all documents incorporated by reference therein, in
reliance upon and in conformity with written information furnished to
▇▇▇▇▇▇▇▇▇▇▇ by or on behalf of the Seller Group or a controlling Person thereof
specifically for use in the preparation thereof.
(b) In the event of any registration of the ▇▇▇▇▇▇▇▇▇▇▇
Shares under the Securities Act pursuant to this Agreement, the Seller and the
Shareholders will jointly and severally indemnify and hold harmless Weatherford
and the Buyer and each Person, if any, who controls ▇▇▇▇▇▇▇▇▇▇▇ or the Buyer
within the meaning of Section 15 of the Securities Act, each officer of
Weatherford who signs the Registration Statement, each director of ▇▇▇▇▇▇▇▇▇▇▇
and each Person who controls any underwriter (if any) within the meaning of
Section 15 of the Securities Act, against any and all such losses, claims,
damages, liabilities or actions which ▇▇▇▇▇▇▇▇▇▇▇ or such officer, director,
underwriter (if any) or controlling Person may become subject under the
Securities Act or otherwise, and will reimburse ▇▇▇▇▇▇▇▇▇▇▇, each such officer,
director, underwriter (if any) and controlling Person for any legal or any
other expenses reasonably incurred by such party in connection with
investigating or defending any such loss, claim, damage, liability or action,
if (i) such loss, claim, damage, liability or action in respect thereof arises
out of or is based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any such prospectus,
or any amendment thereof or supplement thereto, or arises out of or is based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
and such statement or omission of a material fact was made in reliance upon
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and in conformity with information furnished to ▇▇▇▇▇▇▇▇▇▇▇ by or on behalf of
the Seller Group specifically for use in connection with the preparation of the
Registration Statement or prospectus or (ii) such loss, claim, damage,
liability or action in respect thereof arises out of or is based upon the
Seller Group's failure to deliver any required prospectus or otherwise comply
with applicable laws regarding the same. In addition, as a condition to the
inclusion of any ▇▇▇▇▇▇▇▇▇▇▇ Shares held by any other member of the Selling
Group in any registration of the ▇▇▇▇▇▇▇▇▇▇▇ Shares under the Securities Act
pursuant to this Agreement, such Person shall agree to be bound by the
indemnification obligations set forth in this Article 4, but only with respect
to information provided by or on behalf of such Person.
(c) Promptly after receipt by any indemnified Person of
notice of any claim or commencement of any action in respect of which indemnity
is to be sought against an indemnifying Person pursuant to this Agreement, such
indemnified Person shall notify the indemnifying Person in writing of such
claim or of the commencement of such action, and, subject to provisions
hereinafter stated, in case any such action shall be brought against an
indemnified Person and such indemnifying Person shall have been notified of the
same, such indemnifying Person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified Person, and after notice from the
indemnifying Person to such indemnified Person of its election to assume the
defense thereof, such indemnifying Person shall not be liable to such
indemnified Person in connection with the defense thereof; provided, however,
if there exists or will exist a conflict of interest which would make it
inappropriate in the reasonable judgment of the indemnified Person for the same
counsel to represent both the indemnified Person and such indemnifying Person
then such indemnifying Person shall be entitled to retain its own counsel at
the expense of such indemnifying Person; provided further, however, the
indemnifying Person shall not be required to pay for more than one separate
counsel for all of the indemnified Persons in addition to any local counsel.
Payment of any amounts due pursuant to this Section 4.3 shall be made within
ten Business Days after notice is sent by the indemnified Person.
4.4 Termination. If the holding period under Rule 144 or Rule 145
as promulgated under the Securities Act or any successor or similar rule or
statute is reduced to permit the sale of the ▇▇▇▇▇▇▇▇▇▇▇ Shares, the rights of
the Seller Group as to the registration provided for in this Agreement as to
the ▇▇▇▇▇▇▇▇▇▇▇ Shares shall terminate immediately.
4.5 Put Option. If the Registration Statement has not been
declared effective by the Commission by April 1, 2000, the Seller Group shall
have the right, exercisable upon written notice to ▇▇▇▇▇▇▇▇▇▇▇ signed by the
Shareholders, to require ▇▇▇▇▇▇▇▇▇▇▇ to purchase up to an aggregate maximum of
137,500 of the ▇▇▇▇▇▇▇▇▇▇▇ Shares, at a price per share equal to the closing
sales price of the Common Stock on the date such notice is given to
Weatherford, as reported by the New York Stock Exchange.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access to Information.
(a) Until the Closing, the Seller and each of the
Shareholders will furnish the Buyer and its employees, officers, accountants,
attorneys, agents, investment bankers and other authorized representatives with
all financial, operating and other data and information concerning the
Business, commitments and properties of the Seller as the Buyer shall from time
to time reasonably request and will afford the Buyer and its employees,
officers, accountants, attorneys, agents, investment bankers and other
authorized representatives reasonable access to the Seller's offices,
properties, books, records, contracts and documents and will be given the
opportunity to ask questions of, and receive answers from, representatives of
the Seller with respect to the Transferred Assets. As part of its
investigation, the Buyer shall have the right
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(subject to any required consent from an owner of the Real Property) to conduct
environmental assessments of the Transferred Assets, including soil and
groundwater sampling, as it deems appropriate. No investigations by the Buyer
or its employees, representatives or agents shall reduce or otherwise affect
the obligation or liability of the Seller or any of the Shareholders with
respect to any representations, warranties, covenants or agreements made herein
or in any exhibit, schedule or other certificate, instrument, agreement or
document, including the Disclosure Schedule, executed and delivered in
connection with this Agreement. The Seller and each of the Shareholders will
cooperate with the Buyer and its employees, officers, accountants, attorneys,
agents and other authorized representatives in the preparation of any documents
or other materials that may be required by any Governmental Entity.
(b) Each party hereto agrees to hold in confidence all,
and not to disclose to others for any reason whatsoever, any non-public
information received by it or its representatives from the other parties hereto
in connection with the transactions contemplated by this Agreement except (i)
as required by law; (ii) for disclosure to officers, directors, employees and
representatives of such party as necessary in connection with the transactions
contemplated hereby or as necessary to the operation of such party's business;
and (iii) for information that becomes publicly available other than through
such party. If the transactions contemplated by this Agreement are not
consummated, each party hereto will return to the other parties hereto all
non-public documents and other material obtained from such other parties
hereto, and all copies, summaries and extracts thereof, or certify to such
other party hereto that such information has been destroyed.
5.2 Conduct of the Business. The Seller and each of the
Shareholders covenant and agree with the Buyer that from and after the date
hereof until the Closing, except as expressly authorized by this Agreement or
as expressly consented to in writing by the Buyer, the Seller shall, and the
Shareholders shall cause the Seller to:
(a) operate the Business and the Transferred Assets only in
the usual, regular and ordinary manner with a view to maintaining the
goodwill that the Seller now enjoys and, to the extent consistent with
such operation, will use all reasonable efforts to preserve intact the
Seller's present business organization, keep available the services of
the Seller's employees and preserve the Seller's relationships with
its customers, suppliers, jobbers, distributors and other Persons
having business relations with the Seller;
(b) use all reasonable efforts to maintain the Transferred
Assets in a state of repair, order and condition consistent with its
usual past practice;
(c) maintain the Seller's books of account and records
relating to the Business in the usual, regular and ordinary manner, in
accordance with the Seller's usual accounting practices applied on a
consistent basis;
(d) comply in all material respects with all statutes, laws,
orders and regulations applicable to the Seller and to the Business;
(e) not sell, assign, transfer, lease or otherwise dispose
of any of the Transferred Assets except for dispositions of
Inventories for value in the usual and ordinary course of business;
(f) preserve and maintain all rights that the Seller now
enjoys in and to the Proprietary Rights and not sell, assign,
transfer, lease or otherwise dispose of any Proprietary Rights other
than to the Buyer pursuant to the terms of this Agreement;
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(g) not mortgage, pledge or otherwise create a security
interest in any of the Transferred Assets or permit there to be
created or exist any Liens thereon (other than Permitted Liens) that
would not be released upon the transfer of the Transferred Assets to
the Buyer pursuant to this Agreement;
(h) not enter into any contract, commitment or lease in
relation to the Business or the Transferred Assets that is out of the
ordinary course of business;
(i) not amend or modify any of the Entitlements;
(j) not consent to the termination of any of the Entitlements
or waive any of the Seller's rights with respect thereto;
(k) not permit any insurance policy naming the Seller as a
beneficiary or a loss payee relating to the Business or the
Transferred Assets to be canceled or terminated or any of the coverage
thereunder to lapse unless simultaneously with such termination or
cancellation replacement policies providing substantially the same
coverage are in full force and effect;
(l) pay when due all accounts payable, all payments required
by any of the Entitlements and all Taxes other than Taxes that are
being contested in good faith and for which adequate reserves against
the Transferred Assets exist and which would not result in a Lien
being imposed on any of the Transferred Assets; and
(m) promptly notify the Buyer in writing if the Seller or any
of the Shareholders becomes aware of any change that shall have
occurred or that shall have been threatened (or any development that
shall have occurred or that shall have been threatened involving a
prospective change) in the Business or the Transferred Assets that
would reasonably be expected to have a material or adverse effect on
the Business or the Transferred Assets whether or not occurring in the
ordinary course of business.
5.3 Negotiation with Others. The Seller and each of the
Shareholders agree that from the date hereof until the Closing Date or the
termination of this Agreement pursuant to Section 10.1, such Person will not,
directly or indirectly, solicit, encourage or negotiate with any Person not a
party hereto or not affiliated with a party hereto with respect to a merger,
consolidation, asset or stock purchase or any similar transaction with the
Seller.
5.4 Information. During the period from the date of this Agreement
to the Closing Date, the Buyer and the Seller and each of the Shareholders will
promptly inform the others in writing of any claim, action or any proceeding
commenced against such party with respect to the transactions contemplated by
this Agreement or any assets or property of the Seller or the Transferred
Assets.
5.5 Delivery of Business Documents. At Closing, the Seller and the
Shareholders shall deliver to the Buyer all Documents and Other Papers relating
to the Transferred Assets, the Assumed Liabilities and the current and proposed
operations of the Business, including, without limitation, all files relating
to the Accounts Receivable, the Assumed Trade Payables, copies of all insurance
policies and all files relating thereto, computer disks reflecting any books or
records, documents or other papers, or other information or data relating to
the operation of the Business, the Transferred Assets or the Assumed
Liabilities stored on any electronic media, including computers. The Seller,
however, shall be entitled to retain the corporate minute books, stock books
and tax returns of the Seller and to have access to the books and records
relating to the Business to the extent such books and records are necessary for
the preparation of tax returns.
5.6 Further Assurances. The Seller and each of the Shareholders
shall execute, acknowledge and deliver or cause to be executed, acknowledged
and delivered to the Buyer such bills of sale, assignments
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(including but not limited to assignments of leases) and other instruments of
transfer, assignment and conveyance, in form and substance reasonably
satisfactory to counsel for the Buyer, as shall be necessary to vest in the
Buyer all the right, title and interest in and to the Transferred Assets free
and clear of all Liens (including the release of all Liens of record) and shall
use their best efforts to cause to be taken such other action as the Buyer
reasonably may require to more effectively implement and carry into effect the
transactions contemplated by this Agreement.
5.7 Nondisclosure of Proprietary Information.
(a) The Seller and each of the Shareholders agree that,
from and after the Closing, such Seller or Shareholder and such Person's
Affiliates shall (i) hold in confidence and will not directly or indirectly at
any time reveal, report, publish, disclose or transfer to any Person other than
the Buyer any of the Proprietary Information that is not generally known to the
public or utilize any of the Proprietary Information for any purpose and (ii)
not for a period of three years solicit or hire any employees of the Seller who
are subsequently employed by the Buyer or offered employment by the Buyer.
(b) The Seller and each of the Shareholders acknowledge
that all Documents and Other Papers and objects containing or reflecting any
Proprietary Information, whether developed by such Seller or Shareholder or by
someone else for such Seller or Shareholder or any of such Person's Affiliates,
will after the Closing become the exclusive property of the Buyer and be
delivered to the Buyer.
(c) Because of the unique nature of the Proprietary
Information, the Seller and each of the Shareholders understand and agree that
the breach or anticipated breach of the obligations under this Section 5.7 will
result in immediate and irreparable harm and injury to the Buyer and its
Affiliates, for which it will not have an adequate remedy at law, and that the
Buyer and its Affiliates and their successors and assigns shall be entitled to
relief in equity to enjoin such breach or anticipated breach and to seek any
and all other legal and equitable remedies to which they may be entitled.
5.8 Covenant Not to Compete With the Business. As an inducement
for the Buyer to acquire the Business, the Seller and each of the Shareholders
agree that, effective as of the Closing Date and for a period of three years
thereafter, none of the Seller, the Shareholders nor any of their respective
Affiliates, including the Affiliated Company, shall, without the consent of the
Buyer or as expressly permitted in the Supply Agreement, directly or
indirectly, design, develop, market, produce, manufacture, sell or provide any
compressors, UBD Chemicals (as defined in the Supply Agreement) or software for
use in underbalanced drilling applications, or engage in engineering activities
or provide services related thereto, in any geographical area of the world, or,
except for the benefit of Buyer and its Affiliates, assist any Person to do the
same. The Seller and each of the Shareholders acknowledge that a remedy at law
for any breach or attempted breach of this Section 5.8 will be inadequate and
further agree that any breach of this Section 5.8 will result in irreparable
harm to the Business and the Buyer shall, in addition to any other remedy that
may be available to it, be entitled to specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach. The
Seller and each of the Shareholders acknowledge that this covenant not to
compete is being provided as an inducement to the Buyer to acquire the Business
and the Transferred Assets and that this Section 5.8 contains reasonable
limitations as to time, geographical area and scope of activity to be
restrained that do not impose a greater restraint than is necessary to protect
the goodwill or other business interest of the Buyer. Whenever possible, each
provision of this Section 5.8 shall be interpreted in such a manner as to be
effective and valid under applicable law but if any provision of this Section
5.8 shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Section 5.8. If any provision of
this Section 5.8 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 5.8 but shall be confined in
its operation to the provision of this Section 5.8 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 5.8 should ever be
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deemed to exceed the time or geographic limitations permitted by applicable
laws, then such provision shall be reformed to the maximum time or geographic
limitations permitted by applicable law.
5.9 Use of Names. All uses of the names "ECD/Northwest, Inc." and
"ECD" or any derivations thereof (collectively, the "Names") are being
transferred to the Buyer hereunder as part of the Transferred Assets. The
Seller and each of the Shareholders agree not to take any action which could
reasonably be expected to adversely affect the Buyer's right to the Names or
cause confusion with respect to the Buyer's use of the Names. All goodwill with
respect to the use of the Names will inure to the benefit of the Buyer, and
none of the Seller or any of the Shareholders will have any rights to ▇▇▇ or
recover against any person with respect to the use of the Names. Within ten
days after Closing, the Seller agrees to take all necessary action to change
the Seller's name to one bearing no resemblance to any of the Names or any
derivation thereof and will forever cease the use of such names.
5.10 Employee Matters
(a) The Buyer shall offer employment to the employees
of the Seller on terms substantially similar to those offered by the Buyer to
similarly situated employees. Any such employees that the Buyer in fact employs
immediately after the Closing Date shall hereinafter be referred to as the
"Transferred Employees". All of the Seller's employees who are not employed by
the Buyer or one of its Affiliates immediately after the Closing Date shall
hereinafter be referred to as the "Seller Retained Employees". The Seller and
the Shareholders shall be responsible and liable for any and all severance
obligations with respect to the Seller Retained Employees, including any COBRA
obligations.
(c) The parties hereto do not intend to create any
third-party beneficiary rights respecting any employee of the Seller as a
result of the provisions hereof and specifically hereby negate any such
intention.
(d) In determining eligibility for and entitlement to
vacation and other normal benefits (excluding stock-based plans and incentive
programs) based on length of service by Transferred Employees under the Buyer's
normal policies, service with the Seller shall be considered by the Buyer as
service with the Buyer.
5.11 HSR Filing.
(a) Weatherford, the Buyer, the Seller and CHI
(collectively, the "HSR Parties") shall make all premerger notification and
report form filings required under the HSR Act as promptly as reasonably
possible following execution and delivery of this Agreement. Each of the HSR
Parties agrees to use reasonable efforts to respond promptly to, and fully
address, any formal or informal inquiry or request for information by a
Governmental Entity regarding the transactions contemplated hereby.
(b) Each of the HSR Parties will furnish one another
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof (collectively, "HSR Documents")) between such HSR
Party, or any of its respective representatives, on the one hand, and any
Governmental Entity, or members of the staff of such agency or authority, on
the other hand, with respect to this Agreement; provided, however, that (i)
with respect to documents and other materials filed by or on behalf an HSR
Party with the Antitrust Division of the Department of Justice, the Federal
Trade Commission or any state attorneys general that are otherwise available
for review by the other HSR Parties, copies will not be required to be so
provided, (ii) the other HSR Parties may redact all revenue figures relating to
any service not provided or any product not manufactured or sold by the other
HSR Parties or any of their respective Subsidiaries (according to such other
HSR Parties' HSR Documents) and (iii) with respect to any HSR Party's Documents
(A) that contain any information which, in the reasonable judgment of such HSR
Party's counsel, should not be furnished to such other HSR Parties' counsel
because of antitrust considerations or (B) relating to a request
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for additional information pursuant to Section (e)(1) of the HSR Act, the
obligation of an HSR Party to furnish any such HSR Documents to the other HSR
Party's counsel shall be satisfied by the delivery of such HSR Documents on a
confidential basis to such other HSR Parties' counsel pursuant to an
appropriate confidentiality agreement to be entered into by Houston ▇▇▇▇▇▇▇▇,
P.C., on behalf of the Seller and CHI and Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., on
behalf of Weatherford and the Buyer.
(c) Notwithstanding the foregoing provisions in this
Section 5.11, nothing contained in this Agreement shall be construed so as to
require any of the HSR Parties, or any of their respective Affiliates, to sell,
license, dispose of or hold separate, or to operate in any specified manner,
any of their respective assets or businesses (or to require any of the HSR
Parties or any of their respective Subsidiaries or Affiliates to agree to any
of the foregoing). The obligations of each HSR Party under Section 5.11(a)
hereto to use reasonable efforts with respect to antitrust matters shall be
limited to compliance with the reporting provisions of the HSR Act and with its
obligations under Section 5.11(b).
5.12 Continuation of Business by the Buyer. Nothing in this
Agreement, in any exhibit or schedule thereto or in any agreement, instrument
or other document executed or delivered in connection with this Agreement shall
require the Buyer to continue the Business or to manage and operate the
Transferred Assets with any duty or standard or care to the Seller or any of
the Shareholders. The Seller and each of the Shareholders acknowledge and agree
that the Buyer in its sole discretion may continue, manage, modify or
discontinue the operations, liquidate or otherwise change or cease the
operations of the Business and the Transferred Assets. Notwithstanding the
foregoing, if, prior to the Contingent Payment Date, the Buyer sells the
Business to a Person that is not an Affiliate of the Buyer, the Buyer shall pay
the maximum Contingent Payment that would be required under this Agreement. A
merger, share exchange, consolidation or similar business combination involving
Weatherford shall not be considered a sale of the Business nor shall any
transfer or assignment of the assets or business constituting the Business to
an Affiliate of Weatherford be considered a sale of the Business.
5.13 Saipem Contract. If the Buyer is awarded one or more contracts
(collectively the "Saipem Contract") with Saipem ("Saipem") relating to the
dewatering with compressed air of proposed pipelines to be constructed by
Saipem through the Black Sea or the Mediterranean Sea (the "Project"), the
Buyer will make the following payments to CHI:
(a) $250,000, if the Buyer and Saipem execute a letter
of intent or similar agreement relating to the Project;
(b) $750,000, if the Buyer and Saipem execute a
definitive contract relating to the Project, less any payment under clause (a);
and
(c) five percent of all contract revenues from
dewatering services for the first five years of the Project, including
dewatering services for other pipelines if such pipelines are included in the
Project; provided, however, that any payments made under clauses (a) and (b) of
this Section 5.13 shall be credited against any payments due under this clause
(c).
All payments made under Section 5.13 (a) and (b) shall be made by wire transfer
of immediately available funds to an account designated by CHI within ten
Business Days of the event requiring payment. Payments under Section 5.13(c)
shall be made on a quarterly basis, commencing at the end of the first
three-month period during which contract revenues are received. CHI and its
authorized representatives shall have the right, no more than once quarterly,
upon reasonable prior notice and during business hours, to examine the Buyer's
records to confirm the amount of contract revenues received by the Buyer during
the preceding calendar quarter. Contract revenues shall be net of Taxes,
duties, delivery charges, insurance and any third party pass-through charges.
Notwithstanding the foregoing, neither the Buyer nor Weatherford shall have
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any obligation to pursue the Project and shall have no obligation to CHI if
they determine in their sole discretion not to do so.
ARTICLE 6
BUYER'S AND ▇▇▇▇▇▇▇▇▇▇▇'▇ CONDITIONS
The obligation of the Buyer to purchase the Transferred Assets and to
assume the Assumed Trade Payables and the Assumed Liabilities as contemplated
hereby is, at the option of the Buyer and Weatherford, subject to the
satisfaction on or before the Closing Date of the conditions set forth below,
any of which may be waived by the Buyer and Weatherford in writing; provided,
however, the Buyer's and ▇▇▇▇▇▇▇▇▇▇▇'▇ election to proceed with the Closing
shall not be deemed a waiver of any breach of any representation, warranty or
covenant herein, whether or not known to the Buyer or Weatherford or existing
on the Closing Date, and such action shall not prejudice the Buyer's and
▇▇▇▇▇▇▇▇▇▇▇'▇ right to recover damages for any such breach.
6.1 Representations, Warranties and Covenants. The representations
and warranties of the Seller and each of the Shareholders contained in this
Agreement shall be true, correct and complete in all respects on and as of the
Closing Date with the same force and effect as though such representations and
warranties had been made or given on and as of such date. Each and all of the
agreements and covenants of the Seller and each of the Shareholders to be
performed or complied with by them on or before the Closing Date pursuant to
this Agreement shall have been performed or complied with in all respects. The
Seller and each of the Shareholders shall have delivered to the Buyer a
certificate dated the Closing Date regarding the matters set forth in this
Section 6.1.
6.2 Good Standing. The Seller shall have delivered to the Buyer
certificates issued by appropriate Governmental Entities evidencing the good
standing of the Seller, as of a date not more than five calendar days prior to
the Closing Date in Delaware, and as of a date not more than fifteen calendar
days prior to the Closing Date in the jurisdictions in which it is qualified to
do business as a foreign corporation. To the extent provided for under
applicable law, the Seller shall also have delivered to the Buyer certificates
or other writings issued by appropriate Governmental Entities evidencing that
all applicable state income or franchise Taxes of the Seller have been paid.
6.3 Instruments of Transfer. The Seller shall have executed,
acknowledged and delivered to the Buyer such bills of sale, assignments
(including but not limited to assignments of the leases) and other instruments
of transfer, assignment and conveyance, as shall be necessary to vest in the
Buyer all right, title and interest in and to the Transferred Assets.
6.4 No Litigation. No preliminary or permanent injunction or other
order of any court or other Governmental Entity shall be in effect nor shall
there be in effect any statute, rule, regulation or executive order promulgated
or enacted by any Governmental Entity that, in any such case, prevents the
consummation of the transactions contemplated by this Agreement. No suit,
action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or threatened by any Person other than the Buyer or any of
its Affiliates seeking to prevent the sale of the Transferred Assets or
asserting that the sale of all or a portion of the Transferred Assets would be
unlawful.
6.5 Other Legal Matters. All Exhibits, Schedules, certificates,
documents and legal matters in connection with this Agreement and the
transactions contemplated hereby shall be in substantially the forms required
by this Agreement.
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6.6 Licenses, Consents and Approvals by the Seller. All necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity shall have been obtained,
made, expired or lapsed and shall be in full force and effect. The Seller shall
have delivered to the Buyer a copy of each of the licenses, consents, approvals
and other authorizations from Governmental Entities necessary or appropriate
for the Seller to consummate the transactions contemplated by this Agreement.
6.7 Consents of Third Persons. All Required Consents (other than
master service contracts relating to vendor qualification and the Consulting,
Non-Disclosure and Non-Competition Agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇) shall have
been obtained on terms satisfactory to the Buyer and delivered to the Buyer.
6.8 Consents and Release of Liens. All Liens (other than Permitted
Liens, except to the extent such Permitted Liens relate to Debt Obligations of
the Seller) on the Transferred Assets shall be released at Closing and
satisfactory evidence of the release of the Liens and the termination of any
financing statements relating thereto shall be provided to the Buyer at
Closing.
6.9 No Material Adverse Event. The business and properties of the
Seller shall not have been affected or threatened to be affected by any loss or
damage, whether or not covered by insurance, except to the extent that the same
would not have a material adverse effect on the Seller, the Business or the
Transferred Assets.
6.10 Resolutions. The Seller and CHI shall have delivered to the
Buyer certified copies of resolutions of the board of directors and the
shareholders of the Seller and the board of directors of CHI approving this
Agreement and the transactions contemplated hereby.
6.11 Employment Agreement. At the Closing, the Buyer shall enter
into an employment agreement with each of ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇ in
the form attached hereto as Exhibits A-1 and A-2, respectively.
6.12 Supply Agreement. At the Closing, the Buyer and CHI shall
enter into a supply agreement (the "Supply Agreement") in the form attached
hereto as Exhibit B.
6.13 License Agreement. At the Closing, the Buyer and CHI, or one
of its Affiliates, shall enter into a license agreement in the form attached
hereto as Exhibit C.
6.14 Representation Agreement. At the Closing, the Buyer and CHI
shall enter into a representation agreement in the form attached hereto as
Exhibit D.
6.15 Repayment of Indebtedness. All Debt Obligations and
Intercompany Obligations of the Seller shall have been repaid in full, and the
Seller and the Shareholders shall have delivered to the Buyer documentation
satisfactory to the Buyer evidencing such repayment and the release of all
Liens and guarantees related thereto. Notwithstanding the foregoing, the
Seller, at its option, may elect to have all or a portion of the Cash Payment
remitted at Closing directly to the Persons to whom such Debt Obligations or
Intercompany Obligations are owed by delivering written notice of such election
to the Buyer at least five Business Days prior to Closing; provided, however,
that if the Seller makes such election, the Seller and the Shareholders shall
not be relieved from their obligation to deliver to the Buyer at Closing
documentation satisfactory to the Buyer evidencing the repayment of all Debt
Obligations and Intercompany Obligations and the release of all Liens and
guarantees related thereto; provided further, however, that the aggregate
amount of any such payments made by the Buyer and the amount paid to the Seller
at Closing shall not exceed $12,000,000.
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6.16 Stock Exchange Approval. The New York Stock Exchange shall
have approved the listing of the Weatherford Shares.
6.17 Approvals for Issuance of Weatherford Shares. Weatherford
shall have received all consents, approvals and other authorizations from
Governmental Entities necessary or appropriate for Weatherford to issue the
Weatherford Shares.
6.18 Assumed Trade Payables. The Buyer shall have received a
schedule of the Assumed Trade Payables.
ARTICLE 7
SELLER'S AND SHAREHOLDERS' CONDITIONS
The obligation of the Seller to transfer the Transferred Assets as
contemplated hereby is, at the option of the Seller and the Shareholders,
subject to the satisfaction on or before the Closing Date of the conditions set
forth below, any of which may be waived by the Seller and the Shareholders in
writing; provided, however, the Seller's and the Shareholders' election to
proceed with the Closing shall not be deemed a waiver of any breach of any
representation, warranty or covenant herein, whether or not known to the Seller
or the Shareholders or existing on the Closing Date, and such action shall not
prejudice the Seller's and the Shareholders' right to recover damages for any
breach.
7.1 Representations and Warranties. The representations and
warranties of the Buyer and Weatherford contained in this Agreement shall be
true, correct and complete in all respects on and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made or given on and as of such date; each and all of the agreements and
covenants of the Buyer and Weatherford to be performed or complied with by them
on or before the Closing Date pursuant to this Agreement shall have been
performed or complied with in all respects; and the Buyer and Weatherford shall
have delivered to the Seller a certificate signed by an authorized officer of
each of Weatherford and the Buyer General Partner, dated the Closing Date,
regarding the matters set forth in this Section 7.1.
7.2 No Litigation. No preliminary or permanent injunction or other
order of any Governmental Entity shall be in effect nor shall there be any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Entity that, in any such case, prevents the consummation of the
transactions contemplated by this Agreement. No suit, action, claim, proceeding
or investigation before any court or other Governmental Entity shall have been
commenced or threatened by any Person other than the Seller, the Shareholders
or any of their respective Affiliates seeking to prevent the sale of the
Transferred Assets or the Business or asserting that the sale of all or a
portion of the Transferred Assets or the Business would be unlawful.
7.3 Licenses, Consents and Approvals. All necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity shall have been obtained, made, expired
or lapsed and shall be in full force and effect. The Buyer shall have delivered
to the Seller a copy of each of the licenses, consents, approvals and other
authorizations from Governmental Entities necessary or appropriate for the
Buyer to consummate the transactions contemplated by this Agreement.
7.4 Resolutions. The Buyer shall have delivered to the Seller
certified copies of resolutions of the boards of directors of each of
Weatherford and the Buyer General Partner approving this Agreement and the
transactions contemplated hereby.
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7.5 Other Legal Matters. All exhibits, schedules, certificates,
documents and legal matters in connection with this Agreement and the
transactions contemplated hereby shall be in the forms required by this
Agreement.
7.6 Representation Agreement. At the Closing, the Buyer and CHI
shall enter into a representation agreement in the form attached hereto as
Exhibit D.
7.7 Employment Agreement. At the Closing, the Buyer shall enter
into an employment agreement with each of ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇ in
the form attached hereto as Exhibits A-1 and A-2, respectively.
7.8 Supply Agreement. At the Closing, the Buyer and CHI shall
enter into the Supply Agreement.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Seller and the Shareholders. Except as
otherwise limited by this Article 8 and Article 9 hereof, the Seller and each
of the Shareholders, jointly and severally, agree to indemnify, defend and hold
the Buyer and Weatherford, each of their respective Affiliates and each of
their respective officers, directors, employees, agents, stockholders and
controlling Persons and their respective successors and assigns harmless from
and against and in respect of Damages actually suffered, incurred or realized
by such party (collectively, "Buyer Losses"), arising out of or resulting from
or relating to:
(a) any misrepresentation, breach of warranty or breach
of any covenant or agreement made or undertaken by the Seller or any of the
Shareholders in this Agreement or any misrepresentation in or omission from any
other agreement, certificate, exhibit or writing delivered to the Buyer or
Weatherford pursuant to this Agreement, including the Disclosure Schedule;
(b) any Environmental Liability arising from or
attributable to (i) any condition, event, circumstance, activity, practice,
incident, action or omission existing or occurring prior to the Closing Date
and related in any way to the Transferred Assets or the Business, or (ii) the
use, storage, disposal or treatment, or the transportation for storage,
disposal or treatment, of Hazardous Materials prior to the Closing Date and
related in any way to the Transferred Assets or the Business; or
(c) any Retained Liability.
For purposes of determining the Buyer's and ▇▇▇▇▇▇▇▇▇▇▇'▇ right to
indemnification for a misrepresentation or breach of warranty made by the
Seller or any of the Shareholders in this Agreement, all such representations
and warranties that have been made subject to a materiality qualification shall
be deemed to have been made without that qualification, it being understood
that the threshold provided for in Section 8.9 is intended to be the only
materiality qualification for purposes of indemnification.
8.2 Indemnification by the Buyer and Weatherford. Except as
otherwise limited by this Article 8 and Article 9 hereof, the Buyer and
Weatherford, jointly and severally, agree to indemnify, defend and hold the
Seller and the Shareholders and each of their respective officers, directors,
employees, agents, shareholders and controlling Persons and successors and
assigns harmless from and against and in respect of Damages actually suffered,
incurred or realized by such party (collectively, "Seller Losses"), arising out
of or resulting from or relating to (a) any misrepresentation, breach of
warranty or breach of any covenant or
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agreement made or undertaken by the Buyer or Weatherford in this Agreement or
any misrepresentation in or omission from any other agreement, certificate,
exhibit or writing delivered to the Seller or the Shareholders pursuant to this
Agreement or (b) any Assumed Liabilities.
8.3 Procedure. All claims for indemnification under this Article
8 shall be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor
notice of any matter which an Indemnitee has determined has given or could give
rise to a right of indemnification under this Agreement, stating the amount of
the Losses, if known, and method of computation thereof, all with reasonable
particularity, and stating with particularity the nature of such matter.
Failure to provide such notice shall not affect the right of the Indemnitee to
indemnification except to the extent such failure shall have resulted in
liability to the Indemnitor that could have been actually avoided had such
notice been provided within such required time period.
(b) The obligations and liabilities of an Indemnitor
under this Article 8 with respect to Losses arising from claims of any third
party that are subject to the indemnification provided for in this Article 8
("Third Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnitee shall receive notice of any
Third Party Claim, the Indemnitee shall give the Indemnitor prompt notice of
such Third Party Claim and the Indemnitor may, at its option, assume and
control the defense of such Third Party Claim at the Indemnitor's expense and
through counsel of the Indemnitor's choice reasonably acceptable to Indemnitee.
In the event the Indemnitor assumes the defense against any such Third Party
Claim as provided above, the Indemnitee shall have the right to participate at
its own expense in the defense of such asserted liability, shall cooperate with
the Indemnitor in such defense and will attempt to make available on a
reasonable basis to the Indemnitor all witnesses, pertinent records, materials
and information in its possession or under its control relating thereto as is
reasonably required by the Indemnitor. In the event the Indemnitor does not
elect to conduct the defense against any such Third Party Claim, the Indemnitor
shall pay all reasonable costs and expenses of such defense as incurred and
shall cooperate with the Indemnitee (and be entitled to participate) in such
defense and attempt to make available to it on a reasonable basis all such
witnesses, records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnitee. Except
for the settlement of a Third Party Claim that involves the payment of money
only and for which the Indemnitee is totally indemnified by the Indemnitor, no
Third Party Claim may be settled without the written consent of the Indemnitee.
8.4 Payment. Payment of any amounts due pursuant to this Article 8
shall be made in immediately available funds by wire transfer to a bank account
or accounts to be designated by the Indemnitee within ten Business Days after
notice is sent by the Indemnitee.
8.5 Failure to Pay Indemnification. If and to the extent the
Indemnitee shall make written demand upon the Indemnitor for indemnification
pursuant to this Article 8 and the Indemnitor shall refuse or fail to pay in
full within ten Business Days of such written demand the amounts demanded
pursuant hereto and in accordance herewith, then the Indemnitee may utilize any
legal or equitable remedy to collect from the Indemnitor the amount of its
Losses. Nothing contained herein is intended to limit or constrain the
Indemnitee's rights against the Indemnitor for indemnity, the remedies herein
being cumulative and in addition to all other rights and remedies of the
Indemnitee.
8.6 Right of Offset. The Buyer shall be entitled to offset against
any Additional Payment or the Contingent Payment any amount which it shall be
entitled to recover from the Seller or any of the Shareholders with respect to
any indemnifiable Buyer Losses pursuant to this Article 8. Notwithstanding the
foregoing, if the Buyer, the Seller and the Shareholders do not agree on any
amount that the Buyer is entitled to recover pursuant to this Article 8, the
Buyer shall not entitled to exercise its rights of offset pursuant to this
Section 8.6 until the matter has been resolved by binding arbitration pursuant
to Section 12.4; provided,
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however, that the Buyer shall not be required to make any Additional Payment or
the Contingent Payment until the written decision of the arbitrators with
respect to such matter has been issued.
8.7 Adjustment of Liability. The amount which an Indemnitee shall
be entitled to receive from an Indemnitor with respect to any indemnifiable
Losses under this Article 8 shall be net of any insurance recovery by the
Indemnitee on account of such Losses from an unaffiliated party.
8.8 Express Negligence. THE INDEMNITIES SET FORTH IN THIS ARTICLE
8 ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE
EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE
OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES
BECAUSE OF THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR
PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.
8.9 Indemnification Limitations.
(a) The Sellers and the Shareholders shall be liable
under Section 8.1(a) in respect of a misrepresentation or breach of warranty
only if, and then only to the extent that, the aggregate amount of any Buyer
Losses for which the Buyer is entitled to indemnification pursuant to such
clause exceeds $100,000; provided, however, the Sellers' and the Shareholders'
liability under Section 8.1(a) shall not be so limited if such Buyer Losses
arise from a breach of any of the representations set forth in Sections 2.1,
2.2(a), 2.4(a) - (d)(i) or 2.13.
(b) The aggregate liability of the Sellers and
Shareholders under Section 8.1(a) for Buyer Losses arising from a breach of the
representations and warranties set forth in Sections 2.1, 2.2(a), 2.4(a) -
(d)(i) or 2.13 shall not exceed the sum of the VTC, the Contingent Payment, if
any, and any Additional Payments.
(c) The aggregate liability of the Sellers and
Shareholders under Section 8.1(a) for Buyer Losses arising from a breach of any
representation or warranty other than those set forth in Sections 2.1, 2.2(a),
2.4(a) - (d)(i) or 2.13 shall not exceed $7,500,000. At Closing, Weatherford
shall place fifty percent of the Weatherford Shares (the "Escrow Shares") in an
escrow account, on terms reasonably satisfactory to Weatherford and the Seller,
as security for the indemnification obligations of the Seller and Shareholders
hereunder. All expenses of the escrow shall be borne by the Seller. All
dividends and distributions in respect of the Escrow Shares shall be retained
in such escrow account. The Seller shall have the right to direct the escrow
agent to sell such Weatherford Shares in a Resale provided all the proceeds of
such sale, including any investment grade debt securities purchased from a
reinvestment of the proceeds, are retained in such escrow account. The Escrow
Shares, any dividends or distributions in respect thereof and any proceeds
therefrom shall be held in escrow for a period of two years following the
Closing Date; provided, however, that if the Buyer or Weatherford shall have
made a claim for indemnification pursuant to this Article 8 which has not been
finally resolved by such date, the Escrow Shares, any dividends or
distributions in respect thereof and any proceeds therefrom shall continue to
be held in escrow until all claims have been resolved. Weatherford shall be
entitled to offset against the Escrow Shares, any dividends or distributions in
respect thereof or any proceeds therefrom, any amount which it shall be
entitled to recover from the Seller or any of the Shareholders with respect to
any indemnifiable Buyer Losses pursuant to this Article 8, subject to the
provisions of Section 8.6. Notwithstanding the foregoing, if the Buyer, the
Seller and the Shareholders do not agree on any amount that the Buyer is
entitled to recover pursuant to this Article 8, the Buyer shall not entitled to
exercise its right of offset pursuant to this Section 8.9(c) until the matter
has been resolved by binding
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arbitration pursuant to Section 12.4. Until such time as the Escrow Shares have
been delivered to the Seller pursuant to this Section 8.9(c), the Seller shall
be entitled to vote the Escrow Shares. No interest shall be payable with
respect to the Escrow Shares. All income from the Escrow Shares shall become
part of the Escrow Shares.
(d) The aggregate liability of the Seller and the
Shareholders for Buyer Losses arising from any Pre-Closing Obligation shall not
be limited.
ARTICLE 9
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All statements of fact contained in any written statement (including
financial statements), certificate, instrument or document delivered by or on
behalf of the Seller or any of the Shareholders pursuant to this Agreement
shall be deemed representations and warranties of the Seller and the
Shareholders. The several representations and warranties of the parties to this
Agreement shall survive the Closing Date for a period of two years from the
Closing Date (except that the representations and warranties set forth in
Sections 2.1, 2.2(a), 2.4(a) - (d)(i) and 2.13 shall survive the Closing Date
without limitation) (the period during which the representations and warranties
shall survive being referred to herein with respect to such representations and
warranties as the "Survival Period"), and shall be effective with respect to
any inaccuracy therein or breach thereof (and a claim for indemnification under
Article 8 hereof may be made thereon) if a written notice asserting the claim
shall have been given within the Survival Period with respect to such matter.
Any claim for indemnification made during the Survival Period shall be valid
and the representations and warranties relating thereto shall remain in effect
for purposes of such indemnification notwithstanding such claim may not be
resolved within the Survival Period. The agreements and covenants set forth
herein shall survive without limitation. All representations, warranties,
covenants and agreements made by the parties shall not be affected by any
investigation heretofore or hereafter made by and on behalf of any of them and
shall not be deemed merged into any instruments or agreements delivered in
connection with this Agreement or otherwise in connection with the transactions
contemplated hereby.
ARTICLE 10
TERMINATION
10.1 Termination. The obligation to close the transactions
contemplated by this Agreement may be terminated by:
(a) mutual agreement of the Buyer, Weatherford, the
Seller and the Shareholders;
(b) the Buyer and Weatherford, if a material default
shall be made in the observance or in the due and timely performance by the
Seller or any of the Shareholders of any agreements and covenants of the Seller
and the Shareholders herein contained, or if there shall have been a breach by
the Seller or any of the Shareholders of any of the warranties and
representations of the Seller and the Shareholders herein contained, and such
default or breach has not been cured or has not been waived;
(c) the Seller and the Shareholders, if a material
default shall be made by the Buyer or Weatherford in the observance or in the
due and timely performance by the Buyer or Weatherford of any agreements and
covenants of the Buyer and Weatherford herein contained, or if there shall have
been a breach
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by the Buyer or Weatherford of any of the warranties and representations of the
Buyer and Weatherford herein contained, and such default or breach has not been
cured or has not been waived; or
(d) the Buyer and Weatherford or the Seller and the
Shareholders (provided the terminating parties have not materially breached any
of their agreements, covenants or representations and warranties) if the
Closing shall not have occurred on or before May 30, 1999.
10.2 Liability Upon Termination. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of Section 10.1, then this Agreement shall forthwith become void and
there shall not be any liability or obligation with respect to the terminated
provisions of this Agreement on the part of the Seller, the Shareholders, the
Buyer or Weatherford except and to the extent such termination results from the
willful breach by a party of any of its representations, warranties or
agreements hereunder and except that the termination of this Agreement shall
not relieve any party of its obligations under Section 5.1(b), Article 8 (but
only to the extent it applies to breaches of the warranties made in Section
2.13 and Section 3.3), Section 12.2 and Section 12.7.
10.3 Notice of Termination. The parties hereto may exercise their
respective rights of termination under Section 10.1 only by delivering written
notice to that effect to the other party or parties, and such notice is
received on or before the Closing Date.
ARTICLE 11
DEFINITIONS OF CERTAIN TERMS
In addition to terms defined elsewhere in this Agreement, the
following terms shall have the meanings assigned to them herein, unless the
context otherwise indicates, both for purposes of this Agreement and all
exhibits hereto and the Disclosure Schedule:
11.1 "Accounts Receivable" shall mean all accounts and notes
receivable relating to the Business.
11.2 "Additional Payment" shall have the meaning given such term i
Section 1.6 hereof.
11.3 "Adjusted Gross Margin Per Commissioned Compressor" shall have
the meaning given such term in Section 1.7(c) hereof.
11.4 "Affiliate" shall mean, with respect to any specified Person,
a Person that, directly or indirectly, controls, is controlled by or is under
common control with such specified Person.
11.5 "Affiliated Company" shall mean Clearwater, Inc., a
Pennsylvania corporation.
11.6 "Agreement" shall mean this Asset Purchase Agreement among
the Seller, the Shareholders, the Buyer and Weatherford, as amended from time
to time by the parties hereto, including the exhibits hereto and the Disclosure
Schedule.
11.7 "Assumed Liabilities" shall have the meaning given such term
in Section 1.4(d) hereof.
11.8 "Assumed Trade Payables" shall have the meaning given such
term in Section 1.4(c) hereof.
11.9 "Available for Use" shall mean the completion of commission
(i.e., field testing and certification for use) of a compressor, excluding any
compressors that are manufactured for the Project except to the extent that
such compressors are actively marketed and ultimately placed in service.
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11.10 "Average Closing Price" shall have the meaning given such term
in Section 11.98 hereof.
11.11 "Average Number of Commissioned Compressors" shall have the
meaning given such term in Section 1.7(c) hereof.
11.12 "Business" shall mean the design, manufacture, sale,
distribution and service of compressors, chemicals and software for use in
underbalanced drilling applications and the provision of services and
engineering activities related thereto as conducted or proposed to be conducted
by the Seller.
11.13 "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in Houston, Texas are authorized
by law to close.
11.14 "Buyer" shall mean Weatherford U.S., L.P., a Louisiana limited
partnership, or one or more of its designees.
11.15 "Buyer General Partner" shall mean Weatherford Holding U.S.,
Inc., a Delaware corporation and the general partner of the Buyer.
11.16 "Buyer Losses" shall have the meaning given such term in
Section 8.1 hereof.
11.17 "Capital Expenditures" shall have the meaning given such term
in Section 1.7(c) hereof.
11.18 "Cash Payment" shall have the meaning given such term in
Section 1.4 hereof.
11.19 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq.
11.20 "CHI" shall mean Clearwater Holdings, Inc., a Delaware
corporation.
11.21 "CHI Shareholders" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, collectively.
11.22 "Closing" shall mean the transfer by the Seller to the Buyer
of the Transferred Assets, the assumption by the Buyer of the Assumed
Liabilities and the transfer by the Buyer to the Seller of the Purchase Price.
11.23 "Closing Date" shall have the meaning given such term in
Section 1.3 hereof.
11.24 "Closing Date Working Capital" shall mean the aggregate amount
of (a) all current assets reflected on the Closing Statement less (b) all
current liabilities reflected on the Closing Statement .
11.25 "Closing Statement" shall have the meaning given such term in
Section 1.5(a) hereof.
11.26 "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time.
11.27 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or similar provisions of legislation replacing such
law from time to time.
11.28 "Commission" shall mean the United States Securities and
Exchange Commission.
11.29 "Common Stock" shall mean the common stock, par value $1.00
per share, of Weatherford.
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11.30 "Contingent Payment" shall have the meaning given such term
in Section 1.7(a) hereof.
11.31 "Contingent Payment Date" shall meaning the last day of the
Performance Period.
11.32 "Contingent Payment Statement" shall have the meaning given
such term in Section 1.7(d) hereof.
11.33 "Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, claims, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating and
defending any claims or causes of action (including, without limitation,
attorneys' fees and expenses and all fees and expenses of consultants and other
professionals)).
11.34 "Debt Obligations" shall mean any contract, agreement,
indenture, note or other instrument relating to the borrowing of money or any
guarantee or other contingent liability in respect of any indebtedness or
obligation of any Person, including, without limitation, the carry value of all
capital leases and all non-current liabilities, including deferred income taxes
(other than the endorsement of negotiable instruments for deposit or collection
in the ordinary course of business).
11.35 "Disclosure Schedule" shall mean the disclosure schedule of
even date delivered to the Buyer and Weatherford. The Disclosure Schedule is a
part of this Agreement.
11.36 "Documents and Other Papers" shall mean and include any
document, agreement, instrument, certificate, writing, notice, consent,
affidavit, letter, telegram, telex, statement, file, computer disk, microfiche
or other document in electronic format, schedule, exhibit or any other paper or
record whatsoever.
11.37 "Entitlements" shall have the meaning given such term in
Section 1.1(a)(vi) hereof.
11.38 "Environmental Laws" shall mean all national, federal, state,
provincial, municipal or local laws, rules, regulations, statutes, ordinances
or orders of any Governmental Entity relating to (a) the control of any
potential pollutant or protection of the air, water or land, (b) solid, gaseous
or liquid waste generation, handling, treatment, storage, disposal or
transportation and (c) the regulation of or exposure to hazardous, toxic or
other substances alleged to be harmful.
11.39 "Environmental Liabilities" shall mean any and all Damages
(including any remedial, removal, response, abatement, clean-up, investigation
and/or monitoring costs and associated legal costs) incurred or imposed (a)
pursuant to any agreement, order, notice of responsibility, directive
(including directives embodied in Environmental Laws), injunctions, judgment or
similar documents (including settlements) arising out of, in connection with,
or under Environmental Laws, or (b) pursuant to any claim by a Governmental
Entity or any other Person for personal injury, property damage, damage to
natural resources, remediation, or payment or reimbursement of response costs
incurred or expended by such Governmental Entity or other Person pursuant to
common law or statute and related to the use or release of Hazardous Materials.
11.40 "Environmental Permits" shall mean any permit, license,
approval, registration, identification number or other authorization with
respect to the Seller under any Environmental Law.
11.41 "Equipment" shall mean all machinery, transportation equipment,
tools, equipment, furnishings and fixtures owned, leased or subject to a
contract of purchase and sale, or lease commitment that is used in the Business
as operated by the Seller.
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11.42 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
11.43 "Excluded Assets" shall have the meaning given such term in
Section 1.2 hereof.
11.44 "Financial Statements" shall have the meaning given such term
in Section 2.6 hereof.
11.45 "Final Value" shall have the meaning given such term in
Section 1.7(b) hereof.
11.46 "GAAP" shall have the meaning given such term in Section 2.6
hereof.
11.47 "Governmental Entity" shall mean any arbitrator, court,
administrative or regulatory agency, commission, department, board or bureau or
body or other government or authority or instrumentality or any entity or
Person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
11.48 "Hazardous Materials" shall mean (a) any substance or material
that is listed, defined or otherwise designated as a "hazardous substance"
under Section 101(14) of CERCLA, (b) any petroleum or petroleum products, (c)
radioactive materials, urea formaldehyde, asbestos and PCBs and (d) any other
chemical, substance or waste that is regulated by any Governmental Entity under
any Environmental Law.
11.49 "HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
11.50 "HSR Documents" shall have the meaning given such term in
Section 5.11(b) hereof.
11.51 "HSR Parties" shall have the meaning given such term in
Section 5.11(a) hereof.
11.52 "Indemnitee" shall mean the Person or Persons indemnified, or
entitled, or claiming to be entitled to be indemnified, pursuant to the
provisions of Section 8.1 or Section 8.2 hereof, as the case may be.
11.53 "Intercompany Obligation" means any obligation, fixed or
contingent, of the Seller or the Shareholders to any officer, director,
shareholder or Affiliate of any of the Seller or the Shareholders or of such
officer, director, shareholder or Affiliate to any of the Seller or the
Shareholders, including without limitation any Debt Obligation owed to or with
any such Person.
11.54 "Indemnitor" shall mean the Person or Persons having the
obligation to indemnify pursuant to the provisions of Section 8.1 or Section
8.2 hereof, as the case may be.
11.55 "Inventories" shall mean all inventories of finished goods,
tooling inventory, work in progress and raw materials relating to the Business,
wherever situated.
11.56 "Lien" shall mean any lien, pledge, claim, charge, security
interest or other encumbrance, option, defect or other rights of any third
Person of any nature whatsoever.
11.57 "Losses" shall mean Seller Losses or Buyer Losses, as the case
may be.
11.58 "Names" shall have the meaning given such term in Section 5.9
hereof.
11.59 "Net Revenues" shall mean gross revenues received by the Buyer
less Taxes, insurance, delivery charges, returns, allowances, rebates and
similar customer allowances and third party pass-through charges.
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11.60 "Performance Period" shall mean the period ending on the last
day of the 24-month period commencing on the first day of the first monthly
accounting period following the Closing Date.
11.61 "Permitted Liens" shall mean (i) Liens set forth in Section
11.61 of the Disclosure Schedule securing any of the Assumed Liabilities, (ii)
inchoate mechanic or materialmen Liens for construction in progress, (iii)
inchoate workmen, repairmen, warehousemen and carriers Liens arising in the
ordinary course of business, (iv) encumbrances consisting of zoning
restrictions on the use of the Real Property, none of which materially impairs
the use of such property and (v) Liens currently securing Debt Obligations of
the Seller, which Liens will be satisfied and released of the Closing Date;
provided, however, that the Liens described in clauses (ii) and (iii) shall not
be considered Permitted Liens as of the Closing Date.
11.62 "Person" shall mean a corporation, an association, a
partnership, an organization, a business, an individual or a Governmental
Entity.
11.63 "Pre-Closing Obligations" shall mean all liabilities, debts
and obligations of any of the Seller or any of the Shareholders (including
indemnification and other contingent obligations) relating to (i) acts, events
or omissions by any Person or circumstances existing at or prior to the
Closing, (ii) goods or services provided to or for the benefit of the Seller or
any of its Affiliates prior to the Closing, (iii) goods or services
manufactured or provided by or on behalf of the Seller or any of its Affiliates
or licensees prior to the Closing, (iv) any pending or threatened litigation,
claims or disputes made or threatened prior to the Closing, (v) any Retained
Liabilities, (vi) the conduct of the Business, the ownership or operation of
the Transferred Assets or any benefit realized by the Seller prior to the
Closing, (vii) any Excluded Assets, (viii) Debt Obligations of the Seller,
other than the Assumed Liabilities which shall be assumed by the Buyer on the
Closing Date, (ix) the employees of the Seller under any contracts, agreements,
arrangements or understandings with such employees entered into or existing at
or prior to the Closing and all other obligations of the Seller or any of its
Affiliates with respect to their employees at or prior to the Closing, (x) any
obligations with respect to the Seller Retained Employees, (xi) use of the
Proprietary Information, (xii) Taxes, (xiii) any obligations under any
contracts or agreements that were required to be listed in Section 2.5 of the
Disclosure Schedule but were not and (xiv) any liabilities that were not fully
accrued for and reflected on the Closing Statement.
11.64 "Project" shall have the meaning given such term in Section
5.13 hereof.
11.65 "Projected Performance" shall have the meaning given such term
in Section 1.7(c) hereof.
11.66 "Proprietary Information" shall mean collectively (a) the items
set forth in Section 1.1(a)(iv) of the Disclosure Schedule, (b) Proprietary
Rights and (c) any and all other information and material proprietary to the
Seller, owned, possessed or used by the Seller, whether or not such information
is embodied in writing or other physical form, and which is not generally known
to the public, that (i) relates to financial information regarding the Seller
or the Business, including, without limitation, (y) business plans and (z)
sales, financing, pricing and marketing procedures or methods of the Seller or
(ii) relates to specific business matters concerning the Seller, including,
without limitation, the identity of or other information regarding sales
personnel or customers of the Seller.
11.67 "Proprietary Rights" shall mean all rights to the Names and any
derivations thereof, and all patents, including the patents set forth on
Section 1.1(a)(iv) of the Disclosure Schedule, any patent rights, inventions,
shop rights, know how, trade secrets, designs, drawings, art work, plans,
prints, manuals, models, design registrations, inventor's certificates,
technical information and data, copyrightable works, lists of materials,
patterns, molds, records, diagrams, formulae, product design standards, tools,
die, jigs, models, prototypes, product information literature, computer files,
computer software, hard copy files, catalogs, specifications, confidentiality
agreements, confidential information and other proprietary technology and
similar information; all registered and unregistered trademarks, service marks,
logos, trade names and all
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other trademark rights; all registered and unregistered copyrights; and
all registrations for, and applications for registration of, any of the
foregoing, that are used in the conduct of the Business.
11.68 "Purchase Price" shall have the meaning given such term in
Section 1.4 hereof.
11.69 "Real Property" shall mean all real property, or any interest
therein, that is used in the Business.
11.70 "Registration Expenses" shall have the meaning given such term
in Section 4.2(e) hereof.
11.71 "Registration Statement" shall have the meaning given such
term in Section 4.1(a) hereof.
11.72 "Representative" shall have the meaning given such term in
Section 12.1 hereof.
11.73 "Required Consents" shall have the meaning given such term in
Section 2.2(b) hereof.
11.74 "Resale" shall have the meaning given such term in Section 1.6
hereof.
11.75 "Retained Liabilities" shall have the meaning given such term
in Section 1.8 hereof.
11.76 "Saipem" shall have the meaning given such term in Section
5.13 hereof.
11.77 "Saipem Contract" shall have the meaning given such term in
Section 5.13 hereof.
11.78 "SEC Documents" shall mean ▇▇▇▇▇▇▇▇▇▇▇'▇ (a) Annual Report on
Form 10-K for the year ended December 31, 1997, as amended by Amendment No. 1
and Amendment No. 2 to the Annual Report on Form 10-K on Form 10-K/A, (b)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30,
1998, and September 30, 1998, (c) Current Reports on Form 8-K dated May 1,
1997, as amended on January 14, 1998, Form 8-K dated November 5, 1997, as
amended on March 26, 1998, Form 8-K dated December 2, 1997, as amended by
Amendment on February 13, 1998, Form 8-K dated January 28, 1998, Form 8-K dated
February 3, 1998, Form 8-K dated February 19, 1998, as amended on April 21,
1998, Form 8-K dated March 5, 1998, as amended on March 9, 1998, Form 8-K dated
April 20, 1998, Form 8-K dated April 22, 1998, as amended on April 24, 1998,
Form 8-K dated May 15, 1998, as amended on May 22, 1998, Form 8-K dated May 27,
1998, Form 8-K dated June 15, 1998, as amended on July 20, 1998, and as amended
on December 10, 1998, Form 8-K dated July 16, 1998, Form 8-K dated August 17,
1998, Form 8-K dated October 22, 1998, Form 8-K dated February 4, 1999, and
Form 8-K dated February 18, 1999 and (d) proxy statement with respect to the
Annual Meeting of Stockholders held on September 21, 1998.
11.79 "Securities Act" shall mean the Securities Act of 1933, as
amended.
11.80 "Seller" shall mean ECD/Northwest, Inc., a Delaware
corporation.
11.81 "Seller Group" shall mean (a) the Seller, (b) any of the
Shareholders who receives any of the Weatherford Shares from the Seller in a
distribution permitted under the Securities Act and (c)Argosy Investment
Partners, L.P., a Pennsylvania limited partnership, North Atlantic Venture Fund
II, L.P., a Delaware limited partnership, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or up to three key
employees of the Seller or its Affiliates to whom the Seller transfers any of
the Weatherford Shares, provided that the Buyer and Weatherford receive an
opinion of counsel reasonably satisfactory to the Buyer and Weatherford to the
effect that registration under the Securities Act or any applicable state
securities laws is not required for such transfer and such Persons shall have
entered into an agreement reasonably acceptable to Weatherford whereby they
agree to be bound by the provisions of this Agreement as it relates to the
members of the Seller Group.
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11.82 "Seller Losses" shall have the meaning given such term in
Section 8.2 hereof.
11.83 "Seller Retained Employees" shall have the meaning given such
term in Section 5.10(a) hereof.
11.84 "Selling Expenses" shall have the meaning given such term in
Section 4.2(e) hereof.
11.85 "Services" shall mean the products and services historically
provided by the Seller to its customers in connection with the Business, which
include the products and services set forth in Section 11.85 of the Disclosure
Schedule to the extent such products and services were historically provided in
connection with underbalanced drilling services. Services shall not include any
rental of motors.
11.86 "Shareholders" shall mean CHI and the CHI Shareholders,
collectively.
11.87 "Supply Agreement" shall have the meaning given such term in
Section 6.12 hereof.
11.88 "Target Price" shall mean $15,000,000 divided by the number of
Weatherford Shares issued to the Seller at the Closing.
11.89 "Target Working Capital" shall mean $700,000.
11.90 "Taxes" shall mean all federal, state, local, foreign and other
taxes, charges, fees, duties, levies, imposts, customs or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit share, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, premium, property, windfall
profits, or other taxes, fees, assessments, customs, duties, levies, imposts,
or charges of any kind whatsoever, together with any interests, penalties,
additions to tax, fines or other additional amounts imposed thereon or related
thereto, and the term "Tax" means any one of the foregoing Taxes.
11.91 "Tax Returns" shall mean all returns, declarations, reports,
statements and other documents of, relating to, or required to be filed in
respect of, any and all Taxes, and the term "Tax Return" means any one of the
foregoing Tax Returns.
11.92 "Third Party Claims" shall have the meaning given such term
in Section 8.3(b) hereof.
11.93 "Trade Payables" shall mean those obligations of the Seller
relating to the provision of goods and services to the Seller for the conduct
of the Business in the ordinary course of business of the Seller that relate to
the Transferred Assets and that are classified as Trade Payables in accordance
with GAAP.
11.94 "Transferred Assets" shall have the meaning given such term
in Section 1.1(a) hereof.
11.95 "US$", "dollar" or "$" shall mean United States dollars.
11.96 "VTC" shall mean the total consideration received by the Seller
at Closing, which shall be calculated as the sum of (a) the Cash Payment, (b)
the closing sales price of the Common Stock on the Contingent Payment Date, as
reported by the New York Stock Exchange, multiplied by the number of
Weatherford Shares issued to the Seller at Closing and (c) the value as of the
Closing Date of any other securities, assets or property that is received or
will be received by a holder of a share of Common Stock during the Performance
Period in respect of the Common Stock, assuming such securities, assets or
property are not disposed of by the Seller Group (the value of such securities,
assets or property to be determined as set forth in Section 1.12).
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11.97 "Weatherford" shall mean ▇▇▇▇▇▇▇▇▇▇▇ International, Inc., a
Delaware corporation.
11.98 "Weatherford Shares" shall mean 550,000 shares of Common Stock;
provided, however, that if the average of the closing sales price per share of
the Common Stock for the five consecutive trading days ending on the third
Business Day immediately preceding the Closing Date, as reported by the New
York Stock Exchange (the "Average Closing Price"), is (i) less than $19.00, the
Weatherford Shares shall mean the number of shares of Common Stock equal to
$10,450,000 divided by the Average Closing Price, or (ii) more than $22.50, the
Weatherford Shares shall mean the number of shares of Common Stock equal to
$12,375,000 divided by the Average Closing Price.
ARTICLE 12
MISCELLANEOUS
12.1 Representative. The Seller, the Seller Group and each of the
Shareholders hereby irrevocably appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to
be the representative (the "Representative") of the Seller and the Shareholders
following the Closing Date in any matter arising out of this Agreement. For any
matter in which the Buyer is entitled to rely on or otherwise deal with the
Seller, the Seller Group or any of the Shareholders, the Buyer shall be
entitled to communicate solely with the Representative and shall be entitled to
rely on any such communications as being the desire and will of the Seller and
the Shareholders. Notice delivered to the Representative in accordance with
Section 12.4 hereof shall be deemed notice to the Seller and each of the
Shareholders.
12.2 Expenses. Except as otherwise set forth herein, and whether or
not the transactions contemplated by this Agreement shall be consummated, each
party agrees to pay, without right of reimbursement from any other party, the
costs incurred by such party incident to the preparation and execution of this
Agreement and performance of its obligations hereunder, including without
limitation the fees and disbursements of legal counsel, accountants and
consultants employed by such party in connection with the transactions
contemplated by this Agreement. Notwithstanding the foregoing, the parties
agree that all filing fees in connection with premerger notification and report
form filings required under the HSR Act shall be borne equally by the Buyer and
Weatherford, on the one hand, and the Seller and the Shareholders, on the other
hand.
12.3 Notices. All notices, requests, consents, directions and other
instruments and communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered in person, by courier, by overnight delivery service with proof of
delivery or by prepaid registered or certified United States first-class mail,
return receipt requested, addressed to the respective party at the address set
forth below, or if sent by facsimile or other similar form of communication
(with receipt confirmed) to the respective party at the facsimile number set
forth below:
If to the Seller, the Shareholders or the Representative, to:
Clearwater Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
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and
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copies to:
Houston ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer or Weatherford, to:
Weatherford U.S., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or facsimile number and to the attention of such other
Person(s) as either party may designate by written notice. Any notice mailed
shall be deemed to have been given and received on the third Business Day
following the day of mailing.
12.4 Arbitration. Except as otherwise provided herein, in the event
there shall exist any dispute or controversy with respect to this Agreement or
any matter relating hereto or the transactions contemplated hereby, including,
but not limited to Article 8, the parties hereto agree to seek to resolve such
dispute or controversy by mutual agreement. If the parties hereto are unable to
resolve such dispute or controversy by agreement within 60 days following
notice by any party hereto of the nature of such dispute or controversy setting
forth in reasonable detail the circumstances and basis of such dispute or
controversy, the parties agree
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that such dispute or controversy be resolved by binding arbitration pursuant to
the provisions of this Section 12.4 and in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association. All
arbitration proceedings shall be held in Houston, Texas. If a party elects to
submit such matter to arbitration, such party shall provide notice to the other
party of its election to do so, which notice shall name one arbitrator. Within
10 days after the receipt of such notice, the other party shall provide written
notice to the electing party naming a second arbitrator. The two arbitrators so
appointed shall name a third arbitrator, or failing to do so, a third
arbitrator shall be appointed pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. Each arbitrator selected to act hereunder
shall be qualified by education and experience to pass on the particular
question in dispute and shall be independent and not affiliated with any of the
parties hereto. The arbitrators shall resolve all disputes in controversy in
accordance with Texas substantive law. All statutes of limitations that would
otherwise be applicable shall apply to any arbitration proceeding. The
arbitrators appointed pursuant to this Section 12.4 shall promptly hear and
determine (after due notice and hearing and giving the parties reasonable
opportunity to be heard) the questions submitted, and shall render their
decision within 60 days after appointment of the third arbitrator or as soon as
practical thereafter. If within such period a decision is not rendered by the
board or a majority thereof, new arbitrators may be named and shall act
hereunder at the election of either party in like manner as if none had
previously been named. The decision of the arbitrators, or a majority thereof,
made in writing, shall absent manifest error be final and binding upon the
parties hereto as to the questions submitted, and each party shall abide by
such decision.
12.5 Successors. Except as specifically contemplated by this
Agreement, no party hereto shall assign this Agreement or any part hereof
without the prior written consent of the other parties; provided, however, the
Buyer may assign its rights and obligations in this Agreement to an Affiliate
of the Buyer. This Agreement shall inure to the benefit of, be binding upon and
be enforceable by the parties hereto and their respective successors and
assigns.
12.6 Entire Agreement. This Agreement and the exhibits hereto and
the Disclosure Schedule constitute the entire agreement and understanding
between the parties relating to the subject matter hereof and thereof and
supersedes all prior representations, endorsements, premises, agreements,
memoranda communications, negotiations, discussions, understandings and
arrangements, whether oral, written or inferred, between the parties relating
to the subject matter hereof. This Agreement may not be modified, amended,
rescinded, canceled, altered or supplemented, in whole or in part, except upon
the execution and delivery of a written instrument executed by a duly
authorized representative of each of the parties hereto.
12.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.
12.8 Waiver. The waiver of any breach of any term or condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition.
12.9 Severability. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.10 No Third Party Beneficiaries. Any agreement contained,
expressed or implied in this Agreement shall be only for the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, and such agreements shall not inure to the benefit of the obligees of
any indebtedness of any party hereto, it being the intention of the parties
hereto that no Person shall be deemed a third party beneficiary of this
Agreement, except to the extent a third party is expressly given rights herein.
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12.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.12 Headings. Each statement set forth in the Disclosure Schedule
with respect to a particular section herein shall be deemed made solely with
respect to such section and not with respect to any other section hereof unless
specifically set forth in the Disclosure Schedule as also being made with
respect to such other section. The headings of the Articles and Sections of
this Agreement have been inserted for convenience of reference only and shall
in no way restrict or otherwise modify any of the terms or provisions hereof or
affect in any way the meaning or interpretation of this Agreement.
12.13 Negotiated Transaction. The provisions of this Agreement were
negotiated by the parties hereto, and this Agreement shall be deemed to have
been drafted by all of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
SELLER:
ECD/NORTHWEST, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
SHAREHOLDERS:
CLEARWATER HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
BUYER:
WEATHERFORD U.S., L.P.
By: Weatherford Holding U.S., Inc., as
General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President
WEATHERFORD:
▇▇▇▇▇▇▇▇▇▇▇ INTERNATIONAL, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President
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