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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission File Number 0-26710
CORE LABORATORIES N.V.
(Exact name of Registrant as specified in its charter)
THE NETHERLANDS NOT APPLICABLE
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
HERENGRACHT 424
1017 BZ AMSTERDAM
THE NETHERLANDS NOT APPLICABLE
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (31-20) 420-3191
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Shares, NLG 0.03 Par Value Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
As of March 24, 1999, the number of common shares outstanding was 29,390,784.
At that date, the aggregate market value of common shares held by non-affiliates
of the registrant was approximately $544,146,859.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT PART OF 10-K
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1. Proxy statement to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 with respect to the 1999 annual meeting of
shareholders. PART III
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CORE LABORATORIES N.V.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
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PAGE
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PART I
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Item 1. Business................................................................................... 1
Item 2. Properties................................................................................. 7
Item 3. Legal Proceedings ......................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders ...................................... 8
PART II
Item 5. Market for the Common Shares and Related Shareholder Matters ............................. 9
Item 6. Selected Financial Data .................................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................ 15
Item 8. Financial Statements and Supplementary Data................................................ 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 17
PART III
Item 10. Directors and Executive Officers of the Registrant......................................... 17
Item 11. Executive Compensation..................................................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 17
Item 13. Certain Relationships and Related Transactions............................................. 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 18
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PART I
ITEM 1. BUSINESS
GENERAL
Core Laboratories N.V. (the "Company") was established in 1936 and is
one of the world's leading providers of proprietary and patented reservoir
description, production enhancement and reservoir management services and sales
for optimizing reservoir performance and maximizing hydrocarbon recovery from
new and existing fields. The Company has over 70 offices in more than 50
countries and has approximately 3,600 employees. The Company provides its
services to the world's major, national and independent oil companies.
RECENT DEVELOPMENTS
OWEN ACQUISITION
On June 30, 1998, the Company acquired all of the outstanding stock of
Owen Oil Tools, Inc. ("Owen"), a privately held company based in Texas. Owen and
its subsidiaries provide well completion and stimulation technologies to the
petroleum industry. The Company issued approximately 2,277,000 shares in
exchange for all of the outstanding shares of Owen and accounted for the
transaction using the purchase method of accounting. The transaction resulted in
an allocation of approximately $41.5 million in goodwill, which is being
amortized over a 40-year period.
PETRAK ACQUISITION
On July 31, 1998, the Company acquired all of the outstanding shares of
PETRAK Group S.A. ("Petrak"), a privately held company based in Switzerland.
Petrak specializes in characterizing reservoir fluids and their derivatives. The
Company issued approximately 263,000 shares in exchange for all of the
outstanding shares of Petrak and accounted for the transaction using the
purchase method of accounting. The transaction resulted in an allocation of
approximately $3.9 million in goodwill, which is being amortized over a 40-year
period.
JAEX ACQUISITION
On August 31, 1998, the Company acquired all of the remaining shares of
Jaex S.A. de C.V. ("Jaex"), a privately held company based in Mexico, that were
not previously acquired through its acquisition of Owen. The Company previously
owned 50.00098% of Jaex. Jaex provides well completion and stimulation
technologies to the petroleum industry. The Company issued approximately 765,000
shares in exchange for the remaining interest of Jaex and accounted for the
acquisition using the purchase method of accounting. The transaction resulted in
an allocation of approximately $9.3 million in goodwill, which is being
amortized over a 40-year period.
INTEGRA ACQUISITION
On October 28, 1998, the Company acquired all of the outstanding shares
of Integra Geoservices, Inc. ("Integra"), a privately held company based in
Canada. Integra provides specialized geophysical seismic processing services
used to characterize and describe petroleum reservoirs. The Company issued
approximately 86,000 shares in exchange for all of the outstanding shares of
Integra and accounted for the
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transaction using the purchase method of accounting. The transaction resulted in
an allocation of approximately $2.8 million in goodwill, which is being
amortized over a 40-year period.
THE ANDREWS GROUP ACQUISITION
The Company acquired all of the outstanding shares of The Andrews Group
International, Inc. and A.G.I. Mexicana, S.A. de C.V. on December 18, 1998 and
December 11, 1998, respectively (collectively referred to as the "Andrews
Group"). The Andrews Group provides specialized seismic data processing and
interpretation services, as well as other geophysical, geological and
engineering services. The Company issued approximately 715,000 shares in
exchange for all of the outstanding shares of the Andrews Group and accounted
for the transaction using the pooling-of-interests method of accounting. The
Company's consolidated financial statements have been restated for all periods
presented to include the financial position and results of operations of the
Andrews Group.
THRU-TUBING ACQUISITION
On December 30, 1998, the Company acquired all of the outstanding
shares of Thru-Tubing Technology, Inc. ("Thru-Tubing"), a privately held company
based in Louisiana. Thru-Tubing manufactures downhole remedial products which
complement Owen's well completion and stimulation technologies. The Company
issued approximately 195,000 shares in exchange for all of the outstanding
shares of Thru-Tubing and accounted for the transaction using the
pooling-of-interests method of accounting. Thru-Tubing's results of operations
for the year ended December 31, 1998 have been combined with those of the
Company. The Company's consolidated financial statements for prior years were
not restated due to immateriality.
The purchase price allocations of Owen, Petrak, Jaex, and Integra are
preliminary. As additional information concerning the value of the assets
acquired and liabilities assumed becomes known, additional adjustments may be
made to the purchase price allocations included in the accompanying financial
statements. Management believes at this time that the preliminary purchase price
allocation will not differ materially from the final allocation.
DISPOSITION OF DISCONTINUED OPERATIONS
In early 1998, the Company concluded that its package analyzer line of
business was no longer strategic and made a decision to discontinue this product
line. Subsequently, on April 8, 1998, the Company sold the majority of the net
assets of its package analyzer business line for approximately $4.1 million in
cash, resulting in a loss on sale of $1.3 million. Remaining net book value
associated with the unsold assets of the package analyzer product line totaled
approximately $3.5 million and was written down during 1998 to reflect estimated
salvage value.
The results of the package analyzer business line have been reported
separately as discontinued operations in the Consolidated Statements of
Operations. Prior year consolidated financial statements have been restated to
present the package analyzer business line as discontinued operations.
EVENTS SUBSEQUENT TO YEAR-END
ISOTAG ACQUISITION
On January 7, 1999, the Company acquired receivables and certain fixed
assets from Isotag Specialist, Inc. ("Isotag"), and its related company, Fred
Calaway and Co. Both companies are privately held and based in Texas. Isotag
provides fracture diagnostics and related services. The Company issued
approximately 33,000 shares for the assets and will accounted for the
transaction using the purchase method of accounting.
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GEOSCIENCE ACQUISITION
On January 18, 1999 the Company entered into an agreement to acquire
GeoScience Corp. for approximately $197 million in cash and stock. On March 23,
1999 the Company and GeoScience agreed to terminate the agreement. As part of
the termination, the Company agreed to pay GeoScience $3 million through the
cancellation of working capital advances previously made by the Company to
GeoScience.
BUSINESS STRATEGY
The Company's business strategy is to continue the expansion of its
operations through (i) continued development of proprietary hydrocarbon
production enhancement technologies, services and products through client-driven
research and development, (ii) expanded services and product lines offered
throughout the Company's global infrastructure, and (iii) acquisition of
complementary businesses that add key technologies or market presence and
enhance existing products and services.
DEVELOPMENT OF NEW TECHNOLOGIES, SERVICES AND PRODUCTS
The Company's research and development strategy is designed to maintain
and enhance its market leadership position in its principal businesses by
emphasizing the development of technology, services and products to meet the
needs of its customers, who are continually seeking to lower their costs of
finding, developing and producing hydrocarbons. This strategy reflects the
current industry trend towards increased utilization of advanced technologies to
enhance the efficiency of oil field development, reduce the costs associated
with production of known reserves, maximize the efficiency of secondary and
tertiary recovery techniques, and reduce finding and development costs for new
reserves. While the aggregate number of wells being drilled per year has
remained relatively constant in recent years, oil and gas producers have
increased expenditures on high-technology services that provide better reservoir
descriptions which assist them in enhancing production, and improving the
management of their reservoirs. They are also spending more on advanced
reservoir rock and fluids analysis that assist in the development of more
complete and comprehensive analyses of reservoir characteristics and hydrocarbon
fluids. The Company intends to continue concentrating its efforts on
technologies that enhance development and production efficiencies, as opposed to
technologies related to the more volatile exploration sector of the oil and gas
industry.
INTERNATIONAL EXPANSION OF SERVICES AND PRODUCTS
Another component of the Company's business strategy is to broaden the
spectrum of services and products offered to its clients internationally. The
Company plans to offer many of its services and products obtained through
acquisitions through its over 70 facilities located in more than 50 countries.
Management believes this integration will expand the markets served by Owen,
Petrak, Jaex, Integra, the Andrews Group, Thru-Tubing, and other businesses
acquired in the future.
ACQUISITIONS
The Company continually reviews potential acquisitions to add key
technologies, enhance market presence or complement existing businesses. The
Company's recent acquisitions reflect its desire to broaden the services offered
to its clients.
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IMPACT OF BUSINESS STRATEGY
The Company believes that the implementation of these strategies has
contributed to the significant increase in income from continuing operations
before interest expense and income tax to $39.8 million for the year ended
December 31, 1998, from $29.8 million for the year ended December 31, 1997.
OPERATIONS
The Company derives its revenues from services and sales to customers
primarily in the oil and gas industry.
The Company's business units have been aggregated into three reportable
segments which provide products and services used for optimizing reservoir
performance and maximizing hydrocarbon recovery from new and existing fields.
Disclosure relating to these business segments is included in the notes to the
consolidated financial statements.
o Reservoir Description: Encompasses the petrophysical
characterization of petroleum reservoir rock and the phase
behavior relationships of reservoir fluids and gases.
o Production Enhancement: Includes field applications of
proprietary technologies to maximize the efficiency and
effectiveness of well completions, perforations, stimulations,
and production.
o Reservoir Management: Combines and integrates data sets from
reservoir description and production enhancement services to
maximize daily hydrocarbon production and recovery from a well or
field.
The Company offers its services worldwide through over 70 facilities
located in more than 50 countries. Services accounted for approximately 87%, 92%
and 91% of the Company's total revenues from continuing operations for the
fiscal years ended December 31, 1998, 1997 and 1996, respectively.
The Company currently offers its products worldwide through four
manufacturing facilities. Sales revenue accounted for approximately 13%, 8%, and
9% of the Company's total revenues from continuing operations for the fiscal
years ended December 31, 1998, 1997 and 1996, respectively.
The sales backlog at December 31, 1998 was approximately $8.6 million,
compared with $4.9 million at December 31, 1997.
RESERVOIR DESCRIPTION
Most commercial oil and gas fields consist of porous and permeable
reservoir rocks that contain natural gas, crude oil and water. Due to the
density differences of the fluids, natural gas caps the field and overlies an
oil layer, which overlies the water. The Company provides services that
characterize the porous reservoir rock and all three reservoir fluids.
The Company analyzes samples of reservoir rocks for their porosity,
which determines reservoir storage capacity, and for their permeability, which
defines the ability of the rock to permit fluid flow. These fundamental and
basic measurements are used to determine how much oil and gas are present in a
reservoir and the rates at which the hydrocarbons can be produced. Other
important data sets provided by the Company to characterize the reservoir rocks
are resistivity measurements to enhance the value of wireline data and acoustic
velocity determinations that facilitate seismic data processing and
interpretation.
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The economic value of the oilfield is the oil and natural gas that can
be recovered from the porous rock network. The Company characterizes the
properties of the oil and gas so that the maximum quantity of hydrocarbons is
mobilized in the reservoir and is produced to the surface.
The more completely oil companies understand the properties of their
oilfields' reservoir systems, the more oil and gas these fields should
ultimately produce. Incremental barrels of production generate additional cash
flow which may, in turn, be reinvested in other oil production projects.
PRODUCTION ENHANCEMENT
The Company data describing the reservoir system are used by oil
company engineers, geologists and geophysicists to enhance hydrocarbon
production so that it will exceed the 40% average oilfield recovery factor. Two
production-enhancement methods commonly used are (1) hydraulic fracturing of the
reservoir rock to improve flow and (2) flooding the field with water, carbon
dioxide, or hydrocarbon gases to force more oil and gas to the wellbore. The
Company's technologies play a key role in the success of both methods.
The hydraulic fracturing of a producing formation is achieved by
pumping a proppant material in a gel slurry into the reservoir zone at extremely
high pressures. This forces fractures to open in the rock and "props" the
fractures open so that reservoir fluids can flow to the production wellbore.
The Company data on rock type and strength are critical for determining
the proper design of the hydraulic fracturing job. In addition, the Company's
testing indicates whether the gel slurry is compatible with the reservoir fluids
so that damage does not occur to the porous rock network. In addition, the
Company's proprietary ZeroWash(TM) tracer technology is used to determine if the
proppant material was properly placed in the fracture to ensure effective flow
and increased recovery.
Many oilfields today are hydraulically fractured and flooded to
maximize hydrocarbon recovery. The Company conducts dynamic flow tests of the
reservoir fluids through the reservoir rock, at actual reservoir pressure and
temperature, to realistically simulate the actual flooding of a producing zone.
The Company uses patented technologies, such as the Company's Saturation
Monitoring by the Attenuation of X-rays (SMAX(TM)), to help design the enhanced
recovery project. After the field flood is initiated, the Company is often
involved in monitoring the progress of the flood to ensure the maximum number of
incremental barrels is produced.
RESERVOIR MANAGEMENT
Reservoir description and production enhancement data sets, when
applied across an entire oilfield, are used to maximize daily production and the
ultimate total recovery from the reservoir. The Company's teams of
geophysicists, geologists and engineers are involved in numerous large-scale
reservoir management projects, applying proprietary and state-of-the-art
techniques from the earliest phases of a field development program until the
last producible barrel of oil is recovered.
These projects are of increasing importance to oil companies,
especially when oil and natural gas prices are low. The incremental barrel,
which is the lowest cost barrel in the reservoir, is the most profitable for oil
companies. Producing incremental barrels increases our clients' cash flows which
may create future opportunities for the Company.
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MARKETING AND SALES
The Company markets and sells its services and products through a
combination of print advertising, technical seminars, trade shows, and sales
representatives. Print advertising is placed on a regular basis in trade and
technical magazines that target the Company's customers. Direct sales and
marketing are carried out by the Company's sales force, technical experts and
operating managers, as well as by sales representatives and distributors in
various markets where the Company does not have offices.
RESEARCH AND DEVELOPMENT
The market for the Company's products and services is characterized by
changing technology. As a result, the Company's success is dependent upon its
ability to develop or acquire new products and services on a cost-effective
basis and to introduce them into the marketplace in a timely manner. The Company
intends to continue committing substantial financial resources and effort to the
development of new products and services. Ongoing research and development are
an important part of the Company's services operations. The Company has in the
past committed significant resources to research and development and anticipates
that it will continue to do so in the future. Over the years, the Company has
made a number of technological advances, including the development of key
technologies utilized in the Company's operations. Substantially all of the new
technologies have resulted from requests and guidance from the Company's
clients, especially major oil companies.
PATENTS AND TRADEMARKS
The Company believes its patents, trademarks and other intellectual
property rights are an important factor in maintaining its technological
advantage. Typically, the Company will seek to protect its intellectual
technology in all jurisdictions where the Company believes the cost of such
protection is warranted. While certain key technologies have been patented by
the Company, it has not patented all of its proprietary technology even where
regarded as patentable. In addition to patents, the Company protects its trade
secrets through confidentiality agreements with its employees and its customers.
Although the Company's patents are considered important to its operations, no
one patent is considered essential to its success.
INTERNATIONAL OPERATIONS
The Company operates over 70 facilities in more than 50 countries. The
Company's non-U.S. operations accounted for approximately 54%, 55%, and 35% of
the Company's revenues from continuing operations during the fiscal years ended
December 31, 1998, 1997 and 1996, respectively. The Company's business is
subject to various risks beyond its control, such as instability of foreign
economies and governments, currency fluctuations, overlap of different tax
structures, and changes in laws and policies affecting trade and investment. Any
of such factors may cause facilities in some countries to become unprofitable,
possibly resulting in the closing of such facilities. The Company attempts to
limit its exposure to foreign currency fluctuations by limiting the amount in
which its foreign contracts are denominated in a currency other than U.S.
dollars to an amount generally equal to expenses expected to be incurred in such
foreign currency. The Company has not historically engaged in and does not
currently intend to engage in any significant hedging or currency-trading
transactions designed to hedge against adverse currency fluctuations.
ENVIRONMENTAL REGULATION
The Company's operations use many chemicals and gases and is therefore
subject to a variety of federal, state, local and foreign laws and regulations
related to the use, storage, discharge and disposal of
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such chemicals and gases and other emissions and wastes. Consistent with the
Company's quality assurance and control principles, the Company has established
proactive environmental policies with respect to the handling and disposal of
such chemicals, gases, emissions and waste materials from its operations. The
Company has engaged outside consultants to audit its environmental activities
and has implemented health and safety education and training programs. The
Company has not suffered material environmental claims in the past. Management
believes that the Company's operations are currently in compliance with
applicable environmental laws and regulations, and that continued compliance
with existing requirements will not have a material adverse effect on the
Company. However, public interest in the protection of the environment has
increased dramatically in recent years and the Company anticipates that the
trend toward more expansive and stricter environmental laws and regulations will
continue, the occurrence of which may require increased capital expenditures or
operating expenses by the Company.
COMPETITION
The businesses in which the Company engages are competitive. Some of
the Company's competitors are divisions or subsidiaries of companies that are
larger and have greater financial and other resources than the Company. While no
one company competes with the Company in all of its product and service lines,
the Company faces competition in these lines, primarily from independent,
regional companies. The Company competes in different product and service lines
to various degrees on the basis of price, technical performance, availability,
quality, and technical support. The Company's ability to compete successfully
depends on elements both within and outside of its control, including successful
and timely development of new products and services, performance and quality,
customer service, pricing, industry trends, and general economic trends.
RELIANCE ON THE OIL AND GAS INDUSTRY
The Company's business and operations are substantially dependent upon
the condition of the global oil and gas industry. Future downturns in the oil
and gas industry, or in the oil field services business, may have a material
adverse effect on the financial condition or results of operations of the
Company.
The oil and gas industry is highly cyclical and has been subject to
significant economic downturns at various times as a result of numerous factors
affecting the supply of and demand for oil and natural gas, which include the
level of capital expenditures of the oil and gas industry; the level of drilling
activity; the level of production activity; market prices of oil and gas;
worldwide economic conditions; interest rates and the cost of capital;
environmental regulations; tax policies; political requirements of national
governments; coordination by the Organization of Petroleum Exporting Countries
("OPEC"); cost of producing oil and natural gas; and technological advances.
EMPLOYEES
As of December 31, 1998, the Company had approximately 3,600 employees.
The Company does not have any material collective bargaining agreements and
considers relations with its employees to be good.
ITEM 2. PROPERTIES
Currently, the Company has over 70 facilities (totaling more than one
million square feet) in more than 50 countries. In these locations, the Company
typically leases the office facilities. The Company serves its worldwide
customers through six advanced technology centers ("ATC's") which are located in
Dallas,
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Texas; Calgary, Canada; Jakarta, Indonesia; Kuala Lumpur, Malaysia; Aberdeen,
United Kingdom; and Maracaibo, Venezuela. The ATC's are supported by over 50
regional specialty centers located throughout the global energy producing
provinces. The Company's facilities are adequately utilized for current
operations and should accommodate future growth.
ITEM 3. LEGAL PROCEEDINGS
The Company may from time to time be subject to legal proceedings and
claims that arise in the ordinary course of its business. Management believes
that the outcome of these legal actions will not have a material adverse effect
upon the consolidated financial position or future results of operations of the
Company.
On August 18, 1998, Saybolt, Inc. ("Saybolt") agreed to plead guilty in
federal court to criminal violations of the federal Clean Air Act and the
Foreign Corrupt Practices Act which occurred between October 1994 and December
1996, prior to the Company's acquisition of Saybolt. Under the plea agreement
reached between Saybolt, the U.S. Department of Justice and the United States
Attorneys for the districts of Massachusetts, New Jersey, and Connecticut,
Saybolt agreed to pay $4.9 million in fines and agreed to be placed on probation
for five years. The fines were paid out of funds specifically set aside in
escrow for contingencies from the Saybolt selling stockholders at the time of
the acquisition. The Company acquired Saybolt's Dutch parent in May of 1997. The
Company believes that these penalties will have no material adverse effect on
Saybolt's financial position or results of operations and it also believes that
Saybolt's testing licenses will remain in full force and effect. The government
has informed Saybolt that the criminal investigations against Saybolt have
ended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 1998.
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PART II
ITEM 5. MARKET FOR THE COMMON SHARES AND RELATED SHAREHOLDER MATTERS
PRICE RANGE OF COMMON SHARES
The Company's common shares trade on the New York Stock Exchange
("NYSE") under the symbol "CLB". The following table sets forth for the periods
indicated, the range of high and low sales prices per share of the common shares
as reported by NYSE unless otherwise noted.
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HIGH LOW
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1998
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First Quarter (a)....................................................... 25 1/4 14 7/8
Second Quarter (a)...................................................... 30 1/4 20 7/8
Third Quarter........................................................... 28 1/4 11 5/8
Fourth Quarter.......................................................... 25 1/2 13 5/8
1997
First Quarter (a)(b).................................................... 11 8 3/8
Second Quarter (a)(b)................................................... 13 1/16 8 3/16
Third Quarter (a)(b).................................................... 18 7/16 12
Fourth Quarter (a)(b)................................................... 22 7/8 13 3/4
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(a) The Company's common shares traded on Nasdaq National Market
prior to July 10, 1998.
(b) Prices have been restated to reflect a split in the number of
shares in December 1997.
On March 24, 1999 the closing price, as quoted by NYSE, was $23 3/16
per share. As of March 24, 1999, there were 29,390,784 common shares held by
approximately 285 record holders and approximately 15,870 beneficial holders.
DIVIDEND POLICY
The Company has never paid dividends on its common shares and currently
has no plans to pay dividends on the common shares. The Company expects that it
will retain all available earnings generated by its operations for the
development and growth of its business. Any future determination as to the
payment of dividends will be made at the discretion of the Company's Supervisory
Board and will depend upon the Company's operating results, financial condition,
capital requirements, general business conditions and such other factors as the
Supervisory Board deems relevant. Because the Company is a holding company that
conducts substantially all of its operations through subsidiaries, the ability
of the Company to pay cash dividends on the common shares is dependent upon the
ability of its subsidiaries to pay cash dividends or otherwise distribute or
advance funds to the Company and on the terms and conditions of its existing and
future credit arrangements as may exist from time to time. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
RECENT ISSUANCE OF UNREGISTERED SECURITIES
On December 31, 1996, the Company issued approximately 2,200,000
common shares in exchange for substantially all of the outstanding stock of
ProTechnics Company.
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On December 29, 1997, the Company issued approximately 459,000 shares
in exchange for all of the outstanding stock of Stim-Lab Inc.
Disclosure related to current year issuances are included in the
"Recent Developments" discussion in Item 1. With respect to the shares issued in
each acquisition discussed in this section and in Item 1, the Company relied on
exemption from registration under Section 4(2) on Regulation S of the Securities
Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated
financial data for the periods indicated. Prior year financial data has been
restated to properly reflect discontinued operations and the pooling-of-interest
acquisition of the Andrews Group. The selected historical consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the Company's
consolidated financial statements included elsewhere herein:
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YEAR ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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STATEMENT OF OPERATIONS DATA: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SERVICES AND SALES $ 286,203 $ 229,134 $ 111,353 $ 88,320 $ 35,957
INCOME (LOSS) FROM CONTINUING
OPERATIONS 23,603 14,940 6,657 3,291 (1,060)
LESS - NET INCOME APPLICABLE TO
PREFERRED LOAN STOCK -- -- -- (334) (113)
------------ ------------ ------------ ------------ ------------
INCOME FROM CONTINUING
OPERATIONS APPLICABLE TO
COMMON SHARES $ 23,603 $ 14,940 $ 6,657 $ 2,957 $ (1,173)
============ ============ ============ ============ ============
BASIC PER SHARE DATA:
Income from continuing operations $ 0.86 $ 0.63 $ 0.31 $ 0.16 $ (0.19)
============ ============ ============ ============ ============
Weighted average common
shares outstanding 27,329,364 23,970,641 21,899,500 17,871,271 6,095,511
============ ============ ============ ============ ============
DILUTED PER SHARE DATA:
Income from continuing operations $ 0.84 $ 0.61 $ 0.30 $ 0.16 $ (0.19)
============ ============ ============ ============ ============
Weighted average common
shares outstanding 28,122,468 24,651,325 22,096,804 17,977,299 6,095,511
============ ============ ============ ============ ============
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YEAR ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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BALANCE SHEET DATA:
Working capital.......................... $ 65,220 $ 50,992 $ 18,027 $ 18,274 $ 15,725
Total assets............................. 348,608 249,536 92,342 81,312 68,219
Long-term debt, including current 86,593 74,177 16,784 19,716 32,010
maturities...............................
Redeemable preferred stock............... -- -- -- -- 7,500
Shareholders' equity..................... 196,968 113,590 47,566 39,897 14,009
</TABLE>
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain of the information contained or incorporated by reference in
this document is forward-looking in nature. All statements included or
incorporated by reference in this document or made by management other than
statements of historical fact are forward-looking statements. Any expectations
based on these forward-looking statements are subject to risks and
uncertainties. Such risks and uncertainties include, but are not limited to, the
following:
o the continued expansion of services is dependent upon the
Company's ability to continue to develop or acquire new and
useful technology.
o the improvement of margins is subject to the risk that
anticipated synergies of existing and recently acquired
businesses and future acquisitions will not be realized.
o the Company's dependence on one industry, oil and gas.
o the industry risks related to the capital expenditure levels and
the commodity prices for crude oil and natural gas.
o the risks and uncertainties attendant to adverse industry,
political, economic, and financial market conditions, including
stock prices, government regulations, interest rates and credit
availability.
o competition in the Company's markets.
Should one or more of these risks or uncertainties materialize and
should any of the underlying assumptions prove incorrect, actual results of
current and future operations may vary materially from those anticipated. These
factors could cause actual results to differ materially from expectations based
on forward-looking statements made in this document or elsewhere by or on behalf
of Core Laboratories.
The following discussion should be read in conjunction with the
financial statements and notes thereto included elsewhere herein.
BUSINESS DEVELOPMENT
The Company was established in 1936 and is a leading provider of
proprietary and patented reservoir description, production enhancement and
reservoir management services and sales for optimizing reservoir performance and
maximizing hydrocarbon recovery from new and existing fields. The Company
provides its services to the world's major, national and independent oil
companies.
The Company plans to continue the expansion of its operations through
(i) continued development of proprietary hydrocarbon production enhancement
technologies, services and products through client-driven research and
development, (ii) expanded services and product lines offered throughout the
Company's global infrastructure, and (iii) acquisition of complementary
businesses that add key technologies or market presence and enhance existing
products and services.
The Company's recent research and development efforts have been
directed primarily towards the development of new products and services.
The Company's acquisition strategy is to continue to seek acquisitions
of complementary businesses that add key technologies, enhance market presence
and complement the Company's existing products and services. This strategy is
exemplified by its most recent acquisitions of Owen, Petrak, Jaex, Integra, the
Andrews Group, and Thru-Tubing.
11
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth certain percentage relationships based
on the Company's consolidated statements of operations for the periods
indicated. The table for 1998 includes the results of operations of Owen
beginning June 30, 1998, Petrak beginning July 31, 1998, Jaex beginning August
31, 1998 and Integra beginning October 28, 1998 (accounted for as purchases),
the Andrews Group for all periods presented and Thru-Tubing for the year ended
December 31, 1998 (accounted for as poolings-of-interests). All numbers have
been restated to exclude results of discontinued operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Services 87.2% 92.3% 91.0%
Sales 12.8 7.7 9.0
---------- ---------- ----------
100.0 100.0 100.0
Operating expenses:
Costs of services* 77.9 79.6 83.1
Costs of sales* 71.5 84.5 65.0
General and administrative expenses 3.0 2.6 3.2
Depreciation and amortization 5.8 4.8 4.1
Transaction costs associated with merger -- -- 0.3
Other income, net 0.3 (0.5) (0.5)
Income from continuing operations before interest
expense and income tax 13.9 13.0 11.4
Interest expense 2.1 2.8 1.4
---------- ---------- ----------
Income from continuing operations before
income tax 11.8 10.2 10.0
Income tax expense 3.5 3.7 4.0
---------- ---------- ----------
Income from continuing operations 8.3% 6.5% 6.0%
========== ========== ==========
</TABLE>
*Percentage based on applicable segment revenue, rather than total
revenue.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Total revenue for 1998 was $286.2 million, an increase of 25% from
$229.1 million in the prior year. This increase was primarily attributable to an
overall increase in the demand for the Company's services and sales, in addition
to the revenue derived from the businesses acquired in 1998.
Costs of services as a percentage of service revenue decreased compared
to the prior year, due to improved cost savings and efficiencies.
Costs of sales as a percentage of sales revenue for the year ended 1998
decreased compared to the prior year, due to an increase in high margin product
sales.
General and administrative expenses increased $2.5 million in 1998 as
compared to 1997 as a result of increased personnel costs attributable to the
Company's growth. As a result of its ongoing program to manage general and
administrative expenses, the Company has been able to maintain this ratio under
4%.
12
<PAGE> 15
Depreciation and amortization expense from continuing operations for
1998 increased to $16.5 million compared to $11.1 million in 1997 due primarily
to increased capital expenditures, as well as the inclusion of depreciation and
amortization from the businesses acquired during 1998.
Interest expense decreased $0.5 million in 1998 as compared to 1997.
The decrease was primarily attributable to reductions in long-term debt funded
by proceeds from the equity offering in November 1997.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Total revenue for 1997 was $229.1 million, an increase of 105.8% from
$111.4 million in the prior year. This increase was primarily attributable to
increased demand for reservoir description, production enhancement, and
reservoir management services, as well as the inclusion of revenues from
acquired businesses.
Costs of services as a percentage of service revenue decreased compared
to the prior year, due to improved costs savings and efficiencies.
Cost of sales as a percentage of sales revenues for the year ended 1997
increased compared to the prior year due to sales of lower margin products.
General and administrative expenses increased $2.4 million in 1997 to
$6.0 million as a result of increased personnel costs attributable to the
Company's growth. As a result of its ongoing program to manage general and
administrative expenses, the Company has been able to maintain this ratio under
4%.
Depreciation and amortization expense from continuing operations for
1997 increased to $11.1 million compared to $4.6 million in 1996 due primarily
to increased capital expenditures, as well as the inclusion of depreciation and
amortization from the acquired businesses.
Interest expense increased $5.0 million in 1997 as compared to 1996.
The increase was primarily due to additional borrowings used to finance the
Company's 1997 acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
On May 12, 1997, the Company entered into a Credit Facility, which
provides for (i) a term loan of $55 million, (ii) a term loan denominated in
British pounds having an initial U.S. dollar equivalency of $15 million, (iii) a
committed revolving debt facility of $50 million and (iv) a Netherlands guilder
denominated revolving debt facility with an initial U.S. dollar equivalency of
$5 million. At December 31, 1998 approximately $40 million was available for
borrowing under the revolving debt facilities. Loans under the Credit Facility
will generally bear interest ranging from LIBOR plus 0.75% to a maximum of LIBOR
plus 1.75%. The term loans require quarterly principal payments beginning March
31, 1999 with the final principal payment due June 30, 2002. The revolving debt
facilities require interest payments only, until maturity on June 30, 2002. The
terms of the Credit Facility require the Company to meet certain financial
covenants, including certain minimum equity and cash flow tests. Management
believes that the Company is in compliance with all such covenants contained in
its credit agreements. All of the Company's material subsidiaries are guarantors
or co-borrowers under the Credit Facility.
As part of the purchase of Scott Pickford in March 1997, the Company
issued unsecured loan notes in lieu of cash consideration for the outstanding
shares of Scott Pickford. The loan notes bear interest payable semi-annually, at
the rate of LIBOR less 1.0% per annum. Holders of the loan notes have the right
13
<PAGE> 16
to redeem the loan notes at par on each interest payment date. Unless previously
redeemed or purchased, the loan notes are to be redeemed at par on June 30,
2002.
The Company's day-to-day liquidity is based on cash flow from its
business divisions and the ability to borrow in the short-term and long-term
markets at competitive rates. The Company refinanced the outstanding
indebtedness from its acquisitions with borrowings under the Credit Facility and
the Company issued approximately 4.3 million common shares for its 1998
acquisitions.
At December 31, 1998, the Company had working capital of $65.2 million
(of which $8.2 million was cash and short-term investments) and a current ratio
of 2.1 to 1.0 compared to working capital of $51.0 million (of which $12.7
million consisted of cash and short-term investments) and a current ratio of 2.0
to 1.0 at December 31, 1997. The Company is a holding company that conducts
substantially all of its operations through subsidiaries. Consequently, the
Company's cash flow is wholly dependent upon the ability of its subsidiaries to
pay cash dividends or otherwise distribute or advance funds to the Company.
The Company expects to fund any future acquisitions primarily through a
combination of working capital, cash flow from operations, bank borrowings
(including the Credit Facility), and issuances of additional equity. Although
the Credit Facility imposes certain limitations on the incurrence of additional
indebtedness, the Company will be permitted to assume, among other things, the
indebtedness of acquired businesses, subject to compliance with the financial
covenants of the Credit Facility.
The Company anticipates that its cash flow from operations will
continue to provide cash in excess of normal working capital needs and planned
capital expenditures for property, plant and equipment. Capital expenditures for
1998 were $27.0 million and for 1997 totaled $16.6 million.
Due to the relatively low levels of inflation experienced in 1996, 1997
and 1998, inflation has not had a significant effect on the Company's results of
operations in recent periods.
OTHER MATTERS
YEAR 2000 CONVERSION
The Company's has numerous technology systems that are managed on a
decentralized basis. The Company's Year 2000 readiness efforts are therefore
being undertaken on a company wide basis but with centralized oversight. Each
facility is responsible for developing and implementing a plan to minimize the
risk of a significant negative impact on its operations.
The Company has identified four phases to achieve a state of readiness:
(i) identification, (ii) remediation, (iii) implementation and testing, and,
(iv) reassessment. As of December 31, 1998, the identification phase of
assessing all systems that could be affected by Year 2000 date sensitive
software or embedded technology is substantially complete. Remediation and/or
implementation of compliant systems is expected to be completed by the third
quarter of 1999. Reassessment will continue constantly throughout the process.
The Company has relationships with various third parties who must also
be Year 2000 ready. These third parties provide (or receive) resources and
services to (or from) the Company and include organizations with which the
Company exchanges information. Third parties include vendors of hardware,
software and information services; providers of infrastructure services such as
voice and data communications; investors, customers; manufacturing suppliers;
distribution channels; non-consolidated entities; and joint venture partners.
Third parties differ from internal systems in that the company exercises less,
or no, control over
14
<PAGE> 17
Year 2000 readiness. The Company has developed a plan to assess and attempt to
mitigate the risks associated with the potential failure of third parties to
achieve Year 2000 readiness. This plan includes the following activities: (i)
identify and clarify third party dependencies; (ii) research and analyze Year
2000 readiness for critical third parties; and (iii) test critical hardware and
software products and electronic interfaces. As of December 31, 1998, all phases
of this process were substantially complete, however, due to the various stages
of third parties Year 2000 readiness, the Company's testing activities will
extend into 1999.
The Company has commenced contingency planning to reduce the risk of
Year 2000 related business failures. The contingency plans, which address both
internal systems and third party relationships, include the following
activities: (i) evaluate the consequences of failure of business processes with
significant exposure to Year 2000 risk; (ii) determine the probability of a Year
2000 related failure for those processes that have a high consequence of
failure; (iii) develop an action plan to complete contingency plans for those
processes that rank high in both consequence and probability of failure; and
(iv) complete the applicable action plans. The company has substantially
completed evaluation activities as of December 31, 1998 and is proceeding with
the subsequent activities. The Company expects to substantially complete all
contingency-planning activities by September 30, 1999.
Based on its plans to make internal systems ready for Year 2000, to
deal with third party relationships, and to develop contingency actions, the
Company believes that it will experience at most isolated and minor disruptions
of business processes following the turn of the century. Such disruptions are
not expected to have a material effect on the company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the company is not
able to predict a reasonable worst case scenario. If conversion of the company's
internal systems is not completed on a timely basis (due to non-performance by
significant third-party vendors, lack of qualified personnel to perform the Year
2000 work, or other unforeseen circumstances in completing the company's plans),
or if critical third parties fail to achieve Year 2000 readiness on a timely
basis, the Year 2000 issues could have a material adverse impact on the
Company's operations following the turn of the century.
As of December 31, 1998 the Company has incurred and expensed $0.5
million (pretax) in 1998 related to Year 2000 readiness. The Company is in the
process of replacing certain systems at the majority of the Company's facilities
that no longer meet the Company's needs. These replacement systems are Year 2000
compliant and their costs are being capitalized and amortized over their useful
lives, in accordance with the Company's normal accounting policies. The total of
such capitalizable costs is expected to be approximately $0.6 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including changes in interest
rates and foreign currency exchange rates as discussed below. All market risk
sensitive instruments were entered into for purposes other than trading. Trade
accounts receivable and accounts payable have not been included as their
carrying amounts approximate fair value due to the short term maturities of
these instruments. Management also believes the carrying amount of long-term
debt approximates fair value as the majority of borrowings bear interest at
floating market interest rates. This section should be read in conjunction with
Notes to Consolidated Financial Statements Footnote 6 - Long Term Debt and
Footnote 11 - Concentration of Credit Risk.
15
<PAGE> 18
INTEREST RATE SENSITIVITY
The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates. The table presents
principal cash flows and related weighted average LIBOR rates by expected
maturity dates. The information is presented in U.S. dollar equivalents, which
is the Company's functional and reporting currency. The instrument's future
estimated cash flow is denominated in U.S. dollars (US$) and British Pounds
Sterling (GBP), as indicated in parentheses. Average variable interest rates are
based on implied LIBOR forward rates plus a spread on the yield curve at
December 31, 1998. Implied forward rates should not be considered a predictor of
actual future interest rates.
<TABLE>
<CAPTION>
Expected maturity date
(in millions)
---------------------------------------------------------------------------------
After Fair
1999 2000 2001 2002 2003 2003 Total Value
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Debt:
Variable Rate-Term (US$) $ 14.0 $ 21.0 $ 21.0 $ 14.0 $ -- $ -- $ 70.0 $ 70.0
Average interest rate 5.5% 5.7% 5.8% 6.1%
Variable Rate-Revolver
(GBP) $ 3.0 $ 4.5 $ 4.5 $ 3.2 $ -- $ -- $ 15.2 $ 15.2
Average interest rate 5.5% 5.7% 5.8% 6.1%
</TABLE>
The Company did not have any open derivative contracts relating to its floating
rate debt at December 31, 1998.
EXCHANGE RATE SENSITIVITY
The table below provides information about the Company's financial
instruments that are sensitive to changes in foreign currency exchange rates.
The table presents principal cash flows and related weighted average LIBOR
interest rates plus a spread by expected maturity dates. The information is
presented in U.S. dollar equivalents, which is the Company's functional and
reporting currency. The instrument's future estimated maturities are denominated
in British Pounds Sterling (GBP) as indicated in parentheses. Average variable
interest rates are based on implied LIBOR forward rates plus a spread on the
yield curve at December 31, 1998. Implied forward rates should not be considered
a predictor of actual future interest rates.
<TABLE>
<CAPTION>
Expected maturity date
(in millions)
---------------------------------------------------------------------------------
After Fair
1999 2000 2001 2002 2003 2003 Total Value
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$US Functional Currency:
Long Term Debt:
Variable Rate-Revolver
(GBP) $ 3.0 $ 4.5 $ 4.5 $ 3.2 $ -- $ -- $ 15.2 $ 15.2
Average interest rate 5.5% 5.7% 5.8% 6.1%
</TABLE>
The Company did not have any open derivative contracts relating to foreign
currencies at December 31, 1998.
16
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For the financial statements and supplementary data required by this
Item 8, see index to consolidated financial statements and schedules at Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Part III (Items 10 through 13) is omitted because the Registrant
expects to file with the Securities and Exchange Commission within 120 days
after the close of the fiscal year ended December 31, 1998, a definitive proxy
statement pursuant to Regulation 14A under the Securities Exchange Act of 1934.
17
<PAGE> 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS
The following reports, financial statements and schedules are filed
herewith on the pages indicated:
<TABLE>
<CAPTION>
Core Laboratories N.V. and Subsidiaries (The "Company"): Page
----
<S> <C>
Report of Independent Public Accountants................................................ 21
Consolidated Balance Sheets as of December 31, 1998 and 1997............................ 22
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996..................................................... 23
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996................................. 24
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996..................................................... 25
Notes to Consolidated Financial Statements.............................................. 26
</TABLE>
FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because they are not applicable, not
required under the instructions, or the information requested is set forth in
the consolidated financial statements or related notes hereto.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
18
<PAGE> 21
(c) EXHIBITS
The following exhibits are incorporated by reference to the filing
indicated or are filed herewith.
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE FROM THE
EXHIBIT NO. EXHIBIT TITLE FOLLOWING DOCUMENTS
- ----------- ------------- -------------------
<S> <C> <C>
3.1 -- Articles of Association of the Company, as amended (including Form F-1, September 20, 1995
English translation)
4.1 -- Form of certificate representing Common Shares Filed Herewith
10.1 -- Core Laboratories N.V. 1995 Long-Term Incentive Plan (as amended Proxy Statement dated May 2, 1997
and restated effective as of May 29, 1997) for Annual Meeting of Shareholders
10.2 -- Core Laboratories N.V. 1995 Nonemployee Director Stock Option
Proxy Statement dated May 2, 1997 Plan (as amended and restated
effective as of May 29, 1997) for Annual Meeting of Shareholders
10.3 -- Form of Registration Rights Agreement to be entered into by the Form 10-Q, November 10, 1995
Company and certain of its shareholders, dated September 15, 1995
10.4 -- Purchase and Sale Agreement between Core Holdings B.V. and Form F-1, September 20, 1995
Western Atlas International, Inc., Western Atlas International
Nigeria Ltd., Western Atlas de Venezuela, C.A., Western Atlas
Canada Ltd. and Core Laboratories Australia Pty. Ltd. dated as of
September 30, 1994
10.5 -- Form of Indemnification Agreement to be entered into by the Form F-1, September 20, 1995
Company and certain of its directors and officers
10.6 -- Indemnification Agreements, each dated as of October 20, 1995, Form 10-Q, November 10, 1995
between the Company and each of its directors and executive
officers
10.7 -- Stock Purchase Agreement among Core Laboratories N.V., Saybolt Form 8-K, May 23, 1997
International B.V. and the shareholders of Saybolt International
B.V., dated as of April 16, 1997
10.8 -- Amended and Restated Credit Agreement among Core Laboratories Form S-3, November 20, 1997
N.V., Core Laboratories, Inc., Core Laboratories (U.K.) Limited,
Bankers Trust Company, NationsBank, N.A. and the Bank Group,
dated as of July 18, 1997
10.9 -- Agreement and Plan of Merger among Core Laboratories N.V., Owen Form 8-K, July 15, 1998
Oil Tools, Inc., Owen Acquisition, Inc., and each of the
shareholders of Owen Oil Tools, Inc., dated as of June 30, 1998
10.10 -- Core Laboratories Supplemental Executive Retirement Plan Form 10-K, March 31, 1998
effective as of January 1, 1998
10.11 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
David Michael Demshur dated as of August 18, 1998
10.12 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
Richard Lucas Bergmark dated as of August 18, 1998
10.13 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
Monty Lee Davis dated as of August 18, 1998
10.14 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
John David Denson dated as of August 18, 1998
10.15 -- Acquisition Agreement among Core Laboratories N.V., Core Laboratories Filed Herewith
International B.V., Saybolt International B.V., AGI Mexicana S.A.
de C.V. and the Stockholders of A.G.I. Mexicana S.A. de C.V. dated
as of December 11, 1998
10.16 -- Agreement and Plan of Merger among Core Laboratories N.V., A.G.I. Filed Herewith
Acquisition Company, The Andrews Group International, Inc. and
Robert P. Andrews dated as of December 18, 1998
23.1 -- Consent of Arthur Andersen LLP Filed Herewith
27.0 -- Financial Data Schedule Filed Herewith
</TABLE>
19
<PAGE> 22
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CORE LABORATORIES N.V.
BY: CORE LABORATORIES INTERNATIONAL B.V.
DATE: MARCH 31, 1999 BY: /s/ JACOBUS SCHOUTEN
---------------------------------------
JACOBUS SCHOUTEN
SUPERVISORY DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED, ON THE 31ST DAY OF MARCH, 1999.
SIGNATURE TITLE
--------- -----
/s/ DAVID M. DEMSHUR
- ----------------------------- PRESIDENT, CHIEF EXECUTIVE OFFICER
DAVID M. DEMSHUR AND SUPERVISORY DIRECTOR (PRINCIPAL
EXECUTIVE OFFICER AND AUTHORIZED
REPRESENTATIVE IN THE UNITED STATES)
/s/ RICHARD L. BERGMARK
- ----------------------------- CHIEF FINANCIAL OFFICER, TREASURER AND
RICHARD L. BERGMARK SUPERVISORY DIRECTOR (PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER)
/s/ BOB G. AGNEW
- ----------------------------- SUPERVISORY DIRECTOR
BOB G. AGNEW
/s/ JOSEPH R. PERNA
- ----------------------------- SUPERVISORY DIRECTOR
JOSEPH R. PERNA
/s/ TIMOTHY J. PROBERT
- ----------------------------- SUPERVISORY DIRECTOR
TIMOTHY J. PROBERT
/s/ JAMES A. READ
- ----------------------------- SUPERVISORY DIRECTOR
JAMES A. READ
/s/ JACOBUS SCHOUTEN
- ----------------------------- SUPERVISORY DIRECTOR
JACOBUS SCHOUTEN
/s/ STEPHEN D. WEINROTH
- ----------------------------- SUPERVISORY DIRECTOR
STEPHEN D. WEINROTH
20
<PAGE> 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Supervisory Board of Directors and Shareholders of
Core Laboratories N.V.:
We have audited the accompanying consolidated balance sheets of Core
Laboratories N.V. (a Netherlands corporation) and subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Core Laboratories
N.V. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in accordance with the accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
March 25, 1999
21
<PAGE> 24
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................................ $ 8,166 $ 12,726
Accounts receivable, less allowance for doubtful accounts of $7,874 and $6,885
in 1998 and 1997, respectively ....................................................... 84,288 73,347
Inventories .............................................................................. 18,860 9,779
Prepaid expenses and other ............................................................... 9,935 5,806
Deferred tax asset ....................................................................... 5,192 --
-------- --------
Total current assets ................................................................. 126,441 101,658
PROPERTY, PLANT AND EQUIPMENT, net ............................................................ 68,191 55,051
INTANGIBLES AND GOODWILL, net of accumulated amortization of $5,422 and
$2,263 in 1998 and 1997, respectively .................................................... 149,487 80,209
OTHER LONG-TERM ASSETS ........................................................................ 4,489 3,388
ASSETS OF DISCONTINUED OPERATIONS ............................................................. -- 9,230
-------- --------
Total assets ......................................................................... $348,608 $249,536
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ..................................................... $ 18,355 $ 3,220
Short-term debt .......................................................................... 236 427
Accounts payable ......................................................................... 18,528 23,187
Accrued payroll and related costs ........................................................ 7,052 8,299
Taxes other than payroll and income ...................................................... 2,925 2,178
Unearned revenue ......................................................................... 438 2,144
Income tax payable ....................................................................... 6,105 4,176
Deferred tax liability ................................................................... -- 566
Other accrued expenses ................................................................... 7,582 6,469
-------- --------
Total current liabilities ............................................................ 61,221 50,666
LONG-TERM DEBT ................................................................................ 68,238 70,957
DEFERRED COMPENSATION ......................................................................... 2,859 2,385
DEFERRED TAX LIABILITY ........................................................................ 4,618 4,073
MINORITY INTEREST ............................................................................. 1,078 1,212
LONG-TERM LEASE OBLIGATION .................................................................... 154 156
OTHER LONG-TERM LIABILITIES ................................................................... 13,472 4,861
LIABILITIES OF DISCONTINUED OPERATIONS ........................................................ -- 1,636
SHAREHOLDERS' EQUITY:
Preference shares, NLG 0.03 par value; 3,000,000 shares authorized, none issued
or outstanding ....................................................................... -- --
Common shares, NLG 0.03 par value; 100,000,000 shares authorized, 29,298,419 and
25,418,621 issued and outstanding at 1998 and 1997, respectively ..................... 496 437
Additional paid-in capital ............................................................... 152,178 89,132
Retained earnings ........................................................................ 44,294 24,021
-------- --------
Total shareholders' equity ........................................................... 196,968 113,590
-------- --------
Total liabilities and shareholders' equity ...................................... $348,608 $249,536
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
22
<PAGE> 25
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
SERVICES ................................................. $ 249,623 $ 211,399 $ 101,306
SALES .................................................... 36,580 17,735 10,047
------------ ------------ ------------
286,203 229,134 111,353
OPERATING EXPENSES:
Costs of services ................................... 194,360 168,323 84,213
Costs of sales ...................................... 26,147 14,984 6,532
General and administrative expenses ................. 8,447 5,974 3,559
Depreciation and amortization ....................... 16,545 11,095 4,595
Transaction costs associated with merger ............ -- -- 355
Other (income) expense, net ......................... 942 (1,086) (567)
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INTEREST EXPENSE AND INCOME TAX ..................... 39,762 29,844 12,666
INTEREST EXPENSE ......................................... 6,043 6,500 1,502
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX .......................................... 33,719 23,344 11,164
INCOME TAX EXPENSE ....................................... 10,116 8,404 4,507
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS ........................ 23,603 14,940 6,657
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
net of income tax benefit (expense) of
$93, $77, and $(403) ............................... (217) (179) 943
LOSS ON SALE OF DISCONTINUED
OPERATIONS, net of income tax benefit of $1,446 ..... (3,374) -- --
------------ ------------ ------------
NET INCOME ............................................... $ 20,012 $ 14,761 $ 7,600
============ ============ ============
PER SHARE DATA:
Income from continuing operations ................... $ 0.86 $ 0.63 $ 0.31
Income (loss) from discontinued operations .......... (0.01) (0.01) 0.04
Loss on sale of discontinued operations ............. (0.12) -- --
------------ ------------ ------------
Basic earnings per share ............................ $ 0.73 $ 0.62 $ 0.35
============ ============ ============
WEIGHTED AVERAGE BASIC COMMON
SHARES OUTSTANDING ............................... 27,329,364 23,970,641 21,899,500
============ ============ ============
Income from continuing operations ................... $ 0.84 $ 0.61 $ 0.30
Income (loss) from discontinued operations .......... (0.01) (0.01) 0.04
Loss on sale of discontinued operations ............. (0.12) -- --
------------ ------------ ------------
Diluted earnings per share .......................... $ 0.71 $ 0.60 $ 0.34
============ ============ ============
WEIGHTED AVERAGE DILUTED COMMON
SHARES OUTSTANDING .............................. 28,122,468 24,651,325 22,096,804
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
23
<PAGE> 26
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
( IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON SHARES
-------------------------- ADDITIONAL
NUMBER OF PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 (as previously reported) 21,157,464 $ 372 $ 35,063 $ 4,230 $ 39,665
ADJUSTMENT FOR POOLINGS OF INTERESTS .............. 715,000 11 2,309 (2,088) 232
---------- -------- -------- -------- ---------
RESTATED BALANCE, December 31, 1995 ............... 21,872,464 383 37,372 2,142 39,897
STOCK OPTIONS EXERCISED ........................... 1,000 -- 6 -- 6
EQUITY TRANSACTIONS OF
POOLED COMPANIES ............................. 26,812 -- 245 (259) (14)
ADJUSTMENT FOR CHANGE IN FISCAL
YEAR OF POOLED COMPANY ....................... -- -- -- 77 77
NET INCOME ........................................ -- -- -- 7,600 7,600
---------- -------- -------- -------- ---------
BALANCE, December 31, 1996 ........................ 21,900,276 383 37,623 9,560 47,566
---------- -------- -------- -------- ---------
ADJUSTMENT FOR POOLING OF INTEREST ................ 482,541 8 1,311 (300) 1,019
PUBLIC OFFERING ................................... 2,964,862 45 49,960 -- 50,005
STOCK OPTIONS EXERCISED ........................... 70,942 1 238 -- 239
NET INCOME ........................................ -- -- -- 14,761 14,761
---------- -------- -------- -------- ---------
BALANCE, December 31, 1997 ........................ 25,418,621 437 89,132 24,021 113,590
---------- -------- -------- -------- ---------
ADJUSTMENT FOR POOLING OF INTEREST ................ 195,341 3 41 261 305
SHARES ISSUED FOR 1998 PURCHASES .................. 3,389,845 51 61,298 -- 61,349
STOCK OPTIONS EXERCISED ........................... 294,612 5 1,707 -- 1,712
NET INCOME ........................................ -- -- -- 20,012 20,012
---------- -------- -------- -------- ---------
BALANCE, December 31, 1998 ........................ 29,298,419 $ 496 $152,178 $ 44,294 $ 196,968
========== ======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
24
<PAGE> 27
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $ 20,012 $ 14,761 $ 7,600
(Income) loss from discontinued operations ...................... 217 179 (943)
Adjustments to reconcile to net cash
provided by (used in) operating activities --
Depreciation and amortization ................................. 16,545 11,095 4,595
(Gain) loss on sale of fixed assets ........................... 67 (132) (22)
Loss on sale of discontinued operations ....................... 3,374 -- --
Changes in assets and liabilities --
(Increase) decrease in accounts receivable .................. 2,791 (16,942) (1,702)
Increase in inventories ..................................... (2,763) (1,189) (200)
(Increase) decrease in prepaid expenses and other ........... (2,174) (133) 197
(Increase) decrease in net deferred tax asset ............... (5,170) 927 (279)
Increase (decrease) in accounts payable ..................... (10,707) (9,180) 2,024
Increase (decrease) in accrued payroll ...................... (4,160) 3,927 --
Increase in accrued income taxes payable .................... 1,754 2,780 --
Increase (decrease) in other accrued expenses ............... (274) (10,395) 843
Increase (decrease) in other long-term liabilities .......... (13,309) 4,075 (983)
Other ....................................................... 256 (2,568) 618
--------- --------- ---------
Net cash provided by (used in) continuing operations ........ 6,459 (2,795) 11,748
Net cash provided by discontinued operations ................ 111 1,570 1,355
--------- --------- ---------
Net cash provided by (used in) operating activities ....... 6,570 (1,225) 13,103
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of continuing operations ................... (27,004) (16,631) (7,198)
Capital expenditures of discontinued operations ................. -- -- (17)
Acquisitions, net of cash acquired .............................. -- (77,339) (4,310)
Proceeds from sale of fixed assets .............................. 4,906 552 43
Proceeds from sale of discontinued operations ................... 4,114 -- --
Other ........................................................... -- -- 150
--------- --------- ---------
Net cash used in investing activities ......................... (17,984) (93,418) (11,332)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from public offering ............................... -- 50,005 --
Payments on long-term debt ...................................... (16,844) (94,407) (10,793)
Borrowings under long-term debt ................................. 22,032 147,174 10,268
Capital lease obligation ........................................ (168) (181) --
Payments on short-term debt ..................................... -- -- (190)
Stock options exercised ......................................... 1,712 239 6
Other ........................................................... 122 (1,612) 6
--------- --------- ---------
Net cash provided by (used in) financing activities ........... 6,854 101,218 (703)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS .............................. (4,560) 6,575 1,068
CASH AND CASH EQUIVALENTS, beginning of period ....................... 12,726 6,151 5,083
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period ............................. $ 8,166 $ 12,726 $ 6,151
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
25
<PAGE> 28
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. DESCRIPTION OF BUSINESS
Core Laboratories N.V. and its wholly owned subsidiaries (the
"Company") is one of the world's leading providers of proprietary and patented
reservoir description, production enhancement and reservoir management services
and sales for optimizing reservoir performance and maximizing hydrocarbon
recovery from new and existing fields. The Company's customers include major,
national, and independent oil and gas producers. The Company currently operates
over 70 facilities in more than 50 countries.
The Company's business units have been aggregated into three
reportable segments which provide products and services used for optimizing
reservoir performance and maximizing hydrocarbon recovery from new and existing
fields.
o Reservoir Description: Encompasses the petrophysical
characterization of petroleum reservoir rock and the phase
behavior relationships of reservoir fluids and gases.
o Production Enhancement: Includes field applications of
proprietary technologies to maximize the efficiency and
effectiveness of well completions, perforations, stimulations,
and production.
o Reservoir Management: Combines and integrates data sets from
reservoir description and production enhancement services to
maximize daily hydrocarbon production and recovery from a well or
field.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company, and have been prepared in accordance with United
States generally accepted accounting principles ("GAAP"). All significant
intercompany transactions and balances have been eliminated. The equity method
of accounting is used for all investments in which the Company has less than a
majority interest except for a joint venture interest where the cost method of
accounting is applied, as the Company does not exercise significant influence
or control. A minority interest liability has been recorded for those
subsidiaries in which the Company has minority interests.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
26
<PAGE> 29
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and all highly liquid
debt instruments with an original maturity of three months or less when
purchased.
INVENTORIES
Inventories consist primarily of materials and supplies used for sales
or services provided to customers. Inventories are stated at the lower of
average or standard cost (includes direct material, labor and overhead) or
estimated net realizable value.
PROPERTY, PLANT AND EQUIPMENT
Investments in property, plant and equipment are stated at cost.
Allowances for depreciation and amortization are calculated using the
straight-line method based on the estimated useful lives of the related assets
as follows:
<TABLE>
<S> <C>
Buildings .................................................................................. 10 - 40 years
Machinery and equipment .................................................................... 3 - 10 years
</TABLE>
The components of property, plant and equipment are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Land .................................. $ 2,800 $ 3,024
Building and leasehold improvements.... 12,422 22,389
Machinery and equipment ............... 61,878 41,776
Construction in process ............... 10,909 4,512
-------- --------
88,009 71,701
Less - accumulated depreciation... (19,818) (16,650)
-------- --------
$ 68,191 $ 55,051
======== ========
</TABLE>
Expenditures for repairs and maintenance are charged to expense as
incurred and major renewals and improvements are capitalized. Cost and
accumulated depreciation applicable to assets retired or sold are removed from
the accounts, and any resulting gain or loss is included in the statement of
operations. The Company incurred approximately $2,862,000, $2,437,000 and
$1,428,000 in repair and maintenance expenses for the years ended December 31,
1998, 1997 and 1996, respectively.
INTANGIBLES AND GOODWILL
Intangibles and goodwill are amortized using the straight-line method
over their estimated useful lives, which range from 5 to 40 years. Intangibles
include patents, trademarks, service marks and trade names. Goodwill represents
the excess of purchase price over fair value of the net assets acquired in
acquisitions accounted for as purchases. The Company continually evaluates
whether subsequent events or circumstances have occurred that indicate the
remaining useful life of intangibles and goodwill may warrant revision or that
the remaining balance of intangibles and goodwill may not be recoverable by
determining whether the carrying amount of such items can be recovered through
projected undiscounted future cash flows over the remaining amortization
period. Management believes that there have been no events or
27
<PAGE> 30
circumstances that warrant revision to the remaining useful life or which
affect the recoverability of intangibles and goodwill.
LONG-TERM INVESTMENT
The long-term investment of $1,522,000 at December 31, 1998 represents
the Company's investment in affiliated companies in which they hold less than a
majority interest. These investments are accounted for using the equity method
of accounting with the exception of one joint venture interest where the cost
method of accounting is applied as the Company does not exercise significant
influence or control.
INCOME TAXES
Income tax expense includes The Netherlands, United States ("U.S."),
other foreign countries and local, state, and provincial income taxes. The
Company recognizes deferred tax assets or liabilities for the differences
between the financial statement carrying amount and tax basis of existing
assets and liabilities using presently enacted tax rates.
REVENUE RECOGNITION
Revenues are recognized as services are completed and as products are
shipped. All advance client payments are classified as unearned until services
are completed and as products are shipped.
FOREIGN CURRENCIES
The Company's functional currency is the U.S. dollar. Accordingly,
foreign entities remeasure monetary assets and liabilities to U.S. dollars at
year-end exchange rates, while non-monetary items are remeasured at historical
rates. Items of income and expense are remeasured at the applicable month-end
rate, except for depreciation, amortization and cost of sales, which are
remeasured at historical rates. Remeasurement gains and losses are included in
other income and expense in the Consolidated Statements of Operations.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to expense as
incurred. The Company incurred approximately $2,150,000, $2,550,000 and
$156,000 in research and development expenses for the years ended December 31,
1998, 1997, and 1996, respectively.
EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 128, "Earnings per Share". SFAS No. 128 replaces the
presentation of primary earnings per share, as previously prescribed by
Accounting Principles Board ("APB") No. 15, with a presentation of basic
earnings per share. This standard also requires dual presentation of both basic
and diluted earnings per share on the Consolidated Statement of Operations.
Basic earnings per common share is computed by dividing net income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflects the issuance of
additional shares by assuming that all stock options outstanding have been
converted. Prior period amounts have been restated in accordance with the
requirements of the pronouncement.
28
<PAGE> 31
The following table summarizes the calculation of weighted average
common shares outstanding for purposes of the computation of earnings per
share:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average basic common
shares outstanding ......... 27,329,364 23,970,641 21,899,500
Dilutive stock options ........ 793,104 680,684 197,304
---------- ---------- ----------
Weighted average diluted common
shares outstanding ......... 28,122,468 24,651,325 22,096,804
========== ========== ==========
</TABLE>
RECENT PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income", was
issued. SFAS No. 130 is effective for fiscal years beginning after December 31,
1997. SFAS No. 130 requires the presentation of an additional income measure
(termed "comprehensive income"), which adjusts traditional net income for
certain items that previously were only reflected as direct adjustments to
equity. The Company had no items of comprehensive income for any of the periods
presented.
The Company adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information" in 1998, which changes the way the Company
reports information about its operating segments. See Footnote 14 for
additional information.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999, and establishes accounting and reporting
standards for derivative instruments (including certain derivative instruments
embedded in other contracts). Adoption of SFAS No. 133 is not expected to have
a material effect on the Company's financial position or operational results.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
3. ACQUISITIONS
1998 ACQUISITIONS
On June 30, 1998, the Company acquired all of the outstanding stock of
Owen Oil Tools, Inc. ("Owen"), a privately held company based in Texas. Owen
and its subsidiaries provide well completion and stimulation technologies to
the petroleum industry. The Company issued approximately 2,277,000 shares in
exchange for all of the outstanding shares of Owen and accounted for the
transaction using the purchase method of accounting. The transaction resulted
in an allocation of approximately $41.5 million in goodwill, which is being
amortized over a 40-year period.
On July 31, 1998, the Company acquired all of the outstanding shares
of PETRAK Group S.A. ("Petrak"), a privately held company based in Switzerland.
Petrak specializes in characterizing reservoir fluids and their derivatives.
The Company issued approximately 263,000 shares in exchange for all of the
outstanding shares of Petrak and accounted for the transaction using the
purchase method of accounting. The transaction resulted in an allocation of
approximately $3.9 million in goodwill, which is being amortized over a 40-year
period.
On August 31, 1998, the Company acquired all of the remaining shares of
Jaex S.A. de C.V. ("Jaex"), a privately held company based in Mexico, that were
not previously acquired through its acquisition of Owen. The Company previously
owned 50.00098% of Jaex. Jaex provides well completion and stimulation
technologies to the petroleum industry. The Company issued approximately 765,000
shares in exchange for the remaining
29
<PAGE> 32
interest of Jaex and accounted for the acquisition using the purchase method of
accounting. The transaction resulted in an allocation of approximately $9.3
million in goodwill, which is being amortized over a 40-year period.
On October 28, 1998, the Company acquired all of the outstanding
shares of Integra Geoservices, Inc. ("Integra"), a privately held company based
in Canada. Integra provides specialized geophysical seismic processing services
used to characterize and describe petroleum reservoirs. The Company issued
approximately 86,000 shares in exchange for all of the outstanding shares of
Integra and accounted for the transaction using the purchase method of
accounting. The transaction resulted in an allocation of approximately $2.8
million in goodwill, which is being amortized over a 40-year period.
The Company acquired all of the outstanding shares of The Andrews Group
International, Inc. and A.G.I. Mexicana, S.A. de C.V. on December 18, 1998 and
December 11, 1998, respectively (collectively referred to as the "Andrews
Group"). The Andrews Group provides specialized seismic data processing and
interpretation services, as well as other geophysical, geological and
engineering services. The Company issued approximately 715,000 shares in
exchange for all of the outstanding shares of the Andrews Group and accounted
for the transaction using the pooling-of-interests method of accounting. The
Company's consolidated financial statements have been restated for all periods
presented to include the financial position and results of operations of the
Andrews Group.
On December 30, 1998, the Company acquired all of the outstanding
shares of Thru-Tubing Technology, Inc. ("Thru-Tubing"), a privately held
company based in Louisiana. Thru-Tubing manufactures downhole remedial products
which complement Owen's well completion and stimulation technologies. The
Company issued approximately 195,000 shares in exchange for all of the
outstanding shares of Thru-Tubing and accounted for the transaction using the
pooling-of-interests method of accounting. Thru-Tubing's results of operations
for the year ended December 31, 1998 have been combined with those of the
Company. The Company's consolidated financial statements for prior years were
not restated due to immateriality.
The purchase price allocations of Owen, Petrak, Jaex, and Integra are
preliminary. As additional information concerning the value of the assets
acquired and liabilities assumed becomes known, additional adjustments may be
made to the purchase price allocations included in the accompanying financial
statements. Management believes at this time that the preliminary purchase
price allocation will not differ materially from the final allocation.
1997 ACQUISITIONS
On December 29, 1997, the Company completed the acquisition of all of
the outstanding shares of Stim-Lab, Inc. ("Stim-Lab"), a privately held Company
based in Oklahoma. Stim-Lab is a world leader in hydraulic fracturing and well
stimulation technologies. The Company issued approximately 459,000 common shares
in exchange for all of the outstanding shares of Stim-Lab and accounted for the
transaction using the pooling-of-interests method of accounting. Stim-Lab's
results of operations for the year ended December 31, 1997 have been combined
with that of the Company's. Consolidated financial statements for prior years
were not restated due to immateriality.
On May 12, 1997, the Company consummated the acquisition of all of the
outstanding shares of Saybolt International B.V. and its subsidiaries
("Saybolt"), a privately held Company based in the Netherlands. Saybolt operates
in over 50 countries and is an international leader in providing analytical and
field services to characterize properties of crude oil and petroleum products
for the oil industry. The Company financed the transaction through borrowings of
$67 million in cash, and assumed $5 million of net debt and accounted for the
transaction using the purchase
30
<PAGE> 33
method of accounting. The transaction resulted in an allocation of
approximately $78.4 million in goodwill which is being amortized over a 40-year
period.
On March 1, 1997, the Company acquired the outstanding shares of Scott
Pickford plc and its subsidiaries ("Scott Pickford"), a company based in the
United Kingdom. Scott Pickford provides petroleum reservoir management,
geoscience, geophysical and engineering services to its customers by utilizing
petrophysical and phase behavior data sets measured by Core Laboratories. Scott
Pickford specializes in large field studies and equity determinations primarily
in the North Sea. The Company financed the transaction through borrowings of
approximately $14.9 million and accounted for the transaction using the purchase
method of accounting. The transaction resulted in an allocation of approximately
$13.0 million in goodwill which is being amortized over a 40-year period.
1996 ACQUISITIONS
On December 31, 1996, the Company acquired the outstanding shares of
ProTechnics and subsidiaries ("ProTechnics"), a privately held company based in
Texas. The Company issued approximately 2,251,000 shares in exchange for the
outstanding shares of ProTechnics and accounted for the transaction using the
pooling-of-interests method of accounting. In addition, outstanding employee
stock options to purchase ProTechnics common shares were converted into options
to purchase approximately 174,000 shares of the Company's common shares.
ProTechnics is one of the leading providers of services that measure the
effectiveness of well stimulations and completions via their proprietary
ZeroWash(R) and SpectraScan(R) technologies. ProTechnics is also the leader in
determining the efficiencies of enhanced recovery projects through field tracer
surveys.
The results of operations of ProTechnics have been combined with that
of the Company's for the year ended December 31, 1996. In order to conform
ProTechnics year end (March 31) to the Company's calendar year end, an
adjustment has been made to retained earnings during 1996 for a change in the
fiscal year of ProTechnics.
On January 5, 1996, the Company acquired substantially all of the
assets of Gulf States Analytical, Inc. ("Gulf States"), a Texas based company.
The Company financed the transaction through borrowings of approximately $4.3
million and accounted for the transaction using the purchase method of
accounting.
31
<PAGE> 34
The following information presents the results of operations on a pro
forma basis as though the 1998 and 1997 acquisitions accounted for using the
purchase method occurred on January 1, 1997. Information is presented for
informational purposes only, and may not be indicative of actual operating
results that would have been achieved. All amounts are in thousands, except per
share data.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues ................................................ $317,280 $294,975
Income from continuing operations ....................... $ 25,924 $ 19,110
Net income .............................................. $ 22,333 $ 18,931
Basic income per share from continuing operations ....... $ .89 $ .70
Diluted income per share from continuing operations ..... $ .87 $ .68
</TABLE>
4. DISCONTINUED OPERATIONS
In early 1998, the Company concluded that its package analyzer line of
business was no longer strategic and made a decision to discontinue this product
line. Subsequently, on April 8, 1998, the Company sold the majority of the net
assets of its package analyzer business line for approximately $4.1 million in
cash, resulting in a loss on sale of $1.3 million. Remaining net book value
associated with the unsold assets of the package analyzes product line totaled
approximately $3.5 million and was written down during 1998 to reflect
estimated salvage value.
The results of the package analyzer business line have been reported
separately as discontinued operations in the Consolidated Statements of
Operations. Prior year consolidated financial statements have been restated to
present the package analyzer business line as discontinued operations.
The loss on the disposition of discontinued operations is summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Write-down of work in process ................................... $ 988
Write-off of goodwill related to the package analyzer
business line ................................................ 2,563
Loss on sale of package analyzer business line .................. 1,269
------
Loss on disposition of discontinued operations .................. 4,820
Income tax benefit .............................................. 1,446
------
Loss on disposition of discontinued operations, net of tax ...... $3,374
======
</TABLE>
5. INVENTORIES
Inventories consisted of the following at December 31, 1998 and 1997
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Parts and materials ..... $16,987 $2,291
Work in process ......... 1,873 7,488
------- ------
Total ..... $18,860 $9,779
======= ======
</TABLE>
32
<PAGE> 35
6. LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 is summarized in the
following table (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Credit Facility with a bank group:
$70,154 term loan facilities ........... $70,154 $70,000
$55,000 revolving debt facilities ...... 15,000 --
Loan notes .................................. 1,073 1,165
Other indebtedness .......................... 366 3,012
------- -------
Total debt .................. 86,593 74,177
Less - current maturities ................... 18,355 3,220
------- -------
Total long-term debt ........ $68,238 $70,957
======= =======
</TABLE>
On May 12, 1997, the Company entered into a Credit Facility which
provides for (i) a term loan of $55 million, (ii) a term loan denominated in
British pounds having an initial U.S. dollar equivalency of $15 million, (iii)
a committed revolving debt facility of $50 million and (iv) a Netherlands
guilder denominated revolving debt facility with an initial U.S. dollar
equivalency of $5 million. At December 31, 1998, approximately $40 million was
available for borrowing under the revolving debt facilities. Loans under the
Credit Facility will generally bear interest ranging from LIBOR plus 0.75% to a
maximum of LIBOR plus 1.75%. The term loans require quarterly principal
payments beginning March 31, 1999 with the final principal payment due June 30,
2002. The revolving debt facilities require interest payments only, until
maturity on June 30, 2002. The terms of the Credit Facility require the Company
to meet certain financial covenants, including certain minimum equity and cash
flow tests. Management believes that the Company is in compliance with all such
covenants contained in its credit agreements. All of the Company's material
subsidiaries are guarantors or co-borrowers under the Credit Facility.
As part of the purchase of Scott Pickford in March 1997, the Company
issued unsecured loan notes in lieu of cash consideration for the outstanding
shares of Scott Pickford. The loan notes bear interest payable semi-annually,
at the rate of LIBOR less 1.0% per annum. Holders of the loan notes have the
right to redeem the loan notes at par on each interest payment date. Unless
previously redeemed or purchased, the loan notes are to be redeemed at par on
June 30, 2002.
Scheduled maturities of long-term debt (in thousands):
<TABLE>
<S> <C>
1999 .............................................................................. $ 18,355
2000 .............................................................................. 25,543
2001 .............................................................................. 25,518
2002 .............................................................................. 17,175
2003 and thereafter................................................................ 2
</TABLE>
Total cash payments for interest were $6,090,000, $5,273,000, and $1,343,400
for 1998, 1997, and 1996, respectively.
33
<PAGE> 36
7. INCOME TAXES
The components of income from continuing operations before income
taxes for 1998, 1997, and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
United States ............................... $ 9,345 $ 8,340 $ 4,440
Other countries ............................. 24,374 15,004 6,724
------- ------- -------
Income from continuing operations
before income tax .............. $33,719 $23,344 $11,164
======= ======= =======
</TABLE>
The components of income tax expense for 1998, 1997, and 1996, are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current --
United States ................ $ 2,631 $ 2,380 $ 845
Other countries .............. 6,460 2,636 1,132
State and provincial ......... 241 619 125
------- ------- -------
Total current ........... 9,332 5,635 2,102
------- ------- -------
Deferred--
United States ................ 324 187 400
Other countries .............. 460 2,582 2,005
------- ------- -------
Total deferred .......... 784 2,769 2,405
------- ------- -------
Income tax expense ...... $10,116 $ 8,404 $ 4,507
======= ======= =======
</TABLE>
The difference between The Netherlands statutory income tax rate and
the Company's estimated tax rate as reported in the accompanying consolidated
statements of operations for 1998, 1997, and 1996 are as follows:
34
<PAGE> 37
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
The Netherlands income tax rate .................. 35% 35% 35%
Effect of subsidiary rates lower than
The Netherlands ............................. (10) (3) 3
Foreign sales corporation benefits ............... 0 (1) (2)
Goodwill amortization and other non-
deductible expenses ......................... 4 0 0
Change in valuation allowance .................... 0 2 3
State and provincial taxes ....................... 1 3 1
------ ------ ------
Effective tax rate ............................... 30% 36% 40%
====== ====== ======
</TABLE>
Deferred tax assets and liabilities result from various temporary
differences between the financial statement carrying amount and the tax basis of
existing assets and liabilities. Deferred tax assets and liabilities as of
December 31, 1998 and 1997, respectively, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets --
Book reserves and other liabilities .... $ 6,759 $ 916
Net operating loss carryforward ........ 2,874 1,561
Allowance for receivables .............. 258 285
Inventories ............................ 126 78
Other .................................. 101 101
-------- --------
Total deferred tax assets .............. 10,118 2,941
-------- --------
Deferred tax liabilities --
Tax reserves ........................... (3,602) (2,097)
Intangibles ............................ (1,469) (1,085)
Property, plant and equipment .......... (1,345) (1,291)
Receivables ............................ (1,736) (1,735)
Other .................................. (408) (405)
-------- --------
Total deferred tax liabilities ......... (8,560) (6,613)
-------- --------
Valuation allowance ......................... (984) (967)
-------- --------
Net deferred tax asset (liability) ..... $ 574 $ (4,639)
======== ========
</TABLE>
The valuation allowance increased due to the uncertainty of
realization of net operating loss carryforwards in certain foreign tax
jurisdictions. The Company's net deferred tax liability is set forth in the
consolidated balance sheet as of December 31, 1998 and 1997, respectively, as
follows (in thousands):
35
<PAGE> 38
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current deferred tax assets ................. $ 7,143 $ 1,380
Non-current deferred tax assets ............. 1,991 594
Current deferred tax liabilities ............ (1,951) (1,946)
Non-current deferred tax liabilities ........ (6,609) (4,667)
-------- --------
Net deferred tax asset (liability) ..... $ 574 $ (4,639)
======== ========
</TABLE>
Cash payments of income taxes, net of refunds, were $8,286,000,
$2,150,000, and $2,169,000 in 1998, 1997 and 1996, respectively.
8. CAPITAL STOCK
The authorized share capital of the Company consists of 100,000,000
common shares, and 3,000,000 preference shares, each with a par value of NLG
0.03.
On October 22, 1997, the Company declared a two-for-one split of its
common shares payable on December 19, 1997, to shareholders of record as of the
close of business on December 1, 1997. All agreements concerning stock options
and other commitments payable in shares of the Company's common stock provide
for the issuance of additional shares in the event of a declaration of a stock
split. An amount equal to the par value of the common shares issued was
transferred from additional paid-in capital to the common share account. All
references to number of shares, except shares authorized, and to per share
information in the consolidated financial statements have been restated to
reflect the stock split.
On November 20, 1997, the Company successfully completed a public
offering in which it sold 2,964,862 of its common shares (including the
exercise of the underwriter's overallotment of 164,862 common shares) and
received net proceeds of approximately $50.0 million. The Company used the net
proceeds to paydown $43.9 million in existing debt and retained $6.1 million
for working capital.
9. STOCK OPTIONS
EMPLOYEE STOCK OPTION PLAN
The 1995 Long-Term Incentive Plan (the "Plan") was amended and
restated effective as of May 29, 1997, to authorize an additional 1,600,000
common shares, resulting in a maximum aggregate of 2,900,000 common shares for
grant to eligible employees. Options granted pursuant to the Plan are
exercisable for a period of 10 years and will vest in equal installments over
four years, so long as the option holder remains an employee of the Company as
of the date of exercise. The exercise price of options granted under the Plan
is the market value at the date of grant.
36
<PAGE> 39
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1995 Nonemployee Director Stock Option Plan (the "Nonemployee
Director Plan"), was amended and restated effective as of May 29, 1997 to
authorize an additional 100,000 common shares, for a maximum aggregate of
200,000 common shares for grant to eligible Directors of the Company. Pursuant
to the Nonemployee Director Plan, beginning in 1996, 10,000 options will be
granted to each eligible Director and 20,000 were granted to the Chairman on
the day after the annual general meeting. The options are exercisable for a
period of 10 years and will vest on the day before the next annual shareholders
meeting following the date of grant. The exercise price of options granted
under the Plan is the market value at the date of grant.
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS: RANGE OF AVERAGE
SHARES EXERCISE PRICES EXERCISE PRICE
---------- --------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1995... 736,760 $1.28 - $6.00 $ 5.09
Options granted ............... 24,000 6.00 - 7.88 6.71
Options exercised ............. (1,000) 6.00 6.00
Options canceled .............. (50,000) 6.00 6.00
----------
Balance at December 31, 1996... 709,760 1.28 - 7.88 5.08
----------
Options granted ............... 815,000 8.38 - 17.88 8.55
Options exercised ............. (68,942) 1.28 - 6.00 3.30
Options canceled .............. (37,000) 8.38 8.38
----------
Balance at December 31,1997.... 1,418,818 1.28 - 17.88 6.09
----------
Options granted ............... 698,004 11.63 - 24.38 18.10
Options exercised ............. (294,612) 1.28 - 17.88 5.73
Options canceled .............. (114,000) 6.00 - 24.38 14.51
----------
Balance at December 31, 1998... 1,708,210 1.28 - 24.38 11.39
==========
</TABLE>
The exercise prices of options outstanding at December 31, 1998, 1997,
and 1996 ranged from $1.28 to $24.38 per share, $1.28 to $17.88 per share, and
$1.28 to $7.88 per share, respectively. The weighted average contractual life
remaining on outstanding stock options was nine years at December 31, 1998.
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company applies APB Opinion 25, "Accounting for Stock Issued
to Employees", and related Interpretations in accounting for its stock-based
compensation plans. APB Opinion 25 does not require compensation costs to be
recorded on options which have exercise prices at least equal to the market
price of the stock on the date of grant. Accordingly, no compensation cost has
been recognized for the Company's stock-based plans. Had compensation cost for
the Company's stock-based compensation plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the
method prescribed by SFAS No. 123, the Company's net income and net income per
share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share data):
37
<PAGE> 40
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Net income:
As reported ................... $ 20,012 $ 14,761
Pro forma ..................... $ 15,148 $ 13,893
Basic net income per share:
As reported ................... $ .73 $ .62
Pro forma ..................... $ .55 $ .58
Diluted net income per share:
As reported ................... $ .71 $ .60
Pro forma ..................... $ .54 $ .56
</TABLE>
The weighted average fair value of options granted in 1998, 1997, and
1996 of $8.39, $7.08, and $4.00, respectively, was estimated using the
Black-Scholes option-pricing model with the following assumptions: risk-free
interest rates of 6.65% in 1998, 5.6% in 1997, and 6.7% in 1996; no dividends
in 1998, 1997, and 1996; expected volatility of 69% in 1998, 39% in 1997, and
35% in 1996; and expected option lives of 9 years in 1998, and 10 years in 1997
and 1996.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short-term maturities of
these instruments. Management believes that the carrying amount of long-term
debt approximates fair value as the majority of borrowings bear interest at
floating market interest rates.
11. CONCENTRATION OF CREDIT RISK
The Company derives its worldwide revenues from customers primarily in
the oil and gas industry. This industry concentration has the potential to
impact the Company's overall exposure to credit risk, either positively or
negatively, in that the Company's customers could be affected by similar
changes in economic, industry or other conditions. However, the Company
believes that the credit risk posed by this industry concentration is offset by
the creditworthiness of the Company's customer base. The Company's portfolio of
accounts receivable is comprised primarily of major international corporate
entities and government organizations with stable payment experience.
12. RETIREMENT AND OTHER PLANS
The Company has six defined contribution plans (the "Plans") for the
benefit of all qualified employees in the United States, Canada and the United
Kingdom. In accordance with the specific plan, the Company matches the required
portion of employee contributions up to specified limits and under certain
plans, the Company may make discretionary contributions annually in accordance
with the Plans. For the years ended 1998, 1997 and 1996 the Company expensed
$2,984,000, $2,297,000, and $1,461,000, respectively, for its matching and
discretionary contributions to the Plans.
38
<PAGE> 41
The Company provides a retirement benefit to substantially all of its
Dutch employees equal to 1.75% of each employee's final pay for each year of
service, subject to a maximum of 70%. Funding for this benefit is in the form of
premiums paid to an insurance company based upon each employee's age and current
salary. Salary increases require higher premiums, which are paid over future
years and are reflected, at their net present value, as a provision for pension
backservice liabilities. Employees are 100% vested at all times. In the event an
employee leaves the company, the Company is required to immediately pay the
backservice pension liability to the insurance company. The insurance company
has assumed substantially all risk associated with the plan.
The Company also operates a defined benefit plan for a portion of its
U.S. employees; such plan was suspended on December 31, 1997. The Company
recognized a curtailment gain in 1997 of approximately $1.4 million related to
the plan's suspension. The curtailment gain was recorded as a reduction to cost
of services in the 1997 Consolidated Statement of Operations. The benefits paid
are based on years of service and the employee's final average earnings. Pension
income in 1998 was $53,030, while pension costs for 1997 and 1996 were $217,763,
and nil, respectively.
The components of net pension costs (income) related to the defined
benefit plan in 1998 are as follows:
<TABLE>
<S> <C>
Service cost-benefits earned during the period ...................... $ 164,780
Interest cost on projected obligation ............................... 503,820
Actual return on assets ............................................. (721,630)
Net amortization and accrual ........................................ --
------------
Net pension costs (income) .......................................... $ (53,030)
============
Actuarial assumptions used for this calculation are as follows:
Discount rate ....................................................... 6.75%
Rate of return ...................................................... 8.00%
Rate of compensation increase ....................................... 5.00%
</TABLE>
In July 1997, the Company established deferred compensation contracts
for certain officers. The benefits under these contracts are fully vested and
benefits are paid when the participants attain their 65th year of age. The
charge to expense for officer deferred compensation in 1998, 1997, and 1996 was
approximately $260,000, $238,000, and nil, respectively. Life insurance policies
with cash surrender value were purchased for the purpose of funding the officer
deferred compensation contracts.
The Company also maintains deferred compensation contracts with certain
key employees. Vesting is based upon age and years of service. Life insurance
contracts with cash surrender value have been purchased to provide funding under
these agreements. The charge to expense for the key employee deferred
compensation contracts in 1998, 1997, and 1996 was approximately $84,000,
$83,000, and nil, respectively.
13. COMMITMENTS AND CONTINGENCIES
The Company may from time to time be subject to legal proceedings and
claims that arise in the ordinary course of its business. Management believes
that the outcome of these legal actions will not have a material adverse effect
upon the consolidated financial position or future results of operations of the
Company.
39
<PAGE> 42
On August 18, 1998, Saybolt, Inc. ("Saybolt") agreed to plead guilty in federal
court to criminal violations of the federal Clean Air Act and the Foreign
Corrupt Practices Act which occurred between October 1994 and December 1996,
prior to the Company's acquisition of Saybolt. Under the plea agreement reached
between Saybolt, the U.S. Department of Justice and the United States Attorneys
for the districts of Massachusetts, New Jersey, and Connecticut, Saybolt agreed
to pay $4.9 million in fines and agreed to be placed on probation for five
years. The fines were paid out of funds specifically set aside in escrow for
contingencies from the Saybolt selling stockholders at the time of the
acquisition. The Company acquired Saybolt's Dutch parent in May of 1997. The
Company believes that these penalties will have no material adverse effect on
Saybolt's financial position or results of operations and it also believes that
Saybolt's testing licenses will remain in full force and effect. The government
has informed Saybolt that the criminal investigations against Saybolt have
ended.
As security for bids and performance on certain contracts, the Company
was contingently liable at December 31, 1998, in the amount of approximately
$2.4 million under standby letters of credit and bank guarantees.
Minimum rental commitments under non-cancelable operating leases as of
December 31, 1998, consist of the following (in thousands):
<TABLE>
<CAPTION>
Year ended December 31 --
<S> <C>
1999............................. $ 3,547
2000............................. 2,182
2001............................. 1,147
2002............................. 605
2003............................. 292
Thereafter....................... 304
-----------
$ 8,077
===========
</TABLE>
Operating lease commitments relate principally to equipment and office
space. Rental expense for operating leases, including amounts for short-term
leases with nominal future rental commitments, was approximately $5,325,000,
$5,935,000, and $3,841,000 for 1998, 1997 and 1996, respectively.
The Company has entered into various capital leases which provide for
future minimum lease payments over the next five years as follows: $239,000 in
1999, $107,000 in 2000, $39,000 in 2001, $8,000 in 2002 and nil in 2003.
14. SEGMENT REPORTING
The Company's business units have been aggregated into three reportable
segments which provide products and services used for optimizing reservoir
performance and maximizing hydrocarbon recovery from new and existing fields.
o Reservoir Description: Encompasses the petrophysical
characterization of petroleum reservoir rock and the phase
behavior relationships of reservoir fluids and gases.
o Production Enhancement: Includes field applications of
proprietary technologies to maximize the efficiency and
effectiveness of well completions, perforations, stimulations,
and production.
40
<PAGE> 43
o Reservoir Management: Combines and integrates data sets from
reservoir description and production enhancement services to
maximize daily hydrocarbon production and recovery from a well or
field.
SEGMENT EARNINGS
The Company's operations are managed primarily in three separate
segments due to the different technologies and marketing strategies each segment
utilizes and requires. Results of these segments are presented below using the
same accounting policies as used to prepare the Consolidated Balance Sheet and
Statement of Operations. The Company evaluates performance based on income or
loss from operations before income tax, interest, and other non-operating income
(expense). Summarized financial information concerning the Company's segments is
shown in the following table. Items included in "Corporate and Other" represent
those items that are insignificant or that are not directly related to a
particular segment, but benefit the Company as a whole.
<TABLE>
<CAPTION>
INCOME BEFORE TAXES AND
REVENUES INTEREST ASSETS
--------------------------------- ------------------------------- -----------------------------
IN THOUSANDS 1998 1997 1996 1998 1997 1996 1998 1997 1996
--------- --------- --------- --------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reservoir Description ..... $ 213,303 $ 182,225 $ 74,491 $ 25,783 $ 20,928 $ 9,321 $ 307,065 $224,592 $ 52,140
Production Enhancement .... 47,283 22,820 11,649 8,517 5,305 60 111,391 12,785 6,460
Reservoir Management ...... 50,369 44,668 20,803 4,457 2,582 1,198 48,897 39,819 12,651
--------- --------- --------- --------- --------- -------- --------- -------- --------
Total Business Segments ... 310,955 249,713 106,943 38,757 28,815 10,579 467,353 277,196 71,251
--------- --------- --------- --------- --------- -------- --------- -------- --------
Corporate and Other ....... $ 3,742 $ 5,139 $ 6,166 $ 1,005 $ 1,029 $ 2,087 $ 26 $ 19,111 $ 22,847
Intersegment Eliminations . (28,494) (25,718) (1,756) -- -- -- (118,771) (46,771) (1,756)
--------- --------- --------- --------- --------- -------- --------- -------- --------
Consolidated .............. 286,203 229,134 111,353 39,762 29,844 12,666 348,608 249,536 92,342
========= ========= ========= ========= ========= ======== ========= ======== ========
</TABLE>
The Company derives its revenues from services and sales to customers
primarily in one industry segment, the oil and gas industry. The following is a
summary of the Company's United States and other foreign operations for 1998,
1997, and 1996 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Unaffiliated revenues --
United States ........... $ 131,774 $ 102,069 $ 72,310
Other countries ......... 154,429 127,065 39,043
---------- ---------- ----------
$ 286,203 $ 229,134 $ 111,353
========== ========== ==========
Operating income--
United States ........... $ 14,942 $ 10,528 $ 4,858
Other countries ......... 25,762 18,230 7,241
---------- ---------- ----------
$ 40,704 $ 28,758 $ 12,099
========== ========== ==========
Identifiable assets --
United States ........... $ 155,340 $ 62,971 $ 50,095
Other countries ......... 193,268 186,565 42,247
---------- ---------- ----------
$ 348,608 $ 249,536 $ 92,342
========== ========== ==========
</TABLE>
41
<PAGE> 44
Operating income includes sales and services, costs of sales and
services, general and administrative expenses, as well as depreciation and
amortization. United States revenues derived from exports were $12.7 million,
$8.4 million, and $8.7 million in 1998, 1997 and 1996, respectively.
No single customer accounts for 10 percent or more of consolidated
revenues for any of the periods presented.
15. EVENTS SUBSEQUENT TO YEAR END
ISOTAG ACQUISITION
On January 7, 1999, the Company acquired receivables and certain fixed
assets from Isotag Specialist, Inc. ("Isotag"), and its related company, Fred
Calaway and Co. Both companies are privately held and based in Texas. Isotag
provides fracture diagnostics and related services. The Company issued
approximately 33,000 shares for the assets and will account for the transaction
using the purchase method of accounting.
GEOSCIENCE ACQUISITION
On January 18, 1999 the Company entered into an agreement to acquire
GeoScience Corp. for approximately $197 million in cash and stock. On March 23,
1999 the Company agreed to terminate the agreement. As part of the termination,
the Company agreed to pay GeoScience $3 million through the cancellation of
working capital advances previously made by the Company to GeoScience.
42
<PAGE> 45
16. UNAUDITED SELECTED QUARTERLY RESULTS OF OPERATIONS
Summarized quarterly financial data for the four quarters ended
December 31, 1998 and 1997 is as follows (in thousands, except share and per
share data):
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
12/31/98 9/30/98 6/30/98 3/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service and sales revenue .............. $ 76,798 $ 77,262 $ 69,682 $ 62,461
Operating expenses ..................... 67,754 63,273 59,626 55,788
Interest expense ....................... 1,555 1,661 1,447 1,380
------------ ------------ ------------ ------------
Income from continuing operations before
income tax .......................... $ 7,489 $ 12,328 $ 8,609 $ 5,293
============ ============ ============ ============
Income from continuing operations ...... $ 5,242 $ 8,630 $ 6,026 $ 3,705
============ ============ ============ ============
Per share data:
Basic earnings per share from
continuing operations ............... $ 0.18 $ 0.30 $ 0.23 $ 0.14
============ ============ ============ ============
Weighted average basic common shares
outstanding ......................... 29,245,260 28,576,087 25,768,348 25,650,083
============ ============ ============ ============
Diluted earnings per share from
continuing operations ............... $ 0.18 $ 0.29 $ 0.23 $ 0.14
============ ============ ============ ============
Weighted average diluted common
shares outstanding ................ 29,930,709 29,334,845 26,775,487 26,514,596
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
12/31/97 9/30/97 6/30/97 3/31/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service and sales revenue .............. $ 79,755 $ 65,396 $ 54,205 $ 29,778
Operating expenses ..................... 68,512 56,938 47,176 26,664
Interest expense ....................... 2,295 2,417 1,470 318
------------ ------------ ------------ ------------
Income from continuing operations
before income tax ................... $ 8,948 $ 6,041 $ 5,559 $ 2,796
============ ============ ============ ============
Income from continuing operations ...... $ 5,727 $ 3,866 $ 3,558 $ 1,789
============ ============ ============ ============
Per share data:
Basic earnings per share from
continuing operations ................ $ 0.24 $ 0.17 $ 0.16 $ 0.08
============ ============ ============ ============
Weighted average basic common
shares outstanding ................ 24,044,382 22,434,046 22,382,382 22,376,882
============ ============ ============ ============
Diluted earnings per share from
continuing operations ............... $ 0.23 $ 0.17 $ 0.16 $ 0.08
============ ============ ============ ============
Weighted average diluted common
shares outstanding ................ 24,947,951 23,182,989 22,872,392 22,705,168
============ ============ ============ ============
</TABLE>
43
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE FROM THE
EXHIBIT NO. EXHIBIT TITLE FOLLOWING DOCUMENTS
- ----------- ------------- -------------------
<S> <C> <C>
3.1 -- Articles of Association of the Company, as amended (including Form F-1, September 20, 1995
English translation)
4.1 -- Form of certificate representing Common Shares Filed Herewith
10.1 -- Core Laboratories N.V. 1995 Long-Term Incentive Plan (as amended Proxy Statement dated May 2, 1997
and restated effective as of May 29, 1997) for Annual Meeting of Shareholders
10.2 -- Core Laboratories N.V. 1995 Nonemployee Director Stock Option
Proxy Statement dated May 2, 1997 Plan (as amended and restated
effective as of May 29, 1997) for Annual Meeting of Shareholders
10.3 -- Form of Registration Rights Agreement to be entered into by the Form 10-Q, November 10, 1995
Company and certain of its shareholders, dated September 15, 1995
10.4 -- Purchase and Sale Agreement between Core Holdings B.V. and Form F-1, September 20, 1995
Western Atlas International, Inc., Western Atlas International
Nigeria Ltd., Western Atlas de Venezuela, C.A., Western Atlas
Canada Ltd. and Core Laboratories Australia Pty. Ltd. dated as of
September 30, 1994
10.5 -- Form of Indemnification Agreement to be entered into by the Form F-1, September 20, 1995
Company and certain of its directors and officers
10.6 -- Indemnification Agreements, each dated as of October 20, 1995, Form 10-Q, November 10, 1995
between the Company and each of its directors and executive
officers
10.7 -- Stock Purchase Agreement among Core Laboratories N.V., Saybolt Form 8-K, May 23, 1997
International B.V. and the shareholders of Saybolt International
B.V., dated as of April 16, 1997
10.8 -- Amended and Restated Credit Agreement among Core Laboratories Form S-3, November 20, 1997
N.V., Core Laboratories, Inc., Core Laboratories (U.K.) Limited,
Bankers Trust Company, NationsBank, N.A. and the Bank Group,
dated as of July 18, 1997
10.9 -- Agreement and Plan of Merger among Core Laboratories N.V., Owen Form 8-K, July 5, 1998
Oil Tools, Inc., Owen Acquisition, Inc., and each of the
shareholders of Owen Oil Tools, Inc., dated as of June 30, 1998
10.10 -- Core Laboratories Supplemental Executive Retirement Plan Form 10-K, March 31, 1998
effective as of January 1, 1998
10.11 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
David Michael Demshur dated as of August 18, 1998
10.12 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
Richard Lucas Bergmark dated as of August 18, 1998
10.13 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
Monty Lee Davis dated as of August 18, 1998
10.14 -- Form of Employment Agreement between Core Laboratories N.V. and Filed Herewith
John David Denson dated as of August 18, 1998
10.15 -- Acquisition Agreement among Core Laboratories N.V., Core Laboratories Filed Herewith
International B.V., Saybolt International B.V., AGI Mexicana S.A.
de C.V. and the Stockholders of AGI. Mexicare S.A. de C.V. dated
as of December 11, 1998
10.16 -- Agreement and Plan of Merger among Core Laboratories N.V., AGI Filed Herewith
Acquisition Company, The Andrews Group International, Inc. and
Robert P. Andrews dated as of December 18, 1998
23.1 -- Consent of Arthur Andersen LLP Filed Herewith
27.0 -- Financial Data Schedule Filed Herewith
</TABLE>
<PAGE> 1
EXHIBIT 4.1
<TABLE>
<CAPTION>
===================================================================================================================================
<S> <C> <C> <C>
NUMBER [CORELAB LOGO] SHARES
C-
CORE LABORATORIES N.V.
INCORPORATED UNDER THE LAWS OF THE NETHERLANDS WITH ITS SEAT AT AMSTERDAM, THE NETHERLANDS CUSIP N22717 10 7
(Commercial Register Number 261-166) SEE REVERSE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE NOMINAL (PAR) VALUE OF NLG 0.03 (NETHERLANDS GUILDER) OF
CORE LABORATORIES N.V. (the "Company") transferable on the books of the Company by the holder hereof in person by duly authorized
attorney upon surrender of this share certificate properly endorsed. This certificate and the shares represented hereby are
issued and shall be subject to all of the provisions of the laws of The Netherlands to the Articles of Association of the Company
if and as amended (copies of which are available at the office of the Company at Amsterdam The Netherlands and at the office of
the Transfer Agent and Registrar in New York), and to all provisions thereof the holder hereof hereby assents and is bound. This
Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile signatures of the duly authorized officers of the Company.
Dated:
/s/ DAVID M. DEMSHER
PRESIDENT [CORE LABORATORIES N.V. SEAL] /s/ NOT LEGIBLE
Secretary
====================================================================================================================================
</TABLE>
<PAGE> 2
CORE LABORATORIES N.V.
<TABLE>
<CAPTION>
<S> <C>
Transfers of Common Shares may only be made in accordance with Article 11 of the Articles of Association of the Company. The
undersigned Assignor hereby certifies that all requirements relating to the transfer of Common Shares have been complied with.
The Company will furnish without charge to each shareholder who so requests information about the designations, preferences and
relative, participating, optional or other special rights of each class of shares or series thereof of the Company, and about the
qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the office of the
Company at Amsterdam, The Netherlands, or to the office of the Transfer Agent and Registrar in New York. Keep this Certificate in a
safe place. If it is lost, stolen or destroyed the Company may require a bond and/or indemnity as a condition to the issuance of a
replacement certificate. The share(s) represented by this Certificate have been issued by CORE LABORATORIES N.V., a company
organized and existing under the laws of The Netherlands (the "Company"). The Company has authorized the Transfer Agent to
acknowledge the transfer of share(s) on its behalf, which acknowledgment is required by Netherlands law.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _______________ Custodian ____________________
TENENT -- as tenants by the entities (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _____________________
in common (State)
Additional abbreviations may also be used though not listed.
--------------------------
TRANSFER FORM
For value received, _____________________________________________________________________ hereby sell and transfer unto
PLEASE INSERT SOCIAL SECURITY NUMBER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------------
- ---------------------------------------------- ----------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------ Common Shares
of the Company represented by the within Certificate, and do hereby irrevocably constitute and appoint _____________________________
____________________________________________________________________________________________________________________________________
Attorney to transfer the said stock on the books of the within named Company with full power of substitution in the premises.
Date: ___________________________________________________
X _____________________________________________
NOTICE: (SIGNATURE)
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER. X _____________________________________________
(SIGNATURE)
-----------------------------------------------
THE SIGNATURES ???????????????????????????????
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE ???????????????????????????
-----------------------------------------------
SIGNATURE(S) GUARANTEED BY:
-----------------------------------------------
ACKNOWLEDGEMENT
The undersigned, acting on behalf of the Company, hereby acknowledges the transfer of the Common Shares (as described above) and
confirms that entry hereof has been made in the Company's shareholders' register as of
-----------------------------------------
CORE LABORATORIES N.V.
By:______________________________________
Date: ___________________________________
</TABLE>
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made by and between
CORE LABORATORIES N.V. and DAVID MICHAEL DEMSHUR ("EXECUTIVE").
W I T N E S S E T H:
WHEREAS, Executive is currently an employee of Core Laboratories N.V.
and/or one or more of its Affiliates ("COMPANY"); and
WHEREAS, the Company desires to continue to employ Executive on the
terms and conditions, and for the consideration, hereinafter set forth, and
Executive is desirous of continuing to be employed by Company on such terms and
conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to
be paid and provided to Executive under this Agreement and the mutual promises,
covenants, and undertakings contained herein, Core Laboratories N.V. and
Executive, each intending to be legally bound, hereby agree as follows:
I.
EMPLOYMENT AND DUTIES
1.1 EMPLOYMENT; EFFECTIVE DATE. Company agrees to employ Executive, and
Executive agrees to be employed by Company, beginning as of the Effective Date
and continuing for the period of time set forth in Article III of this
Agreement, subject to the terms and conditions of this Agreement.
1.2 POSITION. From and after the Effective Date, Company shall employ
Executive in the position of Senior Vice President and Chief Operating Officer
of Company, or in such other comparable executive position as Company and
Executive may mutually agree.
1.3 DUTIES AND SERVICES. Executive agrees to serve in the position
referred to in Section 1.2 and to perform diligently and to the best of
Executive's abilities the duties and services appertaining to such office, as
well as such additional duties and services appropriate to such office upon
which the parties mutually may agree from time to time. Executive's employment
shall also be subject to the policies maintained and established by Company, as
the same may be amended from time to time.
1.4 OTHER INTERESTS. Executive agrees, during the period of Executive's
employment by Company, to devote Executive's primary business time, energy, and
best efforts to the business and affairs of Company and its Affiliates and not
to engage, directly or indirectly, in any other business or businesses, whether
or not similar to that of Company, except with the consent of the Board of
Directors. The foregoing notwithstanding, the parties recognize and agree that
Executive may, without consent of the Board of Directors, engage in charitable,
civic, and other business activities that do not conflict with the business and
affairs of Company and in passive personal investments, so long as such
activities do not interfere with Executive's performance of Executive's duties
hereunder.
<PAGE> 2
1.5 DUTY OF LOYALTY. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times
in the best interests of Company. In keeping with these duties, Executive shall
make full disclosure to Company of all business opportunities pertaining to
Company's business and shall not appropriate for Executive's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
II.
COMPENSATION AND BENEFITS
2.1 BASE SALARY. During the period of this Agreement, Executive shall
receive a minimum annual base salary of $_______. Executive's annual base salary
shall be reviewed by the Board of Directors (or a committee thereof) on an
annual basis, and, in the sole discretion of the Board of Directors (or such
committee), such annual base salary may be increased, but not decreased,
effective as of August 1 of each year. Executive's annual base salary shall be
paid in equal installments in accordance with the Company's standard policy
regarding payment of compensation to executives but no less frequently than
monthly.
2.2 BONUSES. Executive shall be eligible to receive an annual bonus of
up to 75% of Executive's annual base salary with the amount of such bonus to be
determined by the Committee based upon criteria established from time to time by
the Committee.
2.3 EMPLOYEE BENEFITS. Executive and, to the extent applicable,
Executive's spouse, dependents, and beneficiaries shall be allowed to
participate in all benefits, plans, and programs, including improvements or
modifications of the same, which are now, or may hereafter be, available to
other executive employees of Company. Such benefits, plans, and programs shall
include, without limitation, any deferred compensation plan, profit sharing
plan, thrift plan, health insurance or health care plan, life insurance,
disability insurance, pension plan, supplemental retirement plan, stock option
plan, vacation and sick leave plan, and the like which may be maintained by
Company for Executive specifically or for employees of Executive's seniority and
position generally. Company shall not, however, by reason of this Section be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing, any such benefit, plan, or program, so long as such changes are
similarly applicable to executive employees generally.
2.4 BUSINESS AND ENTERTAINMENT EXPENSES. During his employment
hereunder, subject to Company's standard policies and procedures with respect to
expense reimbursement as applied to its executive employees generally, Company
shall reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business-related purposes,
including, but not limited to, dues and fees to industry and professional
organizations and costs of entertainment and business development.
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<PAGE> 3
2.5 INDEMNIFICATION. Company agrees to indemnify Executive against any
and all liabilities arising out of Executive's employment duties to the extent
such liabilities are not covered by any insurance maintained by Company or
Executive, including any liabilities that are caused by or result from an act or
omission constituting the negligence of Executive in the performance of such
duties, but excluding liabilities that are caused by or result from Executive's
own gross negligence or willful misconduct.
III.
TERM AND TERMINATION OF EMPLOYMENT
3.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the third anniversary of the Effective Date. Said term of
employment shall be extended automatically for an additional successive
three-year period as of each annual anniversary date of the Effective Date that
occurs while this Agreement is in effect; provided, however, that if, at any
time prior to any such anniversary date of the Effective Date, either party
shall give written notice to the other that no such automatic extension shall
occur, then Executive's employment shall terminate on the last day of the
three-year period beginning on the annual anniversary date of the Effective Date
that next occurs after such notice is given.
3.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident,
sickness, or other circumstance that renders Executive mentally or
physically incapable of performing the duties and services required of
Executive hereunder on a full-time basis for a period of at least 180
consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice to Executive by Company of
such breach; or
(v) For any other reason whatsoever, in the sole
discretion of the Board of Directors.
3.3 EXECUTIVE'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Executive shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
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<PAGE> 4
(i) A material breach by Company of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice of such breach by Executive to
Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole
discretion of Executive.
3.4 NOTICE OF TERMINATION. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the term of
employment as provided in Section 3.1, Company or Executive shall do so by
giving written notice of such termination to the other party and stating the
effective date and reason for such termination; provided, however, that no such
action shall alter or amend any other provisions hereof or rights arising
hereunder, including, without limitation, the provisions of Articles V and VI
hereof.
IV.
EFFECT OF TERMINATION OF EMPLOYMENT
4.1 TERMINATION BY EXPIRATION OF TERM. If Executive's employment
hereunder shall terminate upon expiration of the term provided in Section 3.1
hereof, all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of Executive's employment, except for such
benefits as may be required by law.
4.2 TERMINATION BY COMPANY. If Executive's employment hereunder shall
be terminated by Company prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be for any
reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or
3.2(iv), Company shall (i) pay Executive, within thirty days after the last day
of Executive's employment with Company, a Termination Payment and (ii) provide
Executive with Severance Benefits.
4.3 TERMINATION BY EXECUTIVE. If Executive's employment hereunder shall
be terminated by Executive prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be pursuant
to Section 3.3(i) or 3.3(ii), then Company shall (i) pay Executive, within
thirty days after the last day of Executive's employment with Company, a
Termination Payment and (ii) provide Executive with Severance Benefits.
4.4 CHANGE IN CONTROL. If, within two years following the occurrence of
a Change in Control, Executive's employment with Company shall terminate
pursuant to Section 3.3(iii) or under circumstances that would entitle Executive
to a Termination Payment pursuant to Section 4.2 or 4.3, then, in lieu of any
Termination Payment or Severance Benefits pursuant to Section
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<PAGE> 5
4.2 or 4.3, Company shall (1) pay Executive, within thirty days after the last
day of Executive's employment with Company, a Change in Control Payment and (2)
provide Executive with Change in Control Benefits.
4.5 PARACHUTE PAYMENT GROSS UP. Notwithstanding anything to the
contrary in this Agreement, in the event that any payment or distribution by the
Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), Company shall pay to Executive an
additional payment (a "Gross-up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment equal to the Excise
Tax imposed upon the Payments. Company shall make an initial determination as to
whether a Gross-up Payment is required and the amount of any such Gross-up
Payment. Executive shall notify Company in writing of any claim by the Internal
Revenue Service which, if successful, would require Company to make a Gross-up
Payment (or a Gross-up Payment in excess of that, if any, initially determined
by Company) within ten days of the receipt of such claim. Company shall notify
Executive in writing at least ten days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If Company
decides to contest such claim, Executive shall cooperate fully with Company in
such action; provided, however, Company shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of Company's
action. If, as a result of Company's action with respect to a claim, Executive
receives a refund of any amount paid by Company with respect to such claim,
Executive shall promptly pay such refund to Company If Company fails to timely
notify Executive whether it will contest such claim, or if Company determines
not to contest such claim, Company shall immediately pay to Executive the
portion of such claim, if any, which it has not previously paid to Executive.
4.6 NO DUTY TO MITIGATE LOSSES. Executive shall have no duty to find
new employment following the termination of Executive's employment under
circumstances that require Company to pay any amount to Executive pursuant to
this Article IV. Any salary or remuneration received by Executive from a third
party for the providing of personal services (whether by employment or by
functioning as an independent contractor) following the termination of
Executive's employment under circumstances pursuant to which this Article IV
apply shall not reduce Company's obligation to make a payment to Executive (or
the amount of any such payment) pursuant to the terms of this Article IV.
4.7 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article IV shall be received by Executive as liquidated damages and not as a
penalty.
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<PAGE> 6
4.8 OTHER COMPENSATION PROGRAMS. This Agreement governs the rights and
obligations of Executive and Company with respect to Executive's annual base
salary and certain perquisites of employment. Executive's rights and obligations
both during the term of Executive's employment and thereafter with respect to
stock options, restricted stock, incentive and deferred compensation, life
insurance policies insuring the life of Executive, and other benefits under
plans and programs maintained by Company shall be governed by the separate
agreements, plans, programs, and other documents and instruments governing such
matters, or as may be provided by law.
V.
PROTECTION OF INFORMATION
5.1 DISCLOSURE TO EXECUTIVE. Company shall (i) disclose to Executive,
or place Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its Affiliates, and/or (ii) entrust
Executive with business opportunities of Company or its Affiliates, and/or (iii)
place Executive in a position to develop business good will on behalf of Company
or its Affiliates.
5.2 DISCLOSURE TO AND PROPERTY OF COMPANY. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's premises or
otherwise) that relate to Company's business, products, or services (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing terms, evaluations, opinions,
interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer's organizations
or within the organization of acquisition prospects, or marketing and
merchandising techniques, prospective names, and marks) shall be disclosed to
Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 NO UNAUTHORIZED OR DAMAGING USE OR DISCLOSURE. Executive will not,
at any time during or after Executive's employment by Company, make any
unauthorized disclosure of any confidential business information or trade
secrets of Company or its Affiliates, or make any use thereof, except in the
carrying out of Executive's employment responsibilities hereunder. Affiliates of
the Company shall be third party beneficiaries of Executive's obligations under
this Section. As a result of Executive's employment by Company, Executive may
also from time to time have access to, or knowledge of, confidential business
information or trade secrets of third
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<PAGE> 7
parties, such as customers, suppliers, partners, joint venturers, and the like,
of Company and its Affiliates. Executive also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Company's confidential business
information and trade secrets. Executive shall refrain, both during the
employment relationship and after the employment relationship terminates, from
publishing any oral or written statements about Company, any of its Affiliates,
or any of such entities' officers, employees, agents, or representatives (i)
that are slanderous, libelous, or defamatory, or (ii) that disclose private or
confidential information about Company, any of its Affiliates, or any of such
entities' business affairs, officers, employees, agents, or representatives, or
(iii) that constitute an intrusion into the seclusion or private lives of
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives, or (iv) that give rise to unreasonable publicity
about the private lives of Company, any of its Affiliates, or any of such
entities' officers, employees, agents, or representatives, or (v) that place
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives in a false light before the public, or (vi) that
constitute a misappropriation of the name or likeness of Company, any of its
Affiliates, or any of such entities' officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may be
enjoined by the courts.
5.4 OWNERSHIP BY COMPANY. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression, which is the subject matter of copyright (such as videotapes,
written presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Company's business, products, or services,
whether such work is created solely by Executive or jointly with others (whether
during business hours or otherwise and whether on Company's premises or
otherwise), Company shall be deemed the author of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not prepared by Executive within the scope of Executive's employment but is
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. If such work is neither prepared by Executive within the scope of
Executive's employment nor a work specially ordered that is deemed to be a work
made for hire, then Executive hereby agrees to assign, and by these presents
does assign, to Company all of Executive's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
5.5 ASSISTANCE BY EXECUTIVE. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts, improvements, discoveries, and
inventions, and its copyrighted works, including without limitation, the
execution of all formal assignment documents requested by Company or its nominee
and the execution of all lawful oaths and applications for patents and
registration of copyright in the United States and foreign countries.
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<PAGE> 8
5.6 REMEDIES. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by terminating any and all
payments then owing to Executive under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article, but shall be in addition to all remedies available at law or in
equity to Company, including the recovery of damages from Executive and his
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
VI.
NONCOMPETITION OBLIGATION
6.1 IN GENERAL. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the trade secrets and
confidential information of Company and its Affiliates that have been and will
in the future be disclosed or entrusted to Executive, the business good will of
Company and its Affiliates that has been and will in the future be developed in
Executive, or the business opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its Affiliates; and, as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the noncompetition obligations hereunder. Executive shall
not, directly or indirectly for Executive or for others, in any geographic area
or market where Company or any of its Affiliates are conducting any business as
of the date of the termination of the employment relationship or have during the
previous twelve months conducted such business:
(i) Engage in any business competitive with the business
conducted by Company;
(ii) Provide comparable services to any other person,
association, or entity who is primarily engaged in any business
competitive with the business conducted by Company with respect to such
competitive business; or
(iii) Induce any employee of Company or any of its
Affiliates to terminate his or her employment with Company or such
Affiliates, or hire or assist in the hiring of any such employee by any
person, association, or entity not affiliated with Company.
These noncompetition obligations shall apply during the period that Executive is
employed by Company and, if Executive receives a severance payment from Company
pursuant to Article IV, such obligations shall extend for the duration of the
period during which Executive is receiving any benefits pursuant to this
Agreement after termination of the employment relationship.
6.2 ENFORCEMENT AND REMEDIES. Executive understands that the
restrictions set forth in Section 6.1 may limit Executive's ability to engage in
certain businesses anywhere in the world during the period provided for above,
but acknowledges that Executive will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction.
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<PAGE> 9
Executive acknowledges that money damages would not be sufficient remedy for any
breach of this Article by Executive, and Company shall be entitled to enforce
the provisions of this Article by terminating any payments then owing to
Executive under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach. Such remedies shall
not be deemed the exclusive remedies for a breach of this Article, but shall be
in addition to all remedies available at law or in equity to Company, including
without limitation, the recovery of damages from Executive and Executive's
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
6.3 REFORMATION. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
VII.
MISCELLANEOUS
7.1 NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO COMPANY TO: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
IF TO EXECUTIVE TO: David Michael Demshur
c/o 5295 Hollister Road
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices or changes of address shall be
effective only upon receipt.
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<PAGE> 10
7.2 APPLICABLE LAW. This Agreement is entered into under, and shall be
governed for all purposes by, the laws of the state of Texas, except as may be
preempted by federal law.
7.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.4 SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
7.6 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city, and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally.
7.7 HEADINGS. The Article and Section headings herein have been
inserted for purposes of convenience only and shall not be used for interpretive
purposes.
7.8 GENDER AND PLURALS. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
7.9 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto shall be subject to
voluntary or involuntary assignment, alienation, or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
7.10 TERM. This Agreement has a term co-extensive with the term of
employment provided in Section 3.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
V and VI shall survive any termination of the employment relationship and/or of
this Agreement.
7.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties, and agreements between the
parties with respect to employment of Executive by Company. Without limiting the
scope of the preceding sentence, all prior understandings and agreements among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect. Any modification of this Agreement will
be effective only if it is in writing and signed by the party to be charged.
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VIII.
DEFINITIONS
8.1 DEFINITIONS. Where the following words and phrases appear in this
Agreement, each shall have the respective meaning set forth below, unless the
context clearly indicates to the contrary.
(1) "AFFILIATE" shall mean any entity that owns or controls, is owned or
controlled by, or is under common ownership or control with, Core
Laboratories N.V.
(2) "BOARD OF DIRECTORS" shall mean the Board of Supervisory Directors of
Core Laboratories N.V.
(3) "CAUSE" shall mean Executive (i) has engaged in gross negligence or
willful misconduct in the performance of the duties required of
Executive hereunder, (ii) has been convicted of any felony or a
misdemeanor involving moral turpitude, (iii) has willfully refused
without proper legal reason to perform the duties and responsibilities
required of Executive hereunder, (iv) has materially breached any
corporate policy or code of conduct established by Company, or (v) has
willfully engaged in conduct that Executive knows or should know is
materially injurious to Company or any of its Affiliates.
(4) "CHANGE IN CONTROL" shall mean the purchase or other acquisition by any
person, entity, or group of persons, within the meaning of section
13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any
comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of more than twenty
percent (20%) of either the outstanding shares of common stock or the
combined voting power of Core Laboratories N.V.'s then outstanding
voting securities entitled to vote generally, or the approval by the
stockholders of Core Laboratories N.V. of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were
stockholders of Core Laboratories N.V. immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than eighty percent (80%) of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged, or consolidated Core Laboratories N.V.'s then
outstanding securities, or a liquidation or dissolution of the Company,
or of the sale of all or substantially all of Core Laboratories N.V.'s
assets.
(5) "CHANGE IN CONTROL BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day
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prior to Executive's termination of employment with Company
for thirty-six months from the date of such termination at no
cost to Executive or Executive's dependents; provided,
however, that (1) such coverage shall be subject to all of the
terms and conditions of such plans, including, without
limitation, the eligibility provisions, (2) such coverage
shall terminate if and to the extent Executive or Executive's
dependents become covered by the medical, dental, and life
insurance plans of a subsequent employer (and any such
coverage shall be promptly reported to Company by Executive),
(3) if Executive (and/or Executive's spouse) would have been
entitled to retiree medical, dental, and/or life insurance
coverage under Company's plans had Executive voluntarily
retired on the date of such termination, then such coverages
shall be continued as provided under such plans, and (4) in
the event that continued participation in any such Company
plan is not permitted by the terms of such plan, Company shall
use its best efforts to arrange, upon comparable terms,
benefits substantially equivalent to those that were provided
under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment, a lump sum cash payment
in an amount equal to the nonvested employer contributions
allocated to Executive's account under the Company 401(k) plan
that are forfeited as a result of Executive's termination of
employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(6) "CHANGE IN CONTROL PAYMENT" shall mean a lump sum payment in an amount
equal to the sum of (i) 300% of Executive's annual base salary as in
effect pursuant to Section 2.1 immediately prior to Executive's
termination of employment with Company and (ii) 45% of the maximum
annual incentive bonus amount pursuant to Section 2.2 that Executive
could have earned for the year during which Executive's employment with
Company terminates.
(7) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(8) "COMMITTEE" shall mean the Compensation Committee of the Board of
Directors.
(9) "COMPANY" shall mean Core Laboratories N.V. and its Affiliates.
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(10) "SEVERANCE BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day prior to Executive's
termination of employment with Company for thirty-six months
from the date of such termination at no cost to Executive or
Executive's dependents; (provided, however, that (1) such
coverage shall be subject to all of the terms and conditions
of such plans, including, without limitation, eligibility
provisions, (2) such coverage shall terminate if and to the
extent Executive or Executive's dependents become covered by
the medical, dental, and life insurance plans of a subsequent
employer (and any such coverage shall be promptly reported to
Company by Executive), (3) if Executive (and/or Executive's
spouse) would have been entitled to retiree medical, dental,
and/or life insurance coverage under Company's plans had
Executive voluntarily retired on the date of such termination,
then such coverages shall be continued as provided under such
plans), and (4) in the event that continued participation in
any such Company plan is not permitted by the terms of such
plan, Company shall use its best efforts to arrange, upon
comparable terms, benefits substantially equivalent to those
that were provided under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment with Company, a lump sum
cash payment in an amount equal to the nonvested employer
contributions allocated to Executive's account under the
Company 401(k) plan that are forfeited as a result of
Executive's termination of employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(11) "EFFECTIVE DATE" shall mean August 1, 1998.
(12) "EXECUTIVE" shall mean Monty Lee Davis.
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(13) "GOOD REASON" shall mean termination by Executive of Executive's
employment with Company within sixty days of and in connection with or
due to (i) a significant change in the nature, status, or scope of
Executive's duties, responsibilities, or authorities, (ii) a permanent
change and relocation of Executive's principal place of employment with
Company, which is more than fifty miles away from the prior location,
(iii) a material breach by Company of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty days
following written notice of such breach by Executive to Company, (iv) a
material diminution in Executive's participation in bonus, stock
option, incentive award, and other compensation plans provided by
Company for executives with comparable duties, (v) a material
diminution in employee benefits (including but not limited to medical,
dental, life insurance, and long-term disability plans) and perquisites
applicable to Executive from the employee benefits and perquisites
provided by Company to executives with comparable duties, or (vi) in
Executive's judgment, the scope of Executive's position within Company
being inappropriate.
(14) "GROSS UP PAYMENT" shall mean a payment made pursuant to Section 4.5.
(15) "ORIGINAL TERM" shall mean the original term of this Agreement as set
forth in the first sentence of Section 3.1.
(16) "TERMINATION PAYMENT" shall mean a lump sum payment in an amount equal
to the sum of (i) 200% of Executive's annual base salary as in effect
pursuant to Section 2.1 immediately prior to Executive's termination of
employment with Company and (ii) 45% of the maximum annual incentive
bonus amount pursuant to Section 2.2 that Executive could have earned
for the year during which Executive's employment with Company
terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _____ day of August, 1998, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
BY:
-----------------------------
NAME:
---------------------------
TITLE:
--------------------------
EXECUTIVE
--------------------------------
DAVID MICHAEL DEMSHUR
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made by and between
CORE LABORATORIES N.V. and RICHARD LUCAS BERGMARK ("EXECUTIVE").
W I T N E S S E T H:
WHEREAS, Executive is currently an employee of Core Laboratories N.V.
and/or one or more of its Affiliates ("COMPANY"); and
WHEREAS, the Company desires to continue to employ Executive on the
terms and conditions, and for the consideration, hereinafter set forth, and
Executive is desirous of continuing to be employed by Company on such terms and
conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to
be paid and provided to Executive under this Agreement and the mutual promises,
covenants, and undertakings contained herein, Core Laboratories N.V. and
Executive, each intending to be legally bound, hereby agree as follows:
I.
EMPLOYMENT AND DUTIES
1.1 EMPLOYMENT; EFFECTIVE DATE. Company agrees to employ Executive, and
Executive agrees to be employed by Company, beginning as of the Effective Date
and continuing for the period of time set forth in Article III of this
Agreement, subject to the terms and conditions of this Agreement.
1.2 POSITION. From and after the Effective Date, Company shall employ
Executive in the position of Senior Vice President and Chief Operating Officer
of Company, or in such other comparable executive position as Company and
Executive may mutually agree.
1.3 DUTIES AND SERVICES. Executive agrees to serve in the position
referred to in Section 1.2 and to perform diligently and to the best of
Executive's abilities the duties and services appertaining to such office, as
well as such additional duties and services appropriate to such office upon
which the parties mutually may agree from time to time. Executive's employment
shall also be subject to the policies maintained and established by Company, as
the same may be amended from time to time.
1.4 OTHER INTERESTS. Executive agrees, during the period of Executive's
employment by Company, to devote Executive's primary business time, energy, and
best efforts to the business and affairs of Company and its Affiliates and not
to engage, directly or indirectly, in any other business or businesses, whether
or not similar to that of Company, except with the consent of the Board of
Directors. The foregoing notwithstanding, the parties recognize and agree that
Executive may, without consent of the Board of Directors, engage in charitable,
civic, and other business activities that do not conflict with the business and
affairs of Company and in passive personal investments, so long as such
activities do not interfere with Executive's performance of Executive's duties
hereunder.
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1.5 DUTY OF LOYALTY. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times
in the best interests of Company. In keeping with these duties, Executive shall
make full disclosure to Company of all business opportunities pertaining to
Company's business and shall not appropriate for Executive's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
II.
COMPENSATION AND BENEFITS
2.1 BASE SALARY. During the period of this Agreement, Executive shall
receive a minimum annual base salary of $_______. Executive's annual base salary
shall be reviewed by the Board of Directors (or a committee thereof) on an
annual basis, and, in the sole discretion of the Board of Directors (or such
committee), such annual base salary may be increased, but not decreased,
effective as of August 1 of each year. Executive's annual base salary shall be
paid in equal installments in accordance with the Company's standard policy
regarding payment of compensation to executives but no less frequently than
monthly.
2.2 BONUSES. Executive shall be eligible to receive an annual bonus of
up to 75% of Executive's annual base salary with the amount of such bonus to be
determined by the Committee based upon criteria established from time to time by
the Committee.
2.3 EMPLOYEE BENEFITS. Executive and, to the extent applicable,
Executive's spouse, dependents, and beneficiaries shall be allowed to
participate in all benefits, plans, and programs, including improvements or
modifications of the same, which are now, or may hereafter be, available to
other executive employees of Company. Such benefits, plans, and programs shall
include, without limitation, any deferred compensation plan, profit sharing
plan, thrift plan, health insurance or health care plan, life insurance,
disability insurance, pension plan, supplemental retirement plan, stock option
plan, vacation and sick leave plan, and the like which may be maintained by
Company for Executive specifically or for employees of Executive's seniority and
position generally. Company shall not, however, by reason of this Section be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing, any such benefit, plan, or program, so long as such changes are
similarly applicable to executive employees generally.
2.4 BUSINESS AND ENTERTAINMENT EXPENSES. During his employment
hereunder, subject to Company's standard policies and procedures with respect to
expense reimbursement as applied to its executive employees generally, Company
shall reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business-related purposes,
including, but not limited to, dues and fees to industry and professional
organizations and costs of entertainment and business development.
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2.5 INDEMNIFICATION. Company agrees to indemnify Executive against any
and all liabilities arising out of Executive's employment duties to the extent
such liabilities are not covered by any insurance maintained by Company or
Executive, including any liabilities that are caused by or result from an act or
omission constituting the negligence of Executive in the performance of such
duties, but excluding liabilities that are caused by or result from Executive's
own gross negligence or willful misconduct.
III.
TERM AND TERMINATION OF EMPLOYMENT
3.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the third anniversary of the Effective Date. Said term of
employment shall be extended automatically for an additional successive
three-year period as of each annual anniversary date of the Effective Date that
occurs while this Agreement is in effect; provided, however, that if, at any
time prior to any such anniversary date of the Effective Date, either party
shall give written notice to the other that no such automatic extension shall
occur, then Executive's employment shall terminate on the last day of the
three-year period beginning on the annual anniversary date of the Effective Date
that next occurs after such notice is given.
3.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident,
sickness, or other circumstance that renders Executive mentally or
physically incapable of performing the duties and services required of
Executive hereunder on a full-time basis for a period of at least 180
consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice to Executive by Company of
such breach; or
(v) For any other reason whatsoever, in the sole
discretion of the Board of Directors.
3.3 EXECUTIVE'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Executive shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
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(i) A material breach by Company of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice of such breach by Executive to
Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole
discretion of Executive.
3.4 NOTICE OF TERMINATION. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the term of
employment as provided in Section 3.1, Company or Executive shall do so by
giving written notice of such termination to the other party and stating the
effective date and reason for such termination; provided, however, that no such
action shall alter or amend any other provisions hereof or rights arising
hereunder, including, without limitation, the provisions of Articles V and VI
hereof.
IV.
EFFECT OF TERMINATION OF EMPLOYMENT
4.1 TERMINATION BY EXPIRATION OF TERM. If Executive's employment
hereunder shall terminate upon expiration of the term provided in Section 3.1
hereof, all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of Executive's employment, except for such
benefits as may be required by law.
4.2 TERMINATION BY COMPANY. If Executive's employment hereunder shall
be terminated by Company prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be for any
reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or
3.2(iv), Company shall (i) pay Executive, within thirty days after the last day
of Executive's employment with Company, a Termination Payment and (ii) provide
Executive with Severance Benefits.
4.3 TERMINATION BY EXECUTIVE. If Executive's employment hereunder shall
be terminated by Executive prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be pursuant
to Section 3.3(i) or 3.3(ii), then Company shall (i) pay Executive, within
thirty days after the last day of Executive's employment with Company, a
Termination Payment and (ii) provide Executive with Severance Benefits.
4.4 CHANGE IN CONTROL. If, within two years following the occurrence of
a Change in Control, Executive's employment with Company shall terminate
pursuant to Section 3.3(iii) or under circumstances that would entitle Executive
to a Termination Payment pursuant to Section 4.2 or 4.3, then, in lieu of any
Termination Payment or Severance Benefits pursuant to Section
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4.2 or 4.3, Company shall (1) pay Executive, within thirty days after the last
day of Executive's employment with Company, a Change in Control Payment and (2)
provide Executive with Change in Control Benefits.
4.5 PARACHUTE PAYMENT GROSS UP. Notwithstanding anything to the
contrary in this Agreement, in the event that any payment or distribution by the
Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), Company shall pay to Executive an
additional payment (a "Gross-up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment equal to the Excise
Tax imposed upon the Payments. Company shall make an initial determination as to
whether a Gross-up Payment is required and the amount of any such Gross-up
Payment. Executive shall notify Company in writing of any claim by the Internal
Revenue Service which, if successful, would require Company to make a Gross-up
Payment (or a Gross-up Payment in excess of that, if any, initially determined
by Company) within ten days of the receipt of such claim. Company shall notify
Executive in writing at least ten days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If Company
decides to contest such claim, Executive shall cooperate fully with Company in
such action; provided, however, Company shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of Company's
action. If, as a result of Company's action with respect to a claim, Executive
receives a refund of any amount paid by Company with respect to such claim,
Executive shall promptly pay such refund to Company If Company fails to timely
notify Executive whether it will contest such claim, or if Company determines
not to contest such claim, Company shall immediately pay to Executive the
portion of such claim, if any, which it has not previously paid to Executive.
4.6 NO DUTY TO MITIGATE LOSSES. Executive shall have no duty to find
new employment following the termination of Executive's employment under
circumstances that require Company to pay any amount to Executive pursuant to
this Article IV. Any salary or remuneration received by Executive from a third
party for the providing of personal services (whether by employment or by
functioning as an independent contractor) following the termination of
Executive's employment under circumstances pursuant to which this Article IV
apply shall not reduce Company's obligation to make a payment to Executive (or
the amount of any such payment) pursuant to the terms of this Article IV.
4.7 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article IV shall be received by Executive as liquidated damages and not as a
penalty.
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4.8 OTHER COMPENSATION PROGRAMS. This Agreement governs the rights and
obligations of Executive and Company with respect to Executive's annual base
salary and certain perquisites of employment. Executive's rights and obligations
both during the term of Executive's employment and thereafter with respect to
stock options, restricted stock, incentive and deferred compensation, life
insurance policies insuring the life of Executive, and other benefits under
plans and programs maintained by Company shall be governed by the separate
agreements, plans, programs, and other documents and instruments governing such
matters, or as may be provided by law.
V.
PROTECTION OF INFORMATION
5.1 DISCLOSURE TO EXECUTIVE. Company shall (i) disclose to Executive,
or place Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its Affiliates, and/or (ii) entrust
Executive with business opportunities of Company or its Affiliates, and/or (iii)
place Executive in a position to develop business good will on behalf of Company
or its Affiliates.
5.2 DISCLOSURE TO AND PROPERTY OF COMPANY. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's premises or
otherwise) that relate to Company's business, products, or services (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing terms, evaluations, opinions,
interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer's organizations
or within the organization of acquisition prospects, or marketing and
merchandising techniques, prospective names, and marks) shall be disclosed to
Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 NO UNAUTHORIZED OR DAMAGING USE OR DISCLOSURE. Executive will not,
at any time during or after Executive's employment by Company, make any
unauthorized disclosure of any confidential business information or trade
secrets of Company or its Affiliates, or make any use thereof, except in the
carrying out of Executive's employment responsibilities hereunder. Affiliates of
the Company shall be third party beneficiaries of Executive's obligations under
this Section. As a result of Executive's employment by Company, Executive may
also from time to time have access to, or knowledge of, confidential business
information or trade secrets of third
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<PAGE> 7
parties, such as customers, suppliers, partners, joint venturers, and the like,
of Company and its Affiliates. Executive also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Company's confidential business
information and trade secrets. Executive shall refrain, both during the
employment relationship and after the employment relationship terminates, from
publishing any oral or written statements about Company, any of its Affiliates,
or any of such entities' officers, employees, agents, or representatives (i)
that are slanderous, libelous, or defamatory, or (ii) that disclose private or
confidential information about Company, any of its Affiliates, or any of such
entities' business affairs, officers, employees, agents, or representatives, or
(iii) that constitute an intrusion into the seclusion or private lives of
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives, or (iv) that give rise to unreasonable publicity
about the private lives of Company, any of its Affiliates, or any of such
entities' officers, employees, agents, or representatives, or (v) that place
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives in a false light before the public, or (vi) that
constitute a misappropriation of the name or likeness of Company, any of its
Affiliates, or any of such entities' officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may be
enjoined by the courts.
5.4 OWNERSHIP BY COMPANY. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression, which is the subject matter of copyright (such as videotapes,
written presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Company's business, products, or services,
whether such work is created solely by Executive or jointly with others (whether
during business hours or otherwise and whether on Company's premises or
otherwise), Company shall be deemed the author of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not prepared by Executive within the scope of Executive's employment but is
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. If such work is neither prepared by Executive within the scope of
Executive's employment nor a work specially ordered that is deemed to be a work
made for hire, then Executive hereby agrees to assign, and by these presents
does assign, to Company all of Executive's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
5.5 ASSISTANCE BY EXECUTIVE. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts, improvements, discoveries, and
inventions, and its copyrighted works, including without limitation, the
execution of all formal assignment documents requested by Company or its nominee
and the execution of all lawful oaths and applications for patents and
registration of copyright in the United States and foreign countries.
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5.6 REMEDIES. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by terminating any and all
payments then owing to Executive under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article, but shall be in addition to all remedies available at law or in
equity to Company, including the recovery of damages from Executive and his
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
VI.
NONCOMPETITION OBLIGATION
6.1 IN GENERAL. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the trade secrets and
confidential information of Company and its Affiliates that have been and will
in the future be disclosed or entrusted to Executive, the business good will of
Company and its Affiliates that has been and will in the future be developed in
Executive, or the business opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its Affiliates; and, as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the noncompetition obligations hereunder. Executive shall
not, directly or indirectly for Executive or for others, in any geographic area
or market where Company or any of its Affiliates are conducting any business as
of the date of the termination of the employment relationship or have during the
previous twelve months conducted such business:
(i) Engage in any business competitive with the business
conducted by Company;
(ii) Provide comparable services to any other person,
association, or entity who is primarily engaged in any business
competitive with the business conducted by Company with respect to such
competitive business; or
(iii) Induce any employee of Company or any of its
Affiliates to terminate his or her employment with Company or such
Affiliates, or hire or assist in the hiring of any such employee by any
person, association, or entity not affiliated with Company.
These noncompetition obligations shall apply during the period that Executive is
employed by Company and, if Executive receives a severance payment from Company
pursuant to Article IV, such obligations shall extend for the duration of the
period during which Executive is receiving any benefits pursuant to this
Agreement after termination of the employment relationship.
6.2 ENFORCEMENT AND REMEDIES. Executive understands that the
restrictions set forth in Section 6.1 may limit Executive's ability to engage in
certain businesses anywhere in the world during the period provided for above,
but acknowledges that Executive will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction.
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Executive acknowledges that money damages would not be sufficient remedy for any
breach of this Article by Executive, and Company shall be entitled to enforce
the provisions of this Article by terminating any payments then owing to
Executive under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach. Such remedies shall
not be deemed the exclusive remedies for a breach of this Article, but shall be
in addition to all remedies available at law or in equity to Company, including
without limitation, the recovery of damages from Executive and Executive's
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
6.3 REFORMATION. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
VII.
MISCELLANEOUS
7.1 NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO COMPANY TO: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
IF TO EXECUTIVE TO: Richard Lucas Bergmark
c/o 5295 Hollister Road
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices or changes of address shall be
effective only upon receipt.
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7.2 APPLICABLE LAW. This Agreement is entered into under, and shall be
governed for all purposes by, the laws of the state of Texas, except as may be
preempted by federal law.
7.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.4 SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
7.6 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city, and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally.
7.7 HEADINGS. The Article and Section headings herein have been
inserted for purposes of convenience only and shall not be used for interpretive
purposes.
7.8 GENDER AND PLURALS. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
7.9 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto shall be subject to
voluntary or involuntary assignment, alienation, or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
7.10 TERM. This Agreement has a term co-extensive with the term of
employment provided in Section 3.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
V and VI shall survive any termination of the employment relationship and/or of
this Agreement.
7.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties, and agreements between the
parties with respect to employment of Executive by Company. Without limiting the
scope of the preceding sentence, all prior understandings and agreements among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect. Any modification of this Agreement will
be effective only if it is in writing and signed by the party to be charged.
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VIII.
DEFINITIONS
8.1 DEFINITIONS. Where the following words and phrases appear in this
Agreement, each shall have the respective meaning set forth below, unless the
context clearly indicates to the contrary.
(1) "AFFILIATE" shall mean any entity that owns or controls, is owned or
controlled by, or is under common ownership or control with, Core
Laboratories N.V.
(2) "BOARD OF DIRECTORS" shall mean the Board of Supervisory Directors of
Core Laboratories N.V.
(3) "CAUSE" shall mean Executive (i) has engaged in gross negligence or
willful misconduct in the performance of the duties required of
Executive hereunder, (ii) has been convicted of any felony or a
misdemeanor involving moral turpitude, (iii) has willfully refused
without proper legal reason to perform the duties and responsibilities
required of Executive hereunder, (iv) has materially breached any
corporate policy or code of conduct established by Company, or (v) has
willfully engaged in conduct that Executive knows or should know is
materially injurious to Company or any of its Affiliates.
(4) "CHANGE IN CONTROL" shall mean the purchase or other acquisition by any
person, entity, or group of persons, within the meaning of section
13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any
comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of more than twenty
percent (20%) of either the outstanding shares of common stock or the
combined voting power of Core Laboratories N.V.'s then outstanding
voting securities entitled to vote generally, or the approval by the
stockholders of Core Laboratories N.V. of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were
stockholders of Core Laboratories N.V. immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than eighty percent (80%) of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged, or consolidated Core Laboratories N.V.'s then
outstanding securities, or a liquidation or dissolution of the Company,
or of the sale of all or substantially all of Core Laboratories N.V.'s
assets.
(5) "CHANGE IN CONTROL BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day
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prior to Executive's termination of employment with Company
for thirty-six months from the date of such termination at no
cost to Executive or Executive's dependents; provided,
however, that (1) such coverage shall be subject to all of the
terms and conditions of such plans, including, without
limitation, the eligibility provisions, (2) such coverage
shall terminate if and to the extent Executive or Executive's
dependents become covered by the medical, dental, and life
insurance plans of a subsequent employer (and any such
coverage shall be promptly reported to Company by Executive),
(3) if Executive (and/or Executive's spouse) would have been
entitled to retiree medical, dental, and/or life insurance
coverage under Company's plans had Executive voluntarily
retired on the date of such termination, then such coverages
shall be continued as provided under such plans, and (4) in
the event that continued participation in any such Company
plan is not permitted by the terms of such plan, Company shall
use its best efforts to arrange, upon comparable terms,
benefits substantially equivalent to those that were provided
under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment, a lump sum cash payment
in an amount equal to the nonvested employer contributions
allocated to Executive's account under the Company 401(k) plan
that are forfeited as a result of Executive's termination of
employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(6) "CHANGE IN CONTROL PAYMENT" shall mean a lump sum payment in an amount
equal to the sum of (i) 300% of Executive's annual base salary as in
effect pursuant to Section 2.1 immediately prior to Executive's
termination of employment with Company and (ii) 45% of the maximum
annual incentive bonus amount pursuant to Section 2.2 that Executive
could have earned for the year during which Executive's employment with
Company terminates.
(7) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(8) "COMMITTEE" shall mean the Compensation Committee of the Board of
Directors.
(9) "COMPANY" shall mean Core Laboratories N.V. and its Affiliates.
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(10) "SEVERANCE BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day prior to Executive's
termination of employment with Company for thirty-six months
from the date of such termination at no cost to Executive or
Executive's dependents; (provided, however, that (1) such
coverage shall be subject to all of the terms and conditions
of such plans, including, without limitation, eligibility
provisions, (2) such coverage shall terminate if and to the
extent Executive or Executive's dependents become covered by
the medical, dental, and life insurance plans of a subsequent
employer (and any such coverage shall be promptly reported to
Company by Executive), (3) if Executive (and/or Executive's
spouse) would have been entitled to retiree medical, dental,
and/or life insurance coverage under Company's plans had
Executive voluntarily retired on the date of such termination,
then such coverages shall be continued as provided under such
plans), and (4) in the event that continued participation in
any such Company plan is not permitted by the terms of such
plan, Company shall use its best efforts to arrange, upon
comparable terms, benefits substantially equivalent to those
that were provided under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment with Company, a lump sum
cash payment in an amount equal to the nonvested employer
contributions allocated to Executive's account under the
Company 401(k) plan that are forfeited as a result of
Executive's termination of employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(11) "EFFECTIVE DATE" shall mean August 1, 1998.
(12) "EXECUTIVE" shall mean Monty Lee Davis.
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(13) "GOOD REASON" shall mean termination by Executive of Executive's
employment with Company within sixty days of and in connection with or
due to (i) a significant change in the nature, status, or scope of
Executive's duties, responsibilities, or authorities, (ii) a permanent
change and relocation of Executive's principal place of employment with
Company, which is more than fifty miles away from the prior location,
(iii) a material breach by Company of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty days
following written notice of such breach by Executive to Company, (iv) a
material diminution in Executive's participation in bonus, stock
option, incentive award, and other compensation plans provided by
Company for executives with comparable duties, (v) a material
diminution in employee benefits (including but not limited to medical,
dental, life insurance, and long-term disability plans) and perquisites
applicable to Executive from the employee benefits and perquisites
provided by Company to executives with comparable duties, or (vi) in
Executive's judgment, the scope of Executive's position within Company
being inappropriate.
(14) "GROSS UP PAYMENT" shall mean a payment made pursuant to Section 4.5.
(15) "ORIGINAL TERM" shall mean the original term of this Agreement as set
forth in the first sentence of Section 3.1.
(16) "TERMINATION PAYMENT" shall mean a lump sum payment in an amount equal
to the sum of (i) 200% of Executive's annual base salary as in effect
pursuant to Section 2.1 immediately prior to Executive's termination of
employment with Company and (ii) 45% of the maximum annual incentive
bonus amount pursuant to Section 2.2 that Executive could have earned
for the year during which Executive's employment with Company
terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _____ day of August, 1998, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
BY:
-----------------------------
NAME:
---------------------------
TITLE:
--------------------------
EXECUTIVE
--------------------------------
RICHARD LUCAS BERGMARK
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made by and between
CORE LABORATORIES N.V. and MONTY LEE DAVIS ("EXECUTIVE").
W I T N E S S E T H:
WHEREAS, Executive is currently an employee of Core Laboratories N.V.
and/or one or more of its Affiliates ("COMPANY"); and
WHEREAS, the Company desires to continue to employ Executive on the
terms and conditions, and for the consideration, hereinafter set forth, and
Executive is desirous of continuing to be employed by Company on such terms and
conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to
be paid and provided to Executive under this Agreement and the mutual promises,
covenants, and undertakings contained herein, Core Laboratories N.V. and
Executive, each intending to be legally bound, hereby agree as follows:
I.
EMPLOYMENT AND DUTIES
1.1 EMPLOYMENT; EFFECTIVE DATE. Company agrees to employ Executive, and
Executive agrees to be employed by Company, beginning as of the Effective Date
and continuing for the period of time set forth in Article III of this
Agreement, subject to the terms and conditions of this Agreement.
1.2 POSITION. From and after the Effective Date, Company shall employ
Executive in the position of Senior Vice President and Chief Operating Officer
of Company, or in such other comparable executive position as Company and
Executive may mutually agree.
1.3 DUTIES AND SERVICES. Executive agrees to serve in the position
referred to in Section 1.2 and to perform diligently and to the best of
Executive's abilities the duties and services appertaining to such office, as
well as such additional duties and services appropriate to such office upon
which the parties mutually may agree from time to time. Executive's employment
shall also be subject to the policies maintained and established by Company, as
the same may be amended from time to time.
1.4 OTHER INTERESTS. Executive agrees, during the period of Executive's
employment by Company, to devote Executive's primary business time, energy, and
best efforts to the business and affairs of Company and its Affiliates and not
to engage, directly or indirectly, in any other business or businesses, whether
or not similar to that of Company, except with the consent of the Board of
Directors. The foregoing notwithstanding, the parties recognize and agree that
Executive may, without consent of the Board of Directors, engage in charitable,
civic, and other business activities that do not conflict with the business and
affairs of Company and in passive personal investments, so long as such
activities do not interfere with Executive's performance of Executive's duties
hereunder.
<PAGE> 2
1.5 DUTY OF LOYALTY. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times
in the best interests of Company. In keeping with these duties, Executive shall
make full disclosure to Company of all business opportunities pertaining to
Company's business and shall not appropriate for Executive's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
II.
COMPENSATION AND BENEFITS
2.1 BASE SALARY. During the period of this Agreement, Executive shall
receive a minimum annual base salary of $_______. Executive's annual base salary
shall be reviewed by the Board of Directors (or a committee thereof) on an
annual basis, and, in the sole discretion of the Board of Directors (or such
committee), such annual base salary may be increased, but not decreased,
effective as of August 1 of each year. Executive's annual base salary shall be
paid in equal installments in accordance with the Company's standard policy
regarding payment of compensation to executives but no less frequently than
monthly.
2.2 BONUSES. Executive shall be eligible to receive an annual bonus of
up to 75% of Executive's annual base salary with the amount of such bonus to be
determined by the Committee based upon criteria established from time to time by
the Committee.
2.3 EMPLOYEE BENEFITS. Executive and, to the extent applicable,
Executive's spouse, dependents, and beneficiaries shall be allowed to
participate in all benefits, plans, and programs, including improvements or
modifications of the same, which are now, or may hereafter be, available to
other executive employees of Company. Such benefits, plans, and programs shall
include, without limitation, any deferred compensation plan, profit sharing
plan, thrift plan, health insurance or health care plan, life insurance,
disability insurance, pension plan, supplemental retirement plan, stock option
plan, vacation and sick leave plan, and the like which may be maintained by
Company for Executive specifically or for employees of Executive's seniority and
position generally. Company shall not, however, by reason of this Section be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing, any such benefit, plan, or program, so long as such changes are
similarly applicable to executive employees generally.
2.4 BUSINESS AND ENTERTAINMENT EXPENSES. During his employment
hereunder, subject to Company's standard policies and procedures with respect to
expense reimbursement as applied to its executive employees generally, Company
shall reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business-related purposes,
including, but not limited to, dues and fees to industry and professional
organizations and costs of entertainment and business development.
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2.5 INDEMNIFICATION. Company agrees to indemnify Executive against any
and all liabilities arising out of Executive's employment duties to the extent
such liabilities are not covered by any insurance maintained by Company or
Executive, including any liabilities that are caused by or result from an act or
omission constituting the negligence of Executive in the performance of such
duties, but excluding liabilities that are caused by or result from Executive's
own gross negligence or willful misconduct.
III.
TERM AND TERMINATION OF EMPLOYMENT
3.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the third anniversary of the Effective Date. Said term of
employment shall be extended automatically for an additional successive
three-year period as of each annual anniversary date of the Effective Date that
occurs while this Agreement is in effect; provided, however, that if, at any
time prior to any such anniversary date of the Effective Date, either party
shall give written notice to the other that no such automatic extension shall
occur, then Executive's employment shall terminate on the last day of the
three-year period beginning on the annual anniversary date of the Effective Date
that next occurs after such notice is given.
3.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident,
sickness, or other circumstance that renders Executive mentally or
physically incapable of performing the duties and services required of
Executive hereunder on a full-time basis for a period of at least 180
consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice to Executive by Company of
such breach; or
(v) For any other reason whatsoever, in the sole
discretion of the Board of Directors.
3.3 EXECUTIVE'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Executive shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
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(i) A material breach by Company of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice of such breach by Executive to
Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole
discretion of Executive.
3.4 NOTICE OF TERMINATION. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the term of
employment as provided in Section 3.1, Company or Executive shall do so by
giving written notice of such termination to the other party and stating the
effective date and reason for such termination; provided, however, that no such
action shall alter or amend any other provisions hereof or rights arising
hereunder, including, without limitation, the provisions of Articles V and VI
hereof.
IV.
EFFECT OF TERMINATION OF EMPLOYMENT
4.1 TERMINATION BY EXPIRATION OF TERM. If Executive's employment
hereunder shall terminate upon expiration of the term provided in Section 3.1
hereof, all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of Executive's employment, except for such
benefits as may be required by law.
4.2 TERMINATION BY COMPANY. If Executive's employment hereunder shall
be terminated by Company prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be for any
reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or
3.2(iv), Company shall (i) pay Executive, within thirty days after the last day
of Executive's employment with Company, a Termination Payment and (ii) provide
Executive with Severance Benefits.
4.3 TERMINATION BY EXECUTIVE. If Executive's employment hereunder shall
be terminated by Executive prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be pursuant
to Section 3.3(i) or 3.3(ii), then Company shall (i) pay Executive, within
thirty days after the last day of Executive's employment with Company, a
Termination Payment and (ii) provide Executive with Severance Benefits.
4.4 CHANGE IN CONTROL. If, within two years following the occurrence of
a Change in Control, Executive's employment with Company shall terminate
pursuant to Section 3.3(iii) or under circumstances that would entitle Executive
to a Termination Payment pursuant to Section 4.2 or 4.3, then, in lieu of any
Termination Payment or Severance Benefits pursuant to Section
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4.2 or 4.3, Company shall (1) pay Executive, within thirty days after the last
day of Executive's employment with Company, a Change in Control Payment and (2)
provide Executive with Change in Control Benefits.
4.5 PARACHUTE PAYMENT GROSS UP. Notwithstanding anything to the
contrary in this Agreement, in the event that any payment or distribution by the
Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), Company shall pay to Executive an
additional payment (a "Gross-up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment equal to the Excise
Tax imposed upon the Payments. Company shall make an initial determination as to
whether a Gross-up Payment is required and the amount of any such Gross-up
Payment. Executive shall notify Company in writing of any claim by the Internal
Revenue Service which, if successful, would require Company to make a Gross-up
Payment (or a Gross-up Payment in excess of that, if any, initially determined
by Company) within ten days of the receipt of such claim. Company shall notify
Executive in writing at least ten days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If Company
decides to contest such claim, Executive shall cooperate fully with Company in
such action; provided, however, Company shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of Company's
action. If, as a result of Company's action with respect to a claim, Executive
receives a refund of any amount paid by Company with respect to such claim,
Executive shall promptly pay such refund to Company If Company fails to timely
notify Executive whether it will contest such claim, or if Company determines
not to contest such claim, Company shall immediately pay to Executive the
portion of such claim, if any, which it has not previously paid to Executive.
4.6 NO DUTY TO MITIGATE LOSSES. Executive shall have no duty to find
new employment following the termination of Executive's employment under
circumstances that require Company to pay any amount to Executive pursuant to
this Article IV. Any salary or remuneration received by Executive from a third
party for the providing of personal services (whether by employment or by
functioning as an independent contractor) following the termination of
Executive's employment under circumstances pursuant to which this Article IV
apply shall not reduce Company's obligation to make a payment to Executive (or
the amount of any such payment) pursuant to the terms of this Article IV.
4.7 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article IV shall be received by Executive as liquidated damages and not as a
penalty.
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4.8 OTHER COMPENSATION PROGRAMS. This Agreement governs the rights and
obligations of Executive and Company with respect to Executive's annual base
salary and certain perquisites of employment. Executive's rights and obligations
both during the term of Executive's employment and thereafter with respect to
stock options, restricted stock, incentive and deferred compensation, life
insurance policies insuring the life of Executive, and other benefits under
plans and programs maintained by Company shall be governed by the separate
agreements, plans, programs, and other documents and instruments governing such
matters, or as may be provided by law.
V.
PROTECTION OF INFORMATION
5.1 DISCLOSURE TO EXECUTIVE. Company shall (i) disclose to Executive,
or place Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its Affiliates, and/or (ii) entrust
Executive with business opportunities of Company or its Affiliates, and/or (iii)
place Executive in a position to develop business good will on behalf of Company
or its Affiliates.
5.2 DISCLOSURE TO AND PROPERTY OF COMPANY. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's premises or
otherwise) that relate to Company's business, products, or services (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing terms, evaluations, opinions,
interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer's organizations
or within the organization of acquisition prospects, or marketing and
merchandising techniques, prospective names, and marks) shall be disclosed to
Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 NO UNAUTHORIZED OR DAMAGING USE OR DISCLOSURE. Executive will not,
at any time during or after Executive's employment by Company, make any
unauthorized disclosure of any confidential business information or trade
secrets of Company or its Affiliates, or make any use thereof, except in the
carrying out of Executive's employment responsibilities hereunder. Affiliates of
the Company shall be third party beneficiaries of Executive's obligations under
this Section. As a result of Executive's employment by Company, Executive may
also from time to time have access to, or knowledge of, confidential business
information or trade secrets of third
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parties, such as customers, suppliers, partners, joint venturers, and the like,
of Company and its Affiliates. Executive also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Company's confidential business
information and trade secrets. Executive shall refrain, both during the
employment relationship and after the employment relationship terminates, from
publishing any oral or written statements about Company, any of its Affiliates,
or any of such entities' officers, employees, agents, or representatives (i)
that are slanderous, libelous, or defamatory, or (ii) that disclose private or
confidential information about Company, any of its Affiliates, or any of such
entities' business affairs, officers, employees, agents, or representatives, or
(iii) that constitute an intrusion into the seclusion or private lives of
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives, or (iv) that give rise to unreasonable publicity
about the private lives of Company, any of its Affiliates, or any of such
entities' officers, employees, agents, or representatives, or (v) that place
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives in a false light before the public, or (vi) that
constitute a misappropriation of the name or likeness of Company, any of its
Affiliates, or any of such entities' officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may be
enjoined by the courts.
5.4 OWNERSHIP BY COMPANY. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression, which is the subject matter of copyright (such as videotapes,
written presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Company's business, products, or services,
whether such work is created solely by Executive or jointly with others (whether
during business hours or otherwise and whether on Company's premises or
otherwise), Company shall be deemed the author of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not prepared by Executive within the scope of Executive's employment but is
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. If such work is neither prepared by Executive within the scope of
Executive's employment nor a work specially ordered that is deemed to be a work
made for hire, then Executive hereby agrees to assign, and by these presents
does assign, to Company all of Executive's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
5.5 ASSISTANCE BY EXECUTIVE. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts, improvements, discoveries, and
inventions, and its copyrighted works, including without limitation, the
execution of all formal assignment documents requested by Company or its nominee
and the execution of all lawful oaths and applications for patents and
registration of copyright in the United States and foreign countries.
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5.6 REMEDIES. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by terminating any and all
payments then owing to Executive under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article, but shall be in addition to all remedies available at law or in
equity to Company, including the recovery of damages from Executive and his
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
VI.
NONCOMPETITION OBLIGATION
6.1 IN GENERAL. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the trade secrets and
confidential information of Company and its Affiliates that have been and will
in the future be disclosed or entrusted to Executive, the business good will of
Company and its Affiliates that has been and will in the future be developed in
Executive, or the business opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its Affiliates; and, as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the noncompetition obligations hereunder. Executive shall
not, directly or indirectly for Executive or for others, in any geographic area
or market where Company or any of its Affiliates are conducting any business as
of the date of the termination of the employment relationship or have during the
previous twelve months conducted such business:
(i) Engage in any business competitive with the business
conducted by Company;
(ii) Provide comparable services to any other person,
association, or entity who is primarily engaged in any business
competitive with the business conducted by Company with respect to such
competitive business; or
(iii) Induce any employee of Company or any of its
Affiliates to terminate his or her employment with Company or such
Affiliates, or hire or assist in the hiring of any such employee by any
person, association, or entity not affiliated with Company.
These noncompetition obligations shall apply during the period that Executive is
employed by Company and, if Executive receives a severance payment from Company
pursuant to Article IV, such obligations shall extend for the duration of the
period during which Executive is receiving any benefits pursuant to this
Agreement after termination of the employment relationship.
6.2 ENFORCEMENT AND REMEDIES. Executive understands that the
restrictions set forth in Section 6.1 may limit Executive's ability to engage in
certain businesses anywhere in the world during the period provided for above,
but acknowledges that Executive will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction.
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Executive acknowledges that money damages would not be sufficient remedy for any
breach of this Article by Executive, and Company shall be entitled to enforce
the provisions of this Article by terminating any payments then owing to
Executive under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach. Such remedies shall
not be deemed the exclusive remedies for a breach of this Article, but shall be
in addition to all remedies available at law or in equity to Company, including
without limitation, the recovery of damages from Executive and Executive's
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
6.3 REFORMATION. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
VII.
MISCELLANEOUS
7.1 NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO COMPANY TO: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
IF TO EXECUTIVE TO: Monty Lee Davis
c/o 5295 Hollister Road
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices or changes of address shall be
effective only upon receipt.
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7.2 APPLICABLE LAW. This Agreement is entered into under, and shall be
governed for all purposes by, the laws of the state of Texas, except as may be
preempted by federal law.
7.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.4 SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
7.6 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city, and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally.
7.7 HEADINGS. The Article and Section headings herein have been
inserted for purposes of convenience only and shall not be used for interpretive
purposes.
7.8 GENDER AND PLURALS. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
7.9 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto shall be subject to
voluntary or involuntary assignment, alienation, or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
7.10 TERM. This Agreement has a term co-extensive with the term of
employment provided in Section 3.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
V and VI shall survive any termination of the employment relationship and/or of
this Agreement.
7.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties, and agreements between the
parties with respect to employment of Executive by Company. Without limiting the
scope of the preceding sentence, all prior understandings and agreements among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect. Any modification of this Agreement will
be effective only if it is in writing and signed by the party to be charged.
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<PAGE> 11
VIII.
DEFINITIONS
8.1 DEFINITIONS. Where the following words and phrases appear in this
Agreement, each shall have the respective meaning set forth below, unless the
context clearly indicates to the contrary.
(1) "AFFILIATE" shall mean any entity that owns or controls, is owned or
controlled by, or is under common ownership or control with, Core
Laboratories N.V.
(2) "BOARD OF DIRECTORS" shall mean the Board of Supervisory Directors of
Core Laboratories N.V.
(3) "CAUSE" shall mean Executive (i) has engaged in gross negligence or
willful misconduct in the performance of the duties required of
Executive hereunder, (ii) has been convicted of any felony or a
misdemeanor involving moral turpitude, (iii) has willfully refused
without proper legal reason to perform the duties and responsibilities
required of Executive hereunder, (iv) has materially breached any
corporate policy or code of conduct established by Company, or (v) has
willfully engaged in conduct that Executive knows or should know is
materially injurious to Company or any of its Affiliates.
(4) "CHANGE IN CONTROL" shall mean the purchase or other acquisition by any
person, entity, or group of persons, within the meaning of section
13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any
comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of more than twenty
percent (20%) of either the outstanding shares of common stock or the
combined voting power of Core Laboratories N.V.'s then outstanding
voting securities entitled to vote generally, or the approval by the
stockholders of Core Laboratories N.V. of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were
stockholders of Core Laboratories N.V. immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than eighty percent (80%) of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged, or consolidated Core Laboratories N.V.'s then
outstanding securities, or a liquidation or dissolution of the Company,
or of the sale of all or substantially all of Core Laboratories N.V.'s
assets.
(5) "CHANGE IN CONTROL BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day
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prior to Executive's termination of employment with Company
for thirty-six months from the date of such termination at no
cost to Executive or Executive's dependents; provided,
however, that (1) such coverage shall be subject to all of the
terms and conditions of such plans, including, without
limitation, the eligibility provisions, (2) such coverage
shall terminate if and to the extent Executive or Executive's
dependents become covered by the medical, dental, and life
insurance plans of a subsequent employer (and any such
coverage shall be promptly reported to Company by Executive),
(3) if Executive (and/or Executive's spouse) would have been
entitled to retiree medical, dental, and/or life insurance
coverage under Company's plans had Executive voluntarily
retired on the date of such termination, then such coverages
shall be continued as provided under such plans, and (4) in
the event that continued participation in any such Company
plan is not permitted by the terms of such plan, Company shall
use its best efforts to arrange, upon comparable terms,
benefits substantially equivalent to those that were provided
under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment, a lump sum cash payment
in an amount equal to the nonvested employer contributions
allocated to Executive's account under the Company 401(k) plan
that are forfeited as a result of Executive's termination of
employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(6) "CHANGE IN CONTROL PAYMENT" shall mean a lump sum payment in an amount
equal to the sum of (i) 300% of Executive's annual base salary as in
effect pursuant to Section 2.1 immediately prior to Executive's
termination of employment with Company and (ii) 45% of the maximum
annual incentive bonus amount pursuant to Section 2.2 that Executive
could have earned for the year during which Executive's employment with
Company terminates.
(7) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(8) "COMMITTEE" shall mean the Compensation Committee of the Board of
Directors.
(9) "COMPANY" shall mean Core Laboratories N.V. and its Affiliates.
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(10) "SEVERANCE BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day prior to Executive's
termination of employment with Company for thirty-six months
from the date of such termination at no cost to Executive or
Executive's dependents; (provided, however, that (1) such
coverage shall be subject to all of the terms and conditions
of such plans, including, without limitation, eligibility
provisions, (2) such coverage shall terminate if and to the
extent Executive or Executive's dependents become covered by
the medical, dental, and life insurance plans of a subsequent
employer (and any such coverage shall be promptly reported to
Company by Executive), (3) if Executive (and/or Executive's
spouse) would have been entitled to retiree medical, dental,
and/or life insurance coverage under Company's plans had
Executive voluntarily retired on the date of such termination,
then such coverages shall be continued as provided under such
plans), and (4) in the event that continued participation in
any such Company plan is not permitted by the terms of such
plan, Company shall use its best efforts to arrange, upon
comparable terms, benefits substantially equivalent to those
that were provided under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment with Company, a lump sum
cash payment in an amount equal to the nonvested employer
contributions allocated to Executive's account under the
Company 401(k) plan that are forfeited as a result of
Executive's termination of employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(11) "EFFECTIVE DATE" shall mean August 1, 1998.
(12) "EXECUTIVE" shall mean Monty Lee Davis.
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(13) "GOOD REASON" shall mean termination by Executive of Executive's
employment with Company within sixty days of and in connection with or
due to (i) a significant change in the nature, status, or scope of
Executive's duties, responsibilities, or authorities, (ii) a permanent
change and relocation of Executive's principal place of employment with
Company, which is more than fifty miles away from the prior location,
(iii) a material breach by Company of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty days
following written notice of such breach by Executive to Company, (iv) a
material diminution in Executive's participation in bonus, stock
option, incentive award, and other compensation plans provided by
Company for executives with comparable duties, (v) a material
diminution in employee benefits (including but not limited to medical,
dental, life insurance, and long-term disability plans) and perquisites
applicable to Executive from the employee benefits and perquisites
provided by Company to executives with comparable duties, or (vi) in
Executive's judgment, the scope of Executive's position within Company
being inappropriate.
(14) "GROSS UP PAYMENT" shall mean a payment made pursuant to Section 4.5.
(15) "ORIGINAL TERM" shall mean the original term of this Agreement as set
forth in the first sentence of Section 3.1.
(16) "TERMINATION PAYMENT" shall mean a lump sum payment in an amount equal
to the sum of (i) 200% of Executive's annual base salary as in effect
pursuant to Section 2.1 immediately prior to Executive's termination of
employment with Company and (ii) 45% of the maximum annual incentive
bonus amount pursuant to Section 2.2 that Executive could have earned
for the year during which Executive's employment with Company
terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _____ day of August, 1998, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
BY:
-----------------------------
NAME:
---------------------------
TITLE:
--------------------------
EXECUTIVE
--------------------------------
MONTY LEE DAVIS
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made by and between
CORE LABORATORIES N.V. and JOHN DAVID DENSON ("EXECUTIVE").
W I T N E S S E T H:
WHEREAS, Executive is currently an employee of Core Laboratories N.V.
and/or one or more of its Affiliates ("COMPANY"); and
WHEREAS, the Company desires to continue to employ Executive on the
terms and conditions, and for the consideration, hereinafter set forth, and
Executive is desirous of continuing to be employed by Company on such terms and
conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to
be paid and provided to Executive under this Agreement and the mutual promises,
covenants, and undertakings contained herein, Core Laboratories N.V. and
Executive, each intending to be legally bound, hereby agree as follows:
I.
EMPLOYMENT AND DUTIES
1.1 EMPLOYMENT; EFFECTIVE DATE. Company agrees to employ Executive, and
Executive agrees to be employed by Company, beginning as of the Effective Date
and continuing for the period of time set forth in Article III of this
Agreement, subject to the terms and conditions of this Agreement.
1.2 POSITION. From and after the Effective Date, Company shall employ
Executive in the position of General Counsel, Vice President and Secretary of
Company, or in such other comparable executive position as Company and Executive
may mutually agree.
1.3 DUTIES AND SERVICES. Executive agrees to serve in the position
referred to in Section 1.2 and to perform diligently and to the best of
Executive's abilities the duties and services appertaining to such office, as
well as such additional duties and services appropriate to such office upon
which the parties mutually may agree from time to time. Executive's employment
shall also be subject to the policies maintained and established by Company, as
the same may be amended from time to time.
1.4 OTHER INTERESTS. Executive agrees, during the period of Executive's
employment by Company, to devote Executive's primary business time, energy, and
best efforts to the business and affairs of Company and its Affiliates and not
to engage, directly or indirectly, in any other business or businesses, whether
or not similar to that of Company, except with the consent of the Board of
Directors. The foregoing notwithstanding, the parties recognize and agree that
Executive may, without consent of the Board of Directors, engage in charitable,
civic, and other business activities that do not conflict with the business and
affairs of Company and in passive personal investments, so long as such
activities do not interfere with Executive's performance of Executive's duties
hereunder.
<PAGE> 2
1.5 DUTY OF LOYALTY. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times
in the best interests of Company. In keeping with these duties, Executive shall
make full disclosure to Company of all business opportunities pertaining to
Company's business and shall not appropriate for Executive's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
II.
COMPENSATION AND BENEFITS
2.1 BASE SALARY. During the period of this Agreement, Executive shall
receive a minimum annual base salary of $_______. Executive's annual base salary
shall be reviewed by the Board of Directors (or a committee thereof) on an
annual basis, and, in the sole discretion of the Board of Directors (or such
committee), such annual base salary may be increased, but not decreased,
effective as of August 1 of each year. Executive's annual base salary shall be
paid in equal installments in accordance with the Company's standard policy
regarding payment of compensation to executives but no less frequently than
monthly.
2.2 BONUSES. Executive shall be eligible to receive an annual bonus of
up to 50% of Executive's annual base salary with the amount of such bonus to be
determined by the Committee based upon criteria established from time to time by
the Committee.
2.3 EMPLOYEE BENEFITS. Executive and, to the extent applicable,
Executive's spouse, dependents, and beneficiaries shall be allowed to
participate in all benefits, plans, and programs, including improvements or
modifications of the same, which are now, or may hereafter be, available to
other executive employees of Company. Such benefits, plans, and programs shall
include, without limitation, any deferred compensation plan, profit sharing
plan, thrift plan, health insurance or health care plan, life insurance,
disability insurance, pension plan, supplemental retirement plan, stock option
plan, vacation and sick leave plan, and the like which may be maintained by
Company for Executive specifically or for employees of Executive's seniority and
position generally. Company shall not, however, by reason of this Section be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing, any such benefit, plan, or program, so long as such changes are
similarly applicable to executive employees generally.
2.4 BUSINESS AND ENTERTAINMENT EXPENSES. During his employment
hereunder, subject to Company's standard policies and procedures with respect to
expense reimbursement as applied to its executive employees generally, Company
shall reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business-related purposes,
including, but not limited to, dues and fees to industry and professional
organizations and costs of entertainment and business development.
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2.5 INDEMNIFICATION. Company agrees to indemnify Executive against any
and all liabilities arising out of Executive's employment duties to the extent
such liabilities are not covered by any insurance maintained by Company or
Executive, including any liabilities that are caused by or result from an act or
omission constituting the negligence of Executive in the performance of such
duties, but excluding liabilities that are caused by or result from Executive's
own gross negligence or willful misconduct.
III.
TERM AND TERMINATION OF EMPLOYMENT
3.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the third anniversary of the Effective Date. Said term of
employment shall be extended automatically for an additional successive
three-year period as of each annual anniversary date of the Effective Date that
occurs while this Agreement is in effect; provided, however, that if, at any
time prior to any such anniversary date of the Effective Date, either party
shall give written notice to the other that no such automatic extension shall
occur, then Executive's employment shall terminate on the last day of the
three-year period beginning on the annual anniversary date of the Effective Date
that next occurs after such notice is given.
3.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident,
sickness, or other circumstance that renders Executive mentally or
physically incapable of performing the duties and services required of
Executive hereunder on a full-time basis for a period of at least 180
consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice to Executive by Company of
such breach; or
(v) For any other reason whatsoever, in the sole
discretion of the Board of Directors.
3.3 EXECUTIVE'S RIGHT TO TERMINATE. Notwithstanding the provisions of
Section 3.1, Executive shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
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<PAGE> 4
(i) A material breach by Company of any material
provision of this Agreement which, if correctable, remains uncorrected
for thirty days following written notice of such breach by Executive to
Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole
discretion of Executive.
3.4 NOTICE OF TERMINATION. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the term of
employment as provided in Section 3.1, Company or Executive shall do so by
giving written notice of such termination to the other party and stating the
effective date and reason for such termination; provided, however, that no such
action shall alter or amend any other provisions hereof or rights arising
hereunder, including, without limitation, the provisions of Articles V and VI
hereof.
IV.
EFFECT OF TERMINATION OF EMPLOYMENT
4.1 TERMINATION BY EXPIRATION OF TERM. If Executive's employment
hereunder shall terminate upon expiration of the term provided in Section 3.1
hereof, all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of Executive's employment, except for such
benefits as may be required by law.
4.2 TERMINATION BY COMPANY. If Executive's employment hereunder shall
be terminated by Company prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be for any
reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or
3.2(iv), Company shall (i) pay Executive, within thirty days after the last day
of Executive's employment with Company, a Termination Payment and (ii) provide
Executive with Severance Benefits.
4.3 TERMINATION BY EXECUTIVE. If Executive's employment hereunder shall
be terminated by Executive prior to expiration of the term provided in Section
3.1, regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the termination of
such employment; provided, however, that if such termination shall be pursuant
to Section 3.3(i) or 3.3(ii), then Company shall (i) pay Executive, within
thirty days after the last day of Executive's employment with Company, a
Termination Payment and (ii) provide Executive with Severance Benefits.
4.4 CHANGE IN CONTROL. If, within two years following the occurrence of
a Change in Control, Executive's employment with Company shall terminate
pursuant to Section 3.3(iii) or under circumstances that would entitle Executive
to a Termination Payment pursuant to Section 4.2 or 4.3, then, in lieu of any
Termination Payment or Severance Benefits pursuant to Section
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<PAGE> 5
4.2 or 4.3, Company shall (1) pay Executive, within thirty days after the last
day of Executive's employment with Company, a Change in Control Payment and (2)
provide Executive with Change in Control Benefits.
4.5 PARACHUTE PAYMENT GROSS UP. Notwithstanding anything to the
contrary in this Agreement, in the event that any payment or distribution by the
Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), Company shall pay to Executive an
additional payment (a "Gross-up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment equal to the Excise
Tax imposed upon the Payments. Company shall make an initial determination as to
whether a Gross-up Payment is required and the amount of any such Gross-up
Payment. Executive shall notify Company in writing of any claim by the Internal
Revenue Service which, if successful, would require Company to make a Gross-up
Payment (or a Gross-up Payment in excess of that, if any, initially determined
by Company) within ten days of the receipt of such claim. Company shall notify
Executive in writing at least ten days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If Company
decides to contest such claim, Executive shall cooperate fully with Company in
such action; provided, however, Company shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of Company's
action. If, as a result of Company's action with respect to a claim, Executive
receives a refund of any amount paid by Company with respect to such claim,
Executive shall promptly pay such refund to Company If Company fails to timely
notify Executive whether it will contest such claim, or if Company determines
not to contest such claim, Company shall immediately pay to Executive the
portion of such claim, if any, which it has not previously paid to Executive.
4.6 NO DUTY TO MITIGATE LOSSES. Executive shall have no duty to find
new employment following the termination of Executive's employment under
circumstances that require Company to pay any amount to Executive pursuant to
this Article IV. Any salary or remuneration received by Executive from a third
party for the providing of personal services (whether by employment or by
functioning as an independent contractor) following the termination of
Executive's employment under circumstances pursuant to which this Article IV
apply shall not reduce Company's obligation to make a payment to Executive (or
the amount of any such payment) pursuant to the terms of this Article IV.
4.7 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article IV shall be received by Executive as liquidated damages and not as a
penalty.
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4.8 OTHER COMPENSATION PROGRAMS. This Agreement governs the rights and
obligations of Executive and Company with respect to Executive's annual base
salary and certain perquisites of employment. Executive's rights and obligations
both during the term of Executive's employment and thereafter with respect to
stock options, restricted stock, incentive and deferred compensation, life
insurance policies insuring the life of Executive, and other benefits under
plans and programs maintained by Company shall be governed by the separate
agreements, plans, programs, and other documents and instruments governing such
matters, or as may be provided by law.
V.
PROTECTION OF INFORMATION
5.1 DISCLOSURE TO EXECUTIVE. Company shall (i) disclose to Executive,
or place Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its Affiliates, and/or (ii) entrust
Executive with business opportunities of Company or its Affiliates, and/or (iii)
place Executive in a position to develop business good will on behalf of Company
or its Affiliates.
5.2 DISCLOSURE TO AND PROPERTY OF COMPANY. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's premises or
otherwise) that relate to Company's business, products, or services (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing terms, evaluations, opinions,
interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer's organizations
or within the organization of acquisition prospects, or marketing and
merchandising techniques, prospective names, and marks) shall be disclosed to
Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 NO UNAUTHORIZED OR DAMAGING USE OR DISCLOSURE. Executive will not,
at any time during or after Executive's employment by Company, make any
unauthorized disclosure of any confidential business information or trade
secrets of Company or its Affiliates, or make any use thereof, except in the
carrying out of Executive's employment responsibilities hereunder. Affiliates of
the Company shall be third party beneficiaries of Executive's obligations under
this Section. As a result of Executive's employment by Company, Executive may
also from time to time have access to, or knowledge of, confidential business
information or trade secrets of third
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<PAGE> 7
parties, such as customers, suppliers, partners, joint venturers, and the like,
of Company and its Affiliates. Executive also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Company's confidential business
information and trade secrets. Executive shall refrain, both during the
employment relationship and after the employment relationship terminates, from
publishing any oral or written statements about Company, any of its Affiliates,
or any of such entities' officers, employees, agents, or representatives (i)
that are slanderous, libelous, or defamatory, or (ii) that disclose private or
confidential information about Company, any of its Affiliates, or any of such
entities' business affairs, officers, employees, agents, or representatives, or
(iii) that constitute an intrusion into the seclusion or private lives of
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives, or (iv) that give rise to unreasonable publicity
about the private lives of Company, any of its Affiliates, or any of such
entities' officers, employees, agents, or representatives, or (v) that place
Company, any of its Affiliates, or any of such entities' officers, employees,
agents, or representatives in a false light before the public, or (vi) that
constitute a misappropriation of the name or likeness of Company, any of its
Affiliates, or any of such entities' officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may be
enjoined by the courts.
5.4 OWNERSHIP BY COMPANY. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression, which is the subject matter of copyright (such as videotapes,
written presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Company's business, products, or services,
whether such work is created solely by Executive or jointly with others (whether
during business hours or otherwise and whether on Company's premises or
otherwise), Company shall be deemed the author of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not prepared by Executive within the scope of Executive's employment but is
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. If such work is neither prepared by Executive within the scope of
Executive's employment nor a work specially ordered that is deemed to be a work
made for hire, then Executive hereby agrees to assign, and by these presents
does assign, to Company all of Executive's worldwide right, title, and interest
in and to such work and all rights of copyright therein.
5.5 ASSISTANCE BY EXECUTIVE. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts, improvements, discoveries, and
inventions, and its copyrighted works, including without limitation, the
execution of all formal assignment documents requested by Company or its nominee
and the execution of all lawful oaths and applications for patents and
registration of copyright in the United States and foreign countries.
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<PAGE> 8
5.6 REMEDIES. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by terminating any and all
payments then owing to Executive under this Agreement and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article, but shall be in addition to all remedies available at law or in
equity to Company, including the recovery of damages from Executive and his
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
VI.
NONCOMPETITION OBLIGATION
6.1 IN GENERAL. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the trade secrets and
confidential information of Company and its Affiliates that have been and will
in the future be disclosed or entrusted to Executive, the business good will of
Company and its Affiliates that has been and will in the future be developed in
Executive, or the business opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its Affiliates; and, as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the noncompetition obligations hereunder. Executive shall
not, directly or indirectly for Executive or for others, in any geographic area
or market where Company or any of its Affiliates are conducting any business as
of the date of the termination of the employment relationship or have during the
previous twelve months conducted such business:
(i) Engage in any business competitive with the business
conducted by Company;
(ii) Provide comparable services to any other person,
association, or entity who is primarily engaged in any business
competitive with the business conducted by Company with respect to such
competitive business; or
(iii) Induce any employee of Company or any of its
Affiliates to terminate his or her employment with Company or such
Affiliates, or hire or assist in the hiring of any such employee by any
person, association, or entity not affiliated with Company.
These noncompetition obligations shall apply during the period that Executive is
employed by Company and, if Executive receives a severance payment from Company
pursuant to Article IV, such obligations shall extend for the duration of the
period during which Executive is receiving any benefits pursuant to this
Agreement after termination of the employment relationship.
6.2 ENFORCEMENT AND REMEDIES. Executive understands that the
restrictions set forth in Section 6.1 may limit Executive's ability to engage in
certain businesses anywhere in the world during the period provided for above,
but acknowledges that Executive will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction.
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<PAGE> 9
Executive acknowledges that money damages would not be sufficient remedy for any
breach of this Article by Executive, and Company shall be entitled to enforce
the provisions of this Article by terminating any payments then owing to
Executive under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach. Such remedies shall
not be deemed the exclusive remedies for a breach of this Article, but shall be
in addition to all remedies available at law or in equity to Company, including
without limitation, the recovery of damages from Executive and Executive's
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.
6.3 REFORMATION. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
VII.
MISCELLANEOUS
7.1 NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO COMPANY TO: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
IF TO EXECUTIVE TO: John David Denson
c/o 5295 Hollister Road
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices or changes of address shall be
effective only upon receipt.
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<PAGE> 10
7.2 APPLICABLE LAW. This Agreement is entered into under, and shall be
governed for all purposes by, the laws of the state of Texas, except as may be
preempted by federal law.
7.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.4 SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
7.6 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city, and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally.
7.7 HEADINGS. The Article and Section headings herein have been
inserted for purposes of convenience only and shall not be used for interpretive
purposes.
7.8 GENDER AND PLURALS. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
7.9 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto shall be subject to
voluntary or involuntary assignment, alienation, or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
7.10 TERM. This Agreement has a term co-extensive with the term of
employment provided in Section 3.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
V and VI shall survive any termination of the employment relationship and/or of
this Agreement.
7.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties, and agreements between the
parties with respect to employment of Executive by Company. Without limiting the
scope of the preceding sentence, all prior understandings and agreements among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect. Any modification of this Agreement will
be effective only if it is in writing and signed by the party to be charged.
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VIII.
DEFINITIONS
8.1 DEFINITIONS. Where the following words and phrases appear in this
Agreement, each shall have the respective meaning set forth below, unless the
context clearly indicates to the contrary.
(1) "AFFILIATE" shall mean any entity that owns or controls, is owned or
controlled by, or is under common ownership or control with, Core
Laboratories N.V.
(2) "BOARD OF DIRECTORS" shall mean the Board of Supervisory Directors of
Core Laboratories N.V.
(3) "CAUSE" shall mean Executive (i) has engaged in gross negligence or
willful misconduct in the performance of the duties required of
Executive hereunder, (ii) has been convicted of any felony or a
misdemeanor involving moral turpitude, (iii) has willfully refused
without proper legal reason to perform the duties and responsibilities
required of Executive hereunder, (iv) has materially breached any
corporate policy or code of conduct established by Company, or (v) has
willfully engaged in conduct that Executive knows or should know is
materially injurious to Company or any of its Affiliates.
(4) "CHANGE IN CONTROL" shall mean the purchase or other acquisition by any
person, entity, or group of persons, within the meaning of section
13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any
comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of more than twenty
percent (20%) of either the outstanding shares of common stock or the
combined voting power of Core Laboratories N.V.'s then outstanding
voting securities entitled to vote generally, or the approval by the
stockholders of Core Laboratories N.V. of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were
stockholders of Core Laboratories N.V. immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than eighty percent (80%) of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged, or consolidated Core Laboratories N.V.'s then
outstanding securities, or a liquidation or dissolution of the Company,
or of the sale of all or substantially all of Core Laboratories N.V.'s
assets.
(5) "CHANGE IN CONTROL BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day
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<PAGE> 12
prior to Executive's termination of employment with Company
for thirty-six months from the date of such termination at no
cost to Executive or Executive's dependents; provided,
however, that (1) such coverage shall be subject to all of the
terms and conditions of such plans, including, without
limitation, the eligibility provisions, (2) such coverage
shall terminate if and to the extent Executive or Executive's
dependents become covered by the medical, dental, and life
insurance plans of a subsequent employer (and any such
coverage shall be promptly reported to Company by Executive),
(3) if Executive (and/or Executive's spouse) would have been
entitled to retiree medical, dental, and/or life insurance
coverage under Company's plans had Executive voluntarily
retired on the date of such termination, then such coverages
shall be continued as provided under such plans, and (4) in
the event that continued participation in any such Company
plan is not permitted by the terms of such plan, Company shall
use its best efforts to arrange, upon comparable terms,
benefits substantially equivalent to those that were provided
under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment, a lump sum cash payment
in an amount equal to the nonvested employer contributions
allocated to Executive's account under the Company 401(k) plan
that are forfeited as a result of Executive's termination of
employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(6) "CHANGE IN CONTROL PAYMENT" shall mean a lump sum payment in an amount
equal to the sum of (i) 300% of Executive's annual base salary as in
effect pursuant to Section 2.1 immediately prior to Executive's
termination of employment with Company and (ii) 45% of the maximum
annual incentive bonus amount pursuant to Section 2.2 that Executive
could have earned for the year during which Executive's employment with
Company terminates.
(7) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(8) "COMMITTEE" shall mean the Compensation Committee of the Board of
Directors.
(9) "COMPANY" shall mean Core Laboratories N.V. and its Affiliates.
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(10) "SEVERANCE BENEFITS" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group
life insurance plans shall be provided for Executive and those
of Executive's dependents (including Executive's spouse) who
were covered under such plans on the day prior to Executive's
termination of employment with Company for thirty-six months
from the date of such termination at no cost to Executive or
Executive's dependents; (provided, however, that (1) such
coverage shall be subject to all of the terms and conditions
of such plans, including, without limitation, eligibility
provisions, (2) such coverage shall terminate if and to the
extent Executive or Executive's dependents become covered by
the medical, dental, and life insurance plans of a subsequent
employer (and any such coverage shall be promptly reported to
Company by Executive), (3) if Executive (and/or Executive's
spouse) would have been entitled to retiree medical, dental,
and/or life insurance coverage under Company's plans had
Executive voluntarily retired on the date of such termination,
then such coverages shall be continued as provided under such
plans), and (4) in the event that continued participation in
any such Company plan is not permitted by the terms of such
plan, Company shall use its best efforts to arrange, upon
comparable terms, benefits substantially equivalent to those
that were provided under such Company plan.
(ii) Company shall pay to Executive, within thirty days of
Executive's termination of employment with Company, a lump sum
cash payment in an amount equal to the nonvested employer
contributions allocated to Executive's account under the
Company 401(k) plan that are forfeited as a result of
Executive's termination of employment.
(iii) All of the outstanding stock options granted by Company to
Executive shall become fully vested and immediately
exercisable in full upon Executive's termination of employment
and for a period of three months thereafter or for such
greater period as may be provided in the plan or plans
pursuant to which such stock options were granted (but in no
event shall any such stock option be exercisable after the
original term of such stock option).
(iv) Company shall provide Executive with outplacement services at
a cost not to exceed 100% of Executive's annual base salary as
in effect pursuant to Section 2.1 immediately prior to
Executive's termination of employment with Company.
(11) "EFFECTIVE DATE" shall mean August 1, 1998.
(12) "EXECUTIVE" shall mean John David Denson.
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(13) "GOOD REASON" shall mean termination by Executive of Executive's
employment with Company within sixty days of and in connection with or
due to (i) a significant change in the nature, status, or scope of
Executive's duties, responsibilities, or authorities, (ii) a permanent
change and relocation of Executive's principal place of employment with
Company, which is more than fifty miles away from the prior location,
(iii) a material breach by Company of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty days
following written notice of such breach by Executive to Company, (iv) a
material diminution in Executive's participation in bonus, stock
option, incentive award, and other compensation plans provided by
Company for executives with comparable duties, (v) a material
diminution in employee benefits (including but not limited to medical,
dental, life insurance, and long-term disability plans) and perquisites
applicable to Executive from the employee benefits and perquisites
provided by Company to executives with comparable duties, or (vi) in
Executive's judgment, the scope of Executive's position within Company
being inappropriate.
(14) "GROSS UP PAYMENT" shall mean a payment made pursuant to Section 4.5.
(15) "ORIGINAL TERM" shall mean the original term of this Agreement as set
forth in the first sentence of Section 3.1.
(16) "TERMINATION PAYMENT" shall mean a lump sum payment in an amount equal
to the sum of (i) 200% of Executive's annual base salary as in effect
pursuant to Section 2.1 immediately prior to Executive's termination of
employment with Company and (ii) 45% of the maximum annual incentive
bonus amount pursuant to Section 2.2 that Executive could have earned
for the year during which Executive's employment with Company
terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _____ day of August, 1998, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
BY:
-----------------------------
NAME:
---------------------------
TITLE:
--------------------------
EXECUTIVE
--------------------------------
JOHN DAVID DENSON
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<PAGE> 1
EXHIBIT 10.15
ACQUISITION AGREEMENT
Among
Core Laboratories N.V.,
Core Laboratories International B.V.,
Saybolt International B.V.,
A.G.I. Mexicana S.A. de C.V.
and
the Stockholders of
A.G.I. Mexicana S.A. de C.V.
Dated as of
December 11, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
THE EXCHANGE
1.01 THE EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 CONSIDERATION FOR SUCH TRANSFER AND ESCROW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05 WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.06 COMPANY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.01 GOOD TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 CERTAIN SECURITIES LAW MATTERS (REGULATION D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.03 CERTAIN SECURITIES LAW MATTERS (REGULATION S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.04 AUTHORIZATION AND VALIDITY OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND ANDREWS
3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02 ORGANIZATIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.03 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.04 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.06 PERMITS; COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.07 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.08 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.09 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.16 CERTAIN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.17 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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3.18 AFFILIATE INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.19 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.20 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND ACQUISITION SUBS
4.01 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.02 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.03 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.05 REPORTS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.07 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
COVENANTS OF THE STOCKHOLDERS
5.01 AFFIRMATIVE COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.02 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
COVENANTS OF THE COMPANY AND ANDREWS
6.01 AFFIRMATIVE COVENANTS OF THE COMPANY AND ANDREWS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.02 NEGATIVE COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII
COVENANTS OF ACQUIROR AND ACQUISITION SUBS
7.01 AFFIRMATIVE COVENANTS OF ACQUIROR AND ACQUISITION SUBS . . . . . . . . . . . . . . . . . . . . . . . 21
7.02 NEGATIVE COVENANTS OF ACQUIROR AND ACQUISITION SUBS . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.02 ACCESS AND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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8.03 APPROPRIATE ACTION; CONSENTS; FILINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.04 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.05 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.06 EMPLOYEES OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IX
INDEMNIFICATION
9.01 IN GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.02 NO EXHAUSTION OF REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.03 DEFENSE OF THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.04 PAYMENT; ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.05 SATISFACTION OF CLAIMS FROM ESCROW SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.06 LIABILITY LIMITATIONS; SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 28
ARTICLE X
CONDITIONS
10.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR COMPANIES . . . . . . . . . . . . . . . . . . . 28
10.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XI
MISCELLANEOUS
11.01 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.02 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.03 WAIVER AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.04 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.05 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.06 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.07 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.08 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.09 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.11 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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Exhibits:
Exhibit A - Escrow Agreement
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<PAGE> 6
ACQUISITION AGREEMENT
This Acquisition Agreement (this "Agreement") is made and entered into
as of December 11, 1998 by and among Core Laboratories N.V., a Netherlands
limited liability company ("Acquiror"), Core Laboratories International B.V., a
Netherlands limited liability company and wholly owned subsidiary of Acquiror
("Acquisition Sub A"), Saybolt International B.V., a Netherlands limited
liability company and a wholly owned subsidiary of Acquiror ("Acquisition Sub
B"), A.G.I. Mexicana S.A. de C.V., a Mexican corporation (the "Company"),
Robert P. Andrews, a United States resident ("Andrews") and each of the
stockholders of the Company set forth on the signature pages hereto
(individually, including Andrews, "Stockholder" or collectively, including
Andrews, the "Stockholders"). Acquiror, Acquisition Sub A and Acquisition Sub
B are sometimes collectively referred to herein as the "Acquiror Companies."
Acquisition Sub A and Acquisition Sub B are referred to collectively as
"Acquisition Subs."
WHEREAS, the Stockholders are the sole record and beneficial owners of
100% of the capital stock of the Company;
WHEREAS, Acquiror, Acquisition Subs, the Company and the Stockholders,
upon the terms and subject to the conditions of this Agreement, desire to
effect an exchange (the "Exchange") of an aggregate of 15,000 common shares,
par value NLG 0.03 Dutch guilders per share ("Acquiror Shares"), of Acquiror
for all of the shares of Series A Common Stock of the Company ("Company Common
Stock Series A") and all of the issued and outstanding Series B Common Stock of
the Company ("Company Common Stock Series B" and, together with the Company
Common Stock Series A, "Company Stock");
WHEREAS, the Exchange is intended to be treated as a purchase for
financial accounting purposes in accordance with United States of America
generally accepted accounting principles ("GAAP") and the rules, regulations
and interpretations of the Securities and Exchange Commission (the "SEC");
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE EXCHANGE
1.01 THE EXCHANGE. Subject to the terms and conditions of this
Agreement, each of the Stockholders agrees to exchange all of the shares of
Company Stock owned by such Stockholder for Acquiror Shares as hereinafter
provided.
1.02 CLOSING. The Closing of the Exchange for Andrews shall take
place at the offices of Vinson & Elkins, L.L.P., 2300 First City Tower, 1001
Fannin, Houston, Texas, and the simultaneous Closing of the Exchange for the
Stockholders other than Andrews shall take place at the offices of
<PAGE> 7
the Company, both at (a) 9:00 a.m. on December 11, 1998 or (b) at such other
place, time and date as the parties hereto may agree.
1.03 TRANSFER OF SHARES. Subject to the term of the Escrow
Agreement (as defined below), at the Closing the Stockholders shall deliver to
the Acquisition Subs, certificates evidencing all of the Company Stock set
forth opposite the names of the Stockholders on the signature pages hereto.
Such certificates shall be duly endorsed for transfer or accompanied by
properly executed stock powers. Acquisition Sub A shall acquire 99% of the
Company Stock, and Acquisition Sub B shall acquire the remaining 1% of Company
Stock.
1.04 CONSIDERATION FOR SUCH TRANSFER AND ESCROW. In consideration
for the aforesaid delivery of Company Stock and for all other duties,
obligations and performances by the Stockholders hereunder and subject to all
of the other terms and conditions hereof and the Escrow Agreement, at the
Closing Acquiror shall deliver to the Stockholders that number of duly and
validly issued Acquiror Shares, less the escrow portion of such shares pursuant
to the terms and conditions set forth herein, as follows:
for all of the duly and validly issued shares of Company
Common Stock Series A and Series B delivered by a Stockholder to the
Acquisition Subs at the Closing as provided in Section 1.03, such
Stockholder shall be entitled to receive the number of Acquiror Shares
set forth opposite the Stockholder's name on the signature page
hereto.
At the Closing, Acquiror Companies will cause to be delivered to, and
deposited directly with, Bankers Trust Company (the "Escrow Agent"), for the
account and future potential benefit of Andrews, a stock certificate
representing 1,500 Acquiror Shares, which certificate shall be registered as
follows: "Bankers Trust Company, f/b/o Robert P. Andrews." All such Acquiror
Shares so delivered to the Escrow Agent, together with all subsequent stock
dividends or distributions of other Acquiror Shares received in respect of such
shares while deposited with the Escrow Agent shall be referred to as "Escrow
Shares." The Escrow Shares shall be subtracted from the number of Acquiror
Shares Andrews is entitled to receive pursuant to the Exchange at the Closing.
The Escrow Shares shall be held by the Escrow Agent pursuant to the terms and
conditions of an Escrow Agreement in substantially the form attached hereto as
Exhibit A (the "Escrow Agreement") between Acquiror, Acquisition Subs, the
Company and Andrews. The Escrow Agreement shall authorize Andrews to control
the disposition of such Escrow Shares pursuant to the terms of the Escrow
Agreement.
1.05 WITHHOLDING. Acquiror Companies (or any affiliate thereof)
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any Stockholder such amounts as Acquiror
Companies (or any affiliate thereof) are required to deduct and withhold with
respect to any provision of federal, state, local or foreign tax law. To the
extent that amounts are so withheld by Acquiror, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Stockholder in respect of which such deduction and withholding was made by
Acquiror. Stockholders shall be liable for and shall pay all Taxes, direct or
indirect, if any, or other obligations payable under the laws of Mexico and
attributable to the transfer or sale of the Company Stock.
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1.06 COMPANY DIRECTORS. The Company shall take such actions as are
necessary to continue with the sole administrator or to adopt the forms
necessary for a Board of Directors, or the organizational equivalency of such
corporate form of governance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Except as otherwise indicated, each of the Stockholders, severally and
not jointly, represents and warrants to Acquiror Companies that:
2.01 GOOD TITLE. Such Stockholder is the sole record and
beneficial owner of, and has good and valid title to, the number of shares of
Company Stock set forth opposite such Stockholder's name on the signature pages
hereto, free and clear of all liens, claims, encumbrances, options, voting
trusts or agreements, proxies or other claims or charges of any nature
whatsoever (other than resulting from this Agreement).
2.02 CERTAIN SECURITIES LAW MATTERS (REGULATION D).
(a) Andrews, either alone or with his purchaser
representative (if any) as defined in Rule 501(h) under the Securities
Act of 1933, as amended ("Securities Act") of the United States of
America Federal securities law (which law is applicable to Acquiror
given that it is a publicly listed company in the United States of
America), has substantial experience in evaluating and investing in
private placement transactions so that the Stockholder is capable of
evaluating the merits and risks of his investment in the Acquiror
Shares. The Stockholder, by reason of such Stockholder's business or
financial experience, either alone or with his purchaser
representative as defined in Section 501(h) under the Securities Act,
if any, has the capacity to protect such Stockholder's own interests
in connection with the acquisition of the Acquiror Shares hereunder.
The Stockholder has designated himself as an "accredited investor" on
the signature page hereto as "accredited investor" is defined in Rule
501 of Regulation D promulgated pursuant to the Securities Act and,
either alone or with his purchaser representatives, has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the transactions contemplated by
this Agreement. Such Stockholder has been provided and has had access
to material information concerning Acquiror and has received and
reviewed all such material requested, including, but not limited to,
Acquiror's most recent Annual Report to Shareholders and Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, proxy
statement for the annual meeting of shareholders held in 1998 and
Quarterly Reports on Form 10-Q for each of the quarters ended March
31, June 30 and September 30, 1998 (collectively, the "Information").
Andrews is familiar with the business and financial condition,
properties, operations and prospects of Acquiror. Andrews has had an
opportunity to discuss Acquiror's business and financial condition,
properties, operations and prospects with Acquiror's management.
Andrews has also had an opportunity to ask questions of officers of
Acquiror, which questions were answered to Andrews' satisfaction.
Andrews understands that such
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<PAGE> 9
discussion was intended to describe certain aspects of Acquiror's
business and financial condition, properties, operations and
prospects, but were not a thorough or exhaustive description.
(b) Andrews understands that the Acquiror Shares may be
"restricted securities" under the applicable federal securities laws
and that the Securities Act and the rules of the SEC provide in
substance that Andrews may dispose of the Acquiror Shares only
pursuant to an effective registration statement under the Securities
Act or an exemption therefrom, and understands that Acquiror has no
obligation or intention to register the Acquiror Shares. Andrews
understands that Rule 144 under the Securities Act permits limited
resales of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of
certain current public information about the issue, the resale
occurring not less than one (1) year after a party has purchased and
paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions with a "market maker" and
the number of shares being sold not exceeding specified limitations.
Accordingly, Andrews understands that under the SEC's rules, Andrews
may dispose of the Acquiror Shares in transactions which are exempt
from registration under the Securities Act. As a consequence of all
of the foregoing, Andrews understands that he must bear the economic
risk of the investment in the Acquiror Shares for an indefinite period
of time. Acquiror agrees that it will use its best efforts to file
the requisite reports under the Securities Exchange Act of 1934, as
amended, to enable Andrews to sell its Acquiror Shares without
registration in accordance with Rule 144 under the Securities Act.
(c) Andrews acknowledges and agrees that he is not
relying upon Acquiror or the Company or their respective officers,
directors, employees or agents, as to the tax consequences to Andrews
of the transactions contemplated by this Agreement. As to all such tax
consequences, Andrews hereby agrees and represents that he has
consulted with Andrews own legal and tax advisors to the extent that
he has deemed such consultation necessary or appropriate, that he is
making his own determination as to what the tax consequences of the
transactions contemplated hereby will be to him and that neither
Acquiror nor the Company is making any representation, express or
implied, as to any such tax consequences.
2.03 CERTAIN SECURITIES LAW MATTERS (REGULATION S).
(a) Each of the Stockholders other than Andrews
("Non-U.S. Stockholders") is not a U.S. person, as defined in Section
902(k) of Regulation S under the U.S. Securities Act, and is not
acquiring the Acquiror Shares for the account or benefit of any U.S.
person.
(b) Each of the Non-U.S. Stockholders understands that
the shares comprising their Acquiror Shares will be "restricted
securities" under the applicable United States federal securities laws
and that the U.S. Securities Act and the rules of the United States
Securities Exchange Commission (the "Commission") provide in substance
that such Stockholder may dispose of the shares comprising the
Acquiror Shares only pursuant to the provisions of Regulation S under
the U.S. Securities Act, pursuant to an effective registration
statement under the U.S. Securities Act or exemption therefrom and
that hedging transactions
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<PAGE> 10
involving any such Acquiror Shares may not be conducted unless in
compliance with the U.S. Securities Act, and each Non-U.S. Stockholder
further understands that Acquiror will refuse to register any transfer
of such Acquiror Shares not made in accordance with the provisions of
Regulation S, pursuant to registration under the U.S. Securities Act,
or pursuant to an available exemption from registration. As a
consequence of all of the foregoing, each Non-U.S. Stockholder
understands that he or she must bear the economic risk of the
investment in the shares comprising the Acquiror Shares for so long as
he or she owns such shares; and
(c) The Non-U.S. Stockholders understand and agree that a
legend will be placed on any certificates representing the Acquiror
Shares issued to the Non-U.S. Stockholders to the effect that:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER THEREOF, BY ACQUIRING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY
THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (A) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (B)
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR
(C) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE
OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS,
PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN
OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER
EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE
COMPANY."
2.04 AUTHORIZATION AND VALIDITY OF AGREEMENT. Such Stockholder has
the full power, legal right, capacity and authority to enter into, execute and
deliver this Agreement and to carry out and perform the transactions
contemplated hereby. This Agreement constitutes a valid and binding obligation
of such Stockholder, enforceable against such Stockholder in accordance with
its terms.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND ANDREWS
The Company and Andrews, jointly and severally, hereby represent and
warrant to Acquiror Companies that:
3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company is
a corporation whose ownership is represented solely by the Company Stock. The
Company and each of the Company's subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and each of the Company and its subsidiaries has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted and, except as set forth
in Section 3.01 of the Company Disclosure Schedule (as defined below), is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where the failure to
be so duly qualified and in good standing would not reasonably be expected to
have a Company Material Adverse Effect. The term "Company Material Adverse
Effect" as used in this Agreement shall mean any change or effect that would be
materially adverse to the financial condition, results of operations, business,
properties or prospects of the Company and its subsidiaries, taken as a whole,
at the time of such change or effect. Section 3.01 of the Disclosure Schedule
delivered by the Company to Acquiror concurrently with the execution of this
Agreement (the "Company Disclosure Schedule") sets forth, as of the date of
this Agreement, a true and complete list of all the Company's directly or
indirectly owned subsidiaries, together with the jurisdiction of incorporation
or organization of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company.
3.02 ORGANIZATIONAL DOCUMENTS. The Company has heretofore
furnished to Acquiror complete and correct copies of the Articles of
Incorporation and the Bylaws or the equivalent organizational documents, in
each case as amended or restated to the date hereof, of the Company and each of
its subsidiaries. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of its Articles of Incorporation or Bylaws
(or equivalent organizational documents).
3.03 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
of: 50,000 shares of Company Common Stock Series A and 11,087,360
shares of Company Common Stock Series B. As of the date of this
Agreement, 50,000 shares of Company Common Stock Series A were issued
and outstanding, 11,087,360 shares of Company Common Stock Series B
were issued and outstanding and no shares of Company Stock were held
by the Company in its treasury or by the Company's subsidiaries.
Except as set forth above, there are no shares of capital stock of the
Company issued and outstanding or reserved for issuance for any
purpose. Each of the issued shares of capital stock of, or other
equity interests in, each of the Company and its subsidiaries is duly
authorized, validly issued and, in the case of shares of capital
stock, fully paid and nonassessable, and has not been issued in
violation
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of (nor are any of the authorized shares of capital stock of, or other
equity interests in, the Company or any of its subsidiaries subject
to) any preemptive or similar rights created by statute, the Articles
of Incorporation or Bylaws (or the equivalent organizational
documents) of the Company or any of its subsidiaries, or any agreement
to which the Company or any of its subsidiaries is a party or is
bound, and all such issued shares or other equity interests owned by
the Company or a subsidiary of the Company are owned free and clear of
all security interests, liens, claims, pledges, agreements,
limitations on the Company's or such subsidiaries' voting rights,
charges or other encumbrances of any nature whatsoever.
(b) No bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into or
exchangeable or exercisable for securities having the right to vote)
on any matters on which shareholders may vote ("Voting Debt") are
issued or outstanding.
(c) There are no options, warrants or other rights
(including registration rights), agreements, arrangements or
commitments of any character to which the Company or any of its
subsidiaries is a party relating to the issued or unissued capital
stock or other equity interests of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to
grant, issue or sell any shares of capital stock, Voting Debt or other
equity interests of the Company or any of its subsidiaries. There are
no obligations, contingent or otherwise, of the Company or any of its
subsidiaries (i) to repurchase, redeem or otherwise acquire any shares
of Company Stock or other capital stock of the Company or the capital
stock or other equity interests of any subsidiary of the Company or
(ii) (other than advances to wholly owned subsidiaries in the ordinary
course of business) to provide material funds to, or to make any
material investment in (in the form of a loan, capital contribution or
otherwise), or to provide any guarantee with respect to the material
obligations of, any subsidiary of the Company or any other person.
Except for subsidiaries of the Company set forth in Section 3.01 of
the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries (x) directly or indirectly owns, (y) has agreed to
purchase or otherwise acquire or (z) holds any interest convertible
into or exchangeable or exercisable for capital stock or other equity
interest of any corporation, partnership, joint venture or other
business association or entity. Except as set forth in Section
3.03(c) of the Company Disclosure Schedule or for any agreements,
arrangements or commitments between the Company and its wholly owned
subsidiaries or between such wholly owned subsidiaries, there are no
agreements, arrangements or commitments of any character (contingent
or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on, or calculated in accordance with, the
revenues or earnings of the Company or any of its subsidiaries.
Except as set forth in Section 3.03(c) of the Company Disclosure
Schedule, there are no voting trusts, proxies or other agreements or
understandings to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound with
respect to the voting of any shares of capital stock or other equity
interests of the Company or any of its subsidiaries.
3.04 AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the
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consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery hereof by Acquiror Companies,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits,
waivers, approvals, authorizations, orders, filings and notifications
contemplated by the exceptions to Section 3.05(b) are obtained or made
and except as disclosed in Section 3.05(a) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance by the Company of its obligations
hereunder, including consummation of the transactions contemplated
hereby, will not (i) conflict with or violate the Articles of
Incorporation or Bylaws, or the equivalent organizational documents,
in each case as amended or restated, of the Company or any of its
subsidiaries, (ii) conflict with or violate any federal, state,
foreign or local law, statute, ordinance, rule or regulation
(collectively, "Laws") or any judgment, order or decree applicable to
the Company or any of its subsidiaries or by or to which any of their
respective properties is bound or subject or (iii) result in any
breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any
of its subsidiaries pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its
subsidiaries is a party or by or to which the Company or any of its
subsidiaries or any of their respective properties is bound or
subject, except, with respect to clauses (ii) and (iii) above, any
such conflicts, violations, breaches, defaults, events, rights of
termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that could not reasonably be
expected to result in a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of its
obligations hereunder, including consummation of the transactions
contemplated hereby, will not, require the Company to obtain any
consent, license, permit, waiver, approval, authorization or order of,
or to make any filing with or notification to, any governmental or
regulatory authority, federal, state, local or foreign (collectively,
"Governmental Entities"), except (i) where the failure to obtain such
consents, licenses, permits, waivers, approvals, authorizations or
orders, or to make such filings or notifications could not reasonably
be expected to cause a Company Material Adverse Effect or to prevent
the Company from performing its obligations under this Agreement and
(ii) as disclosed in Section 3.05(b) of the Company Disclosure
Schedule.
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3.06 PERMITS; COMPLIANCE. Except as disclosed in Section 3.06 of
the Company Disclosure Schedule, each of the Company and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders necessary in all material respects
to own, lease and operate its properties and to carry on its business as it is
now being conducted (collectively, the "Company Permits"). Section 3.06 of the
Company Disclosure Schedule sets forth a list of each of the Company Permits
and the jurisdiction issuing the same, all of which are in good standing and
not subject to meritorious challenge. Section 3.06 of the Company Disclosure
Schedule also sets forth, as of the date of this Agreement, all actions,
proceedings, investigations or surveys pending or, to the knowledge of the
Company or Andrews, threatened against the Company or any of its subsidiaries,
that could reasonably be expected to result in the loss or revocation of a
Company Permit. Except as set forth in Section 3.06 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is, in any material
respect, in conflict with, in default under or in violation of, and none of
them has been received, since January 31, 1997 from any Governmental Entity any
written notice with respect to any conflict with, default under or violation
of, (i) any Law applicable to the Company or any of its subsidiaries or by or
to which any of their respective properties is bound or subject, (ii) any
judgment, order or decree applicable to the Company or any of its subsidiaries
or (iii) any of the Company Permits.
3.07 FINANCIAL STATEMENTS. The Company has provided Acquiror with
true, correct and complete copies of (i) its audited balance sheets as of
December 31, 1995, 1996 and 1997, and the related statements of income and
stockholders' equity for each of the three years for the periods ended December
31,1997, including the notes to financial statements with respect thereto, and
(ii) its unaudited balance sheet as of October 31, 1998 and unaudited income
statement for the ten-month period then ended (collectively, the "Company
Financial Statements"). Each of the Company Financial Statements (including,
in each case, any related notes thereto) (a) has been prepared in accordance
with generally accepted accounting principles as utilized in Mexico ("Mexican
GAAP") applied on a consistent basis throughout the periods involved (except
(i) to the extent disclosed therein or required by changes in Mexican GAAP, and
(ii) as may be indicated in the notes thereto) and (b) fairly present the
financial position of the Company and its subsidiaries as of the respective
dates thereof and the results of operations for the periods indicated (subject,
in the case of unaudited financial statements for interim periods, to
adjustments, consisting only of normal, recurring accruals, necessary to
present fairly such results of operations).
3.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated
by this Agreement or as set forth in Section 3.08 of the Company Disclosure
Schedule, since December 31, 1997, the Company and its subsidiaries have
conducted their respective businesses only in the ordinary course and in a
manner consistent with past practice and there has not been: (i) any damage,
destruction or loss with respect to any assets of the Company or any of its
subsidiaries that, whether or not covered by insurance, would constitute a
Company Material Adverse Effect; (ii) any change by the Company or its
subsidiaries in their significant accounting policies; (iii) except for
dividends by a wholly owned subsidiary of the Company to the Company or to
another wholly owned subsidiary of the Company, any declaration, setting aside
or payment of any dividends or distributions in respect of shares of Company
Stock or the shares of stock of, or other equity interests in, any subsidiary
of the Company or any redemption, purchase or other acquisition of any of the
Company's securities or any of the securities of any subsidiary of the Company;
(iv) any material increase in the benefits
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under, or the establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, performance awards
(including, without limitation, the granting of stock appreciation rights or
restricted stock awards), stock purchase or other employee Benefit Plan, or any
increase in the compensation payable or to become payable to any of the
directors or officers of the Company or the employees of the Company and its
subsidiaries as a group except in the ordinary course of business consistent
with past practice; or (v) any other Company Material Adverse Effect.
3.09 LITIGATION. Except as disclosed in Section 3.09 of the
Company Disclosure Schedule, (a) there is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company or Andrews or the
management of the Company, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to
the knowledge of the Company or Andrews or the management of the Company,
threatened against the Company or any of its subsidiaries or any properties or
rights of the Company or any of its subsidiaries, and (b) neither the Company
nor any of its subsidiaries is subject to any investigation of any kind,
executory judgment, order, writ, injunction, decree or award of any
Governmental Entity, including without limitation any cease and desist order
and any consent decree, settlement agreement or other similar agreement with
any Governmental Entity. In addition, none of the Stockholders have any
claims, actions or disputes against the Company.
3.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to any of the Company's employee benefit
plans (each, a "Benefit Plan"), no event has occurred and, to the
knowledge of the Company and Andrews, there exists no condition or set
of circumstances, in connection with which the Company or any of its
subsidiaries could be subject to any liability under the terms of such
Benefit Plan or any applicable Law.
(b) There are no collective bargaining or other labor
union contracts to which the Company or its subsidiaries is a party
applicable to persons employed by the Company or its subsidiaries and
no collective bargaining agreement is being negotiated by the Company
or any of its subsidiaries. There is no pending or, to the knowledge
of the Company or Andrews, threatened labor dispute, strike or work
stoppage against the Company or any of its subsidiaries. To the
knowledge of the Company or Andrews, none of the Company, any of its
subsidiaries or any of their respective representatives or employees
has committed any unfair labor practice in connection with the
operation of the respective businesses of the Company or its
subsidiaries that could reasonably be expected to have a Company
Material Adverse Effect, and there is no pending or, to the knowledge
of the Company or Andrews, threatened charge or complaint against the
Company or any of its subsidiaries by any governmental agency.
(c) Section 3.10(c) of the Company Disclosure Schedule
contains true and correct (i) copies of all employment agreements to
which the Company or any of its subsidiaries is a party; (ii) listings
of all officers of the Company who have executed a non-competition
agreement with the Company or any of its subsidiaries; (iii) copies of
all severance agreements, programs and policies of the Company or any
of its subsidiaries with or relating
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<PAGE> 16
to its, or any of its subsidiaries, employees; and (iv) summary
descriptions of all plans, programs, agreements and other arrangements
of the Company or any of its subsidiaries with or relating to its, or
any of its subsidiaries, employees. Except as set forth in Section
3.10(c) of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries will owe a severance payment or similar
obligation to any of their respective employees, officers or directors
as a result of the Exchange or the other transactions contemplated by
this Agreement, and none of such persons will be entitled to severance
payments or other benefits as a result of the Exchange or the other
transactions contemplated by this Agreement in the event of the
subsequent termination of their employment.
(d) No Benefit Plan provides retiree medical or retiree
life insurance benefits and neither the Company nor any of its
subsidiaries is contractually or otherwise obligated (whether or not
in writing) to provide life insurance and medical benefits upon
retirement or termination of employment of employees.
(e) The Company has not taken any of the following or
other similar actions since December 31, 1997: the acceleration of
vesting, waiving of performance criteria or the adjustment of awards
or any other actions permitted upon a change in control of the Company
with respect to any of the Benefit Plans or any of the plans,
programs, agreements, policies or other arrangements described in
Section 3.10(c) of this Agreement.
3.11 TAXES. Except as set forth in Section 3.11 of the Company
Disclosure Schedule,
(a) (i) all returns and reports and workpapers in
connection therewith ("Tax Returns") of or with respect to any Tax
which is required to be filed with respect to the Company or any its
subsidiaries have been duly and timely filed, (ii) all items of
income, gain, loss, deduction and credit or other items required to be
included in each such Tax Return have been so included and all
information provided in each such Tax Return is true, correct and
complete in all respects (including, without limitation, documentation
relating to any reportable item of income, deduction, gain, loss or
credit maintained by the Company), (iii) all Taxes that have become
due with respect to the period covered by each such Tax Return have
been timely paid in full, (iv) all withholding Tax requirements
imposed on or with respect to the Company or any of its subsidiaries
have been satisfied in all respects, and (v) no penalty, interest or
other charge is or will become due with respect to the late filing of
any such Tax Return or late payment of any such Tax.
(b) There is no claim pending against the Company or any
of its subsidiaries for any amount of Taxes, and no assessment,
deficiency or adjustment has been asserted or proposed with respect to
any Tax Return of or with respect to the Company or any of its
subsidiaries other than those disclosed (and to which are attached
true and complete copies of all audit or similar reports) in Section
3.11 of the Company Disclosure Schedule.
(c) The total amounts set up as liabilities for current
and deferred Taxes in the Company Financial Statements are sufficient
to cover the payment of all Taxes, whether or not assessed or
disputed, which are, or are hereafter found to be, or to have been,
due by or
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with respect to the Company and any of its subsidiaries up to and
through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet
due, no liens for Taxes exist upon any of the assets of the Company or
any of its subsidiaries.
(e) None of the transactions contemplated by this
Agreement will result in any Tax liability or the recognition of any
item of income or gain to the Company or any of its subsidiaries,
other than the Netherlands capital tax that may be applicable upon
issuance of the Acquiror Shares by Acquiror pursuant to Article 1
hereof.
3.12 AFFILIATES. Section 3.12 of the Company Disclosure Schedule
identifies all persons who, to the knowledge of the Company or Andrews, may be
deemed to be affiliates of the Company within the meaning of that term as used
in Rule 145 promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), including, without limitation, all directors and executive
officers of the Company.
3.13 CERTAIN BUSINESS PRACTICES. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries (in their capacities as such) has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful purposes,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the United States Foreign Corrupt Practices Act of 1977, as
amended, or (iii) made any other unlawful payment.
3.14 ENVIRONMENTAL. The Company and each of its subsidiaries are
in full compliance in all respects with all applicable laws, rules,
regulations, and other legal requirements, foreign and domestic, relating to
the prevention of pollution and the protection of the environment, including
all such legal requirements pertaining to human health and safety
(collectively, "Environmental Laws"). There is no physical condition existing
on any property ever owned or operated by the Company or any of its
subsidiaries that could give rise to any remedial obligation of the Company or
any of its subsidiaries under any Environmental Law or that could result in any
liability of the Company or any of its subsidiaries to any third party claiming
damage to person or property as a result or consequence of such physical
conditions. There are not any physical conditions existing on any other
property that may have been impacted by the operations of the Company or any of
its subsidiaries that could give rise to any material remedial obligation of
the Company or any of its subsidiaries under any Environmental Law or that
could result in any material liability of the Company or any of its
subsidiaries to any third party claiming damage to person or property as a
result or consequence of such physical conditions. None of the Company or any
of its subsidiaries has caused or permitted its businesses, properties or
assets to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose of, transfer, produce, or process any Hazardous Substance (as
defined below), and has not caused or permitted the Release (as defined below)
of any Hazardous Substance on or off the site of any property of any of the
Company or any of its subsidiaries, except in compliance with all applicable
laws, rules, regulations, orders, judgments and decrees. The term "Hazardous
Substance" shall mean any hazardous waste, as defined by 42 U.S.C. 6903(5), any
hazardous substance, as defined by 42 U.S.C. 9601(14), any pollutant or
contaminant, as defined by 42 U.S.C. 9601(33), and all toxic substances,
hazardous materials, or other chemical substances regulated by
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<PAGE> 18
any other law, rule, or regulation. The term "Release" shall have the meaning
set forth in 42 U.S.C. 9601(22).
3.15 UNDISCLOSED LIABILITIES. Except as and to the extent of the
amounts specifically reflected or accrued for in the balance sheet dated as of
October 31, 1998, included in the Company Financial Statements, or liabilities
incurred in the ordinary course of business since October 31, 1998 or set forth
in Section 3.15 of the Company Disclosure Schedule, none of the Company or any
of its subsidiaries has any liabilities or obligations of any nature whether
absolute, accrued, contingent or otherwise, and whether due or to become due.
Neither the Company nor Andrews knows of any basis for the assertion against
the Company or any of its subsidiaries of any such liability or obligation not
fully reflected or adequately accrued for in the Company Financial Statements
or set forth in Section 3.15 of the Company Disclosure Schedule.
3.16 CERTAIN AGREEMENTS. Except as set forth in Section 3.16 of
the Company Disclosure Schedule, none of the Company or any of its subsidiaries
is a party to, or bound by, any contract, agreement or organizational document
which purports to restrict, by virtue of a noncompetition, territorial
exclusivity or other provision covering such subject matter, the scope of the
business or operations of any of the Company or any of its subsidiaries
geographically or otherwise.
3.17 CONTRACTS AND COMMITMENTS. Section 3.17 of the Company
Disclosure Schedule sets forth (i) a list of each contract or commitment to
which the Company or any of its subsidiaries is a party or by which its or
their property is bound that involves consideration or other expenditure in
excess of $25,000 or performance over a period of more than six months or that
is otherwise material to the business or operations of the Company and its
subsidiaries, taken as a whole ("Material Contracts"); (ii) a list of all real
or personal property leases to which any of the Company or any of its
subsidiaries is a party involving consideration or other expenditure in excess
of $25,000 over the term of the lease ("Material Leases"); (iii) a list of
guarantees, or agreements to indemnify or be contingently liable for, the
payment or performance by any person or business entity to which any of the
Company or any of its subsidiaries is a party ("Guarantees"); and (iv) a list
of contracts or other formal or informal understandings between the Company or
any of its subsidiaries and any of its officers, directors, employees,
consultants, agents or shareholders (or any of such shareholders' family
members or affiliates) ("Affiliate Agreements"). True and complete copies of
each Material Contract, Material Lease, Guarantee and Affiliate Agreement have
been furnished to Acquiror prior to the date hereof. Except as specifically
disclosed in Section 3.17 of the Company Disclosure Schedule, each of the
Material Contracts, Material Leases, Guarantees and Affiliate Agreements
constitutes the valid and legally binding obligation of the parties thereto and
is in full force and effect without default on the part of any party thereto.
3.18 AFFILIATE INTERESTS. None of the Stockholders nor any
employee, consultant, officer or director, or former shareholder, employee,
consultant, officer or director, of the Company or any of its subsidiaries has
any interest in any property, tangible, or intangible, including, without
limitation, patents, trade secrets, other confidential business information,
trademarks, service marks or trade names used in or pertaining to the business
of the Company or any of its subsidiaries, except for the normal rights of a
shareholder.
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<PAGE> 19
3.19 INTELLECTUAL PROPERTY. The Company or one or more of its
subsidiaries own, or are licensed or otherwise have the right to use or
sublicense, all foreign and domestic patents, trademarks (common law and
registered), trademark registration applications, service marks (common law and
registered), service mark registration applications, trade names and
copyrights, copyright applications, trade secrets, know-how and other
proprietary information as are necessary for the conduct of the business of the
Company and its subsidiaries as currently conducted. A list of all such
intellectual property is set forth in Section 3.19 of the Company Disclosure
Schedule. Neither the Company nor any of its subsidiaries is currently in
receipt of any notice of infringement or notice of conflict with the asserted
rights of others in any patents, trademarks, service marks, trade names, trade
secrets and copyrights owned or held by other persons, except, in each case,
for matters that could not reasonably be expected to have a Company Material
Adverse Effect. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate or breach the
terms of or cause any cancellation of any material license held by the Company
or any of its subsidiaries with regard to, any patent, trademark, service mark,
trade name, trade secret or copyright.
3.20 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of the Stockholders.
3.21 INSURANCE. Section 3.21 of the Company Disclosure Schedule
sets forth a list of all policies of insurance currently in effect relating to
the business or operations of the Company and its subsidiaries (true and
complete copies of which have been furnished to Acquiror). Such insurance
policies are in full force and effect. The Company and each of its
subsidiaries are presently insured, and during each of the past five calendar
years have been insured, against such risks and in such amounts as companies
engaged in a similar business and of similar size to that of the Company would,
in accordance with good business practice, customarily be insured. Except as
set forth in Section 3.21 of the Company Disclosure Schedule, the policies of
general liability, malpractice or professional liability, fire, theft and other
insurance maintained with respect to the operations, assets or businesses of
the Company and its subsidiaries provide adequate coverage against loss. The
Company or its subsidiaries have given in a timely manner to their insurers all
notices required to be given under such insurance policies with respect to all
claims and actions covered by insurance, and no insurer has denied coverage of
any such claims or actions or reserved it rights in respect of or rejected any
of such claims. None of the Company or any of its subsidiaries has received
any notice or other communication from any such insurer canceling or materially
amending any of such insurance policies, and no such cancellation is pending or
threatened. The execution of this Agreement and the consummation of the
transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.22 PROPERTIES. Except as set forth in Section 3.22 of the
Company Disclosure Schedule, the Company and its subsidiaries have good and
marketable title, free and clear of all liens to all their material properties
and assets whether tangible or intangible, real, personal or mixed, reflected
in the Company Financial Statements as being owned by the Company and its
subsidiaries as of the date thereof, other than (i) any properties or assets
that have been sold or otherwise disposed of in the ordinary course of business
since the date of such financial statements, (ii) liens disclosed in the
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notes to such financial statements and (iii) liens arising in the ordinary
course of business. All buildings, fixtures, equipment and other property and
assets that are material to the Company's business on a consolidated basis,
that are held under leases or sub-leases by the Company or any of its
subsidiaries, are held under valid instruments enforceable in accordance with
their respective terms, subject to applicable laws of bankruptcy, insolvency or
similar laws relating to creditors' rights generally and to general principles
of equity (whether applied in a proceeding in law or equity). All of the
Company's and its subsidiaries' equipment in regular use has been reasonably
maintained and is in serviceable condition, reasonable wear and tear excepted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND ACQUISITION SUBS
Acquiror and Acquisition Subs hereby represent and warrant to the
Company and the Stockholders that:
4.01 ORGANIZATION AND QUALIFICATION. Acquiror is a limited
liability company duly organized, validly existing and in good standing under
the laws of the Netherlands. Acquisition Sub A is a corporation duly
organized, validly existing and in good standing under the laws of the
Netherlands. Acquisition Sub B is a corporation duly organized, validly
existing and in good standing under the laws of the Netherlands. Each of
Acquiror Companies and their subsidiaries have all requisite power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly qualified and in good
standing could not reasonably be expected to have an Acquiror Material Adverse
Effect. The term "Acquiror Material Adverse Effect" as used in this Agreement
shall mean any change or effect that would be materially adverse to the
financial condition, results of operations, business, properties or prospects
of Acquiror, Acquisition Sub A and Acquisition Sub B and their subsidiaries,
taken as a whole, at the time of such change or effect.
4.02 CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of
(i) 100,000,000 Acquiror Shares, of which, as of December 8, 1998:
(A) 28,367,102 shares were issued and outstanding, all of which are
duly authorized, validly issued, fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights created by
statute or Acquiror's Articles of Association (the "Acquiror
Organizational Documents") or any agreement to which Acquiror is a
party or is bound; (B) no shares were held in the treasury of Acquiror
and (C) 3,100,000 shares were reserved for future issuance pursuant to
stock option plans of Acquiror and (ii) 3,000,000 Preference Shares,
par value NLG 0.03, none of which were issued or outstanding.
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(b) The Acquiror Shares to be issued pursuant to the
Exchange will be duly authorized, validly issued, fully paid and
nonassessable .
4.03 AUTHORITY. Each of the Acquiror Companies has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Acquiror Companies
and the performance by each of the Acquiror Companies of its obligations
hereunder, including the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of either of the Acquiror Companies are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
each of the Acquiror Companies and, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes the legal, valid
and binding obligation of each of the Acquiror Companies, enforceable against
the Acquiror Companies in accordance with its terms.
4.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits,
waivers, approvals, authorizations, orders, filings and notifications
contemplated by the exceptions to Section 4.04(b) are obtained or made
and except as otherwise disclosed in Section 4.04(a) of the Disclosure
Schedule delivered by the Acquiror Companies to the Company
contemporaneously with the execution and delivery of this Agreement
(the "Acquiror Disclosure Schedule"), the execution and delivery of
this Agreement by the Acquiror Companies does not, and performance of
their respective obligations hereunder, including the consummation of
the transactions contemplated hereby, will not (i) conflict with or
violate the Acquiror Organizational Documents or the Articles of
Incorporation or Bylaws, or their organizational equivalency, of
either Acquisition Sub, in each case as amended or restated, (ii)
conflict with or violate any Laws in effect as of the date of this
Agreement applicable to Acquiror, Acquisition Subs or any of
Acquiror's subsidiaries or by or to which any of their properties is
bound or subject or (iii) result in any breach of or constitute a
default (or an event that with or without notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a lien or encumbrance on
any of the properties or assets of Acquiror or any of Acquiror's
subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Acquiror or any of Acquiror's
subsidiaries is a party or by or to which Acquiror or any of
Acquiror's subsidiaries or any of their respective properties is bound
or subject, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults, events, rights of
termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that could not reasonably be
expected to have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Acquiror Companies does not, and the performance of this Agreement by
the Acquiror Companies will not, including the consummation of the
transactions contemplated hereby, require Acquiror or Acquisition Subs
to obtain any consent, license, permit, waiver approval, authorization
or
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order of, or to make any filing with or notification to, any
Governmental Entities, except (i) for applicable requirements, if any,
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the New York Stock Exchange ("NYSE"), (ii) where the failure to
obtain such consents, licenses, permits, waivers, approvals,
authorizations or orders, or to make such filings or notifications
could not reasonably be expected to prevent Acquiror or either
Acquisition Sub from performing their respective obligations under
this Agreement and (iii) as disclosed in Section 4.04(b) of the
Acquiror Disclosure Schedule.
4.05 REPORTS; FINANCIAL STATEMENTS.
(a) Since November 13, 1998, Acquiror has filed all
forms, reports, statements and other documents required to be filed
with the SEC, including without limitation (i) all Annual Reports on
Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all proxy
statements relating to meetings of shareholders (whether annual or
special), (iv) all Current Reports on Form 8-K and (v) all other
reports, schedules, registration statements or other documents
(collectively referred to as the "Acquiror SEC Reports"). The
Acquiror SEC Reports were prepared in all material respects in
accordance with the requirements of applicable Law (including the
Securities Act or the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to the Acquiror SEC
Reports) and the Acquiror SEC Reports did not at the time they were
filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the historical consolidated financial
statements (including, in each case, any related notes thereto)
contained in the Acquiror SEC Reports (i) have been prepared in
accordance with the published rules and regulations of the SEC and
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (A) to the extent disclosed
therein or required by changes in generally accepted accounting
principles, (B) as may be indicated in the notes thereto and (C) in
the case of the unaudited financial statements, as permitted by the
rules and regulations of the SEC) and (ii) fairly present the
consolidated financial position of Acquiror and its subsidiaries as of
the respective dates thereof and the consolidated results of
operations and cash flows for the periods indicated (subject, in the
case of unaudited consolidated financial statements for interim
periods, to adjustments, consisting only of normal, recurring
accruals, necessary to present fairly such results of operations and
cash flows).
4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Acquiror SEC Reports filed prior to the date of this Agreement or as
contemplated by this Agreement, since November 13, 1998, Acquiror and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been any
Acquiror Material Adverse Effect.
4.07 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror Companies.
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ARTICLE V
COVENANTS OF THE STOCKHOLDERS
5.01 AFFIRMATIVE COVENANT. The Stockholders hereby covenant and
agree that, prior to the Closing Date, such person or entity will take all
commercially reasonable actions necessary to ensure that the Company complies
with Articles VI and VIII hereof.
5.02 NEGATIVE COVENANTS. Each of the Stockholders covenants and
agrees that such Stockholder will not:
(a) take any action that reasonably could be expected to
result in (i) any of the representations and warranties of (A) such
Stockholder set forth in Article II hereof or (B) Andrews and the
Company set forth in Article III hereof becoming untrue or (ii) any of
the conditions set forth in Articles X hereof not being satisfied; or
(b) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to,
or that may reasonably be expected to lead to, any Competing
Transaction (hereinafter defined), or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries
or to obtain a Competing Transaction, or agree to, or endorse, any
Competing Transaction, or authorize or permit any agent, investment
banker, financial advisor, attorney, accountant or other
representative retained by such Stockholder to take any such action,
and such Stockholder shall promptly notify Acquiror Companies of all
relevant terms of any such inquiries or proposals received by such
Stockholder or by any such agent, investment banker, financial
advisor, attorney, accountant or other representative relating to any
of such matters and if such inquiry or proposal is in writing, such
Stockholder shall promptly deliver or cause to be delivered to
Acquiror Companies a copy of such inquiry or proposal. For purposes
of this Agreement, "Competing Transaction" shall mean any merger,
consolidation, share exchange, business combination or similar
transaction involving the Company or any of its subsidiaries or the
acquisition in any manner, directly or indirectly, of a material
interest in any voting securities of, or a material equity interest in
a substantial portion of the assets of, the Company or any of its
subsidiaries, other than the transactions contemplated by this
Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY AND ANDREWS
6.01 AFFIRMATIVE COVENANTS OF THE COMPANY AND ANDREWS. The Company
and Andrews hereby covenant and agree that, prior to the Closing Date, unless
otherwise expressly contemplated by this Agreement or consented to in writing
by the Acquiror Companies, the Company will and will cause each of its
subsidiaries to:
(a) operate its business in the usual and ordinary course
consistent with past practices;
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<PAGE> 24
(b) use all reasonable efforts to preserve substantially
intact its business organization, maintain its rights and franchises,
retain the services of its respective officers and key employees and
maintain its relationships with its respective customers and
suppliers;
(c) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear
excepted, and maintain supplies and inventories in quantities
consistent with its customary business practice;
(d) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage
to that currently maintained;
(e) ensure that the aggregate of (i) cash on hand and
(ii) accounts receivables at the Company shall not be less than
$22,982,619 Mexican Pesos and the aggregate outstanding balance of
(i) long-term debt and (ii) short-term debt shall not be greater than
$53,390,349 Mexican Pesos;
(f) ensure that the net assets of the Company shall be no
less than -$1,604,062 Mexican Pesos plus all net income earned from
October 31, 1998 through the Closing Date; and
(g) use its best efforts to ensure that Andrews shall
execute and deliver, along with Acquiror, the Acquisition Subs and the
Escrow Agent, the Escrow Agreement.
6.02 NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Acquiror Companies, from the date of this Agreement until the Closing, the
Company and Andrews will not do, and will not permit any of its subsidiaries to
do, any of the following:
(a) (i) increase the compensation payable to or to become
payable to any director or executive officer or their organizational
equivalency; (ii) increase the compensation payable or pay bonuses to
employees of the Company other than in the ordinary course of
business, (iii) grant any severance or termination pay (other than
pursuant to the normal severance practices of the Company or its
subsidiaries as in effect on the date of this Agreement) to, or enter
into any employment or severance agreement with, any director, officer
or employee; (iv) except as set forth in Section 3.10(d) of the
Company Disclosure Schedule, establish, adopt or enter into any
employee Benefit Plan or arrangement or (v) except as may be required
by applicable law or as set forth in Section 3.10(d) of the Company
Disclosure Schedule, amend, or take any other actions (including,
without limitation, the acceleration of vesting, waiving of
performance criteria or the adjustment of awards or any other actions
permitted upon a "change in control" (as defined in the respective
plans) of the Company, with respect to any of the Benefit Plans or any
of the plans, programs, agreements, policies or other arrangements
described in Section 3.10(d) of this Agreement;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock or
other equity interests, except dividends by a wholly
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owned subsidiary of the Company to the Company or another wholly owned
subsidiary of the Company;
(c) (i) except as described in Section 3.03(c) of the
Company Disclosure Schedule, redeem, purchase or otherwise acquire any
shares of its or any of its subsidiaries' capital stock or any
securities or obligations convertible into or exchangeable for any
shares of its or its subsidiaries' capital stock (other than any such
acquisition directly from any wholly owned subsidiary of the Company
in exchange for capital contributions or loans to such subsidiary), or
any options, warrants or conversion or other rights to acquire any
shares of its or its subsidiaries' capital stock or any such
securities or obligations; (ii) effect any reorganization or
recapitalization of the Company or any of its subsidiaries; or (iii)
split, combine or reclassify any of its or its subsidiaries' capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of
its or its subsidiaries' capital stock;
(d) (i) except as set forth in Section 3.03(a) hereof or
as described in Section 3.03(c) of the Company Disclosure Schedule,
issue (whether upon original issue or out of treasury), sell, grant,
award, deliver or limit the voting rights of any shares of any class
of its or its subsidiaries' capital stock, any securities convertible
into or exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire, any such shares; (ii) amend or
otherwise modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms materially more favorable
to the holders thereof; or (iii) take any action to accelerate the
vesting of any of the stock options;
(e) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion
of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization
or division thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent
with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, any of its assets or any
assets of any of its subsidiaries, except for pledges or dispositions
of assets in the ordinary course of business and consistent with past
practice;
(g) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to,
or that may reasonably be expected to lead to, any Competing
Transaction, or enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to, or endorse, any Competing Transaction, or
authorize or permit any of the officers, directors, employees or
agents of the Company or any of its subsidiaries or any agent,
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of the Company's
subsidiaries to take any such action, and the Company shall promptly
notify Acquiror of all relevant terms of any such inquiries or
proposals received by the Company or any of its subsidiaries or by any
such
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officer, director, employee, agent, investment banker, financial
advisor, attorney, accountant or other representative relating to any
of such matters and if such inquiry or proposal is in writing, the
Company shall promptly deliver or cause to be delivered to Acquiror
Companies a copy of such inquiry or proposal;
(h) release any third party from its obligations under
any existing standstill agreement or arrangement relating to a
Competing Transaction or otherwise under any confidentiality or other
similar agreement relating to information material to the Company or
any of its subsidiaries;
(i) propose to adopt any amendments to its Articles of
Incorporation or its Bylaws (or equivalent organizational documents)
that would have an adverse effect on the consummation of the
transactions contemplated by this Agreement;
(j) (i) change any of its significant accounting policies
or (ii) make or rescind any express or deemed election relating to
Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or change any of its methods of
reporting income or deductions for tax purposes from those employed
in the preparation of the tax returns for the taxable year ending
December 31, 1998, except, in the case of clause (i) or clause (ii),
as may be required by Law or generally accepted accounting principles;
(k) incur any obligation for borrowed money or purchase
money indebtedness, whether or not evidenced by a note, bond,
debenture or similar instrument or under any financing lease, whether
pursuant to a sale-and-leaseback transaction or otherwise, except in
the ordinary course of business consistent with past practice;
(l) enter into any material arrangement, agreement or
contract with any third party (other than customers in the ordinary
course of business); or
(m) agree in writing or otherwise to do any of the
foregoing.
ARTICLE VII
COVENANTS OF ACQUIROR AND ACQUISITION SUBS
7.01 AFFIRMATIVE COVENANTS OF ACQUIROR AND ACQUISITION SUBS.
Acquiror and Acquisition Subs hereby covenant and agree that, prior to the
Closing, unless otherwise expressly contemplated by this Agreement or consented
to in writing by the Company, Acquiror and Acquisition Subs will:
(a) use all reasonable efforts to preserve substantially
intact their business organizations;
(b) maintain and keep their properties and assets in as
good repair and condition as at present, ordinary wear and tear
excepted, and maintain supplies and inventories in quantities
consistent with its customary business practice; and
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(c) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage
to that currently maintained.
7.02 NEGATIVE COVENANTS OF ACQUIROR AND ACQUISITION SUBS. Except
as expressly contemplated by this Agreement or otherwise consented to in
writing by the Company, from the date of this Agreement until the Closing,
neither Acquiror nor Acquisition Subs will do any of the following:
(a) amend any of the material terms or provisions of the
Acquiror Shares;
(b) knowingly take any action that would result in a
failure to maintain the listing of the common stock of the Acquiror on
the New York Stock Exchange;
(c) propose to adopt any amendments to the Acquiror
Organizational Documents that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement; or
(d) agree in writing or otherwise to do any of the
foregoing.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 NOTIFICATION OF CERTAIN MATTERS. The Company and Andrews
shall give prompt notice to Acquiror, and Acquiror shall give prompt notice to
the Company, orally and in writing, of (i) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any
representation or warranty of the party giving such notice contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Closing Date, (ii) any material failure of the party giving such notice to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder within the time specified therefor and
(iii) any change or event having, or which, insofar as can be reasonably
foreseen, could have, a material adverse effect on the financial condition,
results of operations, business or prospects of Acquiror, Acquisition Subs or
the Company.
8.02 ACCESS AND INFORMATION.
(a) The Company shall, and shall cause its subsidiaries
to, (i) afford to Acquiror Companies and their officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Acquiror Representatives") access
during ordinary business hours and at other reasonable times, upon
reasonable prior notice, to the officers, employees, accountants,
agents, properties, offices and other facilities of the Company and
its subsidiaries and to the books and records thereof and (ii) furnish
promptly to Acquiror and the Acquiror Representatives such information
concerning the business, properties, contracts, records and personnel
of the Company and its subsidiaries (including, without limitation,
financial, operating and other data and information) as may be
reasonably requested, from time to time, by Acquiror or the Acquiror
Representatives.
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(b) Acquiror shall, and shall cause its subsidiaries to,
(i) afford to the Company and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Company Representatives") access
during ordinary business hours, upon reasonable prior notice, to the
officers, employees, accountants, agents, properties, offices and
other facilities of Acquiror and its subsidiaries and to the books and
records thereof and (ii) furnish promptly to the Company and the
Company Representatives such information concerning the business,
properties, contracts, records and personnel of Acquiror and its
subsidiaries (including, without limitation, financial, operating and
other data and information) as may be reasonably requested, from time
to time, by the Company or the Company Representatives.
(c) Notwithstanding the foregoing provisions of this
Section 8.02, neither party shall be required to grant access or
furnish information to the other party to the extent that such access
or the furnishing of such information is prohibited by Law or
contract. No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the
parties that are contained herein and each such representation and
warranty shall survive such investigation.
(d) Each party to this Agreement shall hold in confidence
all nonpublic information received from the other party to this
Agreement until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will
deliver to the other party all documents, work papers and other
materials (including copies) obtained by such party or on its behalf
from another party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution hereof.
8.03 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Acquiror Companies shall each use,
and shall cause each of their respective subsidiaries to use, and each
of the Stockholders shall use all reasonable efforts promptly (i) to
take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable under applicable
Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, (ii) to obtain from any Governmental
Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained by the Company,
Acquiror Companies or any of the Stockholders, respectively, or any of
the Company's or Acquiror's Companies respective subsidiaries, in
connection with the authorization, execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby, (iii) to make all necessary filings, and
thereafter make any other required submissions, with respect to this
Agreement and the Exchange required under (A) the Securities Act and
the Exchange Act and the rules and regulations thereunder, and any
other applicable federal or state securities laws and (B) any other
applicable Law; provided that Acquiror Companies and the Company shall
cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the
nonfiling party and its advisors prior to filing and, if requested,
shall accept all reasonable additions, deletions or changes suggested
in connection therewith. The Company and
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Acquiror Companies shall furnish all information required for any
application or other filing to be made pursuant to the rules and
regulations of any applicable Law in connection with the transactions
contemplated by this Agreement.
(b) Acquiror Companies, the Company and each of the
Stockholders agree, and Acquiror Companies and the Company shall cause
each of their respective subsidiaries, to cooperate and to use all
reasonable efforts to contest and resist any action, including
legislative, administrative or judicial action, and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order")
that is in effect and that restricts, prevents or prohibits the
consummation of the Exchange or any other transactions contemplated by
this Agreement, including, without limitation, by vigorously pursuing
all available avenues of administrative and judicial appeal and all
available legislative action. Acquiror Companies, the Company and
each of the Stockholders also agree to take any and all reasonable
actions, including, without limitation, the disposition of assets or
the withdrawal from doing business in particular jurisdictions,
required by regulatory authorities as a condition to the granting of
any approvals required in order to permit the consummation of the
Exchange or as may be required to avoid, lift, vacate or reverse any
legislative or judicial action that would otherwise cause any
condition to the Exchange not to be satisfied; provided, however, that
in no event shall any party take, or be required to take, any action
that could reasonably be expected to have a Company Material Adverse
Effect or an Acquiror Material Adverse Effect.
(c) The Company, Acquiror Companies and each of the
Stockholders shall each promptly give (or shall cause their respective
subsidiaries to give) any notices regarding the Exchange, this
Agreement or the transactions contemplated hereby to third parties
required by Law or by any contract, license, lease or other agreement
to which such person is a party or by which such person is bound, and
use (and cause its subsidiaries to use) all reasonable efforts to
obtain any third party consents (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (ii)
otherwise required under any contracts, licenses, leases or other
agreements in connection with the consummation of the transactions
contemplated by this Agreement or (iii) required to prevent a Company
Material Adverse Effect or an Acquiror Material Adverse Effect,
respectively, from occurring after the Closing.
(d) If any party shall fail to obtain any third party
consent described in subsection (c)(i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably
requested by the other parties, to limit the adverse effect upon the
Company and Acquiror Companies, their respective subsidiaries, and
their respective businesses resulting, or which could reasonably be
expected to result after the Closing, from the failure to obtain such
consent.
8.04 PUBLIC ANNOUNCEMENTS. Acquiror, Acquisition Subs and the
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
Exchange and shall not issue any such press release or make any such public
statement prior to such consultation; provided, however, that a party may,
without consulting with the other party, issue such a press release or make
such a public statement if required
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by applicable Law or the rules of a national securities exchange if such party
has used commercially reasonable efforts to consult with the other party but
has been unable to do so in a timely manner.
8.05 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses; provided that the actual and reasonable legal
fees incurred by the Company and the Stockholders in connection with the
negotiation and Closing of this Agreement shall be borne by the Company.
Except as provided in the preceding sentence, the Stockholders shall not
charge the Company or any of its subsidiaries, or cause the Company or any of
its subsidiaries to pay or be liable, for any costs or expenses incurred by any
of the Stockholders in connection with this Agreement or the transactions
contemplated hereby.
8.06 EMPLOYEES OF COMPANY. As soon as reasonably practicable after
the Closing Date, Acquiror shall provide employee benefit plans and
arrangements to employees of the Company and its subsidiaries that are the same
as the employee benefit plans and arrangements of Acquiror for similarly
situated employees of the Acquiror as in effect immediately prior to the
Closing Date. The employees of Company and its subsidiaries shall be credited
for their actual years of service with the Company for purposes of eligibility,
vesting and benefit accrual under all Acquiror benefit plans including, but not
limited to, vacation, severance, retirement and disability plans. Such
employee benefits under the Acquiror medical plan shall not be subject to any
exclusions for any pre-existing conditions, and credit shall be received for
any deductibles or out-of-pocket amounts previously paid. Nothing in this
Agreement is intended to confer upon any employee of the Company or its
subsidiaries retained ("Retained Employees") any right to continued employment
after evaluation by Acquiror and its affiliates of their employment needs at
any time after the Closing; provided, however, that any severance liabilities
incurred as a result of any termination of employment of any Retained Employees
after the Closing shall not result in any liability of Andrews under Article
IX. Notwithstanding any provision in this Agreement to the contrary, Acquiror
expressly reserves the right to amend, modify, or terminate any benefit plan or
program established or maintained by Acquiror or any of its affiliates
(including, without limitation, the Company or its subsidiaries) for the
benefit of the Retained Employees.
ARTICLE IX
INDEMNIFICATION
9.01 IN GENERAL. Subject to the terms and conditions of this
Article IX, Andrews hereby agrees to indemnify, defend and hold harmless
Acquiror Companies and their directors, officers, employees, consultants,
affiliates and controlling persons (hereinafter, including the Company and its
subsidiaries after the Closing collectively, the "Acquiror Indemnified
Parties"), from and against all Claims asserted against, resulting from,
imposed upon or incurred by Acquiror or any Acquiror Indemnified Party,
directly or indirectly, by reason of, arising out of, or resulting from (a) the
inaccuracy or breach of any representation or warranty of the Company or any of
the Stockholders contained in or made pursuant to this Agreement or (b) the
breach of any covenant or agreement of the Company or any of the Stockholders
contained in or made pursuant to this Agreement. As used in this Article IX,
the term "Claim" shall include (i) all debts, liabilities and obligations, (ii)
all
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losses, damages, costs and expenses (including, without limitation, interest
(including prejudgment interest in any litigated matter), penalties, court
costs and reasonable attorneys' fees and expenses), and (iii) all demands,
claims, actions, costs of investigation, causes of action, proceedings,
arbitrations, judgments, settlements and assessments, whether or not ultimately
determined to be valid.
9.02 NO EXHAUSTION OF REMEDIES. Andrews acknowledges that his
obligation is independent of the obligations of the Company pursuant to this
Agreement, and that Andrews waives any right to require the Acquiror
Indemnified Parties to (i) proceed against the Company or (ii) pursue any other
remedy whatsoever in the power of the Acquiror Indemnified Parties.
9.03 DEFENSE OF THIRD PARTY CLAIMS. The obligation of Andrews to
indemnify the Acquiror Indemnified Parties under this Article IX with respect
to Claims relating to or arising from third parties (a "Third Party Claim")
shall be subject to the following terms and conditions:
(a) Notice and Defense. The Acquiror Indemnified Party
will give the other party or parties (whether one or more, the
"Indemnifying Party") prompt written notice of any such Third Party
Claim, and the Indemnifying Party may undertake the defense thereof by
representatives chosen by it upon written notice to the Acquiror
Indemnified Party provided within 20 days of receiving notice of such
Third Party Claim (or sooner if the nature of the Third Party Claim so
requires). Failure of the Acquiror Indemnified Party to give such
notice shall not affect the Indemnifying Party's duty or obligations
under this Article IX, except to the extent the Indemnifying Party is
materially prejudiced thereby. The Acquiror Indemnified Party shall
make available to the Indemnifying Party or its representatives all
records and other materials required by the Indemnifying Party and in
the possession or under the control of the Acquiror Indemnified Party,
for the use of the Indemnifying Party and its representatives in
defending any such claim, and shall in other respects give reasonable
cooperation in such defense.
(b) Failure to Defend. If the Indemnifying Party, within
20 days after notice of any such Third Party Claim (or sooner if the
nature of any Third Party Claim so requires), fails to undertake the
defense of such Third Party Claim actively and in good faith, then the
Acquiror Indemnified Party will have the right to undertake the
defense, compromise or settlement of such Third Party Claim, or
consent to the entry of a judgment with respect thereto.
(c) Acquiror Indemnified Party's Rights. Anything in
this Article IX to the contrary notwithstanding, (i) if there is a
reasonable probability that the Third Party Claim may adversely affect
the Acquiror Indemnified Party other than as a result of money damages
or other money payments in an aggregate amount of less than $100,000,
the Acquiror Indemnified Party shall have the right to defend,
compromise or settle such Third Party Claim (provided that the
Acquiror Indemnified Party shall not settle such Third Party Claim or
consent to any judgment without first obtaining the consent of the
Indemnifying Party, which shall not be unreasonably withheld), and
(ii) the Indemnifying Party shall not without the written consent of
the Acquiror Indemnified Party, settle or compromise any Third Party
Claim or consent to the entry of any judgment that does not include as
an unconditional term
-26-
<PAGE> 32
thereof the giving by the claimant or the plaintiff to the Acquiror
Indemnified Party of an unconditional release from all liability in
respect of such Third Party Claim.
9.04 PAYMENT; ARBITRATION. Upon the occurrence of a Claim for
which indemnification is believed to be due hereunder, the Indemnified Party
shall provide notice of such Claim to the Indemnifying Party, stating in
specific terms the circumstances giving rise to the Claim, specifying the
amount of the Claim and making a request for any payment then believed due.
Any Claim shall be conclusive against the Indemnifying Party in all respects 30
days after receipt by the Indemnifying Party of such notice, unless within such
period the Indemnifying Party sends the Indemnified Party a notice disputing
the propriety of the Claim. Such notice of dispute shall describe the basis
for such objection and the amount of the Claim as to which the Indemnifying
Party does not believe should be subject to indemnification. Upon receipt of
any such notice of dispute, both the Indemnified Party and the Indemnifying
Party shall use all reasonable efforts to cooperate and arrive at a mutually
acceptable resolution of such dispute within the next 30 days. If a mutually
acceptable resolution cannot be reached between the Indemnified Party and the
Indemnifying Party with such 30-day period, either party may submit the dispute
for resolution by binding arbitration pursuant to the provisions of this
Section 9.04. If a party elects to submit such matter to arbitration, such
party shall provide notice to the other party of its election to do so, and the
parties shall attempt to appoint a single arbitrator. If the parties are
unable within 10 days of receipt of the notice to agree on a single arbitrator,
then each party shall appoint one arbitrator, and the two arbitrators so
appointed shall name a third arbitrator within a period of 10 days of their
nomination. If the two arbitrators fail to appoint a third arbitrator within
such 10-day period, a third arbitrator shall be appointed pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. In all
respects, such panel shall be governed by the American Arbitration
Association's then existing Commercial Arbitration Rules, and the place of
arbitration shall be in a city mutually selected by the Indemnifying Party and
the Indemnified Party (or, if no city can be mutually agreed upon within 10
days, then in Houston, Texas). If it is finally determined that all or a
portion of such Claim amount is owed to the Indemnified Party, then such Claim
amount shall be satisfied in accordance with Section 9.02 hereof. Judgment
upon the award resulting from arbitration may be entered in any court having
jurisdiction for direct enforcement, or any application may be made to a court
for a judicial acceptance of the award and an order of enforcement, as the case
may be.
9.05 SATISFACTION OF CLAIMS FROM ESCROW SHARES. After the Closing
Date and except that any Claims based on fraud shall not be subject to the
following limitations, the obligations and liabilities of Andrews pursuant to
this Agreement shall be satisfied solely, and from no other source, from
payments of the Escrow Shares and the Acquiror Shares escrowed in the closing
of the Agreement and Plan of Merger for the Andrews Group International, Inc.
("U.S. Acquisition") (together, the "Full Escrow Shares") by delivery to the
Acquiror Indemnified Parties. Pursuant to the terms of the Escrow Agreement,
if Andrews is determined to owe a Claim amount pursuant to the procedures set
forth in Section 9.04, then the amount due the Indemnified Party hereunder
shall be satisfied by the delivery to the Indemnified Party pursuant to the
Escrow Agreement of Full Escrow Shares equal in value to the amount of the
Claim to be satisfied, and the Claim shall be deemed paid and satisfied upon
receipt by the Indemnified Party of certificates representing such number of
Full Escrow Shares duly endorsed for transfer to the Indemnified Party. The
per share value of the Full Escrow Shares for purposes of this Article IX and
the Escrow Agreement with respect to a particular Claim shall be the Market
Value (as defined herein) of the Full Escrow Shares.
-27-
<PAGE> 33
The "Market Value" of a Full Escrow Share shall be the price of the Acquiror
Stock on the later of the Closing Date or the closing of the U.S. Acquisition,
(regardless of the actual trading price for the Acquiror Stock) with
appropriate adjustment to take into account any stock split, reverse stock
split, stock dividend, recapitalization, share exchanges or other similar
capital adjustments with respect (including by reason of merger, consolidation
or other business combination involving Acquiror) to the Full Escrow Shares.
The Market Value of the Additional Corpus (as such term is defined in the
Escrow Agreement) shall be determined by mutual agreement of Andrews and the
Acquiror Companies. In the event that such parties cannot in good faith agree
on the market value of the Additional Corpus, the matter shall be settled by
binding arbitration in accordance with the procedures set forth herein.
Andrews shall have the power and authority to make all decisions with regard to
the settlement of Claims brought pursuant to Section 9.01 of this Agreement
from the Full Escrow Shares.
9.06 LIABILITY LIMITATIONS; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. All representations, warranties, covenants and agreements of the
Company and the Stockholders in this Agreement or made pursuant hereto shall
survive the Closing and any investigation thereof for one year after the later
of the Closing Date or the closing of the U.S. Acquisition, and Stockholders
shall have no liability under this Article IX unless written notice of a Claim
is provided within such period. After the Closing, the Acquiror Indemnified
Parties shall not be entitled to indemnification for Claims from the Full
Escrow Shares except to the extent the aggregate amount for all claims exceeds
$25,000. After the Closing, all claims by the Acquiror Indemnified Parties
pursuant to this Agreement shall be limited to the Full Escrow Shares, except
for any Claims of fraud. If any Acquiror Indemnified Party recovers against an
Indemnifying Party for a Claim and there exists the possibility of recovery
against any insurance policy in effect covering such Claim, the Indemnifying
Party shall be entitled to pursue recovery under such insurance policy to the
extent of the Claim.
ARTICLE X
CONDITIONS
10.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR COMPANIES.
The obligation of the Acquiror Companies to effect the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any or all of which may be waived by
Acquiror Companies, in whole or in part, to the extent permitted by applicable
law:
(a) Each of the representations and warranties of the
Company and the Stockholders contained in this Agreement shall be true
and correct in all material respects (without duplication of any
materiality exception contained in any individual representation and
warranty) as of the date of this Agreement and as of the Closing Date
as though made again as of the Closing Date. Acquiror shall have
received a certificate of the President, or the organizational
equivalency, and the Chief Financial Officer of the Company and from
Andrews, dated the Closing Date, to such effect with respect to the
representations and warranties of the Company set forth in Article IV
hereof;
(b) The Company and the Stockholders shall have performed
or complied with all agreements and covenants required by this
Agreement to be performed or complied with
-28-
<PAGE> 34
by such person on or prior to the Closing Date. Acquiror shall have
received a certificate of the President, or the organizational
equivalency, and the Chief Financial Officer of the Company, dated the
Closing Date, to such effect with respect to the Company's performance
and compliance;
(c) The resignations, effective at the Closing Date, of
each of directors and officers of the Company, or the organizational
equivalency, shall have been delivered to Acquiror;
(d) The applicable waiting period under any competition
Laws, Regulations and Orders of foreign Governmental Entities, as set
forth in Acquiror's Disclosure Letter or the Company's Disclosure
Letter, shall have expired or been terminated;
(e) No court or Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any Laws (whether temporary,
preliminary or permanent) which is in effect and which has the effect
of making the Exchange illegal or otherwise prohibiting consummation
of the Exchange;
(f) Acquiror Companies shall have received the Escrow
Agreement, duly executed and delivered by Andrews and the Escrow
Agent; and
10.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Closing of the following
conditions, any or all of which may be waived by the Company, in whole or in
part, to the extent permitted by applicable law:
(a) Each of the representations and warranties of
Acquiror Companies contained in this Agreement shall be true and
correct in all material respects (without duplication of any
materiality exception contained in any individual representation and
warranty) as of the date of this Agreement and as of the Closing Date
as though made again as of the Closing Date. The Company shall have
received a certificate of the President and the Chief Financial
Officer of Acquiror and the Acquisition Subs, dated the Closing Date,
to such effect;
(b) Acquiror shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date. The Company
shall have received a certificate of the President and the Chief
Financial Officer of Acquiror and the Acquisition Subs, dated the
Closing Date, to such effect;
(c) No court or Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any Laws (whether temporary,
preliminary or permanent) which is in effect and which has the effect
of making the Exchange illegal or otherwise prohibiting consummation
of the Exchange;
(d) The applicable waiting period under any competition
Laws, Regulations and Orders of foreign Governmental Entities, as set
forth in Acquiror's Disclosure Letter or the Company's Disclosure
Letter, shall have expired or been terminated; and
-29-
<PAGE> 35
ARTICLE XI
MISCELLANEOUS
11.01 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual consent of Acquiror, Acquisition Subs,
Andrews and the Company;
(b) by either Acquiror, Acquisition Subs, Andrews or the
Company if the Closing has not occurred on or before December 31,
1998;
(c) by Acquiror, upon a breach of any covenant or
agreement on the part of the Company or any of the Stockholders set
forth in this Agreement, or if any representation or warranty of the
Company or any of the Stockholders shall have become untrue, in either
case such that the conditions set forth in Section 10.01(a) or Section
10.01(b) would not be satisfied (a "Terminating Company Breach");
provided that, if such Terminating Company Breach is curable by the
Company or any of the Stockholders, as the case may be, through the
exercise of reasonable efforts and for so long as the Company or such
Stockholder or Stockholders continue to exercise such reasonable
efforts, Acquiror may not terminate this Agreement under this Section
11.01(c);
(d) by the Company, upon breach of any covenant or
agreement on the part of Acquiror Companies set forth in this
Agreement, or if any representation or warranty of Acquiror Companies
shall have become untrue, in either case such that the conditions set
forth in Section 10.02(a) or Section 10.02(b) would not be satisfied
(a "Terminating Acquiror Breach"); provided that, if such Terminating
Acquiror Breach is curable by Acquiror through the exercise of its
reasonable efforts and for so long as Acquiror continues to exercise
such reasonable efforts, the Company may not terminate this Agreement
under this Section 11.02(d); or
(e) by either Acquiror Companies or the Company, if there
shall be any Order which is final and nonappealable preventing the
consummation of the Exchange, unless the party relying on such Order
has not complied with its obligations under Section 8.03(b).
11.02 EFFECT OF TERMINATION. In the event of any termination of
this Agreement pursuant to Section 11.01, the Stockholders, the Company,
Acquiror and Acquisition Subs shall have no obligation or liability to each
other except that (i) the provisions of Sections IX shall survive any such
termination, and (ii) nothing herein and no termination pursuant hereto will
relieve any party from liability for any breach of this Agreement.
11.03 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto.
-30-
<PAGE> 36
The waiver by any party hereto of any condition or of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other
condition or subsequent breach.
11.04 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the Disclosure Schedules and Exhibits hereto) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
oral and written, among the parties or any of them, with respect to the subject
matter hereof, and neither this nor any document delivered in connection with
this Agreement confers upon any person not a party hereto any rights or
remedies hereunder except as provided in Article IX hereof.
11.05 ASSIGNMENT. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto,
except that the parties hereto agree that the right and obligations of the
Acquiror Companies may be assigned to an affiliate of the Acquiror.
11.06 CERTAIN DEFINITIONS. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned
person;
(b) "business day" means any day other than a day on
which banks in Mexico and The Netherlands are authorized or obligated
to be closed;
(c) "Closing" shall mean a meeting, which shall be held
in accordance with Section 1.02 of this Agreement, of persons
interested in the transactions contemplated by this Agreement at which
all documents deemed necessary by the parties to this Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are
executed and delivered;
(d) "Closing Date" shall mean the date of the Closing as
determined pursuant to Section 1.02 of this Agreement.
(e) "control" (including the terms "controlled,"
"controlled by" and "under common control with") means the possession,
directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management or policies of a
person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(f) "person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act);
-31-
<PAGE> 37
(g) "Significant Subsidiary" means any subsidiary of
Acquiror that would constitute a Significant Subsidiary within the
meaning of Rule 1-02 of Regulation S-X of the SEC;
(h) "subsidiary" or "subsidiaries" of the Company,
Acquiror, Acquisition Subs or any other person, means any
corporation, partnership, joint venture or other legal entity of which
the Company, Acquiror, Acquisition Subs or any such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing
body of such corporation or other legal entity;
(i) "Tax" or "Taxes" shall mean any and all taxes,
charges, fees, levies, assessments, duties or other amounts payable to
any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value
added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social
security, workers compensation, unemployment compensation, utility,
severance, excise, stamp, windfall profits, transfer and gains taxes,
(ii) customs, duties, imposts, charges, levies or other similar
assessments of any kind, and (iii) interest, penalties and additions
to tax imposed with respect thereto; and
(j) "Trading Day" shall mean each business day on which
the New York Stock Exchange is open for trading.
11.07 NOTICES. All notices, requests, demands, claims and other
communications that are required to be or may be given under this Agreement
shall be in writing and (i) delivered in person or by courier, (ii) sent by
telecopy or facsimile transmission, or (iii) mailed, certified first class
mail, postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
If to the Company: A.G.I. Mexicana S.A. de C.V.
Paseo de la Reforma #382
ler.Piso Col Juarez Mexico
Telecopy: (525) 514-5438
Attention: Robert P. Andrews
with a copy to: Webb & Lauterbach, P.C.
1570 Three Post Oak Central
1990 Post Oak Boulevard
Houston, Texas 77056-3814
Telecopy: (713) 626-9807
Attention: Micheal Webb
-32-
<PAGE> 38
If to the Stockholders: Mr. Robert P. Andrews
c/o The Andrews Group International, Inc.
1800 Augusta Drive, Suite 200
Houston, Texas 77057-3130
Telecopy: (713) 782-9639
with a copy to: Webb & Lauterbach, P.C.
1570 Three Post Oak Central
1990 Post Oak Boulevard
Houston, Texas 77056-3814
Telecopy: (713) 626-9807
Attention: Micheal Webb
If to Acquiror or Acquisition
Subs: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Telecopy: 011-31-20-627-9886
Attention: Jacobus Schouten
with a copy to: Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 690-3947
Attention: John D. Denson
and to: Vinson & Elkins L.L.P.
1001 Fannin Street, Suite 2300
Houston, Texas 77002-6760
Telecopy: (713) 758-2346
Attention: T. Mark Kelly
or to such other address as the parties hereto shall have furnished to the
other parties hereto by notice given in accordance with this Section 11.07.
Such notices shall be effective (i) if delivered in person or by courier, upon
actual receipt by the intended recipient, (ii) if sent by telecopy or facsimile
transmission, when the sender receives telecopier confirmation that such notice
was received at the telecopier number of the addressee, or (iii) if mailed,
upon the earlier of five days after deposit in the mail and the date of
delivery as shown by the return receipt therefor.
11.08 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive law of the State of Texas and the
United States of America, without giving effect to the principles of conflicts
of law thereof.
11.09 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms,
-33-
<PAGE> 39
provision, covenants and restrictions of this Agreement shall continue in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such
determination that any term, provision, covenant or restriction is invalid,
void or unenforceable, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts either by original or facsimile signatures, each of which shall be
an original, but all of which together shall constitute one and the same
agreement.
11.11 HEADINGS. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
-34-
<PAGE> 40
IN WITNESS WHEREOF, the Company and each of the Acquiror Companies
have each caused this Agreement to be executed on its behalf by its officer
thereunto duly authorized, and each of the Stockholders has executed this
Agreement, all as of the date first above written.
CORE LABORATORIES N.V.
By: Core Laboratories International B.V.,
its Sole Managing Director
By
----------------------------------------
Name: Jacobus Schouten
Title: Managing Director
CORE LABORATORIES INTERNATIONAL B.V.
By
----------------------------------------
Name: Jacobus Schouten
Title: Managing Director
SAYBOLT INTERNATIONAL B.V.
By
----------------------------------------
Name: Jacobus Schouten
Title: Managing Director
A.G.I. MEXICANA S.A. DE C.V.
By
----------------------------------------
Name:
Title:
-35-
<PAGE> 41
STOCKHOLDERS
By
----------------------------------------
Robert P. Andrews
By
----------------------------------------
Martha Segura G. de Cosio
By
----------------------------------------
Javier Nunez Ariza
By
----------------------------------------
Gustavo Escalante Patino
By
----------------------------------------
Rodolfo Antero Reyes
-36-
<PAGE> 42
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMPANY Accredited Acquiror
Stockholders: STOCK OWNED Investor Shares
-------------------------- ------------ ----------
SERIES A Series B
---------- ----------
<S> <C> <C> <C> <C>
Robert P. Andrews 24,500 5,432,806 [X] 7,350
Martha Segura G.de Cosio 20,000 4,434,944 6,000
Javier Nunez Ariza 2,500 554,368 750
Gustavo Escalante Patino 1,500 332,621 450
Rodolfo Antero Reyes 1,500 332,621 450
------- ----------- -------
Total 50,000 11,087,360 15,000
</TABLE>
-37-
<PAGE> 43
EXHIBIT A
ESCROW AGREEMENT
-38-
<PAGE> 1
EXHIBIT 10.16
AGREEMENT AND PLAN OF MERGER
AMONG
CORE LABORATORIES N.V.,
AGI ACQUISITION COMPANY,
THE ANDREWS GROUP INTERNATIONAL, INC.
AND
ROBERT P. ANDREWS
DECEMBER 18, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER
1.01 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 EFFECT OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 ARTICLES OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05 DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.06 ACQUISITION CONSIDERATION; CONVERSION AND CANCELLATION OF SECURITIES . . . . . . . . . . . 2
1.07 PAYMENT FOR COMPANY STOCK; SURRENDER OF CERTIFICATES . . . . . . . . . . . . . . . . . . . 4
1.08 NO FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.09 AGREEMENT TO VOTE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.11 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.12 STOCK TRANSFER BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.13 TAKING OF NECESSARY ACTION; FURTHER ACTION . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . 6
2.02 ORGANIZATIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.03 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.04 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.06 PERMITS; COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.07 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.09 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 POOLING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.13 AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.15 ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.16 UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.17 CERTAIN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.18 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.19 AFFILIATE INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.20 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.21 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.22 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
2.23 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.24 GOOD TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.25 CERTAIN SECURITIES LAW MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.26 AUTHORIZATION AND VALIDITY OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR
3.01 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.02 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.03 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 18
3.05 REPORTS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.07 POOLING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.08 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV COVENANTS OF THE STOCKHOLDER
4.01 AFFIRMATIVE COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.02 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V COVENANTS OF THE COMPANY
5.01 AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.02 NEGATIVE COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI COVENANTS OF ACQUIROR
6.01 AFFIRMATIVE COVENANTS OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.02 NEGATIVE COVENANTS OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII ADDITIONAL AGREEMENTS
7.01 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.02 ACCESS AND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.03 APPROPRIATE ACTION; CONSENTS; FILINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.04 AFFILIATES; POOLING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.05 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.06 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.07 EMPLOYEES OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.08 TAX-FREE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII INDEMNIFICATION
8.01 IN GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.02 NO EXHAUSTION OF REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.03 DEFENSE OF THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
8.04 PAYMENT; ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.05 SATISFACTION OF CLAIMS FROM ESCROW SHARES . . . . . . . . . . . . . . . . . . . . . . . . 30
8.06 LIABILITY LIMITATIONS; SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 31
ARTICLE IX CONDITIONS
9.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR COMPANIES . . . . . . . . . . . . . . 31
9.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 32
ARTICLE X MISCELLANEOUS
10.01 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.02 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.03 WAIVER AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.04 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . 34
10.05 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.06 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.07 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.08 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.09 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.11 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<PAGE> 5
EXHIBITS
- --------
Exhibit A -- Escrow Agreement
Exhibit B -- Employment Agreement Form
Exhibit C -- Affiliates' Letter
Exhibit D -- Andrews Employment Agreement
Exhibit E -- Acquiror Disclosure Schedules
Exhibit F -- Company Disclosure Schedules
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<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of December 18, 1998 by and among Core Laboratories N.V., a
Netherlands limited liability company ("Acquiror"), AGI Acquisition Company, a
Texas corporation with its principal place of business in Houston, Texas, and a
wholly-owned subsidiary of Acquiror ("Acquisition Sub"), The Andrews Group
International Inc., a Texas corporation (the "Company"), and Robert P. Andrews
the sole stockholder of the Company (the "Andrews"). Acquiror and Acquisition
Sub are sometimes collectively referred to herein as the "Acquiror Companies."
RECITALS
Andrews owns, beneficially and of record, all 100% of the outstanding
capital stock of the Company.
Acquisition Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the Texas Business Corporation Act (the
"TBCA"), will merge with and into the Company (the "Merger").
The Board of Directors of the Company has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of the
Company and is fair to, and in the best interests of, the Company and Andrews
and has approved and adopted this Agreement and the transactions contemplated
hereby, and recommended approval and adoption of this Agreement and the Merger
by the stockholder (Andrews) of the Company.
This Agreement and the Merger have been approved and adopted by the
requisite vote of the stockholder (Andrews) of the Company and of Acquisition
Sub as required by the TBCA.
For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization within the meaning of the provisions of Section
368(a) of the Code.
The Merger is intended to be treated as a "pooling of interests" for
financial accounting purposes under United States generally accepted accounting
principles ("GAAP").
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. Upon the terms and subject to the conditions set
forth in this
<PAGE> 7
Agreement, and in accordance with the TBCA, at the Effective Time (as defined
in Section 1.02 of this Agreement), Acquisition Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence
of Acquisition Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). The name of the
Surviving Corporation shall be "The Andrews Group International, Inc."
1.02 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
IX of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing a Plan of Merger with the Secretary of State of the State
of Texas, in such form as required by, and executed in accordance with the
relevant provisions of, the TBCA (the date and time of the completion of such
filing being the "Effective Time").
1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the TBCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Acquisition Sub and the Company shall vest
in the Surviving Corporation, and all debts, liabilities and duties of
Acquisition Sub and the Company shall become the debts, liabilities and duties
of the Surviving Corporation.
1.04 ARTICLES OF INCORPORATION; BYLAWS. At the Effective Time, the
Articles of Incorporation and the Bylaws of Acquisition Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and the Bylaws of the Surviving Corporation, except that Article I of the
Articles of Incorporation thereof shall be amended to read "The name of the
corporation is The Andrews Group International, Inc."
1.05 DIRECTORS AND OFFICERS. The directors of Acquisition Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Acquisition Sub immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, in each case until their respective successors
are duly elected or appointed and qualified.
1.06 ACQUISITION CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of the Acquiror Companies, the Company or Andrews:
(a) Subject to the other provisions of this Article I,
all of the Company's common stock, par value $1.00 per share ("Company
Stock"), issued and outstanding immediately prior to the Effective
Time (excluding any Company Stock described in Section 1.06(c) of this
Agreement), shall be converted into 700,000 shares of fully paid and
nonassessable common shares, par value NLG 0.03 Dutch gilders per
share ("Acquiror Shares"), of Acquiror, subject to the escrow of a
portion of such shares pursuant to the terms and conditions set forth
herein. At the Effective Time, Acquiror will cause to be delivered
to,
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<PAGE> 8
and directly deposited with, Bankers Trust Company (the "Escrow
Agent"), for the account and future potential benefit of Andrews
immediately prior to the Effective Time, a stock certificate
representing 70,000 Acquiror Shares, which certificate shall be
registered as follows: "Bankers Trust Company, f/b/o Robert P.
Andrews" All such Acquiror Shares so delivered to the Escrow Agent,
together with all subsequent stock dividends or distributions of other
Acquiror Shares received in respect of such shares while deposited
with the Escrow Agent shall be referred to as "Escrow Shares." The
Escrow Shares shall be subtracted from the number of Acquiror Shares
Andrews at the Effective Time is entitled to receive pursuant to the
Merger. The Escrow Shares shall be held by the Escrow Agent pursuant
to the terms and conditions of an Escrow Agreement in substantially
the form attached hereto as Exhibit A (the "Escrow Agreement") between
Acquiror, Acquisition Sub, the Company and Andrews. The Escrow
Agreement shall authorize the Stockholder's Representative to control
the disposition of such Escrow Shares pursuant to the terms of the
Escrow Agreement.
(b) As a result of the conversion pursuant to subsection
1.06(a), all shares of Company Stock shall cease to be outstanding and
shall automatically be canceled and retired.
(c) Notwithstanding any provision of this Agreement to
the contrary, each share of Company Stock held in the treasury of the
Company and each share of Company Stock owned by Acquiror or any
direct or indirect wholly owned subsidiary of Acquiror or of the
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be
made with respect thereto.
(d) Each share of common stock, par value $.01 per share,
of Acquisition Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, par
value $.01 per share, of the Surviving Corporation.
1.07 PAYMENT FOR COMPANY STOCK; SURRENDER OF CERTIFICATES.
(a) Exchange Procedures.
(b) Distributions with Respect to Acquiror Shares.
1.08 NO FRACTIONAL SHARES.
1.09 AGREEMENT TO VOTE SHARES. At any meeting of the Company with
respect to any of the following, and at any adjournment thereof, and with
respect to any consent solicited with respect to any of the following, Andrews
hereby agrees to vote his Company Stock (i) in favor of approval of the Merger
and any matter which could reasonably be expected to facilitate the Merger and
(ii) against approval of any proposal made in opposition to or in competition
with the Merger, against any merger, consolidation, sale of assets,
reorganization or recapitalization with any party, against any liquidation or
winding up of the Company and against any other matter which would,
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<PAGE> 9
or could reasonably be expected to, prohibit or discourage the Merger.
1.10 WITHHOLDING. Acquiror (or any affiliate thereof) shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to Andrews such amounts as Acquiror (or any
affiliate thereof) is required to deduct and withhold with respect to the
making of such payment under the Code (as hereinafter defined), or any other
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by Acquiror, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to Andrews in respect of
which such deduction and withholding was made by Acquiror.
1.11 CLOSING. The Closing shall take place at the offices of
Vinson & Elkins L.L.P., 1001 Fannin, 3600 First City Tower, Houston, Texas
77002-6760, at (a) 10:00 a.m. on December 18, 1998, (b) if the conditions set
forth in Article X of this Agreement have not been satisfied or waived on or
before December 18, 1998, at 10:00 a.m. on the second business day following
the date on which the conditions set forth in Article X of this Agreement have
been satisfied or waived or (c) at such other place, time and date as the
parties hereto may agree. At the conclusion of the Closing, the parties hereto
shall cause the Plan of Merger to be filed with the Secretary of State of the
State of Texas.
1.12 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Stock thereafter on the records
of the Company.
1.13 TAKING OF NECESSARY ACTION; FURTHER ACTION. Acquiror and the
Company shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company or Acquisition Sub,
such corporations shall direct their respective officers and directors to take
all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND ANDREWS
The Company and Andrews, jointly and severally, hereby represent and
warrant to Acquiror that:
2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company is
a corporation, and each of the Company's subsidiaries (as such term in defined
in Section 10.06 herein) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
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<PAGE> 10
incorporation or organization, and each of the Company and its subsidiaries has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted and, except as set forth
in Section 2.01 of the Company Disclosure Schedule (as defined below), is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where the failure to
be so duly qualified and in good standing could not reasonably be expected to
have a Company Material Adverse Effect. The term "Company Material Adverse
Effect" as used in this Agreement shall mean any change or effect that would be
materially adverse to the financial condition, results of operations, business
or prospects of the Company and its subsidiaries, taken as a whole, at the time
of such change or effect. Section 2.01 of the Disclosure Schedule delivered by
the Company to Acquiror concurrently with the execution of this Agreement (the
"Company Disclosure Schedule") sets forth, as of the date of this Agreement, a
true and complete list of all the Company's directly or indirectly owned
subsidiaries, together with the jurisdiction of incorporation or organization
of each subsidiary and the percentage of each subsidiary's outstanding capital
stock or other equity interests owned by the Company or another subsidiary of
the Company.
2.02 ORGANIZATIONAL DOCUMENTS. The Company has heretofore
furnished or made available to Acquiror complete and correct copies of the
Articles of Incorporation and the Bylaws or the equivalent organizational
documents, in each case as amended or restated to the date hereof, of the
Company and each of its subsidiaries. Neither the Company nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws (or equivalent organizational documents).
2.03 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
of 100,000 shares of Common Stock, par value $1.00 per share and there are no
shares of preferred stock. As of the date of this Agreement, 1,000 shares of
Common Stock were issued and outstanding, 0 shares of Company Stock were held
by the Company in its treasury or by the Company's subsidiaries and no shares
of Company Stock were reserved for issuance. Each of the issued shares of
capital stock of, or other equity interests in, each of the Company and its
subsidiaries is duly authorized, validly issued and, in the case of shares of
capital stock, fully paid and nonassessable, and has not been issued in
violation of (nor are any of the authorized shares of capital stock of, or
other equity interests in, the Company or any of its subsidiaries subject to)
any preemptive or similar rights created by statute, the Articles of
Incorporation or Bylaws (or the equivalent organizational documents) of the
Company or any of its subsidiaries, or any agreement to which the Company or
any of its subsidiaries is a party or is bound, and all such issued shares or
other equity interests owned by the Company or a subsidiary of the Company are
owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations on the Company's or such subsidiaries' voting rights,
charges or other encumbrances of any nature whatsoever.
(b) No bonds, debentures, notes or other indebtedness of
the Company having the
-5-
<PAGE> 11
right to vote (or convertible into or exchangeable or exercisable for
securities having the right to vote) on any matters on which shareholders may
vote ("Voting Debt") are issued or outstanding.
(c) Except as set forth in Section 2.03(c) of the Company
Disclosure Schedule, there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which the Company or any of its subsidiaries is a party relating to the
issued or unissued capital stock or other equity interests of the Company or
any of its subsidiaries or obligating the Company or any of its subsidiaries to
grant, issue or sell any shares of capital stock, Voting Debt or other equity
interests of the Company or any of its subsidiaries. Except as set forth in
Section 2.03(c) of the Company Disclosure Schedule, there are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries (i) to
repurchase, redeem or otherwise acquire any shares of capital stock or other
securities of the Company or the capital stock or other equity interests of any
subsidiary of the Company or (ii) (other than advances to wholly owned
subsidiaries in the ordinary course of business) to provide material funds to,
or to make any material investment in (in the form of a loan, capital
contribution or otherwise), or to provide any guarantee with respect to the
material obligations of, any subsidiary of the Company or any other person.
Except (i) as set forth in Section 2.03(c) of the Company Disclosure Schedule
or (ii) for subsidiaries of the Company set forth in Section 2.01 of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries
(x) directly or indirectly owns, (y) has agreed to purchase or otherwise
acquire or (z) holds any interest convertible into or exchangeable or
exercisable for, 5% or more of the capital stock or other equity interest of
any corporation, partnership, joint venture or other business association or
entity. Except as set forth in Section 2.03(c) of the Company Disclosure
Schedule or for any agreements, arrangements or commitments between the Company
and its wholly owned subsidiaries or between such wholly owned subsidiaries,
there are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on, or calculated in accordance with, the revenues or
earnings of the Company or any of its subsidiaries. Except as set forth in
Section 2.03(c) of the Company Disclosure Schedule, there are no voting trusts,
proxies or other agreements or understandings to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
is bound with respect to the voting of any shares of capital stock or other
equity interests of the Company or any of its subsidiaries.
2.04 AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Acquiror, constitutes the legal, valid and binding
obligation of the Company.
2.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
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<PAGE> 12
(a) Assuming that all consents, licenses, permits,
waivers, approvals, authorizations, orders, filings and notifications
contemplated by the exceptions to Section 2.05(b) are obtained or made and
except as disclosed in Section 2.05(a) of the Company Disclosure Schedule, the
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of its obligations hereunder, including consummation
of the transactions contemplated hereby, will not (i) conflict with or violate
the Articles of Incorporation or Bylaws, or the equivalent organizational
documents, in each case as amended or restated, of the Company or any of its
subsidiaries, (ii) conflict with or violate any federal, state, foreign or
local law, statute, ordinance, rule or regulation (collectively, "Laws") or
any judgment, order or decree applicable to the Company or any of its
subsidiaries or by or to which any of their respective properties is bound or
subject or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by or
to which the Company or any of its subsidiaries or any of their respective
properties is bound or subject.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of its obligations
hereunder, including consummation of the transactions contemplated hereby, will
not, require the Company to obtain any consent, license, permit, waiver,
approval, authorization or order of, or to make any filing with or notification
to, any governmental or regulatory authority, federal, state, local or foreign
(collectively, "Governmental Entities"), except (i) the filing of the Plan of
Merger with the Secretary of State of the State of Texas, (ii) the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
(iii) where the failure to obtain such consents, licenses, permits, waivers,
approvals, authorizations or orders, or to make such filings or notifications
could not reasonably be expected to cause a Company Material Adverse Effect or
to prevent the Company from performing its obligations under this Agreement and
(iv) as disclosed in Section 2.05(b) of the Company Disclosure Schedule.
2.06 PERMITS; COMPLIANCE. Except as disclosed in Section 2.06 of
the Company Disclosure Schedule, each of the Company and its subsidiaries is in
possession of all (i) franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"). Section 2.06 of the Company Disclosure
Schedule sets forth a list of each of the Company Permits and the jurisdiction
issuing the same, all of which are in good standing and not subject to
meritorious challenge. Section 2.06 of the Company Disclosure Schedule also
sets forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the knowledge of the Company or
Andrews, threatened against the Company or any of its subsidiaries that could
reasonably be expected to result in the loss or revocation of a Company
-7-
<PAGE> 13
Permit. Except as set forth in Section 2.06 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict with,
in default under or in violation of , and none of them has received, since
December 31, 1996, from any Governmental Entity any written notice with respect
to any conflict with, default under or violation of, (i) any Law applicable to
the Company or any of its subsidiaries or by or to which any of their
respective properties is bound or subject, (ii) any judgment, order or decree
applicable to the Company or any of its subsidiaries or (iii) any of the
Company Permits.
2.07 FINANCIAL STATEMENTS. The Company has provided Acquiror with
true, correct and complete copies of its audited consolidated balance sheet,
income statement and statement of cash flows for the years ended December 31,
1995, 1996 and 1997 and the ten months ended October 31, 1998 (collectively,
the "Company Financial Statements"). Each of the Company Financial Statements
(including, in each case, any related notes thereto), except as set forth in
Section 2.07 of the Company disclosure Schedule, (a) has been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved in compliance with SEC reporting requirements (except (i) to the
extent disclosed therein or required by changes in GAAP, and (ii) as may be
indicated in the notes thereto, and (b) fairly present the consolidated
financial position of the Company and its subsidiaries as of the respective
dates thereof and the consolidated results of operations and cash flows for the
periods indicated (subject, in the case of unaudited consolidated financial
statements for interim periods, to adjustments, consisting only of normal,
recurring accruals, necessary to present fairly such results of operations and
cash flows).
2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated
by this Agreement or as set forth in Section 2.08 of the Company Disclosure
Schedule, since December 31, 1997 the Company and its subsidiaries have
conducted their respective businesses only in the ordinary course and in a
manner consistent with past practice and there has not been: (i) any damage,
destruction or loss with respect to any assets of the Company or any of its
subsidiaries that, whether or not covered by insurance, would constitute a
Company Material Adverse Effect; (ii) any change by the Company or its
subsidiaries in their significant accounting policies; (iii) except for
dividends by a wholly owned subsidiary of the Company to the Company or to
another wholly owned subsidiary of the Company, any declaration, setting aside
or payment of any dividends or distributions in respect of shares of Company
Stock or the shares of stock of, or other equity interests in, any subsidiary
of the Company or any redemption, purchase or other acquisition of any of the
Company's securities or any of the securities of any subsidiary of the Company;
(iv) any material increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, performance awards (including, without limitation,
the granting of stock appreciation rights or restricted stock awards), stock
purchase or other employee benefit plan, or any increase in the compensation
payable or to become payable to any of the directors or officers of the Company
or the employees of the Company and its subsidiaries as a group; or (v) any
other Company Material Adverse Effect.
2.09 LITIGATION. Except as disclosed in Section 2.09 of the
Company Disclosure Schedule, there is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company
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<PAGE> 14
or Andrews, investigation of any kind, at law or in equity (including actions
or proceedings seeking injunctive relief), pending or, to the knowledge of the
Company or Andrews, threatened against the Company or any of its subsidiaries
or any properties or rights of the Company or any of its subsidiaries, and
neither the Company nor any of its subsidiaries is subject to any executory
judgment, order, writ, injunction, decree or award of any Governmental Entity,
including without limitation any cease and desist order and any consent decree,
settlement agreement or other similar written agreement with any Governmental
Entity.
2.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), maintained or contributed to by the Company
or any of its subsidiaries, or with respect to which the Company or any of its
subsidiaries could incur liability under Section 4069, 4212(c) or 4204 of ERISA
(the "Benefit Plans"), the Company has delivered or made available to Acquiror
a true and correct copy of (i) the most recent annual report (Form 5500) filed
with the Internal Revenue Service (the "IRS") for each Benefit Plan for which a
Form 5500 is required to be filed, (ii) such Benefit Plan, (iii) each trust
agreement, if any, relating to such Benefit Plan, (iv) the most recent summary
plan description for each Benefit Plan for which a summary plan description is
required, (v) the most recent actuarial report or valuation relating to a
Benefit Plan subject to Title IV of ERISA and (vi) the most recent
determination letter, if any, issued by the IRS with respect to any Benefit
Plan qualified under Section 401 of the Code.
(b) With respect to the Benefit Plans, no event has
occurred and, to the knowledge of the Company or Andrews, there exists no
condition or set of circumstances, in connection with which the Company or any
of its subsidiaries could be subject to any liability under the terms of such
Benefit Plans, ERISA, the Code or any other applicable Law.
(c) There are no collective bargaining or other labor
union contracts to which the Company or its subsidiaries is a party applicable
to persons employed by the Company or its subsidiaries and no collective
bargaining agreement is being negotiated by the Company or any of its
subsidiaries. There is no pending or, to the knowledge of the Company or
Andrews, threatened labor dispute, strike or work stoppage against the Company
or any of its subsidiaries. To the knowledge of the Company or any of the
Stockholder, none of the Company, any of its subsidiaries or any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the respective businesses of the Company or
its subsidiaries that could reasonably be expected to have a Company Material
Adverse Effect, and there is no pending or, to the knowledge of the Company or
Andrews, threatened charge or complaint against the Company or any of its
subsidiaries by the National Labor Relations Board or any comparable state
agency.
(d) Section 2.10(d) of the Company Disclosure Schedule
contains true and correct
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(i) copies of all employment agreements to which the Company or any of its
subsidiaries is a party; (ii) listings of all officers of the Company who have
executed a non-competition agreement with the Company or any of its
subsidiaries; (iii) copies of all severance agreements, programs and policies
of the Company or any of its subsidiaries with or relating to its, or any of
its subsidiaries, employees; and (iv) summary descriptions of all plans,
programs, agreements and other arrangements of the Company or any of its
subsidiaries with or relating to its, or any of its subsidiaries, employees.
Except as set forth in Section 2.10(d) of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries will owe a severance payment or
similar obligation to any of their respective employees, officers or directors
as a result of the Merger or the other transactions contemplated by this
Agreement, and none of such persons will be entitled to severance payments or
other benefits as a result of the Merger or the other transactions
contemplated by this Agreement in the event of the subsequent termination of
their employment.
(e) No Benefit Plan provides retiree medical or retiree
life insurance benefits and (y) neither the Company nor any of its subsidiaries
is contractually or otherwise obligated (whether or not in writing) to provide
life insurance and medical benefits upon retirement or termination of
employment of employees.
(f) Neither the Company nor any of its subsidiaries
contributes to or has an obligation to contribute to, and has not within six
years prior to the date of this Agreement contributed to or had an obligation
to contribute to, a multi-employer plan within the meaning of Section 3(37) of
ERISA.
(g) The Company has not taken any of the following or
other similar actions since December 31, 1997: the acceleration of vesting,
waiving of performance criteria or the adjustment of awards or any other
actions permitted upon a change in control of the Company with respect to any
of the Benefit Plans or any of the plans, programs, agreements, policies or
other arrangements described in Section 2.10(d) of this Agreement.
2.11 TAXES. Except as set forth in Section 2.11 of the Company
Disclosure Schedule,
(a) (i) all returns and reports ("Tax Returns") of or
with respect to any Tax which is required to be filed with respect to the
Company or any its subsidiaries have been duly and timely filed, (ii) all items
of income, gain, loss, deduction and credit or other items required to be
included in each such Tax Return have been so included and all information
provided in each such Tax Return is true, correct and complete in all material
respects, (iii) all Taxes that have become due with respect to the period
covered by each such Tax Return have been timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to Company or any of
its subsidiaries have been satisfied in all material respects, and (v) no
penalty, interest or other charge is or will become due with respect to the
late filing of any such Tax Return or late payment of any such Tax.
(b) There is no claim against the Company or any of its
subsidiaries for Taxes, and no assessment, deficiency or adjustment has been
asserted or proposed with respect to any Tax
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<PAGE> 16
Return of or with respect to the Company or any of its subsidiaries other than
those disclosed (and to which are attached true and complete copies of all
audit or similar reports) in Section 2.11 of the Company Disclosure Schedule.
(c) The total amounts set up as liabilities for current
and deferred Taxes in the Company Financial Statements are sufficient to cover
the payment of all Taxes, whether or not assessed or disputed, which are, or
are hereafter found to be, or to have been, due by or with respect to the
Company and any of its subsidiaries up to and through the periods covered
thereby.
(d) Except for statutory liens for current Taxes not yet
due, no liens for Taxes exist upon any of the assets of the Company or any of
its subsidiaries.
(e) None of the transactions contemplated by this
Agreement will result in any Tax liability or the recognition of any item of
income or gain to the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries has
made an election under section 341(f) of the Code.
2.12 POOLING. Neither the Company nor, to the knowledge of the
Company or Andrews, any of the Company's affiliates has taken or agreed to take
any action that would prevent the Merger from being treated for financial
accounting purposes as a "pooling of interests" in accordance with GAAP and the
rules, regulations and interpretations of the SEC (a "Pooling Transaction").
2.13 AFFILIATES. Section 2.13 of the Company Disclosure Schedule
identifies all persons who, to the knowledge of the Company, may be deemed to
be affiliates of the Company within the meaning of that term as used in Rule
145 promulgated pursuant to the Securities Act, including, without limitation,
all directors and executive officers of the Company.
2.14 CERTAIN BUSINESS PRACTICES. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries (in their capacities as such) has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful purposes
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, (iii) consummated any transaction, made any payment,
entered into any agreement or arrangement or taken any other action in
violation of Section 1128B(b) of the Social Security Act, as amended, or (iv)
made any other unlawful payment.
2.15 ENVIRONMENTAL. The Company and each of its subsidiaries is in
full compliance with all laws, rules, regulations, and other legal
requirements, foreign and domestic, relating to the prevention of pollution and
the protection of the environment, including all such legal requirements
pertaining to human health and safety (collectively, "Environmental Laws").
There is no physical condition existing on any property ever owned or operated
by the Company or any of its subsidiaries
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<PAGE> 17
nor are there any physical conditions existing on any other property that may
have been impacted by the operations of the Company or any of its subsidiaries
that could give rise to any remedial obligation under any Environmental Laws or
that could result in any liability to any third party claiming damage to person
or property as a result or consequence of such physical conditions. None of the
Company or any of its subsidiaries has caused or permitted its businesses,
properties or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce, or process any Hazardous
Substance (as defined below) except in compliance with all applicable laws,
rules, regulations, orders, judgments and decrees, and has not caused or
permitted the Release (as defined below) of any Hazardous Substance on or off
the site of any property of any of the Company or any of its subsidiaries. The
term "Hazardous Substance" shall mean any hazardous waste, as defined by 42
U.S.C. 6903(5), any hazardous substance, as defined by 42 U.S.C. 9601(14), any
pollutant or contaminant, as defined by 42 U.S.C. 9601(33), and all toxic
substances, hazardous materials, or other chemical substances regulated by any
other law, rule, or regulation. The term "Release" shall have the meaning set
forth in 42 U.S.C. 9601(22).
2.16 UNDISCLOSED LIABILITIES. Except as and to the extent of the
amounts specifically reflected or accrued for in the balance sheet dated as of
October 31, 1998, included in the Company Financial Statements, or set forth in
Section 2.16 of the Company Disclosure Schedule, none of the Company or any of
its subsidiaries has any liabilities or obligations of any nature whether
absolute, accrued, contingent or otherwise, and whether due or to become due.
Neither the Company nor Andrews knows of any basis for the assertion against
the Company or any of its subsidiaries of any such liability or obligation not
fully reflected or adequately accrued for in the Company Financial Statements
or set forth in Section 2.16 of the Company Disclosure Schedule.
2.17 CERTAIN AGREEMENTS. Except as set forth in Section 2.17 of
the Company Disclosure Schedule, none of the Company or any of its subsidiaries
is a party to, or bound by, any contract, agreement or organizational document
which purports to restrict, by virtue of a noncompetition, territorial
exclusivity or other provision covering such subject matter, the scope of the
business or operations of any of the Company or any of its subsidiaries
geographically or otherwise.
2.18 CONTRACTS AND COMMITMENTS. Section 2.18 of the Company
Disclosure Schedule sets forth (i) a list of each contract or commitment to
which the Company or any of its subsidiaries is a party or by which its or
their property is bound that involves consideration or other expenditure in
excess of $25,000 or performance over a period of more than six months or that
is otherwise material to the business or operations of the Company and its
subsidiaries, taken as a whole ("Material Contracts"); (ii) a list of all real
or personal property leases to which any of the Company or any of its
subsidiaries is a party involving consideration or other expenditure in excess
of $25,000 over the term of the lease ("Material Leases"); (iii) a list of
guarantees, or agreements to indemnify or be contingently liable for, the
payment or performance by any person or business entity to which any of the
Company or any of its subsidiaries is a party ("Guarantees"); and (iv) a list
of contracts or other formal or informal understandings between the Company or
any of its subsidiaries and any of its officers, directors, employees,
consultants, agents or shareholder (or any of such shareholders' family members
or affiliates) ("Affiliate Agreements"). True and complete copies of each
Material
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<PAGE> 18
Contract, Material Lease, Guarantee and Affiliate Agreement have been furnished
to Acquiror prior to the date hereof. Except as specifically disclosed in
Section 2.18 of the Company Disclosure Schedule, each of the Material
Contracts, Material Leases, Guarantees and Affiliate Agreements constitutes the
valid and legally binding obligation of the parties thereto and is in full
force and effect without default on the part of the Company, and to the
knowledge of the Company Andrews, any other party thereto.
2.19 AFFILIATE INTERESTS. Neither Andrews nor any employee,
consultant, officer or director, or former shareholder, employee, consultant,
officer or director, of the Company or any of its subsidiaries has any interest
in any property, tangible, or intangible, including, without limitation,
patents, trade secrets, other confidential business information, trademarks,
service marks or trade names used in or pertaining to the business of the
Company or any of its subsidiaries, except (with respect to the Stockholder)
for the normal rights of a shareholder.
2.20 INTELLECTUAL PROPERTY. The Company or one or more of its
subsidiaries own, or hold licenses under or otherwise have the right to use or
sublicense, all foreign and domestic patents, trademarks (common law and
registered), trademark registration applications, service marks (common law and
registered), service mark registration applications, trade names and
copyrights, copyright applications, trade secrets, know-how and other
proprietary information as are necessary for the conduct of the business of the
Company and its subsidiaries as currently conducted. A list of all such
intellectual property is set forth in Section 2.20 of the Company Disclosure
Schedule. Neither the Company nor any of its subsidiaries is currently in
receipt of any notice of infringement or notice of conflict with the asserted
rights of others in any patents, trademarks, service marks, trade names, trade
secrets and copyrights owned or held by other persons, except, in each case,
for matters that could not reasonably be expected to have a Company Material
Adverse Effect. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate or breach the
terms of or cause any cancellation of any material license held by the Company
or any of its subsidiaries under, any patent, trademark, service mark, trade
name, trade secret or copyright.
2.21 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or Andrews.
2.22 INSURANCE. Section 2.22 of the Company Disclosure Schedule
sets forth a list of all policies of insurance currently in effect relating to
the business or operations of the Company and its subsidiaries (true and
complete copies of which have been furnished to Acquiror). Such insurance
policies are in full force and effect. The Company and each of its
subsidiaries are presently insured, and during each of the past five calendar
years have been insured, against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured. Except as set forth in Section 2.22 of the Company Disclosure
Schedule, the policies of general liability, malpractice or professional
liability, fire, theft and other insurance maintained with respect to the
operations, assets or businesses of the Company and its subsidiaries provide
adequate
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<PAGE> 19
coverage against loss. The Company or its subsidiaries have given in a timely
manner to their insurers all notices required to be given under such insurance
policies with respect to all claims and actions covered by insurance, and no
insurer has denied coverage of any such claims or actions or reserved it rights
in respect of or rejected any of such claims. None of the Company or any of
its subsidiaries has received any notice or other communication from any such
insurer canceling or materially amending any of such insurance policies, and no
such cancellation is pending or threatened.
2.23 PROPERTIES. Except as set forth in Section 2.23 of the
Company Disclosure Schedule, the Company and its subsidiaries have good and
marketable title, free and clear of all liens to all their material properties
and assets whether tangible or intangible, real, personal or mixed, reflected
in the Company Financial Statements as being owned by the Company and its
subsidiaries as of the date thereof, other than (i) any properties or assets
that have been sold or otherwise disposed of in the ordinary course of business
since the date of such financial statements, (ii) liens disclosed in the notes
to such financial statements and (iii) liens arising in the ordinary course of
business. All buildings, and all fixtures, equipment and other property and
assets that are material to its business on a consolidated basis, held under
leases or sub-leases by the Company or any of its subsidiaries are held under
valid instruments enforceable in accordance with their respective terms,
subject to applicable laws of bankruptcy, insolvency or similar laws relating
to creditors' rights generally and to general principles of equity (whether
applied in a proceeding in law or equity). All of the Company's and its
subsidiaries' equipment in regular use has been reasonably maintained and is in
serviceable condition, reasonable wear and tear excepted.
2.24 GOOD TITLE. Andrews is the sole record and beneficial owner
of, and has good and valid title to, the number of shares of Company Stock,
free and clear of all liens, claims, encumbrances, options, voting trusts or
agreements, proxies or other claims or charges of any nature whatsoever (other
than resulting from this Agreement).
2.25 CERTAIN SECURITIES LAW MATTERS.
(a) Andrews, either alone or with his purchaser
representative as defined in Rule 501(h) under the Securities Act of 1933, as
amended ("Securities Act"), if any, has substantial experience in evaluating
and investing in private placement transactions so that such Andrews is capable
of evaluating the merits and risks of its investment in the Acquiror Shares.
Andrews, by reason of such Andrew's business or financial experience, either
alone or with his purchaser representative as defined in Section 501(h) under
the Securities Act, if any, has the capacity to protect his own interests in
connection with the acquisition of the Acquiror Shares hereunder. Andrews has
designated himself, as an "accredited investor" on the signature page hereto is
an "accredited investor" as defined in Rule 501 of Regulation D promulgated
pursuant to the Securities Act. Andrews has received copies of the Acquiror
SEC Reports (as such term is defined in Section 3.05), as well as certain
financial and other information on the Company and the Acquiror. Andrews is
familiar with the business and financial condition, properties, operations and
prospects of Acquiror. Andrews has had an opportunity to discuss Acquiror's
business and financial condition,
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<PAGE> 20
properties, operations and prospects with Acquiror's management. Andrews has
also had an opportunity to ask questions of officers of Acquiror, which
questions were answered to his satisfaction. Andrews understands that such
discussion was intended to describe certain aspects of Acquiror's business and
financial condition, properties, operations and prospects, but were not a
thorough or exhaustive description.
(b) Andrews understands that the Acquiror Shares will be
"restricted securities" under the applicable federal securities laws and that
the Securities Act and the rules of the SEC provide in substance that he may
dispose of the Acquiror Shares only pursuant to an effective registration
statement under the Securities Act or an exemption therefrom, and it
understands that Acquiror has no obligation or intention to register the
Acquiror Shares, or to take action so as to permit sales pursuant to the
Securities Act (including Rule 144) thereunder which permits limited resales of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
issue, the resale occurring not less than one (1) year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions with a "market maker" and the
number of shares being sold not exceeding specified limitations. Accordingly,
Andrews understands that under the SEC's rules, he may dispose of the Acquiror
Shares in transactions which are exempt from registration under the Securities
Act. As a consequence of all of the foregoing, Andrews understands that he
must bear the economic risk of the investment in the Acquiror Shares for an
indefinite period of time.
(c) Andrews acknowledges and agrees that he is not
relying upon Acquiror or the Company or their respective officers, directors,
employees or agents, as to the United States federal income tax or any other
tax consequences to Andrews of the transactions contemplated by this Agreement.
As to all such tax consequences, Andrews hereby agrees and represents that he
has consulted with his own legal and tax advisors to the extent that he has
deemed such consultation necessary or appropriate, that he is making his own
determination as to what the tax consequences of the transactions contemplated
hereby will be to him and that neither Acquiror nor the Company is making any
representation, express or implied, as to any such tax consequences.
2.26 AUTHORIZATION AND VALIDITY OF AGREEMENT. Andrews has the full
power, legal right, capacity and authority to enter into, execute and deliver
this Agreement and to carry out and perform the transactions contemplated
hereby. This Agreement constitutes a valid and binding obligation of Andrews,
enforceable against Andrews in accordance with its terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to the Company and the
Stockholder that:
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<PAGE> 21
3.01 ORGANIZATION AND QUALIFICATION. Acquiror is a limited
liability company duly organized, validly existing and in good standing under
the laws of The Netherlands and Acquisition Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Each of Acquiror Companies has all requisite power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
other than where the failure to be so duly qualified and in good standing could
not reasonably be expected to have an Acquiror Material Adverse Effect. The
term "Acquiror Material Adverse Effect" as used in this Agreement shall mean
any change or effect that would be materially adverse to the financial
condition, results of operations, business or prospects of Acquiror and its
subsidiaries, taken as a whole, at the time of such change or effect.
3.02 CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of
(i) 100,000,000 Acquiror Shares, of which, as of ____________, 1998: (A)
___________ were issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable and were not issued in violation
of any preemptive or similar rights created by statute, Acquiror's Articles of
Association (collectively, the "Acquiror Organizational Documents") or any
agreement to which Acquiror is a party or is bound; (B) no shares were held in
the treasury of Acquiror and (C) __________ shares were reserved for future
issuance pursuant to stock option plans of Acquiror and (ii) 3,000,000
Preference Shares, par value NLG 0.03, none of which were issued or
outstanding.
(b) The Acquiror Shares to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid and nonassessable.
3.03 AUTHORITY. Each of the Acquiror Companies has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Acquiror Companies
and the performance by each of the Acquiror Companies of its obligations
hereunder, including the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of either of the Acquiror Companies are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
each of the Acquiror Companies and, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes the legal, valid
and binding obligation of each of the Acquiror Companies.
3.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits,
waivers, approvals, authorizations, orders, filings and notifications
contemplated by the exceptions to Section 3.04(b)
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<PAGE> 22
are obtained or made and except as otherwise disclosed in Section 3.04(a) of
the Disclosure Schedule delivered by the Acquiror to the Company
contemporaneously with the execution and delivery of this Agreement (the
"Acquiror Disclosure Schedule"), the execution and delivery of this Agreement
by the Acquiror Companies does not, and performance of their respective
obligations hereunder, including the consummation of the transactions
contemplated hereby, will not (i) conflict with or violate the Acquiror
Organizational Documents or the Articles of Incorporation or Bylaws of
Acquisition Sub, (ii) conflict with or violate any Laws in effect as of the
date of this Agreement applicable to Acquiror or any of Acquiror's subsidiaries
or by or to which any of their properties is bound or subject or (iii) result
in any breach of or constitute a default (or an event that with or without
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a lien or encumbrance on
any of the properties or assets of Acquiror or any of Acquiror's subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Acquiror
or any of Acquiror's subsidiaries is a party or by or to which Acquiror or any
of Acquiror's subsidiaries or any of their respective properties is bound or
subject, except for any such conflicts, violations, breaches, defaults, events,
rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that could not reasonably be expected to
have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Acquiror Companies does not, and the performance of this Agreement by the
Acquiror Companies will not, including the consummation of the transactions
contemplated hereby, require Acquiror or Acquisition Sub to obtain any
consent, license, permit, waiver approval, authorization or order of, or to
make any filing with or notification to, any Governmental Entities, except (i)
for the filing of the Plan of Merger with the Secretary of State of the State
of Texas, (ii) the applicable requirements of the HSR Act, (iii) the applicable
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the National Association of Securities Dealers, Inc. (the "NASD"),
(iv) where the failure to obtain such consents, licenses, permits, waivers,
approvals, authorizations or orders, or to make such filings or notifications
could not reasonably be expected to prevent Acquiror or Acquisition Sub from
performing their respective obligations under this Agreement and (v) as
disclosed in Section 3.04(b) of the Acquiror Disclosure Schedule.
3.05 REPORTS; FINANCIAL STATEMENTS.
(a) Since December 31, 1997, Acquiror has filed all
forms, reports, statements and other documents required to be filed with the
SEC, including without limitation (i) all Annual Reports on Form 10-K, (ii) all
Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to meetings
of shareholders (whether annual or special), (iv) all Current Reports on Form
8-K and (v) all other reports, schedules, registration statements or other
documents (collectively referred to as the "Acquiror SEC Reports"). The
Acquiror SEC Reports were prepared in all material respects in accordance with
the requirements of applicable Law (including the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to the Acquiror SEC Reports) and the Acquiror SEC Reports
did not at the time they were filed contain
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<PAGE> 23
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the historical consolidated financial
statements (including, in each case, any related notes thereto) contained in
the Acquiror SEC Reports (i) have been prepared in accordance with the
published rules and regulations of the SEC and generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except (A) to the extent disclosed therein or required by changes in generally
accepted accounting principles, (B) as may be indicated in the notes thereto
and (C) in the case of the unaudited financial statements, as permitted by the
rules and regulations of the SEC) and (ii) fairly present the consolidated
financial position of Acquiror and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated (subject, in the case of unaudited consolidated financial
statements for interim periods, to adjustments, consisting only of normal,
recurring accruals, necessary to present fairly such results of operations and
cash flows).
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Acquiror SEC Reports filed prior to the date of this Agreement or as
contemplated by this Agreement, since December 31, 1997, Acquiror and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been any
Acquiror Material Adverse Effect.
3.07 POOLING. Neither Acquiror nor, to the knowledge of Acquiror,
any of its affiliates has taken or agreed to take any action that would prevent
the Merger from being treated for financial accounting purposes as a Pooling
Transaction in accordance with GAAP and the rules, regulations and
interpretations of the SEC.
3.08 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror.
ARTICLE IV
COVENANTS OF ANDREWS
4.01 AFFIRMATIVE COVENANT. Andrews covenants and agrees that,
prior to the Effective Time, he will take all commercially reasonable actions
necessary to ensure that the Company complies with Articles V and VII hereof.
4.02 NEGATIVE COVENANTS. Andrews covenants and agrees that, prior
to the Effective Time, he will not:
(a) take any action that reasonably could be expected to
result in (i) any of the
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representations and warranties of Andrews and the Company set forth in
Article II hereof becoming untrue or (ii) any of the conditions set
forth in Article X hereof not being satisfied; or
(b) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to,
or that may reasonably be expected to lead to, any Competing
Transaction, or enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to, or endorse, any Competing Transaction, or
authorize or permit any agent, investment banker, financial advisor,
attorney, accountant or other representative retained by Andrews to
take any such action, and Andrews shall promptly notify Acquiror of
all relevant terms of any such inquiries or proposals received by
Andrews or by any such agent, investment banker, financial advisor,
attorney, accountant or other representative relating to any of such
matters and if such inquiry or proposal is in writing, Andrews shall
promptly deliver or cause to be delivered to Acquiror a copy of such
inquiry or proposal. For purposes of this Agreement, "Competing
Transaction" shall mean any merger, consolidation, share exchange,
business combination or similar transaction involving the Company or
any of its subsidiaries or the acquisition in any manner, directly or
indirectly, of a material interest in any voting securities of, or a
material equity interest in a substantial portion of the assets of,
the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by
Acquiror, the Company will and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary course
consistent with past practices;
(b) use all reasonable efforts to preserve substantially
intact its business organization, maintain its rights and franchises,
retain the services of its respective officers and key employees and
maintain its relationships with its respective customers and
suppliers;
(c) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear
excepted, and maintain supplies and inventories in quantities
consistent with its customary business practice;
(d) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage
to that currently maintained;
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(e) ensure that the aggregate of (i) cash on hand and
(ii) accounts receivables at the Company shall not be less than
$6,863,000 and the aggregate outstanding balance of (i)long-term debt
and (ii) short-term debt shall not be greater than $____________
[October 31, 1998 figure];
(f) ensure that the net worth be no less than
$[____________] plus all net income earned from October 31, 1998
through the closing date; and
(g) use its best efforts to ensure that Andrews
Representative shall execute and deliver, along with Acquiror, the
Acquisition Sub and the Escrow Agent, the Escrow Agreement.
5.02 NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by
Acquiror, from the date of this Agreement until the Effective Time, the Company
will not do, and will not permit any of its subsidiaries to do, any of the
following:
(a) (i) increase the compensation payable to or to become
payable to any director or executive officer; (ii) increase the
compensation payable or pay bonuses to employees of the Company
(excluding payments made pursuant to agreements disclosed in Section
23.10(d) of the Company Disclosure Schedule) other than in the
ordinary course of business, (iii) grant any severance or termination
pay (other than pursuant to the normal severance practices of the
Company or its subsidiaries as in effect on the date of this
Agreement) to, or enter into any employment or severance agreement
with, any director, officer or employee; (iv) except as set forth in
Section 2.10(d) of the Company Disclosure Schedule, establish, adopt
or enter into any employee benefit plan or arrangement or (v) except
as may be required by applicable law or as set forth in Section
2.10(d) of the Company Disclosure Schedule, amend, or take any other
actions (including, without limitation, the acceleration of vesting,
waiving of performance criteria or the adjustment of awards or any
other actions permitted upon a "change in control" (as defined in the
respective plans) of the Company, with respect to any of the Benefit
Plans or any of the plans, programs, agreements, policies or other
arrangements described in Section 2.10(d) of this Agreement;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock or
other equity interests, except dividends by a wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of
the Company;
(c) (i) except as described in Section 2.03(c) of the
Company Disclosure Schedule, redeem, purchase or otherwise acquire any
shares of its or any of its subsidiaries' capital stock or any
securities or obligations convertible into or exchangeable for any
shares of its or its subsidiaries' capital stock (other than any such
acquisition directly from any wholly owned subsidiary of the Company
in exchange for capital contributions or loans to
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such subsidiary), or any options, warrants or conversion or other
rights to acquire any shares of its or its subsidiaries' capital stock
or any such securities or obligations; (ii) effect any reorganization
or recapitalization of the Company or any of its subsidiaries; or
(iii) split, combine or reclassify any of its or its subsidiaries'
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for,
shares of its or its subsidiaries' capital stock;
(d) (i) except as set forth in Section 2.03(a) hereof or
as described in Section 2.03(c) of the Company Disclosure Schedule,
issue (whether upon original issue or out of treasury), sell, grant,
award, deliver or limit the voting rights of any shares of any class
of its or its subsidiaries' capital stock, any securities convertible
into or exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire, any such shares; (ii) amend or
otherwise modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms materially more favorable
to the holders thereof; or (iii) take any action to accelerate the
vesting of any of the stock options;
(e) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion
of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization
or division thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent
with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, any of its assets or any
assets of any of its subsidiaries, except for pledges or dispositions
of assets in the ordinary course of business and consistent with past
practice;
(g) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to,
or that may reasonably be expected to lead to, any Competing
Transaction, or enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to, or endorse, any Competing Transaction, or
authorize or permit any of the officers, directors, employees or
agents of the Company or any of its subsidiaries or any agent,
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of the Company's
subsidiaries to take any such action, and the Company shall promptly
notify Acquiror of all relevant terms of any such inquiries or
proposals received by the Company or any of its subsidiaries or by any
such officer, director, employee, agent, investment banker, financial
advisor, attorney, accountant or other representative relating to any
of such matters and if such inquiry or proposal is in writing, the
Company shall promptly deliver or cause to be delivered to Acquiror a
copy of such inquiry or proposal;
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<PAGE> 27
(h) release any third party from its obligations under
any existing standstill agreement or arrangement relating to a
Competing Transaction or otherwise under any confidentiality or other
similar agreement relating to information material to the Company or
any of its subsidiaries;
(i) propose to adopt any amendments to its Articles of
Incorporation or its Bylaws that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement;
(j) (i) change any of its significant accounting policies
or (ii) make or rescind any express or deemed election relating to
Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or change any of its methods of
reporting income or deductions for federal income tax purposes from
those employed in the preparation of the federal income tax returns
for the taxable year ending December 31, 1997, except, in the case of
clause (i) or clause (ii), as may be required by Law or generally
accepted accounting principles;
(k) incur any obligation for borrowed money or purchase
money indebtedness, whether or not evidenced by a note, bond,
debenture or similar instrument or under any financing lease, whether
pursuant to a sale-and-leaseback transaction or otherwise, except in
the ordinary course of business consistent with past practice;
(l) enter into any material arrangement, agreement or
contract with any third party (other than customers in the ordinary
course of business); or
(m) agree in writing or otherwise to do any of the
foregoing.
ARTICLE VI
COVENANTS OF ACQUIROR
6.01 AFFIRMATIVE COVENANTS OF ACQUIROR. Acquiror hereby covenants
and agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by the Company,
Acquiror will:
(a) use all reasonable efforts to preserve substantially
intact its business organization;
(b) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear
excepted, and maintain supplies and inventories in quantities
consistent with its customary business practice; and
(c) use all reasonable efforts to keep in full force and
effect insurance and bonds
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comparable in amount and scope of coverage to that currently
maintained.
6.02 NEGATIVE COVENANTS OF ACQUIROR. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, Acquiror
will not do any of the following:
(a) amend any of the material terms or provisions of the
Acquiror Shares;
(b ) knowingly take any action that would result in a
failure to maintain the listing of the shares of the Acquiror on the
New York Stock Exchange Stock Market;
(c) propose to adopt any amendments to the Acquiror
Organizational Documents that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement; or
(d) agree in writing or otherwise to do any of the
foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 NOTIFICATION OF CERTAIN MATTERS. The Company and Andrews
shall give prompt notice to Acquiror, and Acquiror shall give prompt notice to
the Company, orally and in writing, of (i) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any
representation or warranty of the party giving such notice contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Effective Time, (ii) any material failure of the party giving such notice to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder within the time specified therefor and
(iii) any change or event having, or which, insofar as can be reasonably
foreseen, could have, a material adverse effect on the financial condition,
results of operations, business or prospects of Acquiror or the Company.
7.02 ACCESS AND INFORMATION.
(a) The Company shall, and shall cause its subsidiaries
to, (i) afford to Acquiror and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"Acquiror Representatives") access during ordinary business hours and at other
reasonable times, upon reasonable prior notice, to the officers, employees,
accountants, agents, properties, offices and other facilities of the Company
and its subsidiaries and to the books and records thereof and (ii) furnish
promptly to Acquiror and the Acquiror Representatives such information
concerning the business, properties, contracts, records and personnel of the
Company and its subsidiaries (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by Acquiror or the Acquiror
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Representatives.
(b) Acquiror shall, and shall cause its subsidiaries to,
(i) afford to the Company and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the
"Company Representatives") access during ordinary business hours, upon
reasonable prior notice, to the officers, employees, accountants, agents,
properties, offices and other facilities of Acquiror and its subsidiaries and
to the books and records thereof and (ii) furnish promptly to the Company and
the Company Representatives such information concerning the business,
properties, contracts, records and personnel of Acquiror and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time, by the Company
or the Company Representatives.
(c) Notwithstanding the foregoing provisions of this
Section 7.02, neither party shall be required to grant access or furnish
information to the other party to the extent that such access or the furnishing
of such information is prohibited by Law or contract. No investigation by the
parties hereto made heretofore or hereafter shall affect the representations
and warranties of the parties that are contained herein and each such
representation and warranty shall survive such investigation.
(d) Each party to this Agreement shall hold in confidence
all nonpublic information received from the other party to this Agreement until
such time as such information is otherwise publicly available and, if this
Agreement is terminated, each party will deliver to the other party all
documents, work papers and other materials (including copies) obtained by such
party or on its behalf from another party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution hereof.
7.03 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Acquiror shall each use, and shall
cause each of their respective subsidiaries to use, and the Stockholder shall
use all reasonable efforts promptly (i) to take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective
the transactions contemplated by this Agreement, (ii) to obtain from any
Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained by the Company, Acquiror or
Andrews, respectively, or any of the Company's or Acquiror's respective
subsidiaries, in connection with the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, (iii) to make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement and the Merger
required under (A) the Securities Act and the Exchange Act and the rules and
regulations thereunder, and any other applicable federal or state securities
laws, (B) the HSR Act and (C) any other applicable Law; provided that Acquiror
and the Company shall cooperate with each other in connection with the making
of all such filings, including providing copies of all such documents to the
nonfiling party and its advisors prior to filing and, if requested, shall
accept all
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reasonable additions, deletions or changes suggested in connection therewith.
The Company and Acquiror shall furnish all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable Law in connection with the transactions contemplated by this
Agreement.
(b) Acquiror, the Company and Andrews agree, and Acquiror
and the Company shall cause each of their respective subsidiaries, to cooperate
and to use all reasonable efforts to contest and resist any action, including
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that is in effect and that
restricts, prevents or prohibits the consummation of the Merger or any other
transactions contemplated by this Agreement, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal
and all available legislative action. Acquiror, the Company and Andrews also
agree to take any and all reasonable actions, including, without limitation,
the disposition of assets or the withdrawal from doing business in particular
jurisdictions, required by regulatory authorities as a condition to the
granting of any approvals required in order to permit the consummation of the
Merger or as may be required to avoid, lift, vacate or reverse any legislative
or judicial action that would otherwise cause any condition to the Merger not
to be satisfied; provided, however, that in no event shall any party take, or
be required to take, any action that could reasonably be expected to have a
Company Material Adverse Effect or an Acquiror Material Adverse Effect.
(c) The Company, Acquiror and Andrews shall each promptly
give (or shall cause their respective subsidiaries to give) any notices
regarding the Merger, this Agreement or the transactions contemplated hereby to
third parties required by Law or by any contract, license, lease or other
agreement to which such person is a party or by which such person is bound, and
use (and cause its subsidiaries to use) all reasonable efforts to obtain any
third party consents (i) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, (ii) otherwise required under any
contracts, licenses, leases or other agreements in connection with the
consummation of the transactions contemplated by this Agreement or (iii)
required to prevent a Company Material Adverse Effect or an Acquiror Material
Adverse Effect, respectively, from occurring after the Effective Time.
(d) If any party shall fail to obtain any third party
consent described in subsection (c)(i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested by the
other parties, to limit the adverse effect upon the Company and Acquiror, their
respective subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
7.04 AFFILIATES; POOLING. The Company shall use all reasonable
efforts to obtain and deliver to Acquiror an executed letter agreement,
substantially in the form of Exhibit C hereto, from (i) each person identified
as an affiliate of the Company in Section 2.13 of the Company Disclosure
Schedule within 5 days after the execution hereof, (ii) any person who may be
deemed to have become an affiliate of the Company after the date of this
Agreement and on or prior to the Effective
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Time as soon as practicable after such person attains such status and (iii) any
person whose agreement thereto may be deemed reasonably necessary by Acquiror
to sustain the Merger's status as a Pooling Transaction on or prior to the
Effective Time.
7.05 PUBLIC ANNOUNCEMENTS. Acquiror and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such
consultation; provided, however, that a party may, without consulting with the
other party, issue such a press release or make such a public statement if
required by applicable Law or the rules of the NASD or a national securities
exchange if such party has used commercially reasonable efforts to consult with
the other party but has been unable to do so in a timely manner.
7.06 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses. The Company shall have fully paid all outside
legal and accounting expenses incurred in connection with this Agreement on or
before the Closing.
7.07 EMPLOYEES OF COMPANY. As soon as reasonably practicable after
the Effective Time, Acquiror shall provide employee benefit plans and
arrangements to employees of the Company and its subsidiaries that are similar
to the employee benefit plans and arrangements of Acquiror for similarly
situated employees of the Acquiror as in effect immediately prior to the
Effective Time. The employees of Company and its subsidiaries shall be
credited for their actual years of service with the Company for purposes of
eligibility, vesting and benefit accrual under all Acquiror benefit plans
including, but not limited to, vacation, severance, retirement and disability
plans. Such employee benefits under the Acquiror medical plan shall not be
subject to any exclusions for any pre-existing conditions, and credit shall be
received for any deductibles or out-of-pocket amounts previously paid. Nothing
in this Agreement is intended to confer upon any employee of the Company or its
subsidiaries retained ("Retained Employees") any right to continued employment
after evaluation by Acquiror and its affiliates of their employment needs at
any time after the Closing. Notwithstanding any provision in this Agreement to
the contrary, Acquiror expressly reserves the right to amend, modify, or
terminate any benefit plan or program established or maintained by Acquiror or
any of its affiliates (including, without limitation, the Company or its
subsidiaries) for the benefit of the Retained Employees.
7.08 TAX-FREE REORGANIZATION. Subject to the terms and conditions
hereof, Acquiror and the Company shall each use its best efforts to cause the
Merger to be treated as a reorganization within the meaning of Section 368(a)
of the Code. Acquiror shall cause the Company to comply with all applicable
reporting requirements under Section 367(a) of the Code and U.S. Treasury
Regulations issued thereunder.
ARTICLE VIII
INDEMNIFICATION
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8.01 IN GENERAL. Subject to the terms and conditions of this
Article IX, Andrews hereby agrees, to indemnify, defend and hold harmless
Acquiror and its directors, officers, employees, consultants, affiliates and
controlling persons (hereinafter, including the Company and its subsidiaries
after the Effective Time (collectively, the "Acquiror Indemnified Parties"),
from and against all Claims asserted against, resulting from, imposed upon or
incurred by Acquiror or any Acquiror Indemnified Party, directly or indirectly,
by reason of, arising out of, or resulting from (a) the inaccuracy or breach of
any representation or warranty of the Company or Andrews contained in or made
pursuant to this Agreement or (b) the breach of any covenant or agreement of
the Company or Andrews contained in or made pursuant to this Agreement. It is
agreed among the parties hereto that the obligations of Andrews to the Acquiror
Indemnified Party pursuant to this Section 8.01 be satisfied only pursuant to
the Escrow Agreement and the procedures set forth in Sections 8.04 and 8.05
hereof. As used in this Article IX, the term "Claim" shall include (i) all
debts, liabilities and obligations, (ii) all losses, damages, costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs and reasonable
attorneys' fees and expenses), and (iii) all demands, claims, actions, costs of
investigation, causes of action, proceedings, arbitrations, judgments,
settlements and assessments, whether or not ultimately determined to be valid.
8.02 NO EXHAUSTION OF REMEDIES. Andrews acknowledges that his
obligation is independent of the obligations of the Company pursuant to this
Agreement, and that he waives any right to require the Acquiror Indemnified
Parties to (i) proceed against the Company; or (ii) pursue any other remedy
whatsoever in the power of the Acquiror Indemnified Parties.
8.03 DEFENSE OF THIRD PARTY CLAIMS. The obligation of Andrews to
indemnify the Acquiror Indemnified Parties under this Article VIII with
respect to Claims relating to or arising from third parties (a "Third Party
Claim") shall be subject to the following terms and conditions:
(a) Notice and Defense. The Acquiror Indemnified Party
will give the other party or parties (whether one or more, the
"Indemnifying Party") prompt written notice of any such Third Party
Claim, and the Indemnifying Party may undertake the defense thereof by
representatives chosen by it upon written notice to the Acquiror
Indemnified Party provided within 20 days of receiving notice of such
Third Party Claim (or sooner if the nature of the Third Party Claim so
requires). Failure of the Acquiror Indemnified Party to give such
notice shall not affect the Indemnifying Party's duty or obligations
under this Article VIII, except to the extent the Indemnifying Party
is materially prejudiced thereby. The Acquiror Indemnified Party shall
make available to the Indemnifying Party or its representatives all
records and other materials required by the Indemnifying Party and in
the possession or under the control of the Acquiror Indemnified Party,
for the use of the Indemnifying Party and its representatives in
defending any such clam, and shall in other respects give reasonable
cooperation in such defense.
(b) Failure to Defend. If the Indemnifying Party, within
20 days after notice of any such Third Party Claim (or sooner if the
nature of any Third Party Claim so requires),
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fails to undertake the defense of such Third Party Claim actively and
in good faith, then the Acquiror Indemnified Party will have the right
to undertake the defense, compromise or settlement of such Third Party
Claim, or consent to the entry of a judgment with respect thereto.
(c) Acquiror Indemnified Party's Rights. Anything in
this Article VIII to the contrary notwithstanding, (i) if there is a
reasonable probability that the Third Party Claim may adversely affect
the Acquiror Indemnified Party other than as a result of money damages
or other money payments in an aggregate amount of less than $100,000,
the Acquiror Indemnified Party shall have the right to defend,
compromise or settle such Third Party Claim (provided that the
Acquiror Indemnified Party shall not settle such Third Party Claim or
consent to any judgment without first obtaining the consent of the
Indemnifying Party, which shall not be unreasonably withheld), and
(ii) the Indemnifying Party shall not without the written consent of
the Acquiror Indemnified Party, settle or compromise any Third Party
Claim or consent to the entry of any judgment that does not include as
an unconditional term thereof the giving by the claimant or the
plaintiff to the Acquiror Indemnified Party of an unconditional
release from all liability in respect of such Third Party Claim.
8.04 PAYMENT; ARBITRATION. Upon the occurrence of a Claim for
which indemnification is believed to be due hereunder, the Indemnified Party
shall provide notice of such Claim to the Indemnifying Party, stating in
specific terms the circumstances giving rise to the Claim, specifying the
amount of the Claim and making a request for any payment then believed due.
Any Claim shall be conclusive against the Indemnifying Party in all respects 30
days after receipt by the Indemnifying Party of such notice, unless within such
period the Indemnifying Party sends the Indemnified Party a notice disputing
the propriety of the Claim. Such notice of dispute shall describe the basis
for such objection and the amount of the Claim as to which the Indemnifying
Party does not believe should be subject to indemnification. Upon receipt of
any such notice of dispute, both the Indemnified Party and the Indemnifying
Party shall use all reasonable efforts to cooperate and arrive at a mutually
acceptable resolution of such dispute within the next 30 days. If a mutually
acceptable resolution cannot be reached between the Indemnified Party and the
Indemnifying Party with such 30-day period, either party may submit the dispute
for resolution by binding arbitration pursuant to the provisions of this
Section 8.04. If a party elects to submit such matter to arbitration, such
party shall provide notice to the other party of its election to do so, and the
parties shall attempt to appoint a single arbitrator. If the parties are
unable within 10 days of receipt of the notice to agree on a single arbitrator,
then each party shall appoint one arbitrator, and the two arbitrators so
appointed shall name a third arbitrator within a period of 10 days of their
nomination. If the two arbitrators fail to appoint a third arbitrator within
such 10-day period, a third arbitrator shall be appointed pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. In all
respects, such panel shall be governed by the American Arbitration
Association's then existing Commercial Arbitration Rules, and the place of
arbitration shall be in a city mutually selected by the Indemnifying Party and
the Indemnified Party (or, if no city can be mutually agreed upon within 10
days, then in Houston, Texas). If it is finally determined that all or a
portion of such Claim amount
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is owed to the Indemnified Party, then such Claim amount shall be satisfied in
accordance with Section 8.02 hereof. Judgment upon the award resulting from
arbitration may be entered in any court having jurisdiction for direct
enforcement, or any application may be made to a court for a judicial
acceptance of the award and an order of enforcement, as the case may be.
8.05 SATISFACTION OF CLAIMS FROM ESCROW SHARES. After the
Effective Time, the obligations and liabilities of Andrews pursuant to Section
8.01 of this Agreement shall be satisfied solely from payments of the Escrow
Shares by delivery to the Acquiror Indemnified Parties. Pursuant to the terms
of the Escrow Agreement, if Andrews is determined to owe a Claim amount
pursuant to the procedures set forth in Section 8.04, then the amount due the
Indemnified Party hereunder shall be satisfied by the delivery to the
Indemnified Party pursuant to the Escrow Agreement of Escrow Shares equal in
value to the amount of the Claim to be satisfied, and the Claim shall be deemed
paid and satisfied upon receipt by the Indemnified Party of certificates
representing such number of Escrow Shares duly endorsed for transfer to the
Indemnified Party. The per share value of the Escrow Shares for purposes of
this Article VIII and the Escrow Agreement with respect to a particular Claim
shall be the Market Value (as defined herein) of the Escrow Shares. The
"Market Value" of an Escrow Share shall be the price of the Acquiror Stock on
December 18, 1998 (regardless of the actual trading price for the Acquiror
Stock) with appropriate adjustment to take into account any stock split,
reverse stock split, stock dividend, recapitalization or other similar capital
adjustments with respect to the Escrow Shares. The Market Value of the
Additional Corpus (as such term is defined in the Escrow Agreement) shall be
determined by mutual agreement of Andrews and the Acquiror. In the event that
such parties cannot in good faith agree on the market value of the Additional
Corpus, the matter shall be settled by binding arbitration in accordance with
the procedures set forth herein.
8.06 LIABILITY LIMITATIONS; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. All representations, warranties, covenants and agreements of the
Company and Andrews in this Agreement or made pursuant hereto shall survive the
Closing and any investigation thereof for one year after the Closing Date, and
Andrews shall have no liability under this Article VIII unless written notice
of a Claim is provided within such period. After the Effective Time, the
Acquiror Indemnified Parties shall not be entitled to indemnification for
Claims from the Escrow Shares except to the extent the aggregate amount for all
claims exceeds $25,000. After the Effective Time, all claims by the Acquiror
Indemnified Parties pursuant to this Agreement shall be limited to the Escrow
Shares.
ARTICLE IX
CONDITIONS
9.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR COMPANIES.
The obligation of the Acquiror Companies to effect the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which may be
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waived by Acquiror, in whole or in part, to the extent permitted by applicable
law:
(a) Each of the representations and warranties of the
Company and Andrews contained in this Agreement shall be true and
correct in all material respects (without duplication of any
materiality exception contained in any individual representation and
warranty) as of the date of this Agreement and as of the Effective
Time as though made again as of the Effective Time. Acquiror shall
have received a certificate of the President and the Chief Financial
Officer of the Company, dated the Closing Date, to such effect with
respect to the representations and warranties of the Company set forth
in Article II hereof;
(b) The Company and Andrews shall have performed or
complied with all agreements and covenants required by this Agreement
to be performed or complied with by such person on or prior to the
Effective Time. Acquiror shall have received a certificate of the
President and the Chief Financial Officer of the Company, dated the
Closing Date, to such effect with respect to the Company's performance
and compliance;
(c) The resignations, effective at the Effective Time, of
each of directors and officers of the Company shall have been
delivered to Acquiror;
(d) No court or Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any Laws (whether temporary,
preliminary or permanent) which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting consummation of
the Merger;
(e) The applicable waiting period under any competition
Laws, Regulations and Orders of foreign Governmental Entities, as set
forth in Acquiror's Disclosure Letter or the Company's Disclosure
Letter, shall have expired or been terminated;
(f) Acquiror shall have been advised in writing by Arthur
Andersen LLP as of the Closing Date to the effect that such firm knows
of no reason why the Merger cannot be treated for financial accounting
purposes as a Pooling Transaction;
(g) Messrs. ______, ______, ______, _____, and _____
shall have duly executed and delivered to Acquiror an employment
agreement substantially in the form of Exhibit B hereto and Andrews in
the form of Exhibit D hereto;
(h) Acquiror shall have received the Escrow Agreement,
duly executed and delivered by Andrews and the Escrow Agent.
9.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived by the Company, in
whole or in part, to the extent permitted by applicable law:
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(a) Each of the representations and warranties of
Acquiror contained in this Agreement shall be true and correct in all
material respects (without duplication of any materiality exception
contained in any individual representation and warranty) as of the
date of this Agreement and as of the Effective Time as though made
again as of the Effective Time. The Company shall have received a
certificate of the President and the Chief Financial Officer of
Acquiror, dated the Closing Date, to such effect;
(b) Acquiror shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time. The Company
shall have received a certificate of the President and the Chief
Financial Officer of Acquiror, dated the Closing Date, to such effect;
(c) No court or Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any Laws (whether temporary,
preliminary or permanent) which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting consummation of
the Merger;
(d) The applicable waiting period under any competition
Laws, Regulations and Orders of foreign Governmental Entities, as set
forth in Acquiror's Disclosure Letter or the Company's Disclosure
Letter, shall have expired or been terminated.
ARTICLE X
MISCELLANEOUS
10.01 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) by mutual consent of Acquiror and the Company;
(b) by either Acquiror or the Company if the Effective
Time has not occurred on or before January 31, 1999;
(c) by Acquiror, upon a breach of any covenant or
agreement on the part of the Company or Andrews set forth in this
Agreement, or if any representation or warranty of the Company or
Andrews shall have become untrue, in either case such that the
conditions set forth in Section ______ or Section ______ would not be
satisfied (a "Terminating Company Breach"); provided that, if such
Terminating Company Breach is curable by the Company or Andrews, as
the case may be, through the exercise of reasonable efforts and for so
long as the Company or Andrews continue to exercise such reasonable
efforts, Acquiror may not terminate this Agreement under this Section
10.01(c);
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(d) by the Company, upon breach of any covenant or
agreement on the part of Acquiror set forth in this Agreement, or if
any representation or warranty of Acquiror shall have become untrue,
in either case such that the conditions set forth in Section ______ or
Section ______ would not be satisfied (a "Terminating Acquiror
Breach"); provided that, if such Terminating Acquiror Breach is
curable by Acquiror through the exercise of its reasonable efforts and
for so long as Acquiror continues to exercise such reasonable efforts,
the Company may not terminate this Agreement under this Section
10.02(d); or
(e) by either Acquiror or the Company, if there shall be
any Order which is final and nonappealable preventing the consummation
of the Merger, unless the party relying on such Order has not complied
with its obligations under Section 7.03(b).
10.02 EFFECT OF TERMINATION. In the event of any termination of
this Agreement pursuant to Section 10.01, Andrews, the Company, Acquiror and
Acquisition Sub shall have no obligation or liability to each other except that
(i) the provisions of Sections ______ and ______ shall survive any such
termination, and (ii) nothing herein and no termination pursuant hereto will
relieve any party from liability for any breach of this Agreement.
10.03 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto. The waiver by any
party hereto of any condition or of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other condition or
subsequent breach.
10.04 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the Schedules and Exhibits hereto) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both oral and
written, among the parties or any of them, with respect to the subject matter
hereof, and neither this nor any document delivered in connection with this
Agreement confers upon any person not a party hereto any rights or remedies
hereunder except as provided in Article VIII hereof.
10.05 ASSIGNMENT. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto,
except that the parties hereto agree that the right and obligations of the
Acquiror may be assigned to an affiliate of the Acquiror.
10.06 CERTAIN DEFINITIONS. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned
person;
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(b) "business day" means any day other than a day on
which banks in the State of Texas are authorized or obligated to be
closed;
(c) "Closing" shall mean a meeting, which shall be held
in accordance with Section ______ of this Agreement, of persons
interested in the transactions contemplated by this Agreement at which
all documents deemed necessary by the parties to this Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are
executed and delivered;
(d) "Closing Date" shall mean the date of the Closing as
determined pursuant to Section 1.11 of this Agreement.
(e) "control" (including the terms "controlled,"
"controlled by" and "under common control with") means the possession,
directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management or policies of a
person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(f) "person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act);
(g) "Significant Subsidiary" means any subsidiary of
Acquiror that would constitute a Significant Subsidiary within the
meaning of Rule 1-02 of Regulation S-X of the SEC;
(h) "subsidiary" or "subsidiaries" of the Company,
Acquiror or any other person, means any corporation, partnership,
joint venture or other legal entity of which the Company, Acquiror or
any such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50%
or more of the stock or other equity interests the holders of which
are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity;
(i) "Tax" or "Taxes" shall mean any and all taxes,
charges, fees, levies, assessments, duties or other amounts payable to
any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value
added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social
security, workers compensation, unemployment compensation, utility,
severance, excise, stamp, windfall profits, transfer and gains taxes,
(ii) customs, duties, imposts, charges, levies or other similar
assessments of any kind, and (iii) interest, penalties and additions
to tax imposed with respect thereto; and
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(j) "Trading Day" shall mean each business day on which
the New York Stock Exchange is open for trading.
10.07 NOTICES. All notices, requests, demands, claims and other
communications that are required to be or may be given under this Agreement
shall be in writing and (i) delivered in person or by courier, (ii) sent by
telecopy or facsimile transmission, or (iii) mailed, certified first class
mail, postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
If to the Company: The Andrews Group International, Inc.
1800 Augusta Drive, Suite 200
Houston, Texas 77057-3130
Telecopy: (713) 782-9639
Attention: Robert P. Andrews
with a copy to: Webb &Lauterbach, P.C.
1570 Three Post Oak Central
1990 Post Oak Boulevard
Houston, Texas 77056-3814
Telecopy: (713) 626-9807
Attention: Micheal Webb
If to Andrews: Mr. Robert P. Andrews
c/o The Andrews Group International, Inc.
1800 Augusta Drive, Suite 200
Houston, Texas 77057-3130
Telecopy: (713) 782-9639
with a copy to: Webb & Lauterbach, P.C.
1570 Three Post Oak Central
1990 Post Oak Boulevard
Houston, Texas 77056-3814
Telecopy: (713) 626-9807
Attention: Micheal Webb
If to Acquiror: Core Laboratories N.V.
or Acquisition sub Herengracht 424
1017 BZ Amsterdam
The Netherlands
Telecopy: 011-31-20-627-9886
Attention: Jacobus Schouten
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<PAGE> 40
with a copy to: Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 690-3947
Attention: John D. Denson
or to such other address as the parties hereto shall have furnished to the
other parties hereto by notice given in accordance with this Section 10.07.
Such notices shall be effective (i) if delivered in person or by courier, upon
actual receipt by the intended recipient, (ii) if sent by telecopy or facsimile
transmission, when the sender receives telecopier confirmation that such notice
was received at the telecopier number of the addressee, or (iii) if mailed,
upon the earlier of five days after deposit in the mail and the date of
delivery as shown by the return receipt therefor.
10.08 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive law of the State of Texas, without
giving effect to the principles of conflicts of law thereof. Venue for all
purposes shall lie in Harris County, Texas.
10.09 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term,
provision, covenant or restriction is invalid, void or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, by original or facsimile signatures each of which shall be an
original, but all of which together shall constitute one and the same
agreement.
10.11 HEADINGS. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
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IN WITNESS WHEREOF, the Company and each of the Acquiror Companies
have each caused this Agreement to be executed on its behalf by its officer
thereunto duly authorized, and Andrews has executed this Agreement, all as of
the date first above written.
CORE LABORATORIES N.V.
By
-----------------------------------
Name:
Title:
AGI ACQUISITION COMPANY
By
-----------------------------------
Name:
Title:
THE ANDREWS GROUP INTERNATIONAL, INC.
By
-----------------------------------
Name:
Title:
ROBERT P. ANDREWS:
By
-----------------------------------
Name: Robert P. Andrews
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EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement ("Escrow Agreement"), dated as of December __,
1998, is entered into by and among Core Laboratories N.V., a Netherlands
limited liability company ("Buyer"), Andrews Acquisition, Inc., a Texas
corporation ("Buyer Sub I"), Andrews Acquisition B.V., a Netherlands limited
liability company ("Buyer Sub II") (Buyer Sub I and Buyer Sub II, hereinafter
referred to as "Buyer Subs"), Robert P. Andrews an individual resident in the
United States (the "Seller"), and Bankers Trust Company, as escrow agent
("Escrow Agent"). Defined terms used but not otherwise defined herein shall
have the meanings set forth in the Merger Agreements (as defined below).
RECITALS
WHEREAS, Buyer, Buyer Sub I, and Seller have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger I Agreement"),
pursuant to which Buyer Sub I is acquiring all of the issued and outstanding
capital stock of The Andrews Group International, Inc., a Texas corporation
wholly owned by Seller ("Andrews Company"), in exchange for the issuance by
Buyer to Seller of the Buyer Shares; and
WHEREAS, Buyer, Buyer Sub II, and Seller have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger II
Agreement"), pursuant to which Buyer Sub II is acquiring all of the issued and
outstanding capital stock of A.G.I. Mexicana S.A. de C.V., a Mexican
corporation owned 99.0% by Seller ("Mexicana Company"), in exchange for the
issuance by Buyer to Seller of the Buyer Shares; and
WHEREAS, pursuant to the Merger I Agreement and the Merger II
Agreement (collectively, the "Merger Agreements"), Seller has made certain
representations, warranties, covenants and agreements to and with Buyer and
Buyer Subs, and Seller has agreed to indemnify, defend and hold harmless the
Buyer Indemnified Parties against Claims under Article IX of the Merger
Agreements; and
WHEREAS, the parties to the Merger Agreements have agreed to establish
an escrow fund (the "Escrow Fund"), initially consisting of _______ Buyer
Shares, from which they may, subject to the terms and conditions of the Merger
Agreements and this Escrow Agreement, satisfy Seller's obligations to indemnify
against Claims; and
WHEREAS, the Escrow Agent has agreed to act as the agent and custodian
for the Escrow Fund for the benefit of the parties to the Merger Agreements.
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements, provisions and covenants contained in this Escrow Agreement and the
Merger Agreements, the parties hereby agree as follows:
ARTICLE 1
ESTABLISHMENT OF ESCROW
(a) Buyer, Buyer Subs, and Seller each hereby appoint the Escrow
Agent to act as agent and custodian for the Escrow Fund for their respective
benefits pursuant to the terms of this Escrow Agreement, and the Escrow Agent
hereby accepts such appointment pursuant to such terms.
(b) Pursuant to the provisions of Section 2.3 of the Merger
Agreement, Buyer will cause to be delivered to, and directly deposited with,
the Escrow Agent for the account and future potential benefit of Seller a stock
certificate representing _______ Buyer Shares, which certificate shall be
registered as follows: "Bankers Trust Company f/b/o the Former Shareholder of
the Common Stock of The Andrews Group International, Inc. and A.G.I. Mexicana
S.A. de C.V.". Buyer will cause all such Buyer Shares hereby initially
delivered to, and initially deposited with, the Escrow Agent, together with all
subsequent stock dividends or distributions of other Buyer Shares received in
respect of such shares while deposited hereunder, shall be referred to herein
as the "Escrow Shares".
(c) The respective number of Escrow Shares to be initially
deposited with the Escrow Agent by Buyer for the account of the Seller is set
forth on Exhibit A hereto.
(d) The Seller shall deliver to the Escrow Agent simultaneously
herewith four stock powers duly executed and endorsed in blank in the form
attached as Exhibit B hereto with respect to each stock certificates
representing the Escrow Shares, and the Escrow Agent hereby acknowledges
receipt of the stock certificate representing the Escrow Shares and such
executed stock powers. The Seller agrees to execute in the future such
additional stock powers as may be required or requested by Buyer or the Escrow
Agent to transfer any Escrow Shares required in accordance with the provisions
of the Merger Agreements and this Escrow Agreement.
(e) The Escrow Shares shall be retained, managed and disbursed by
the Escrow Agent subject to the terms and conditions of this Escrow Agreement
and Article IX of the Merger Agreements. The Seller shall have the full and
unencumbered right to vote all Escrow Shares held for his account in the Escrow
Fund on matters submitted to a vote of Buyer's shareholders.
(f) All cash dividends and cash distributions on Escrow Shares,
when and if distributed by Buyer, and all additional Buyer Shares, property or
other securities, issued on or with respect to the Escrow Shares ("Additional
Corpus"), including as a result of stock splits, stock dividends or other
similar capital adjustments to, or recapitalizations on, or share exchanges
with (including by reason or merger, consolidation or other business
combination involving Buyer), the Buyer Shares,
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or other securities, shall be retained in the Escrow Fund for the account of
Seller subject to the terms hereof.
ARTICLE 2
CLAIMS AGAINST ESCROW SHARES
(a) If Buyer is entitled to indemnification from Seller against a
Claim pursuant to Section 9.1 (or any other section) of the Merger Agreements,
then such Claim shall be satisfied by the Escrow Agent's delivery to Buyer of
the requisite number of Escrow Shares (determined in accordance with Article IX
of the Merger Agreements). Any Claim by Buyer against Seller shall be deemed
to be paid and satisfied upon receipt by Buyer from the Escrow Agent of stock
certificates representing the requisite number of Escrow Shares (accompanied by
stock powers duly executed and endorsed in blank covering such shares in
accordance with Article 3 of this Escrow Agreement) and any Additional Corpus
allocable to such Escrow Shares. As used in this Escrow Agreement, the term
"Claim" shall have the same meaning as set forth in Section 9.1 of the Merger
Agreements as it shall apply to any claim for indemnification asserted by Buyer
against Seller pursuant to Section 9.1 (or any other section) of the Merger
Agreements. As used in this Escrow Agreement with respect to entitlement to
indemnification under the Merger Agreements, the term "Buyer" shall include all
parties included in the definition of "Buyer Indemnified Parties" as set forth
in Section 9.1 of the Merger Agreements.
(b) The delivery to Buyer of Escrow Shares and Additional Corpus,
if any, applicable to such Escrow Shares, in satisfaction of an indemnification
claim hereunder shall be taken from the account of the Seller in the Escrow
Fund.
ARTICLE 3
PROCEDURE FOR CHARGE TO ESCROW
(a) Any Claim under the indemnification provisions of the Merger
Agreements to be satisfied under this Escrow Agreement shall be made by Buyer
by notice to the Escrow Agent and Seller, stating in specific terms the
circumstances giving rise to the Claim, specifying the amount of the Claim and
making a request for any payment then believed due. A Claim shall be deemed to
be finally resolved and appropriate for payment by the Escrow Agent when the
conditions specified in clause (b) below have been met with respect thereto.
(b) For purposes of this Escrow Agreement, a "Final Instruction"
shall mean a written notice given to the Escrow Agent directing the
disbursement from the Escrow Fund of the amount of the Claim, and shall be
signed both by Buyer and Seller, except as otherwise provided in clause (ii) or
(iii) below. A Final Instruction shall be delivered to the Escrow Agent under
the following circumstances, and accompanied by the indicated documentation:
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<PAGE> 45
(i) If Seller disputes either the validity, amount or
calculation of the Claim, Seller shall give written notice of such
dispute to Buyer, with a copy to the Escrow Agent, within 30 days
after the delivery of notice of the Claim by Buyer. Such notice shall
set forth the reasons and basis for disputing such Claim and the
amount in dispute. In such circumstances, no Final Instruction may be
given to the Escrow Agent except as provided in clause (iii) below.
(ii) If Seller fails to respond to the Claim within 30
days after the delivery to Seller and the Escrow Agent of the notice
of the Claim, or if Seller notifies the Escrow Agent that there is no
dispute with respect to the Claim, Buyer shall have the right to
deliver to the Escrow Agent a Final Instruction, signed only by Buyer,
with respect to the Claim.
(iii) In the case of a dispute, the Escrow Agent shall not
disburse any of the Escrow Fund in connection with the disputed amount
of such Claim until such time as the Escrow Agent receives a Final
Instruction with respect to such disputed Claim as set forth below.
Upon receipt of such notice of dispute by Buyer, both Buyer and Seller
shall use all reasonable efforts to cooperate and arrive at a mutually
acceptable resolution of such dispute within the next 30 days. If
Seller and the Buyer reach an agreement with respect to such dispute,
Seller and Buyer shall give to the Escrow Agent a Final Instruction,
signed by both Seller and Buyer, with respect to the Claim. If a
mutually acceptable resolution cannot be reached between Buyer and
Seller within such 30-day period, either party may submit the dispute
for resolution by binding arbitration pursuant to the provisions of
this Article 3. If a party elects to submit such matter to
arbitration, such party shall provide notice to the other party of its
election to do so, and the parties shall attempt to appoint a single
arbitrator. If the parties are unable within 10 days after receipt of
the notice to agree on a single arbitrator, then each party shall
appoint one arbitrator, and the two arbitrators so appointed shall
name a third arbitrator within a period of 10 days of their
nomination. If the two arbitrators fail to appoint a third arbitrator
within such 10-day period, a third arbitrator shall be appointed
pursuant to the then existing Commercial Arbitration Rules (the
"Rules") of the American Arbitration Association ("AAA"). In all
respects, such panel and the arbitration proceeding shall be governed
by the Rules, and the place of arbitration shall be in a city mutually
selected by Buyer and Seller (or, if no city can be mutually agreed
upon within 10 days, then in Houston, Texas). If it is finally
determined that all or a portion of such Claim amount is owed to an
Buyer Indemnified Party, the Buyer Indemnified Party shall be entitled
to payment of such Claim upon presentation of a Final Instruction
signed by Buyer and accompanied by a copy of the arbitration order.
Judgment upon the award resulting from arbitration may be entered in
any court having jurisdiction for direct enforcement, or any
application may be made to a court for a judicial acceptance of the
award and an order of enforcement, as the case may be.
(c) Promptly after resolution of a Claim as provided in clause (b)
above, the Escrow
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<PAGE> 46
Agent shall satisfy such Claim by delivering to Buyer the amount of the Escrow
Fund calculated in accordance with Section 9.4 of the Merger Agreements or, if
the value of the Escrow Fund held hereunder is less than the amount of such
Claim, by delivering to Buyer all of the Escrow Fund then held hereunder. Any
Escrow Shares delivered to Buyer in satisfaction of a Claim hereunder shall be
accompanied by duly executed blank stock powers (in the form attached as Exhibit
B) therefor and any such Escrow Shares so delivered shall be free and clear of
any interest of Seller or Escrow Agent therein. If the amount of the Escrow
Shares to be delivered to Buyer is not available in that specified certificate
denomination then the Escrow Agent should request the necessary denomination
from the stock transfer agent at the following address: American Stock Transfer
& Trust Company, 40 Wall Street, New York, NY 10005, Attention: Susan Silber.
ARTICLE 4
DISPOSITION OF ESCROW FUND
(a) The Escrow Fund held hereunder shall be released by the Escrow
Agent to Seller on the next business day following the first anniversary of the
Closing Date (the "Distribution Date"). Notwithstanding any other provision
hereof, if on the Distribution Date any unresolved Claim is then pending
hereunder, only the amount of the Escrow Fund having a value in excess of the
value required to satisfy such Claim (Escrow Shares being valued for such
purpose in accordance with Article IX of the Merger Agreements) as determined
in good faith by Buyer shall be released to Seller.
(b) At such later time as all Claims have been finally resolved
and the amount of all such Claims has been paid to Buyer, the balance of the
Escrow Fund then held hereunder, if any, shall be disbursed to Seller.
(c) The escrow established by this Escrow Agreement shall continue
in effect until release of the entire Escrow Fund pursuant to the provisions
hereof.
(d) No fractional Buyer Shares shall be delivered at any time by
the Escrow Agent.
ARTICLE 5
PROVISIONS RELATING TO THE ESCROW AGENT
(a) The Escrow Agent shall have no duties or responsibilities
whatsoever with respect to the Escrow Fund except as are specifically set forth
herein. The Escrow Agent shall neither be responsible for or under, nor
chargeable with knowledge of the terms and conditions of, any other agreement,
instrument or document in connection herewith. The Escrow Agent may
conclusively rely upon, and shall be fully protected from all liability, loss,
cost, damage or expense in acting or omitting to act pursuant to any written
notice, instrument, request, consent, certificate, document,
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<PAGE> 47
letter, telegram, opinion, order, resolution or other writing hereunder without
being required to determine the authenticity of such document, the correctness
of any fact stated therein, the propriety of the service thereof or the
capacity, identity or authority of any party purporting to sign or deliver such
document. The Escrow Agent shall have no responsibility for the contents of
any such writing contemplated herein and may rely without any liability upon
the contents thereof.
(b) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized
hereby or with the rights or powers conferred upon it hereunder, nor for action
taken or omitted by it in good faith, and in accordance with advice of counsel
(which counsel may be of the Escrow Agent's own choosing), and shall not be
liable for any mistake of fact or error of judgment or for any acts or
omissions of any kind except for its own willful misconduct or gross
negligence.
(c) Each of the Buyer and Seller agree to jointly and severally
indemnify the Escrow Agent and its employees, directors, officers and agents
and hold each harmless against any and all liabilities incurred by it hereunder
as a consequence of such party's action, and the parties agree jointly and
severally to indemnify the Escrow Agent and hold it harmless against any
claims, costs, payments, and expenses (including the fees and expenses of
counsel) and all liabilities incurred by it in connection with the performance
of its duties hereunder and them hereunder, except in either case for claims,
costs, payments and expenses (including the fees and expenses of counsel) and
liabilities incurred by the Escrow Agent resulting from its own willful
misconduct or gross negligence.
(d) The Escrow Agent may resign as such following the giving of 60
days' prior written notice to Buyer and Seller. Similarly, the Escrow Agent
may be removed and replaced following the giving of 60 days' prior written
notice to the Escrow Agent jointly by Buyer and Seller. In either event, the
duties of the Escrow Agent shall terminate 60 days after the date of such
notice (or at such earlier date as may be mutually agreeable), except for its
obligations to hold and deliver the Escrow Fund to the successor Escrow Agent;
and the Escrow Agent shall then deliver the balance of the Escrow Fund then in
its possession to such a successor Escrow Agent as shall be appointed by Buyer
and the Seller as evidenced by a written notice filed with the Escrow Agent.
If Buyer and Seller are unable to agree upon a successor Escrow Agent by the
effective date of such resignation or removal, the then acting Escrow Agent may
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent or other appropriate relief; and any such resulting appointment
shall be binding upon all of the parties hereto. Upon acknowledgment by any
successor Escrow Agent of the receipt of the then remaining balance of the
Escrow Fund, the then acting Escrow Agent shall be fully released and relieved
of all duties, responsibilities and obligations under this Escrow Agreement.
(e) The Escrow Agent shall not be bound in any way by any
agreement, other than this Escrow Agreement. A copy of the Merger Agreements,
together with the Schedules and Exhibits
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<PAGE> 48
thereto, has been provided to the Escrow Agent in connection with the execution
of this Escrow Agreement and the Escrow Agent understands that the terms of
Seller's indemnification obligations are set forth in Article IX of the Merger
Agreements. The Merger Agreements form an integral part of this Escrow
Agreement and, therefore, Article IX thereof is hereby incorporated by
reference herein.
(f) The Escrow Agent shall be under no duty to institute or defend
any arbitration or legal proceeding with respect to the Escrow Fund or under
this Escrow Agreement and none of the costs or expenses or any such proceeding
shall be borne by the Escrow Agent. The costs and expenses of any such
proceeding shall be borne as decided by the arbitrators or court and shall be
direct obligations of Buyer or Seller, as the case may be, and shall not be
satisfied in any way by the Escrow Fund.
ARTICLE 6
SECURITY INTEREST
The Seller hereby grants to Buyer a first priority security interest
in his respective right, title to and interest in the Escrow Fund held under
this Escrow Agreement, for the purpose of securing, or partially securing, his
indemnification obligations to Buyer pursuant to Article IX of the Merger
Agreements. The Seller agrees to execute and deliver any such further
instruments as Buyer or Escrow Agent may request from time to time evidencing
such security interest.
ARTICLE 7
NOTICES
All notices, requests, demands, claims and other communications which
are required to be or may be given under this Escrow Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered in person
or by courier, (ii) sent by telecopy or facsimile transmission, answer back
requested, or (iii) mailed, by registered or certified mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
(a) If to Buyer: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Telecopy: 011-31-20-627-9886
Attention: Jacobus Schouten
and
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<PAGE> 49
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 690-3947
Attention: John D. Denson
(b) If to Seller: Robert P. Andrews
c/o The Andrews Group International, Inc.
1800 Augusta Drive, Suite 200
Houston, Texas 77057-3130
Telecopy: (713) 782-9639
Attention: H. Dean Owen, Jr.
with a copy
(which shall not
constitute notice) to: Webb &Lauterbach, P.C.
1570 Three Post Oak Central
1990 Post Oak Boulevard
Houston, Texas 77056-3814
Telecopy: (713) 626-9807
Attention: Mr. Michael Webb
(c) If to the Escrow Agent:
Bankers Trust Company
4 Albany Street
New York, NY 10006
Telecopy: (212) 250-6392
Attention:
-------------------------------
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Article 7. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five
business days after deposit in the mail and the date of delivery as shown by
the return receipt therefor.
ARTICLE 8
BINDING EFFECT; OTHER INTERESTS
This Escrow Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
successors and assigns. Nothing herein is
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<PAGE> 50
intended or shall be construed to give any other person (including, without
limitation, any creditors of Escrow Agent, Buyer or Seller) any right, remedy
or claim under, in or with respect to this Escrow Agreement or the Escrow Fund
held hereunder. The Escrow Agent shall not have a lien or adverse claim upon,
or any other right whatsoever to payment from, the Escrow Fund (or dividends or
distributions paid thereon) for or on account of any right to payment or
reimbursement hereunder or otherwise.
ARTICLE 9
GOVERNING LAW
This Escrow Agreement shall be construed and enforced in accordance
with the laws of the State of Texas, excluding any choice of law rules that may
direct the application of the laws of another jurisdiction.
ARTICLE 10
COMPENSATION; EXPENSES
The Escrow Agent shall be entitled to payment from Buyer for customary
fees and expenses for all services rendered by it hereunder in accordance with
Exhibit C attached hereto (as such schedule may be amended from time to time),
payable on the closing date. The Escrow Agent shall also be entitled to
reimbursement on demand for all loss, liability, damage or expenses paid or
incurred by it in the administration of its duties hereunder, including, but
not limited to, all counsel, advisors' and agents' fees and disbursements and
all taxes or other governmental charges.
ARTICLE 11
TERM
This Escrow Agreement shall terminate on the later of (i) the
Distribution Date or (ii) the date on which all Claims, if any, asserted by
Buyer pursuant to the terms of this Escrow Agreement and the Merger Agreements
shall have been conclusively resolved and paid pursuant to this Escrow
Agreement and the Merger Agreements. The rights of the Escrow Agent and the
obligations of the other parties hereto under Articles 5 and 10 hereof shall
survive the termination thereof and the resignation or removal of the Escrow
Agent.
ARTICLE 12
AMENDMENT AND MODIFICATION
Buyer, Seller, and the Escrow Agent may amend, modify and/or
supplement this Escrow Agreement as they may mutually agree in writing.
ARTICLE 13
- 45 -
<PAGE> 51
COUNTERPARTS
This Escrow Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
ARTICLE 14
HEADINGS
The headings used in this Escrow Agreement are for convenience only
and shall not affect the construction hereof.
ARTICLE 15
ASSIGNABILITY
Neither this Escrow Agreement nor any interest herein or in the Escrow
Fund may be assigned or transferred, voluntarily or by operation of law, by
Buyer, Seller or the Escrow Agent, except pursuant to the laws of descent and
distribution; provided, however, that Buyer may assign this Escrow Agreement
and any or all interest herein to any "affiliate" of Buyer upon notice to all
parties and, thereupon such assignee shall fully assume and succeed to all of
the assignors' rights, benefits, obligations, duties and responsibilities
hereunder.
ARTICLE 16
TAX WITHHOLDING
Notwithstanding anything to the contrary set forth herein, the Escrow
Agent is authorized to withhold from any proposed distribution to Seller from
the Escrow Fund such amount as is necessary for the purpose of complying with
the Escrow Agent's obligations under federal, state or local tax provisions;
provided, however, that such withholding shall not reduce the amount of the
Escrow Fund which may otherwise required to be delivered to Buyer under Article
3 hereof. In the event that there are insufficient funds remaining to pay any
withholding obligations after distribution of the Escrow Funds to Buyer, such
liability shall be the responsibility of the Seller.
ARTICLE 17
SEVERABILITY
If any term, provision, covenant or restriction of this Escrow
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Escrow Agreement shall continue in full force and effect
and shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
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<PAGE> 52
ARTICLE 18
DESIGNEES FOR INSTRUCTIONS
Buyer may, by notice to the Escrow Agent, designate one or more
persons who will execute notices and from whom the Escrow Agent may take
instructions hereunder. Such designations may be changed from time to time
upon notice to the Escrow Agent from Buyer. The Escrow Agent will be entitled
to rely conclusively on any notices or instructions from any person so
designated by Buyer.
ARTICLE 19
MEDIATION AND ARBITRATION
(a) Except as provided in Article 3 of this Escrow Agreement for
disputes relating to claims against the Escrow Fund:
(i) Before the institution of any litigation between any
persons relating to this Escrow Agreement, including any dispute over
the application or interpretation of any provision hereof, if
negotiations and other discussions fail, at the election of any party
to this Escrow Agreement, such dispute shall be first submitted to
mediation in accordance with the provisions of the Commercial
Mediation Rules of the AAA before resorting to arbitration. The
parties agree to conduct the mediation in good faith and make
reasonable efforts to resolve their dispute by mediation. The place
of the mediation shall be in a city mutually selected by the parties
(or, if no city can be mutually agreed upon within ten (10) days, then
in Houston, Texas).
(ii) If the dispute is not resolved by the mediation
required under the preceding subsection, such dispute shall, at the
election of any party to this Escrow Agreement, be subject to binding
arbitration in accordance with the provisions of the Rules, and
judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The arbitration shall be heard
before a panel of three (3) arbitrators selected in accordance with
the procedures therefor set forth in Article 3 of this Escrow
Agreement. The parties agree to use the Houston, Texas office of the
AAA and the place of arbitration shall be in a city mutually selected
by the parties (or, if no city can be mutually agreed upon within ten
(10) days, then in Houston, Texas).
(iii) The prevailing party in any mediation, arbitration or
litigation shall be entitled to recover from the other party
reasonable attorneys' fees, court costs and the administrative costs,
fees and expenses of the AAA, each as applicable, incurred in the
same, in addition to any other relief that may be awarded.
(b) If either party appeals the decision of the arbitrators, the
parties agree that the United
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<PAGE> 53
States Judicial District including Harris County, Texas, and the state courts
within Harris County, Texas, shall have exclusive venue and jurisdiction of
same.
[signatures on following page]
- 48 -
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Escrow Agreement as of the day and year first above written.
Buyer: Seller:
Core Laboratories N.V.
By: Core Laboratories International B.V.,
its sole Managing Director
-----------------------------
Robert P. Andrews
By:
Name: Jacobus Schouten
--------------------------
Title: Managing Director Escrow Agent:
-------------------------
Buyer Sub I:
Bankers Trust Company
Andrews Acquisition, Inc.
By:
--------------------------
Name:
------------------------
By: Title:
----------------------------- -----------------------
Name: Jacobus Schouten
--------------------------
Title: Managing Director
-------------------------
Buyer Sub II:
Andrews Acquisition B.V.
By:
----------------------------
Name: Jacobus Schouten
--------------------------
Title: Managing Director
------------------------
- 49 -
<PAGE> 55
Exhibit "A"
Escrow Shares
Name of Seller Escrow Shares
- -------------- -------------
Robert P. Andrews XXX
<PAGE> 56
Exhibit "B"
CORE LABORATORIES N.V.
COMMON STOCK
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________
__________________________________________________________________, ___________
________________________ (______) shares of the Common Stock of Core
Laboratories N.V., standing in my name on the books of said Corporation
represented by Certificate(s) No(s). _________ herewith, and do hereby
irrevocably constitute and appoint Bankers Trust Company attorney to transfer
the said stock on the books of said Corporation with full power of substitution
in the premises.
Dated:
----------------------
By:
-----------------------------
-----------------------------
<PAGE> 57
Exhibit "C"
Bankers Trust Company
Corporate Trust and Agency Services
Schedule of Fees for
Core Laboratories N.V./The Andrews Group International, Inc./A.G.I. Mexicana
S.A. de C.V. Escrow
Annual Administration Fee: [$xxx]
(payable at closing and each subsequent anniversary)
These fees cover the review and execution of the Escrow Agreement,
establishment of the appropriate custody account, the receipt and distribution
of the Escrow Shares, and all normal administrative time spent coordinating
with other members of the working group.
Note: The fees set forth in this schedule are subject to review of
documentation. The fees are also subject to change should circumstances
warrant. Out-of-pocket expenses and disbursements, including counsel fees,
incurred in the performance of our duties will be added to the billed fees.
Fees for any services not covered in this or related schedules will be based
upon our appraisal of the services rendered.
We may place orders to buy/sell financial instruments with outside
broker-dealers that we select, as well as with BT or its affiliates. These
transactions (for which normal and customary spreads or other compensation may
be earned by such broker-dealers, including BT or its affiliates, in addition
to the charges quoted above) will be executed on a riskless principal basis
solely for your account(s) and without recourse to us or our affiliates. If
you choose to invest in any mutual fund, BT and/or our affiliates may earn
investment management fees and other service fees/expenses associated with
these funds as disclosed in the mutual fund prospectus provided to you, in
addition to the charges quoted above. Likewise, BT has entered into agreements
with certain mutual funds or their agents to provide shareholder services to
those funds. For providing these shareholder services, BT is paid a fee by
these mutual funds that calculated on an annual basis does not exceed 25 basis
points of the amount of your investment in these mutual funds. In addition, if
you choose to use other services provided by BT or its affiliates, Corporate
Trust or other BT affiliates may be allocated a portion of the fees earned. We
will provide periodic account statements describing transactions executed for
your account(s). Trade confirms will be available upon your request at no
additional charge. If a transaction should fail to close for reasons beyond
our control, we reserve the right to charge our acceptance fee plus
reimbursement for legal fees incurred.
Shares of mutual funds are not deposits or obligations of, or guaranteed by,
Bankers Trust Company or any of its affiliates and are not insured by the
Federal Deposit Insurance Corporation or any other
<PAGE> 58
agency of the U.S.
<PAGE> 59
CORE LABORATORIES N.V.
COMMON STOCK
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________________________________________________
_____________________________________, ________________________________________
________________________________________________ (______) shares of the Common
Stock of Core Laboratories N.V., standing in my name on the books of said
Corporation represented by Certificate(s) No(s). _________ herewith, and do
hereby irrevocably constitute and appoint Bankers Trust Company attorney to
transfer the said stock on the books of said Corporation with full power of
substitution in the premises.
Dated:
---------------------
By:
--------------------------------
--------------------------------
<PAGE> 60
EXHIBIT B
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
as of December __, 1998 by and between Core Laboratories, Inc., a corporation
organized under the laws of the State of Delaware ("Employer"), and Robert P.
Andrews, a resident of the State of Texas ("Employee").
WHEREAS, Employee is employed as the President of The Andrews Group
International, Inc. ("Previous Employer");
WHEREAS, Core Laboratories N.V. ("Core"), Employee and The Andrews
Group International, Inc. are parties to an Agreement and Plan of Merger dated
as of the date hereof whereby Core will acquire all of the capital stock of The
Andrews Group International, Inc. and The Andrews Group International, Inc.
will become a wholly owned indirect subsidiary of Core (the "Acquisition");
WHEREAS, one of the conditions to consummation of the Acquisition is
that Employer and Employee enter into this Agreement;
WHEREAS, Employer is desirous of employing Employee, and Employee
wishes to be employed by Employer, in accordance with the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
EMPLOYMENT
1.01 Employer hereby employs Employee, effective as of the Closing
Date (as defined in the Agreement and Plan of Merger) (the "Effective Date"),
and Employee accepts such employment as of the Effective Date, according to the
terms and conditions set forth in this Agreement.
ARTICLE II
TERM OF EMPLOYMENT
2.01 TERM. The term of this Agreement shall commence on the
Effective Date and, except as provided in Section 7.03, shall continue until
the earliest to occur of the following events:
<PAGE> 61
(a) Employee resigns, (b) Employee's service is terminated pursuant to the
provisions of Sections 2.02, 2.03, 2.04 or 2.05 or (c) the parties hereto agree
in writing to terminate this Agreement.
2.02 DISABILITY. If Employee is determined by Employer in its
discretion to be permanently disabled, the employment of Employee hereunder may
be terminated by Employer by giving at least thirty (30) days prior notice to
Employee. As used in this Section 2.02, the term "permanently disabled" shall
mean that Employer has determined that Employee is substantially unable to
discharge satisfactorily his duties and obligations hereunder on a full-time
active basis by reason of illness, accident or other disability for a period of
three (3) consecutive months. Except as otherwise provided in Section 5.03,
Employee shall be entitled only to, and Employer's obligations under this
Agreement shall be limited to, the payment of any unpaid amount of Employee's
base salary accrued under Section 4.01 to the date of such termination and any
accrued and unused vacation days.
2.03 DEATH. This Agreement shall terminate immediately on the date
of Employee's death. Employee's estate shall be entitled only to, and
Employer's obligation under this Agreement shall be limited to, the payment of
any unpaid amount of Employee's base salary accrued under Section 4.01 to the
date of Employee's death and any accrued and unused vacation days.
2.04 TERMINATION FOR CAUSE. The employment of Employee hereunder
may be terminated "for cause" immediately without prior notice by Employer if
Employer in its discretion determines that Employee shall have:
(A) deliberately refused or failed, after reasonable notice in
writing from the Board of Supervisory Directors of Core (the
"Board") or a representative of Employer duly authorized by
the Board (the "Supervising Representative") that such refusal
or failure would constitute a default hereunder, to carry out
any reasonable order of the Board or the Supervising
Representative;
(B) committed a breach of the terms of this Agreement or any other
legal obligation owed by Employee to Employer;
(C) demonstrated gross incompetence, negligence or willful
misconduct in the execution of Employee's assigned duties;
(D) demonstrated moral turpitude to the detriment of Employer or
violated Employer's policy on the use of alcohol or drugs as
in effect from time to time; or
(E) been convicted of a felony or other serious crime.
In such cases, Employee shall be entitled only to, and Employer's
obligation under this Agreement shall be limited to, the payment of any unpaid
amount of Employee's base salary accrued under Section 4.01 to the date of such
termination and any accrued and unused vacation days. This
<PAGE> 62
Section 2.04 shall in no way be construed as precluding Employer from
terminating Employee without cause or prior notice or for any reason, as
provided in Section 2.05.
2.05 AT-WILL EMPLOYEE; OTHER TERMINATION. Employee understands and
agrees that he is an at-will employee and may be terminated from employment
with Employer for any reason, without cause, at any time; provided, however,
that for any termination made pursuant to this Section 2.05, Employer shall
provide Employee with 30 days prior notice of such termination. Furthermore,
Employer agrees that Employee may terminate his employment with Employer at any
time and for any reason by giving prior written notice to Employer. In such
cases, Employee shall be entitled only to, and Employer's obligation under this
Agreement shall be limited to, the payment of any unpaid amount of Employee's
base salary accrued under Section 4.01 to the date of such termination and any
accrued and unused vacation days.
ARTICLE III
DUTIES AND FUNCTIONS
3.01 POSITION; DUTIES. Employee agrees to serve as President of
The Andrews Group International, Inc. a subsidiary of the Employer, to perform
the duties of such office diligently and to the best of his abilities and to
assume such additional duties as may from time to time be assigned to him
consistent with his position.
3.02 PERFORMANCE; SERVICE. Employee agrees in all respects to
carry out and use his best efforts in carrying out the objectives of Employer
and protecting Employer's interests. Employee agrees to be in the full-time
service of Employer and to devote all of his business time and attention to the
duties assigned to him pursuant to this Agreement.
3.03 WORK FOR SUBSIDIARIES OR OTHER AFFILIATES. All terms and
conditions set forth in this Agreement between Employer and Employee shall
apply whether Employee carries out his activities in or for Employer or in or
for any subsidiary or other affiliate thereof. Employee shall receive no
salary or other payment for any position he holds with Employer or any
subsidiary or other affiliate thereof other than as set forth in this
Agreement.
ARTICLE IV
COMPENSATION
During the term of employment described in Section 2.01 above while
this Agreement is in effect, Employer shall provide to Employee the following:
4.01 BASE SALARY. Employer shall pay to Employee an annual gross
base salary in the amount of ___________ and No/100 U.S. dollars (U.S. $XXX),
payable in arrears pursuant to the Employers typical pay schedule. Annual
adjustments may be made from time to time to such base salary on the basis of
merit as determined by the Board or the Supervising Representative.
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<PAGE> 63
4.02 BONUS. Employee shall be eligible to receive an annual
incentive bonus on or about March 31 of each calendar year in accordance with
and subject to the performance criteria approved by the Board or the
Supervising Representative and commensurate with those applicable to senior
management of Employer. The amount of any such incentive bonus shall be
limited to 50% of Employee's then base salary specified in Section 4.01.
4.03 TAX. All amounts payable by Employer under this Agreement
shall be subject to the prior reduction or withholding by Employer of
appropriate taxes and other required amounts. If a determination is made by
any relevant governmental authority that insufficient withholdings have been
made and to the extent that such withholdings would, if made, have resulted in
the Employee receiving a lower amount of net remuneration, Employee shall
indemnify Employer for all amounts determined to be so payable as a result of
such failure to withhold any or sufficient amounts.
ARTICLE V
EMPLOYEE BENEFITS
5.01 AUTOMOBILE. During the Employee's term of employment
hereunder, Employer shall provide a monthly automobile allowance of $550.00.
5.03 EMPLOYEE BENEFITS. Employee shall be entitled to participate
in all health, disability, pension and other employee benefit plans offered by
Employer under the terms and conditions of each such plan.
ARTICLE VI
ADDITIONAL RIGHTS OF EMPLOYEE
6.01 VACATION. In addition to U.S. public holidays, Employee shall
be entitled to a paid annual vacation of twenty (20) business days during each
full calendar year of employment during such times as shall not interfere with
the operations of Employer. Employee's rights shall accrue ratably during each
calendar year and shall be subject to proration for partial calendar years. In
the event that in any calendar year Employee shall fail to use all vacation
days to which he is entitled during such year, Employee shall be entitled to
carry forward five (5) of such vacation days into the next succeeding calendar
year.
6.02 EXPENSES. Employer shall reimburse, or direct payment of, all
expenses reasonably incurred by Employee in the performance of his duties
hereunder, upon the submission of written evidence of such expenses to the
reasonable satisfaction of Employer, in accordance with Employer's written
expense reimbursement policies.
6.03 TERMINATION PAYMENT.
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<PAGE> 64
(A) Subject to Paragraph (B) below, in the event that Employee's
employment pursuant to this Agreement is terminated by
Employer other than "for cause," as described in Section 2.04,
for permanent disability as described in Section 2.02 or for
death, Employer shall pay to Employee an amount equal to the
base salary specified in Section 4.01 as adjusted for the year
in which such termination occurs. Employee agrees that this
termination payment will be in lieu of, and not in addition
to, any payment to which he would otherwise be entitled on
account of termination of his employment under any other
Employer severance, termination, pay in lieu of notice, or
similar payment program, plan, policy or agreement.
(B) The payment referred to in Section 6.03(A) shall be reduced by
any statutory or other compensation that Employee may be
entitled to receive from Employer as a result of such
termination, and Employee, to the extent permitted by
applicable law, hereby waives any and all rights and remedies
with respect to such termination other than as expressly
provided herein.
6.04 LOCATION. Employee's services shall be performed primarily at
one of the facilities of Employer located in Houston, Texas. Employee
acknowledges that worldwide travel shall be required. In the event that the
Board or the Supervising Representative determines in its sole discretion that
the duties of Employee hereunder require that Employee relocate to a country or
state other than as set forth above, the parties agree to enter into good faith
negotiations regarding the terms of such relocation. In the event that, after
forty five (45) days after such negotiations have commenced, the parties have
failed to reach an agreement, Employer shall have the option of suspending its
relocation plans or exercising its rights under Section 2.05 above.
ARTICLE VII
CONFIDENTIAL INFORMATION AND COVENANT NOT TO COMPETE
7.01 GENERAL. Employee hereby covenants and agrees with Employer
that, except as otherwise expressly consented to, approved or otherwise
permitted by the Board or the Supervising Representative in writing, during
Employee's term of employment hereunder and for a subsequent period as set
forth below, Employee shall not, in any geographic area or market area or
market where Employer or any of its affiliates conduct any business either on
the date of termination of the employment of Employee or during any of the
immediately preceding twelve (12) months, directly or indirectly, acting alone,
by providing material assistance to the efforts of his spouse or as a member of
a partnership or other business entity or as a holder of any interest in a
security of any class of a corporation or other business entity (other than as
a holder of less than one percent (1%) of the outstanding amount of any
security listed on a national securities exchange or designated as a National
Market System security by the National Association of Securities Dealers, Inc.)
or as an officer, director, partner, employee, consultant, agent or
representative of any corporation, partnership or other business entity:
[INSERT CONCEPT OF UP-FRONT PAYMENT AS CONSIDERATION FOR
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<PAGE> 65
THESE COVENANTS.]
(A) Other than as required in the performance of his assigned
duties to Employer and other than as required by law, either
use or disclose to any person, firm or corporation any
confidential or proprietary information concerning the
organization, business, inventions, discoveries, customers,
suppliers, operations, affairs or trade secrets of Core,
Employer, Employer's affiliates or Previous Employer that
Employee may have acquired in the course of, or incident to,
his employment by Employer, Employer's affiliates or Previous
Employer, whether or not Employee was aware that such
information was confidential or proprietary when originally
given to or learned by him; provided, however, that such
obligations of non-use and nondisclosure shall not apply to
information that is or becomes a part of the public domain
without breach by Employee of the aforementioned obligations;
(B) Engage anywhere in any business, trade, or other enterprise
substantially similar to, or directly or indirectly in
competition with, the business of Core, Employer, Employer's
affiliates or Previous Employer if engaging in such business,
trade or other enterprise could result in any unauthorized use
or disclosure by Employee of any confidential or proprietary
information of or concerning Core, Employer, Employer's
affiliates or Previous Employer. Employer and Employee agree
that Employer currently carries on substantial business
worldwide. Employer and Employee further agree that
Employee's engaging in the business of reservoir description,
production enhancement, reservoir management, reservoir
monitoring, seismic processing, and seismic interpretation
would necessarily involve the unauthorized use or disclosure
by Employee of such confidential or proprietary information;
(C) Request, induce or attempt to influence any current, future or
prospective customer or supplier of Core, Employer, Employer's
affiliates or Previous Employer to limit, curtail or cancel
its business with Employer; or
(D) Request, induce or attempt to influence any current, future or
prospective officer, director, employee, consultant, agent or
representative of Employer to (i) terminate his, her or its
employment or business relationship with Employer or (ii)
commit any act that, if committed by Employee, would
constitute a breach of any provision of this Section 7.01.
7.02 INTENT; SCOPE. Employee and Employer agree that the
provisions of clauses (A), (B), (C) and (D) of Section 7.01 are reasonable and
necessary to protect the legitimate interests of Employer. The provisions of
said clauses are separate and distinct commitments independent of each of the
other said clauses. Employee and Employer further agree that if the scope of
any said clauses is deemed by any administrative agency, arbitrator or court to
be overly broad, such agency, arbitrator or court may reduce the scope thereof
to that which it deems reasonable under the
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<PAGE> 66
circumstances.
7.03 TERM. If Employee is terminated for any reason or voluntarily
leaves the employ of Employer, the provisions set forth in this Article VII
shall survive for a period of twelve (12) months following the date of such
termination or cessation of employment.
ARTICLE XIII
EMPLOYEE REPRESENTATIONS
8.01 Employee represents that he is free to enter into this
Agreement and is not under any contractual or other restraint which would
prohibit the satisfactory performance of his duties to Employer hereunder.
Employee represents and warrants further that he has read and understands each
of the provisions of this Agreement and that he has sought and obtained the
advice of legal counsel before agreeing to be bound by the terms hereof.
Employee acknowledges and agrees that Employer would not have continued
Employee's employment and entered into this Agreement but for Employee's
agreement to be bound by the covenants contained herein.
ARTICLE IX
MISCELLANEOUS
9.01 ENTIRE AGREEMENT. This Agreement, including the annexes
attached hereto, contains the entire understanding of the parties hereto in
respect of its subject matter. This Agreement supersedes all prior written or
oral agreements and understandings between the parties with respect to the
subject matter hereof.
9.02 ARBITRATION. Any controversy or claim which Employee may have
against Employer or any of its employees, officers, directors or agents,
specifically including (but not limited to) any claims arising out of or
relating to this Agreement or breach thereof, whether arising during or after
the effective period of this Agreement, shall be settled by final and binding
arbitration in accordance with the Model Employment Arbitration Procedures of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. Except
as otherwise expressly provided herein, in reaching his or her decision, the
arbitrator shall have no authority or jurisdiction to change or modify any
provision of this Agreement or to award punitive damages, nor shall such
provisions be modified or punitive damages awarded in any other forum.
9.03 NOTICES. Any notice or other communications required or
permitted hereunder shall be sufficiently given if in writing and personally
delivered or sent by airmail, postage prepaid, or by international air courier,
telecopier or telex addressed to Employer or Employee, as the case may be, to
the following address or at such other address for such party as specified by
like notice:
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<PAGE> 67
(A) If to Employer:
to: Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Attention: John D. Denson
Telecopy: (713) 690-3947
(B) If to Employee:
to: Robert P. Andrews
Core Laboratories, Inc.
5295 Hollister Road
Houston, Texas 77040
Telecopy: (713) 690-3947
9.04 CHANGE, MODIFICATION, WAIVER. No change or modification of
this Agreement shall be valid unless it is in writing and signed by each of the
parties hereto. No waiver of any provision of this Agreement shall be valid
unless it is in writing and signed by the party against whom the waiver is
sought to be enforced. The failure of a party to insist upon strict
performance of any provision of this Agreement in any one or more instances
shall not be construed as a waiver or relinquishment of the right to insist
upon strict compliance with such provision in the future. No waiver by any
party of the breach of any term or provision contained in this Agreement,
whether by conduct or otherwise, shall be deemed to be or construed as a
further or continuing waiver of any such breach.
9.05 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs and
assigns; provided, however, that Employee shall not directly or indirectly
assign or delegate any of his rights or obligations hereunder in whole or in
part without the prior written consent of Employer, and any such assignment or
delegation without such consent shall be void.
9.06 HEADINGS DESCRIPTIVE. The headings used herein are included
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.07 SAVINGS CLAUSE. Should any valid federal or state law or
final determination of any administrative agency, arbitrator or court of
competent jurisdiction affect any provision of this Agreement, the provision or
provisions so affected shall be automatically conformed to the law of
determination and this Agreement shall otherwise continue in full force and
effect.
9.08 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
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<PAGE> 68
IN WITNESS WHEREOF, Employer and Employee have each executed or caused
this Agreement to be executed on its behalf by its officer thereunto duly
authorized, as applicable, all as of the date first above written.
CORE LABORATORIES, INC.
By:
------------------------------------
Name:
Title:
ROBERT P. ANDREWS
By:
------------------------------------
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
registration statements on (1) the Company's 1995 Nonemployee Director Stock
Option Plan (File No. 333-40639), (2) the Company's 1995 Long Term Incentive
Plan (File No. 333-40641), and (3) the Company's Core Laboratories, Inc. Profit
Sharing Retirement Plan (File No. 33-80473).
ARTHUR ANDERSEN LLP
Houston, Texas
March 31, 1999
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