SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report : June 12, 1996
VENTURE SEISMIC LTD.
------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
ALBERTA, CANADA
-------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-270270 N/A
- -------- ---------------
(Commission File Number) (IRS Employer Identification No.)
3110 - 80TH AVENUE S.E. CALGARY, ALBERTA T2C 1J3
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (403) 777-9070
<PAGE>
Item 2. Acquisition or disposition of assets
On June 12, 1996 Venture Seismic Ltd. ("Venture") completed the
acquisition of 100% of the common shares of Boone Geophysical, Inc.
("Boone") from Lynn Boone, the sole shareholder of Boone. The
acquisition consists of the operating assets of Boone, a seismic
acquisition contractor operating in the south eastern states. The
acquired operation will be used by Venture to expand its geographic
area of operations into the southern United States.
The purchase price, which totalled $1,750,000, consisted of (a) an
initial payment of $1,150,000 in cash, (b) the issuance of 93,633
Common Shares of the Company valued at $400,000, and (c) $200,000
payable in cash or Common Shares of the Company, at the election of the
Company, to be paid in four installments over the next twelve months.
The Company also entered into two year employment agreements with two
officers of Boone providing for aggregate compensation of $125,000 per
annum.
The cash purchase consideration was provided from the existing cash
balances of Venture at the time of closing.
The excess ($1,510,377) of the purchase price over the fair value of
the net assets acquired was recognized as goodwill and will be
amortized over ten years, resulting in charges to operations of
approximately $150,000 per annum.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a) Financial statements of Business acquired
Boone Geophysical, Inc. balance sheet as at December 31, 1995
and the statements of income and retained earnings and cash
flows for the year then ended and Independent Auditors'
Report.
b) Pro Forma Financial Information
1)Pro forma condensed consolidated balance sheet (unaudited)
as at March 31, 1996.
2)Pro forma consolidated income statement (unaudited)combining
the income statement of Venture Seismic Ltd. for the year
ended September 30, 1995 with the income statement of Boone
Geophysical, Inc. for the year ended December 31, 1995.
-2-
<PAGE>
3)Pro forma interim consolidated income statement (unaudited)
combining the income statement of Venture Seismic Ltd. for
the six months ended March 31, 1996 with the income
statement of Boone Geophysical, Inc. for the three months
ended March 31, 1996.
Exhibits
c) 10.20 Securities Purchase Agreement dated as of May 31, 1996 between Venture
Seismic Ltd., Boone Geophysical, Inc. and Lynn Boone.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Venture Seismic Ltd.
/S/ GREGORY B. WIEBE
- --------------------
By: Gregory B. Wiebe
Chief Financial Officer
June 26, 1996
-3-
<PAGE>
FINANCIAL STATEMENTS
BOONE GEOPHYSICAL, INC.
DECEMBER 31, 1995
F-1
<PAGE>
AUDITORS' REPORT
To the Board of Directors of
VENTURE SEISMIC LTD.
We have audited the balance sheet of BOONE GEOPHYSICAL, INC. as at
December 31, 1995 and the related statement of income and retained
earnings and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an 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 our audit provides 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 the
company as at December 31, 1995 and the results of its operations
and the changes in its financial position for the year then ended
in accordance with generally accepted accounting principles.
Calgary, Canada /s/ Ernst & Young
May 31, 1996 Chartered Accountants
F-2
<PAGE>
BOONE GEOPHYSICAL, INC.
BALANCE SHEET
(in U.S. Dollars)
As at December 31
1995
$
------------------
ASSETS
CURRENT
Cash 46,017
Accounts receivable [note 5] 309,500
Due from related parties [note 2] 150,472
Work in progress 51,340
-------------------
557,329
CAPITAL ASSETS [NOTES 3, 4 AND 5] 290,186
------------------
847,515
==================
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT
Bank loan [note 4] 25,000
Accounts payable and accrued liabilities 183,302
Current portion of long term debt [note 5] 53,471
------------------
261,773
------------------
LONG TERM DEBT [NOTE 5] 76,664
------------------
DEFERRED INCOME TAXES 60,000
------------------
SHAREHOLDER'S EQUITY
Share capital [note 6] 1,000
Retained earnings 448,078
------------------
449,078
------------------
847,515
==================
See accompanying notes
F-3
<PAGE>
BOONE GEOPHYSICAL, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
(in U.S. Dollars)
Year ended December 31, 1995
-----------------
REVENUE $ 2,970,901
DIRECT EXPENSES 2,470,133
-----------------
GROSS MARGIN 500,768
Interest income 6,743
-----------------
507,511
-----------------
OTHER EXPENSES
General and administrative 213,410
Depreciation 94,809
Interest [note 7] 11,413
-----------------
319,632
-----------------
INCOME BEFORE INCOME TAXES 187,879
INCOME TAXES [NOTE 8]
Current 5,000
Deferred 60,000
-----------------
65,000
-----------------
NET INCOME FOR THE YEAR 122,879
RETAINED EARNINGS, BEGINNING OF YEAR 325,199
-----------------
RETAINED EARNINGS, END OF YEAR 448,078
=================
See accompanying notes
F-4
<PAGE>
BOONE GEOPHYSICAL, INC.
STATEMENT OF CASH FLOWS
(in U.S. Dollars)
Year ended December 31, 1995
-----------------
OPERATING ACTIVITIES
Net income for the year $ 122,879
Items not involving cash
Depreciation 94,809
Deferred income taxes 60,000
Net change in non-cash working capital [note 9] 64,779
------------------
342,467
-----------------
FINANCING ACTIVITIES
Decrease in long term debt (38,305)
Advance to related parties (160,542)
Increase in bank loan 25,000
-----------------
(173,847)
-----------------
INVESTING ACTIVITIES
Purchase of fixed assets (136,295)
INCREASE IN CASH FOR THE YEAR 32,325
CASH, BEGINNING OF YEAR 13,692
------------------
CASH, END OF YEAR 46,017
=================
See accompanying notes
F-5
<PAGE>
BOONE GEOPHYSICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(in U.S. Dollars)
December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements of the company are expressed in U.S.
dollars and have been prepared in accordance with accounting
principles generally accepted in Canada, consistently applied.
Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates
and approximations which have been made using careful judgment.
The financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below.
CAPITAL ASSETS
Capital assets are recorded at cost. Depreciation is provided on
the following bases to amortize the cost of the capital assets
over their estimated economic useful lives as follows:
Buildings 3% Straight-line
Recording Equipment 30% Declining Balance
Automotive Equipment 20% Declining Balance
Furniture and Fixtures 20% Declining Balance
When capital assets are sold or scrapped, the cost of the asset
and related accumulated depreciation are removed from the accounts
and any resulting gain or loss on disposal is reflected in income.
REVENUE RECOGNITION
The company recognizes revenue on contracts using the
percentage-of- completion method, primarily based on contract
costs incurred to date compared with total estimated contract
costs to be incurred. Changes to total estimated contract costs
and full provision for losses, if any, are recognized in the
period they are determined.
INCOME TAXES
The company follows the deferral method of tax allocation in
accounting for income taxes under which the income tax provision
is based on the income reported in the accounts. Under this
method, provision is made for income taxes deferred principally as
a result of the company adopting the cash method for income tax
purposes compared to the accrual method for accounting purposes.
2. DUE FROM RELATED PARTIES
Advances to related parties represent funds advanced to the
shareholder. These advances are non-interest bearing and have no
fixed terms of repayment.
F-6
<PAGE>
BOONE GEOPHYSICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(in U.S. Dollars)
December 31, 1995
3. CAPITAL ASSETS
ACCUMULATED
COST DEPRECIATION
$ $
-----------------------------------
Land 12,000 --
Buildings 59,674 28,129
Recording Equipment 1,524,702 1,375,084
Automotive Equipment 351,292 260,353
Furniture And Fixtures 21,088 15,004
------------------------------------
1,968,756 1,678,570
-----------------------------------
NET BOOK VALUE 290,186
===================================
4. BANK LOAN
The bank loan is repayable on demand with interest payable at bank
prime plus 2%. Certain equipment has been pledged as collateral
for the bank loan.
5. LONG TERM DEBT
1995
$
----------
Bank loan, bearing interest at bank prime plus 2%,
repayable in monthly installments of
$2,647, comprised of principal and interest.
62,852
Automotive equipment loans, bearing interest at rates varying
from 9.5% to 10.15%, repayable in monthly instalments
and maturing at varying terms from September 1997 to
August 1998. The related automotive equipment has been
pledged as collateral.
42,559
Note payable, bearing interest at 7%, repayable in
monthly instalments of $904, comprised of principal 24,724
and interest. ----------
130,135
53,471
Less current portion ----------
76,664
==========
Land and buildings of the company, a general security agreement on
the assets of the company and a personal guarantee provided by the
shareholder have been pledged as collateral for the bank loan.
F-7
<PAGE>
BOONE GEOPHYSICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(in U.S. Dollars)
December 31, 1995
PRINCIPAL REPAYMENTS ARE AS FOLLOWS:
$
-------------
1996 53,471
1997 55,307
1998 21,357
-------------
130,135
=============
6. SHARE CAPITAL
AUTHORIZED
The company's authorized share capital consists of 1,000 shares
without par value.
ISSUED
COMMON
--------------------------------
NUMBER AMOUNT
$
-------------- --------------
1,000 1,000
7. INTEREST EXPENSE
1995
$
------------------
53
SHORT-TERM BANK INDEBTEDNESS 11,360
LONG-TERM DEBT
------------------
11,413
==================
F-8
<PAGE>
BOONE GEOPHYSICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(in U.S. Dollars)
December 31, 1995
8. INCOME TAXES
Income tax expense varies from the amounts that would be computed
by applying the combined U.S. Federal and state income tax rate
due to the following differences:
1995
$
------------------
Corporate tax rate 34 %
==================
Provision for income taxes at
statutory tax rate 63,900
Increase (decrease) in income taxes due to:
Small business deduction (6,450)
Other 7,550
------------------
65,000
==================
9. NET CHANGE IN NON-CASH WORKING CAPITAL
1995
$
------------------
Accounts receivable (85,278)
Work in progress (51,340)
Prepaid expenses and deposits 25,000
Accounts payable and accrued liabilities 176,397
------------------
64,779
==================
F-9
<PAGE>
BOONE GEOPHYSICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(in U.S. Dollars)
December 31, 1995
10. UNITED STATES ACCOUNTING PRINCIPLES
The company paid interest of $11,413 in the year ended December
31, 1995.
The deferred tax liability is comprised of the following:
1995
$
----------------
Accounts receivable 105,000
Work in progress 17,000
Accounts payable and accrued liabilities (62,000)
----------------
60,000
================
The company has three significant customers which accounted for
approximately 59% of the company's revenue during the year ended
December 31, 1995.
F-10
<PAGE>
BOONE GEOPHYSICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(in U.S. Dollars)
December 31, 1995
Approximately 84% of accounts receivable were represented by two
customers at December 31, 1995 of which one of these customers is
one of the significant customers mentioned above.
11. SUBSEQUENT EVENTS
Subsequent to December 31, 1995, all of the company's outstanding
shares were acquired by Venture Seismic Ltd. ("Venture") for total
consideration of $1,750,000 consisting of i) an initial payment of
$1,150,000 in cash, ii) the issuance of 93,633 common shares of
venture valued at $400,000, and iii) $200,000 payable in cash or
common shares of Venture, to be paid in four instalments over the
next twelve months.
12. COMPARATIVE FIGURES
These financial statements have been prepared for purposes of
filing with Venture Seismic Ltd.'s Form 8-k hence comparative
figures have not been presented.
F-11
<PAGE>
ERNST & YOUNG
VENTURE SEISMIC LTD.
Pro Forma Financial Information
(Unaudited)
The following unaudited pro forma financial information has been prepared
giving effect to the acquisition of Boone Geophysical, Inc. ("Boone"), for
purposes of the pro forma consolidated balance sheet as if the transaction had
occurred March 31, 1996, for purposes of the pro forma consolidated statement of
income for the year ended September 30, 1995, as if the transaction had occurred
October 1, 1994 and for purposes of the pro forma consolidated income statement
for the period ended March 31, 1996, as if the transaction had occurred October
1, 1995.
The acquisition of Boone has been accounted for as a purchase. The excess of
the purchase price over the fair value of the net assets acquired was recognized
as goodwill and is being amortized over ten years.
The pro forma financial information is not necessarily indicative of the
results of operations or of the financial position which would have been
attained had the acquisition been consumated at any of the foregoing dates or
which may be attained in the future. The pro forma financial information should
be read in conjunction with the historical consolidated financial statements of
Venture Seismic Ltd. and the historical financial statements of Boone
Geophysical, Inc.
F-12
<PAGE>
Venture Seismic Ltd. and Boone Geophysical, Inc.
PRO FORMA CONSOLIDATED
BALANCE SHEET
As at March 31, 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Venture Boone Pro Forma
March 31, March 31, Pro Forma Balance
1996 1996 Adjustments Sheet
$ $ $ $
------------ ------------ ------------- -------------
ASSETS
Current assets
Cash 1,489,623 205,068 (c) (155,068) 239,623
(a) (50,000)
(a) (1,250,000)
Accounts receivable 7,442,994 383,009 (c) (383,009) 7,442,994
Other receivables 120,971 -- -- 120,971
Due from related parties 7,334 157,588 (c) (157,588) 7,334
Work in progress 809,307 42,000 (c) (42,000) 809,307
Prepaid expenses and 285,754 -- -- 285,754
deposits
------------ ----------- -------------
10,155,983 787,665 8,905,983
Advances to shareholders 22,002 -- -- 22,002
Fixed assets 7,377,903 283,753 (b) (44,130) 7,617,526
Intangible assets -- -- (a) 1,510,377 1,510,377
------------ ----------- ---------------
17,555,888 1,071,418 18,055,888
============ ============ ===============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness 440,000 -- -- 440,000
Accounts payable and
accrued 5,385,440 284,879 (c) (284,879) 5,385,440
liabilities
Income taxes payable 76,444 80,000 (c) (80,000) 76,444
Current portion of long term
debt 825,075 60,955 (c) (60,955) 825,075
--------------- ---------------- --------------
6,726,959 425,834 6,726,959
--------------- ---------------- --------------
Long term debt 1,993,931 62,098 (c) (62,098) 1,993,931
--------------- ---------------- --------------
Deferred income taxes 587,855 33,000 (c) (33,000) 587,855
--------------- ---------------- --------------
SHAREHOLDERS'
EQUITY
Share capital 6,630,866 1,000 (a) (1,000) 7,130,866
(a) 500,000
Retained earnings 1,531,353 549,486 (a) (549,486) 1,531,353
Cummulative translation
adjustment 84,924 -- -- 84,924
--------------- ---------------- --------------
8,247,143 550,486 8,747,143
--------------- ---------------- --------------
17,555,888 1,071,418 18,055,888
=============== ================ ===============
</TABLE>
See accompanying notes
F-13
<PAGE>
Venture Seismic Ltd. and Boone Geophysical, Inc.
PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
For the year ended September 30, 1995
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Venture Boone
Year ended Year ended Pro Forma
September December Pro Forma Income
30, 1995 31, 1995 Adjustments Statement
$ $ $ $
------------- -------------- ------------ ----------------
Revenue 9,458,452 2,970,901 12,429,353
Direct expenses 6,713,181 2,470,133 9,183,314
------------- -------------- ----------------
Gross margin 2,745,271 500,768 3,246,039
Interest and other income 27,976 6,743 34,719
------------- -------------- ----------------
2,773,247 507,511 3,280,758
------------- -------------- ----------------
Expenses
General and administrative 825,193 213,410 (e) 18,000 1,056,603
Depreciation and
amortization 901,896 94,809 (d) 150,000 1,146,705
Interest 290,115 11,413 301,528
------------- -------------- ----------------
2,017,204 319,632 2,504,836
------------- -------------- ----------------
Income before income taxes
756,043 187,879 775,922
------------- -------------- ----------------
Income taxes
Current 174,317 5,000 179,317
Deferred 145,420 60,000 205,420
------------- -------------- ----------------
319,737 65,000 384,737
------------- -------------- ----------------
Net income 436,306 122,879 391,185
============= ============== ================
</TABLE>
See accompanying notes
F-14
<PAGE>
Venture Seismic Ltd. and Boone Geophysical, Inc.
PRO FORMA INTERIM CONSOLIDATED
STATEMENT OF INCOME
For the six months ended March 31, 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Venture Boone
Six months Three months Pro Forma
ended March ended March Pro Forma Income
31, 1996 31, 1996 Adjustments Statement
$ $ $ $
------------- ------------- ------------ ------------
Revenue 7,464,286 808,129 8,272,415
Direct expenses 5,516,233 572,924 6,089,157
------------- ------------- ------------
Gross margin 1,948,053 235,205 2,183,258
Interest and other income 81,265 1,185 82,450
------------- ------------- ------------
2,029,318 236,390 2,265,708
------------- -------------- -------------
Expenses
General and administrative 631,667 60,113 (e) 4,500 696,280
Depreciation and 577,615 20,954 (d) 37,500 636,069
amortization
Interest 157,255 916 158,171
------------- -------------- -------------
1,366,537 81,983 1,490,520
------------- -------------- -------------
Income before income taxes
662,781 154,407 775,188
-------------- -------------- --------------
Income taxes
Current 143,980 80,000 223,980
Deferred 146,990 (27,000) 119,990
--------------- -------------- --------------
290,970 53,000 343,970
-------------- -------------- --------------
Net income 371,811 101,407 431,218
============== ============== ===============
</TABLE>
F-15
<PAGE>
Venture Seismic Ltd. and Boone Geophysical, Inc.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The following pro forma adjustments are reflected in the proforma
consolidated balance sheet as at March 31, 1996 and in the pro
forma consolidated statement of income and the pro forma interim
consolidated statement of income.
a) Effective June 1, 1996 Venture Seismic Ltd. ("Venture")
acquired Boone Geophysical, Inc. for an aggregate purchase
price of $1,800,000, consisting of $1,250,000 in cash,
$500,000 of Venture common shares and $50,000 of estimated
direct acquisition costs. The assigned fair value of net
assets acquired is:
$
------------------
Current assets 50,000
Fixed assets 239,623
------------------
289,623
Excess of cost over net tangible
assets acquired, assigned to goodwill 1,510,377
------------------
1,800,000
==================
b) Adjustment to reflect the disposition of land and building
prior to the acquisition June 1, 1996.
c) Adjustments to reflect the assumption of all assets, other
than fixed assets and $50,000 in cash, and all liabilities
by the vendor.
d) Adjustment to reflect the amortization of goodwill resulting
from the acquisition.
e) Adjustment to reflect the leasing of office and warehouse
facilities from the Vendor.
F-16
Exhibit 10.20
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "AGREEMENT") is made and entered into on
the 31st day of May, 1996 between LYNN BOONE (the "SECURITYHOLDER"), being the
owner of all of the issued and outstanding shares of capital stock of BOONE
GEOPHYSICAL, INC., a Texas corporation ("BOONE"), and VENTURE SEISMIC LTD., an
Alberta corporation (the "BUYER").
The Securityholder collectively owns all of the issued and outstanding shares of
capital stock of Boone (the "SHARES"), with the Securityholder owning the number
and type of Shares set forth in Exhibit A hereto. The Buyer desires to purchase
from the Securityholder, and the Securityholder desires to sell to the Buyer,
all of the Shares in accordance with the provisions of this Agreement.
References in this Agreement to "SECTION A" refer to a section in Appendix A
hereto.
NOW THEREFORE, intending to be legally bound hereby, the parties hereto agree as
follows:
1. SALE AND PURCHASE OF THE SHARES. Subject to the terms and conditions of this
Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
defined in Section 2(a) hereof) the Securityholder shall sell to the Buyer and
the Buyer shall purchase from the Securityholder all of the Shares owned by the
Securityholder in exchange for a total purchase price of $1,750,000.00,
determined and payable as follows:
(a) $1,150,000.00 by cash, certified cheque or solicitor's trust
cheque or cheques, allocated to the Securityholder hereto,
delivered at the Closing (as defined in Section 2(a) hereof)
(the "CASH CONSIDERATION");
(b) $400,000.00 by issuance of 93,633 common shares of the Buyer
(the "VSL SHARES") to the Securityholder, which shares shall
be delivered at the Closing (as defined in Section 2(a)
hereof) in the manner provided in Section 2(b) hereof;
(c) $200,000.00 in accordance with the following schedule:
DATE OF PAYMENT AMOUNT AND METHOD OF PAYMENT
(i) September 1, 1996 $50,000.00 cash
(ii) December 1, 1996 $50,000.00 in VSL Shares
(iii) March 1, 1997 $50,000.00 cash
(iv) June 1, 1997 $50,000.00 in VSL Shares,
with the above number of the VSL Shares to be delivered at the
payment dates described above to the Securityholder in the
manner provided in Section 2(b) hereof, all subject to Section
3 for post-closing adjustments to such purchase price.
Notwithstanding anything herein contained in this Section
1(c), the Buyer shall have the option to pay cash to the
Securityholder in lieu of the VSL Shares described in Section
1 (c) (ii) or (iv), as the case may be. In the event the Buyer
elects to pay such amounts by issuing VSL Shares, the number
of VSL Shares to be issued to the Securityholder shall be
determined by dividing the respective amounts by the average
closing price per Buyer common share on the
<PAGE>
2
Nasdaq National Market for ten (10) consecutive trading days
ending on the date immediately preceding the date on which the
payment in VSL Shares is to be made.
2. CLOSING.
(a) The closing (the "CLOSING") of the sale and purchase of Shares
described in Section 1 hereof shall take place at the offices of the
Securityholder's solicitors, Hal R. Ridley, commencing at 10:00 a.m., local
time, on the later of (i) May 31, 1996, or (ii) the 6th business day after
notice from the Buyer of satisfaction of the conditions(s) precedent set forth
in Sections 7.1-7.6. The date on which the Closing takes place is sometimes
referred to herein as the "CLOSING DATE". The transactions contemplated by this
agreement shall be effective as of May 31, 1996 (the "EFFECTIVE DATE") and
during the interim period from the Effective Date to the Closing Date the
Securityholder shall operate Boone for the account of the Buyer and shall carry
on business in the normal course during such time.
(b) At the Closing, the Securityholder shall deliver to the Buyer, free and
clear of all security interests, pledges, liens, transfer and stamp tax
obligations, encumbrances, claims and other charges thereon of every kind, the
certificates for the Shares to be sold by the Securityholder in negotiable form,
duly endorsed in blank, or with separate stock transfer powers attached thereto
and signed in blank, in exchange for (i) the Cash Consideration, and (ii) the
delivery by the Buyer to the Securityholder of the VSL Shares pursuant to
Section 1(b) hereof.
(c) At the Closing, the Securityholder shall make available to the Buyer
the written resignations of all the directors and officers of Boone effective as
of the Closing Date except for such directors and officers as the Buyer shall
designate in writing, and shall cause to be made available to the Buyer and any
continuing directors and officers of Boone (the "POST-CLOSING BOONE DIRECTORS
AND OFFICERS") all minute books, stock record books, books of account, corporate
seals, leases, contracts, agreements, securities, bank, checking and money
market accounts, other investments, deposits, customer and subscriber lists,
files and other documents, instruments and papers belonging to Boone and shall
cause full possession and control of all of the assets and properties of every
kind and nature, tangible and intangible, of Boone and of all other things and
matters pertaining to the operation of the business of Boone to be transferred
and delivered to the post- Closing Boone directors and officers. At the Closing,
the Securityholder shall also deliver to the Buyer, and the Buyer shall deliver
to the Securityholder, the agreements, certificates and other instruments and
documents referred to in Sections 7 and 8 hereof, respectively.
(d) After the Closing, the Buyer shall make all agreements, documents,
information and other items referred to in Section 2(c) hereof available to the
Securityholder for inspection, in each case upon reasonable prior notice to the
Buyer, during normal business hours, at no expense to the Buyer and only for a
proper purpose, including without limitation the use thereof in connection with
(i) the Securityholder's review of the Closing Balance Sheet (as defined in
Section 3(a) hereof), (ii) the indemnification and other obligations of the
Securityholder hereunder and (iii) the payment of any liability to any third
party which is owed by the Securityholder.
<PAGE>
3
3. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE.
(a) As soon as reasonably practical following (but not more than 60 days
after) the Closing Date, the Buyer shall prepare and deliver to the
Securityholder a balance sheet of Boone as of the Effective Date (the "CLOSING
BALANCE SHEET"). The Closing Balance Sheet shall be prepared in accordance with
U.S. generally accepted accounting principles applied on a consistent basis with
the preparation of the December 31, 1995 Balance Sheet (as defined in Section
A.2.4 hereof), to the extent such methods and criteria are consistent with U.S.
generally accepted accounting principles, consistently applied, provided that
the Closing Balance Sheet shall in any event reflect (i) the assumption by the
Securityholder of all liabilities of Boone and the transfer to the
Securityholder of all accounts receivable of Boone incurred prior to the
Effective Date as set forth in Section 12.1 hereof, (ii) the distribution by
Boone, immediately prior to Closing, of land and buildings located at 874A Wire
Road, Huntsville, Texas to Securityholder or his nominee, (iii) the distribution
by Boone, immediately prior to the Closing, to the Securityholder of all bank
accounts of Boone and cash in excess of $50,000.00, and (iv) the distribution
(if made) by Boone, immediately prior to the Closing, to the Securityholder of
key man life insurance policies and any cash value associated therewith. All
expenses incurred in connection with the preparation of the Closing Balance
Sheet shall be the responsibility of the Buyer.
(b) The Closing Balance Sheet shall become final and binding upon the
parties unless within 10 days following its submittal to the Securityholder, the
Securityholder notifies the Buyer of his objection thereto, which objection may
only be that the Closing Balance Sheet was not properly prepared under Section
3(a) hereof. If the Securityholder does so notify the Buyer of their objection
to the Closing Balance Sheet, the Securityholder and the Buyer shall negotiate
in good faith to resolve any differences. If within 30 days following the
receipt of such notice by the Buyer any of such differences have not been
resolved, they shall be resolved by Ernst & Young, Calgary, Alberta, the Buyer's
independent chartered accountants, whose opinion thereon and the resulting
Closing Balance Sheet shall be final, binding and not subject to any appeal. The
fees and expenses of Ernst & Young shall be paid one-half by the Securityholder
and one-half by the Buyer.
(c) Within 10 days following the final determination of the Closing Balance
Sheet, either (i) the Buyer shall pay to the Securityholder the amount by which
the assets (other than fixed assets) minus the liabilities is in excess of
$50,000.00 on such Closing Balance Sheet or (ii) the Securityholder shall pay to
the Buyer the amount by which the assets (other than fixed assets) minus the
liabilities is less than $50,000.00 on such Closing Balance Sheet.
(d) Nothing in this Section 3 shall preclude any party from exercising, or
shall adversely affect or otherwise limit in any respect the exercise of, any
right or remedy available to it, him or her hereunder or otherwise for any
misrepresentation or breach of warranty hereunder, but neither the Buyer nor the
Securityholder shall have any right to dispute the Closing Balance Sheet or any
portion thereof once it has been finally determined in accordance with Section
3(b) hereof.
4. EXAMINATION OF BUSINESS AND ASSETS. For the purpose of allowing the Buyer to
analyze the business and affairs of Boone, all information relative to the
Shares, the business of Boone and the assets in the possession of the
Securityholder or Boone to which the Securityholder or Boone have access shall
<PAGE>
4
be open to inspection by the Buyer, the Buyer's financial advisors and the
Buyer's Alberta and Texas solicitors, Burstall Ward and Thompson & Knight, at
any reasonable time up to and including two (2) business days prior to the
Closing Date, as the Buyer may deem reasonably necessary or advisable in order
to ensure that each of the representations, warranties, covenants and
agreements of the Securityholder and Boone herein contained shall be true and
correct on the Closing Date (the "DUE DILIGENCE").
5. REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDER. The Securityholder
represents and warrants to the Buyer as set forth in Sections A.1 and A.2 of
Appendix A hereto, which Sections are incorporated in this Section 5 by
reference and are deemed to be a part of this Agreement. The representations
and warranties shall be effective on the Effective Date and on the Closing
Date.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Securityholder as set forth in Section A.3 of Appendix A
hereto, which Section is incorporated in this Section 6 by reference and is
deemed to be a part of this Agreement. The representations and warranties shall
be effective on the Effective Date and on the Closing Date.
7. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS. All obligations of the
Buyer under this Agreement are subject to the fulfilment or satisfaction, prior
to or at the Closing, of each of the following conditions precedent:
7.1 APPROVAL OF DUE DILIGENCE. The Buyer shall have received the requisite
approval from its board of directors of the transactions contemplated by this
Agreement and of the Due Diligence.
7.2 PERFORMANCE BY THE SECURITYHOLDER. The Securityholder shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by them prior to or at the Closing.
7.3 EMPLOYMENT AGREEMENTS, NON-COMPETITION AGREEMENTS. Each of Lynn Boone and
Donna Boone shall have executed and delivered an employment agreement with the
Buyer providing for a twenty five month employment term and the Buyer and the
Securityholder shall have entered into a non-competition agreement on terms
satisfactory to such parties, which will include appropriate non-competition
provisions for a minimum of 3 years after the Closing Date.
7.4 REGULATORY APPROVALS. The Buyer shall have obtained all applicable
governmental, regulatory, stock exchange and contractual approvals to complete
the transactions contemplated by this Agreement.
7.5 RELEASES. The Securityholder and any other officers and directors of Boone
shall have executed and delivered releases in favour of Boone in their
capacities as directors, officers, shareholders and employees of Boone, in such
form as required by the Buyer.
7.6 APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions, proceedings,
resolutions, instruments and documents required to carry out this Agreement or
incidental hereto and all other related legal matters shall have been approved
on the Closing Date by Burstall Ward, counsel for the Buyer, in the exercise of
their reasonable judgment. The Securityholder shall also have delivered to the
Buyer such other documents, instruments, certifications and further assurances
as such counsel for the Buyer may reasonably require.
<PAGE>
5
8. CONDITIONS PRECEDENT TO THE SECURITYHOLDER'S OBLIGATIONS. All obligations of
the Securityholder under this Agreement are subject to the fulfilment or
satisfaction, prior to or at the Closing, of each of the following conditions
precedent:
8.1 PERFORMANCE BY THE BUYER. The Buyer shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by the Buyer prior to or at the Closing.
8.2 EMPLOYMENT AGREEMENTS. The Buyer shall have executed and delivered an
employment agreement with Lynn Boone providing for a twenty five month
employment term.
8.3 APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions, proceedings,
resolutions, instruments and documents required to carry out this Agreement or
incidental hereto and all other related legal matters shall have been approved
on the Closing Date by Hal R. Ridley, counsel for the Securityholder, in the
exercise of his reasonable judgment. The Buyer shall also have delivered to the
Securityholder such other documents, instruments, certifications and further
assurances as such counsel for the Securityholder may reasonably require.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY THE SECURITYHOLDER. From and after the Closing, the
Securityholder shall reimburse, indemnify and hold harmless the Buyer and its
affiliates (including without limitation Boone) (each such person and its
successors and assigns is referred to herein as a "BUYER INDEMNIFIED PARTY")
against and in respect of any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses suffered, sustained, incurred or
required to be paid by any Buyer Indemnified Party because of or that result
from, relate to or arise out of the untruth, inaccuracy or breach of, any
representation or warranty of the Securityholder contained in Section A.1 of
this Agreement and any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including without limitation reasonable legal fees and expenses)
incident to any of the foregoing or to the enforcement of this Section 9.1.
9.2 FURTHER INDEMNIFICATION BY THE SECURITYHOLDER. From and after the Closing,
the Securityholder shall reimburse, indemnify any Buyer Indemnified Party
against and in respect of:
(a) any and all damages, losses, settlement payments, deficiencies,
liabilities, costs and expenses suffered, sustained, incurred or required to be
paid by any Buyer Indemnified Party because of or that result from, relate to
or arise out of:
(i) the untruth, inaccuracy or breach of, or the failure
to fulfil, any representation, warranty (other than a
representation or warranty contained in Section A.1
of this Agreement), agreement, covenant or statement
of any Securityholder contained in this Agreement or
in any certificate or other writing furnished to the
Buyer by or on behalf of any Securityholder or Boone
in connection herewith;
(ii) any claim by any former shareholder of Boone
involving the transactions contemplated hereby or any
prior transaction involving any shares of capital
stock of Boone or any predecessor corporation
(including, without limitation, claims
<PAGE>
6
relating to any and all decisions and determinations made with
respect to amounts or allocations of purchase price or other
consideration); or
(iii) the assertion against any Buyer Indemnified Party of any liability or
obligation relating to or arising out of the business, operations or
assets of Boone prior to the Closing Date or the actions or omissions of
Boone's directors, officers, shareholders, employees or agents prior to
the Closing Date, including without limitation any liability or
obligation relating to, and any claim which arises out of or is based
upon, (1) negligence, (2) strict liability, (3) any Environmental Claim
(as defined in Section A.2.19 hereof) or which otherwise relates to, or
involves a claim, liability or obligation which arises out of or is
based upon, any Environmental Law (as defined in Section A.2.19 hereof)
to the extent that such liability or obligation relates to or arises out
of, in whole or in part, any activity occurring, condition existing,
omission to act or other matter existing prior to the Closing Date, (4)
any other statute, rule or regulation or (5) any express or implied
representation, warranty, agreement or guarantee made by or on behalf of
Boone, or alleged to have been made by or on behalf of Boone, or any
liability or obligation which is imposed or asserted to be imposed on
Boone or any successor corporation by operation of law, in connection
with any product designed, used, rented, sold, manufactured, shipped or
installed by or on behalf of Boone, or for any service performed by or
on behalf of Boone, including without limitation any acts, omissions,
workmanship or material performed or sold by Boone, in any case prior to
the Closing Date and irrespective of the date that any claim, suit or
other cause of action related to any of the foregoing is filed or
otherwise instituted against Boone or any successor corporation (with
all references to Boone in this Section 9.2(a)(iii) also deemed to be
references to any predecessor in business of Boone; provided, however,
that the foregoing shall not apply to liabilities and obligations of
Boone described in Section A.2.7(a) hereof; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including without
limitation reasonable legal fees and expenses) incident to any
of the foregoing or to the enforcement of this Section 9.2.
9.3 INDEMNIFICATION BY THE BUYER. From and after the Closing, the Buyer shall
reimburse, indemnify and hold harmless the Securityholder (the Securityholder
and his or her heirs, administrators, personal representatives and assigns is
referred to herein as a "SECURITYHOLDER INDEMNIFIED PARTY") against and in
respect of:
(c) any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses suffered,
sustained, incurred or required to be paid by such
Securityholder Indemnified Party because of or that result
from, relate to or arise out of:
(i) the untruth, inaccuracy or breach of, or the failure
to fulfil, any representation, warranty, agreement,
covenant or statement of the Buyer contained in this
Agreement or in any certificate or other writing
furnished to the Securityholder by or on behalf of
the Buyer in connection herewith; or
<PAGE>
7
(ii) the assertion against any Securityholder Indemnified
Party of any liability or obligation relating to or
arising out of the business, operations or assets of
Boone or any Subsidiary after the Closing Date or the
actions or omissions of Boone's directors, officers,
shareholders, employees or agents (other than
Securityholder) after the Closing Date; and
(d) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including without
limitation reasonable legal fees and expenses) incident to any
of the foregoing or to the enforcement of this Section 9.3.
9.4 LIMITATIONS ON LIABILITY.
(e) Except as otherwise provided in Section 9.6 hereof and except that
this limitation shall not apply to any indemnification claims arising
under or with respect to Sections 9.1 and 10(a) hereof or to any
purchase price adjustments made in accordance with Section 3 hereof,
the Securityholder shall not be liable to any Buyer Indemnified Party
under Section 9.2 for any misrepresentation or breach of warranty
until the aggregate amount for which they would otherwise (but for
this provision) be liable to any or all Buyer Indemnified Parties for
all such misrepresentations and breaches of warranty exceeds in the
aggregate the sum (the "DEDUCTIBLE") of $5,000.00
(f) Except as otherwise provided in Section 9.6 hereof and except
that this limitation shall not apply to any indemnification
claim arising under or with respect to Section 10(b) hereof,
the Buyer shall not be liable to any Securityholder
Indemnified Party under Section 9.3 hereof for any
misrepresentation or breach of warranty until the aggregate
amount for which it would otherwise (but for this provision)
be liable to any or all Securityholder Indemnified Parties for
all such misrepresentations and breaches of warranty exceeds
in the aggregate the Deductible.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in Section
9.6 hereof, the representations and warranties given or made by the
Securityholder or the Buyer in this Agreement or in any certificate or other
writing furnished in connection herewith shall survive the Closing for a
period of two years after the Closing Date and shall thereafter terminate and
be of no further force or effect, except that (a) all representations and
warranties relating to Taxes and Tax Returns (each as defined in Section
A.2.10 hereof) shall survive the Closing for the period of the applicable
statutes of limitation plus any extensions or waivers thereof, (b) all
representations and warranties set forth in Sections A.1 and A.2.19 and 10(a)
hereof shall survive the Closing without limitation and (c) any representation
or warranty as to which a claim (including without limitation a contingent
claim) shall have been asserted during the survival period shall continue in
effect with respect to such claim until such claim shall have been finally
resolved or settled. Notwithstanding any investigation or audit conducted
before or after the Closing Date or the decision of any party to complete the
Closing, each party shall be entitled to rely upon the representations and
warranties of the other party or parties set forth herein.
9.6 EXCEPTIONS TO LIMITATIONS. Nothing herein shall be deemed to limit or
restrict in any manner any rights or remedies which any Buyer Indemnified
Party has, or might have, at law, in equity or otherwise, against the
Securityholder, or which any Securityholder Indemnified Party has or might
have
<PAGE>
8
against the Buyer, based on any willful misrepresentation, willful breach of
warranty or willful failure to fulfil any agreement or covenant.
9.7 PAYMENT OF INDEMNIFICATION OBLIGATIONS. In the event that any
Securityholder or the Buyer is required to make any payment under this Section
9, such party shall promptly pay the Buyer Indemnified Party or the
Securityholder Indemnified Party, as the case may be, the amount of such
indemnity obligation. If there should be a dispute as to such amount, such
Securityholder or the Buyer, as the case may be, shall nevertheless pay when
due such portion, if any, of the obligation as shall not be subject to
dispute. The difference, if any, between the amount of the obligation
ultimately determined as properly payable under this Section 9 and the
portion, if any, theretofore paid shall bear interest for the period from the
date the amount was demanded by the Buyer Indemnified Party or the
Securityholder Indemnified Party, as the case may be, until payment in full,
payable on demand, at the fluctuating rate per annum which at all times shall
be two percentage points in excess of the rate which is publicly announced
from time to time by The Toronto-Dominion Bank or such other Canadian
chartered bank as its "PRIME RATE".
9.8 INDEMNIFICATION PROCEDURE. All claims for indemnification under this
Section 9 shall be asserted and resolved as follows:
(g) In the event that any claim or demand for which a party (the
"INDEMNIFYING PARTY") would be liable to any Buyer Indemnified Party
or Securityholder Indemnified Party (in either case, the "INDEMNIFIED
PARTY") hereunder is asserted against an Indemnified Party by a third
party, the Indemnified Party shall with reasonable promptness notify
the Indemnifying Party of such claim or demand, specifying the nature
of such claim or demand and the amount or the estimated amount thereof
to the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim or demand) (the "CLAIM NOTICE"). The
Indemnifying Party shall have 10 days from the receipt of the Claim
Notice (the "NOTICE PERIOD") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the Indemnifying
Party's liability to the Indemnified Party hereunder with respect to
such claim or demand and (ii) if the Indemnifying Party does not
dispute such liability, whether or not the Indemnifying Party desires,
at the sole cost and expense of the Indemnifying Party, to defend
against such claim or demand, provided that the Indemnified Party is
hereby authorized (but not obligated) prior to and during the Notice
Period to file any motion, answer or other pleading which the
Indemnified Party shall deem necessary or appropriate to protect the
Indemnified Party's interests. In the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that the
Indemnifying Party does not dispute the Indemnifying Party's
obligation to indemnify hereunder and desires to defend the
Indemnified Party against such claim or demand and except as
hereinafter provided, the Indemnifying Party shall have the right to
defend by appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by the Indemnifying Party to a final conclusion.
If the Indemnified Party desires to participate in, but not control,
any such defense or settlement the Indemnified Party may do so at the
Indemnified Party's sole cost and expense. If the Indemnifying Party
elects not to defend the Indemnified Party against such claim or
demand, whether by not giving the Indemnified Party timely notice as
provided above or otherwise, then the Indemnified Party, without
waiving any rights against the Indemnifying Party, may settle or
defend against any such claim in the Indemnified Party's sole
discretion and, if it is ultimately determined that the Indemnifying
Party is responsible therefor under this Section 8, then the
Indemnified Party shall be entitled to
<PAGE>
9
recover from the Indemnifying Party the amount of any
settlement or judgment and all indemnifiable costs and
expenses of the Indemnified Party with respect thereto,
including without limitation interest as provided in Section
9.7 hereof.
(h) The Buyer Indemnified Party shall have the right to control the
defense of any such claim or demand and the amount of any judgment or
settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the
Indemnifying Party hereunder. If the Buyer Indemnified Party should
elect to exercise such right, the Indemnifying Party shall have the
right to participate in, but not control, the defense of such claim or
demand at the sole cost and expense of the Indemnifying Party.
(i) In the event the Indemnified Party should have a claim against the
Indemnifying Party hereunder which does not involve a claim or demand
being asserted against or sought to be collected by a third party, the
Indemnified Party shall with reasonable promptness send a Claim Notice
with respect to such claim to the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnified Party within the
Notice Period that the Indemnifying Party disputes such claim, the
amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
(j) Nothing herein shall be deemed to prevent the Indemnified Party from
making a claim hereunder for potential or contingent claims or demands
provided the Claim Notice sets forth the specific basis for any such
potential or contingent claim or demand to the extent then feasible
and the Indemnified Party has reasonable grounds to believe that such
a claim or demand may be made.
(k) The Indemnified Party's failure to give reasonably prompt notice to
the Indemnifying Party of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless the
failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
10. NO BROKERS' OR FINDERS' FEES.
(a) The Securityholder represents and warrants that all discussions,
activities and negotiations relative to this Agreement have been
carried on by him directly without the intervention of any person who
may be entitled to any brokerage or finder's fee or other commission
in respect hereof or the consummation of the transactions contemplated
hereby (other than as disclosed to the Buyer in the case of a fee
payable by the Securityholder to Jack Clements) and the Securityholder
agrees to indemnify and hold harmless the Buyer Indemnified Parties
against any and all claims, losses, liabilities and expenses
(including without limitation reasonable legal fees and expenses)
which may be asserted against or incurred or paid by any of them as a
result of the Securityholder's dealings, arrangements or agreements
with any such person.
(b) The Buyer represents and warrants that all discussions, activities and
negotiations relative to this Agreement have been carried on by the
Buyer and its affiliates directly without the intervention of any
person who may be entitled to any brokerage or finder's fee or other
<PAGE>
10
commission in respect hereof or the consummation of the
transactions contemplated hereby and the Buyer agrees to
indemnify and hold harmless the Securityholder Indemnified
Parties against any and all claims, losses, liabilities and
expenses (including without limitation reasonable legal fees
and expenses) which may be asserted against or incurred or
paid by the Securityholder as a result of the Buyer's
dealings, arrangements or agreements with any such person.
11. COVENANT NOT TO COMPETE.
(a) From the date of this Agreement until the third anniversary of the
Closing, the Securityholder agrees that he will not, anywhere in the
world, unless acting for the Buyer or its affiliates or in accordance
with the Buyer's prior written consent, (i) (directly or indirectly)
own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be
connected as an officer, director, employee, principal, agent,
representative, consultant, investor, owner, partner, manager, joint
venturer or otherwise with, or permit his name to be used by or in
connection with, any business or enterprise engaged anywhere in the
world in geographical seismograph acquisition or during the three-year
non-compete period stated above or at the time of its termination,
(ii) call on or solicit any person who or which during such
non-compete period is, or within 18 months prior to any such
solicitation had been, a customer of Boone with respect to any
business covered by clause (i) above or (iii) solicit the employment
of any person who during such non-compete period is, or within 18
months prior to any such solicitation had been, employed by Boone on a
full or part-time basis.
(b) The Securityholder acknowledges that (i) the provisions of this
Section 11 are reasonable and necessary to protect the legitimate
interests of the Buyer and its affiliates (including without
limitation Boone), (ii) any violation of this Section 11 will result
in irreparable injury to the Buyer and its affiliates (including
without limitation Boone) and that damages at law would not be
reasonable or adequate compensation to the Buyer and its affiliates
(including without limitation Boone) for a violation of this Section
11 and (iii) the Buyer and its affiliates (including without
limitation Boone) shall be entitled to have the provisions of this
Section 11 specifically enforced by preliminary and permanent
injunctive relief without the necessity of proving actual damages and
without posting bond or other security as well as to an equitable
accounting of all earnings, profits and other benefits arising out of
any violation of this Section 11, including without limitation
estimated future earnings. In the event that the provisions of this
Section 11 should ever be deemed or held by a court of competent
jurisdiction to exceed the time, geographic, product or any other
limitations permitted by applicable law, then such provisions shall be
deemed reformed to the maximum permitted by applicable law.
(c) The Buyer and the Securityholder intend to and do hereby confer
jurisdiction to enforce the covenants set forth in this Section 11
upon the courts of any jurisdiction within the geographical scope of
such covenants. In addition to Section 12.7 hereof and not in
limitation thereof, if the courts of any one or more of such
jurisdictions hold such covenants unenforceable in whole or in part,
it is the intention of the Buyer and each covenanting Securityholder
that such determination not bar or in any way adversely affect the
right of the Buyer and its affiliates (including without limitation
Boone) to equitable relief and remedies hereunder in courts of any
other jurisdiction as to breaches or
<PAGE>
11
violations of this Section 11, such covenants being, for this
purpose, severable into diverse and independent covenants.
12. MISCELLANEOUS.
12.1 ASSUMPTION OF BOONE LIABILITIES, ACCOUNTS RECEIVABLE. All accounts
receivable of Boone uncollected as of the Effective Date shall be assigned by
Boone to the Securityholder for collection and all liabilities of Boone as
specified in Exhibit B hereto shall be assumed and paid by the Securityholder.
12.2 EXPENSES. The Buyer and the Securityholder shall pay its or his expenses
incidental to the preparation hereof and, through the Closing, the carrying out
of the provisions hereof and the consummation of the transactions contemplated
hereby. The parties hereto shall pay their own expenses incidental to the
carrying out of the provisions hereof after the Closing, and no such expenses
of the Securityholder, including without limitation the Securityholder's legal
fees and expenses, shall be paid by or out of any of the assets or properties
of the Buyer or Boone.
12.3 CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. This Agreement shall not be amended or modified except by
a written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
12.4 ASSIGNMENT AND BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon and enure to the benefit of and be enforceable
by the heirs, administrators, personal representatives, successors and assigns
of the parties hereto.
12.5 WAIVER. Any term or provision of this Agreement may be waived at any time
by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
12.6 NOTICES. Any notice, request, claim, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally or sent by telegram,
by registered or certified mail, postage prepaid, or by recognized courier
service, as follows:
If to the Buyer, to:
Venture Seismic Ltd.
3110 80th Avenue S.E.
Calgary, Alberta
T2C 1T3
Telecopier: (403) 777-9080
Attention: Brian W. Kozun
<PAGE>
12
With a required copy to:
Burstall Ward
Barristers & Solicitors
1800, 800 5th Avenue S.W.
Calgary, Alberta
T2P 3T6
Telecopier: (403) 266-6016
Attention: Scott W. Sangster
If to the Securityholder, to:
Boone Geophysical, Inc.
Post Office Drawer 1535
874A Wire Road
Huntsville, Texas 77347-1535
Telecopier:
Attention: President
With a required copy to:
Hal R. Ridley
Attorney at Law
1224 University Avenue
Huntsville, Texas 77340
Telecopier: (409) 295-3788
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telegraphed, mailed
or dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
12.7 ALBERTA LAW TO GOVERN; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
Province of Alberta. Each of the Buyer and the Securityholder irrevocably and
unconditionally (a) agrees that any suit, action or other legal proceeding
(collectively, "SUIT") instituted by the Securityholder and arising out of this
Agreement shall be brought and adjudicated only in the Province of Alberta, (b)
agrees that any Suit instituted by the Buyer arising out of this Agreement
shall be brought and adjudicated only in the Province of Alberta, and (c)
waives and agrees not to assert by way of motion, as a defense or otherwise in
any such Suit, any claim that it, he or she is not subject to the jurisdiction
of the above courts, that such Suit is brought in an inconvenient forum or that
the venue of such Suit is improper. Each of the Buyer and the Securityholder
also irrevocably and unconditionally consents to the service of any process,
pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 12.6 hereof.
12.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Section 9 hereof, the other Buyer Indemnified
Parties and Securityholder Indemnified Parties, and their heirs,
administrators, personal
<PAGE>
13
representatives, successors and assigns, and they shall not be construed as
conferring any rights on any other persons.
12.9 HEADINGS; GENDER; "PERSON"; "DOLLARS"; "$". All section headings contained
in this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation
hereof. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine or neuter, as the context
requires. Any reference to a "PERSON" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity. Any reference to an
"AFFILIATE" or an "AFFILIATED CORPORATION" herein shall have the meaning
ascribed to such terms in the Business Corporations Act (Alberta), as amended
from time to time. Any reference to "DOLLARS" or "$" shall refer to dollars of
the United States of America.
12.10 TAX TREATMENT. The Buyer makes no representations regarding the tax
consequences to the Securityholder of the transactions contemplated by this
Agreement. The Securityholder acknowledges that they have been advised of the
tax consequences of the transactions contemplated by this Agreement by their
own tax advisers, and that they are relying on their tax advisers in
determining their respective tax consequences in connection with the
transactions contemplated in this Agreement.
12.11 EXHIBITS; APPENDIX; SCHEDULES. The Exhibits hereto, Appendix A hereto and
the Schedules referred to herein and therein are intended to be and hereby are
specifically made a part of this Agreement.
12.12 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstance in any other jurisdiction or to other persons or
circumstances in any jurisdiction, shall not be affected thereby, and to this
end the provisions of this Agreement shall be severable.
<PAGE>
14
12.13 COUNTERPARTS; TELECOPIER EXECUTION. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts. Execution and delivery of
counterparts of this Agreement by telecopier by any party shall be binding on
all parties to this Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of
the date first written.
VENTURE SEISMIC LTD.
Per: /s/ Brian W. Kozun
---------------------------
Name: Brian W. Kozun
Title: President
THE SECURITYHOLDER
/s/ Gina L. McCarver /s/ Lynn Boone
- ----------------------------- --------------------------------
WITNESS LYNN BOONE
<PAGE>
APPENDIX A-1
APPENDIX A
REPRESENTATIONS AND WARRANTIES
A.1 REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDER. The Securityholder
hereby represents and warrants to the Buyer as follows:
A.1.1 SHARE OWNERSHIP; AUTHORITY. The Securityholder is the lawful owner of
record and beneficially of the number of Shares set beside the Securityholder's
name in column A of Exhibit A hereto, free and clear of all security interests,
pledges, liens, encumbrances, claims and other charges and restrictions thereon
of every kind, including without limitation any agreements, subscriptions,
options, warrants, calls, commitments or rights (contingent or otherwise) of
any character granting to any person any interest in or right to acquire from
the Securityholder at any time, or upon the happening of any stated event, any
Shares owned by the Securityholder. The Securityholder has full right, power
and authority to execute, deliver and perform this Agreement. This Agreement
has been duly executed and delivered by the Securityholder. This Agreement
constitutes the legal, valid and binding obligation of the Securityholder
enforceable against the Securityholder in accordance with its terms.
A.1.2 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. The execution, delivery and
performance hereof by the Securityholder will not contravene or violate (a) any
law, rule or regulation to which the Securityholder is subject or (b) any
judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
the Securityholder; nor will such execution, delivery or performance violate,
be in conflict with or result in the breach (with or without the giving of
notice or lapse of time, or both) of any term, condition or provision of, or
require the consent of any other party to, any contract, commitment, agreement,
lease, license, permit, authorization, document or other understanding, oral or
written, to or by which the Securityholder is a party or otherwise bound or
affected. No authorization, approval or consent, and no registration or filing
with, any governmental or regulatory official, body or authority is required in
connection with the execution, delivery and performance hereof by the
Securityholder.
A.1.3 NO CLAIMS AGAINST BOONE. The Securityholder has no claim, either accrued,
absolute, contingent or otherwise and whether known or unknown, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured,
against Boone for any reason and, in the case of a Securityholder who is an
employee, for wages and benefits owing in the ordinary course of business of
Boone.
A.1.4 THE VSL SHARES, RESTRICTIONS ON TRANSFER, INVESTMENT REPRESENTATIONS. The
Securityholder acknowledges that the execution of this Agreement by the
Securityholder and the delivery to the Securityholder of the VSL Shares has
been or will be made in reliance upon, and is conditioned on, the following
representations, warranties, acknowledgments and covenants of the
Securityholder:
(a) The Securityholder has such knowledge and experience in financial, tax
and business matters that he is fully capable of evaluating the
relative risks and merits of the obligations incurred under this
Agreement and making an informed decision with respect hereto. The
Securityholder is completely familiar with the business, operations,
assets, properties, prospects and financial condition of the Buyer;
and the Securityholder hereby waives and relinquishes any duty on the
part of the Buyer to disclose any matter, fact or thing relating to
the business, operations, assets, properties, prospects or financial
condition of the Buyer now known or hereafter known by the Buyer.
<PAGE>
APPENDIX A-2
(b) The Securityholder acknowledges a thorough familiarity with, and an
understanding of, the definition of "ACCREDITED INVESTOR" as defined
in Rule 501(a) of Regulation D, as such Rule is currently in effect
and represents and warrants that the Securityholder is an accredited
investor within the meaning of such definition.
(c) The Securityholder acknowledges that he has not received from the
Buyer or any person acting on the Buyer's behalf any general
solicitation or public media advertisements.
(d) The Securityholder acknowledges that the VSL Shares to be received by
the Securityholder under this Agreement will not have been registered
under the Securities Act of 1933, as amended (the "ACT"), nor
qualified under a prospectus filed under the Securities Act (Alberta)
nor have the VSL Shares been registered under the securities or "BLUE
SKY" laws of any of the United States or Canada or of any other
jurisdictions and will be "RESTRICTED SECURITIES" as defined in Rule
144 under the Act (securities acquired from an issuer in a transaction
not involving a public offering).
(e) The Securityholder represents and warrants to the Buyer that the VSL
Shares are not being acquired with a view to, or for resale in
connection with, the distribution thereof, and understands that the
effect of such representation and warranty is that the VSL Shares must
be held by the Securityholder unless and until subsequently registered
under the Act and applicable state and provincial securities laws, or
unless an exemption from such registration or prospectus requirement
is available at the time of any proposed sale or other transfer. Each
Securityholder understands that Rule 144 under the Act requires, among
other conditions, a two year holding period prior to the resale of the
VSL Shares without having to satisfy the registration requirements
under the Act and that there can be no assurance that the conditions
of such Rule will be satisfied so as to allow any proposed sale.
(f) The Securityholder agrees not to sell, pledge, hypothecate or
otherwise transfer any of the VSL Shares received by him under this
Agreement except or unless: (i) there is then in effect a registration
statement under the Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) such Securityholder shall have notified the Buyer of the proposed
disposition and shall have furnished the Buyer with a detailed
statement of the circumstances surrounding the proposed disposition,
and, if reasonably requested by the Buyer, the Securityholder shall
have furnished the Buyer with an opinion of counsel, reasonably
satisfactory to the Buyer, that such disposition will not require
registration of such the VSL Shares under the Act.
(g) The certificates representing the VSL Shares to be issued pursuant
hereto will bear the following legend:
THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
A SECURITIES PURCHASE AGREEMENT DATED
AS OF May 31, 1996, WITH VENTURE SEISMIC
LTD. SUCH SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY APPLICABLE STATE OR
<PAGE>
APPENDIX A-3
PROVINCIAL SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SHARES UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS,
UNLESS, IN THE OPINION, WHICH SHALL BE IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO VENTURE SEISMIC
LTD., SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS
VENTURE SEISMIC LTD. HAS DETERMINED TO PERMIT SUCH
TRANSFER WITHOUT THE PROVISION OF SUCH AN OPINION.
Each Securityholder also understands that the Buyer will instruct its
transfer agent to place a stop transfer notation in its records with
respect to the certificates representing the VSL Shares.
(h) DISCLOSURE MATERIALS. Each Securityholder represents and warrants to
the Buyer that he or it has received and had full opportunity, prior
to the execution of this Agreement to review thoroughly (along with
counsel, accountants or other advisers) a copy of each of the
following documents: (i) the Buyer's Prospectus dated November 6,
1995; (ii) Report on Form 10KSB for the fiscal year ended September
30, 1995 and (iii) the Buyer's reports on Form 10-QSB for the periods
ended December 31, 1995 and March 31, 1996.
(i) ACCESS TO INFORMATION. The Securityholder represents, warrants and
acknowledges that the Securityholder, and the attorneys, accountants,
representatives and agents of the Securityholder, have had a
reasonable time prior to the execution hereof and completion of the
transactions contemplated hereby, to ask questions and receive answers
concerning the business and operations of the Buyer and to obtain any
additional information necessary to make a fully informed decision
with respect to the execution of this Agreement, and the investment in
the VSL Shares effected hereby.
A.2 FURTHER REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDER. The
Securityholder hereby further represents and warrants to the Buyer as follows:
A.2.1 CORPORATE EXISTENCE. Boone is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, and it has
all requisite power and authority and all necessary licenses, permits and
authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith. Boone is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required, all of which jurisdictions are listed on Schedule
A.2.1 hereto.
A.2.2 CAPITALIZATION. The total authorized capital stock of Boone consists of
1000 shares of common stock, of which 1000 of such shares are issued and
outstanding (all such issued and outstanding shares have been previously
defined as the "SHARES"). All of the Shares have been duly authorized and
validly issued, are fully paid and non-assessable, were not issued or
transferred in violation of the terms of any agreement or other understanding
binding upon Boone and were issued and transferred in compliance with all
applicable charter documents of Boone and all applicable federal, provincial,
state and foreign securities
<PAGE>
APPENDIX A-4
laws, rules and regulations. There are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire
from Boone any shares of, or any securities convertible into, the capital
stock of Boone. All preemptive rights with respect to the issuance of the
Shares or any other capital shares of Boone have been complied with.
A.2.3 SUBSIDIARIES; NO INTEREST IN OTHER ENTITIES. Boone owns no shares of any
corporation and has no other ownership or other investment interests, either
of record, beneficially or equitably, in any association, partnership, joint
venture or legal entity, except for bank, checking and money market accounts
and other cash equivalent investments.
A.2.4 FINANCIAL STATEMENTS. The Securityholder has delivered to the Buyer
prior to the date hereof (a) the balance sheets of Boone as of December 31,
1993, December 31, 1994 and December 31, 1995 and the related statement of
operations, shareholders' equity and cash flows for the 12-month periods then
ended, internally prepared by Boone, and (b) the unaudited balance sheets as
at, and statements of income for the periods ended, January 31, February 29
and March 31, 1996. The unaudited balance sheet of Boone as of December 31,
1995 shall be referred to as the "DECEMBER 31, 1995 BALANCE SHEET" together
with the statement of operations, shareholders' equity and cash flows for the
periods then ended. The foregoing financial statements shall collectively be
referred to as the "FINANCIALS". Such Financials (including without limitation
all notes, comments, schedules and supplemental data contained in or annexed
to such statements), correct and complete copies of all of which are attached
hereto as Schedule A.2.4, are accurate, complete and in accordance with the
books and records of Boone and present fairly the financial position and
assets and liabilities of Boone as of their respective dates and the results
of their operations for the periods then ended, in conformity with U.S.
generally accepted accounting principles applied on a consistent basis.
A.2.5 ACCOUNTS RECEIVABLE. All accounts receivable of Boone (a) are not
subject to valid defenses, set-offs or counterclaims other than normal returns
and allowances and (b) were generated only in the ordinary course of business.
A.2.6 INVENTORY AND REVENUE PRODUCING EQUIPMENT. All inventory and revenue
producing equipment of Boone reflected on the December 31, 1995 Balance Sheet,
and all inventory and revenue producing equipment owned by Boone as of the
date hereof, was acquired and has been maintained in accordance with the
regular business practices of Boone, consists of items of a quality and
quantity useable, saleable or rentable in the ordinary course of their
businesses consistent with past practice, and is valued in conformity with
generally accepted accounting principles applied on a consistent basis; no
significant amount of such inventory or revenue producing equipment is
obsolete.
A.2.7 ABSENCE OF UNDISCLOSED LIABILITIES.
(j) Boone is not liable for or subject to any liability except for:
(i) those liabilities and obligations adequately and
specifically disclosed on the December 31, 1995 Balance
Sheet and not heretofore paid or discharged;
(ii) those liabilities and obligations arising in the ordinary course
of its business consistent with past practice under any contract,
commitment or agreement
<PAGE>
APPENDIX A-5
specifically disclosed on any Schedule to this
Appendix A or not required to be disclosed thereon
because of the term or amount involved or otherwise;
and
(iii)those liabilities and obligations incurred, consistent with its
past practice, in the ordinary course of its business and either
not required to be shown on the December 31, 1995 Balance Sheet
or arising since December 31, 1995, which liabilities and
obligations in the aggregate are of a character and magnitude
consistent with its past practice.
For purposes of this Section A.2.7 and Section 8.1 hereof, the term
"LIABILITIES" shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
(k) Except as provided in Section A.2.18 hereof, Boone does not provide
or maintain, and is not required under applicable law to provide or
maintain, for their employees any pension, retirement,
profit-sharing or other plan or policy for the benefit of employees
which is required to comply with, and Boone has no liabilities with
respect to itself or any other person under, the federal Employees
Retirement Income Security Act of 1974 ("ERISA"), the Income Tax Act
(Canada) (the "ITA"), the Unemployment Insurance Act (Canada) or the
Canada Pension Plan Act (Canada). Furthermore, Boone has no
liability for any dividends or distributions to any Securityholder
and since December 31, 1995 has not paid or delivered or become
committed to pay or deliver any dividend, or made or become
committed to make any distribution or payment, to any shareholder in
respect of its capital shares or redeemed, purchased or otherwise
acquired any of its capital shares.
A.2.8 EXISTING CONDITION. Except as disclosed on Schedule A.2.8 hereto, since
December 31, 1995, Boone has not:
(l) sold, assigned or transferred any of its assets or properties except
in the ordinary course of its business consistent with past
practice;
(m) created, incurred, assumed or guaranteed any indebtedness for money
borrowed or incurred any other liabilities exceeding $5,000.00 in
the aggregate except for current liabilities incurred consistent
with past practice;
(n) suffered any damage, destruction or loss, whether or not covered by
insurance, (i) materially and adversely affecting their businesses,
operations, assets, properties or prospects or (ii) of any item
carried on Boone's books of account at more than $5,000.00;
(o) suffered any material adverse change in its business, operations,
assets, properties, prospects or condition (financial or otherwise);
(p) made any capital expenditure or capital addition or betterment
except for such as may be involved in the ordinary repair,
maintenance and replacement of its assets;
<PAGE>
APPENDIX A-6
(q) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or
loan to, any of their directors, officers or employees, or to any
Securityholder, or made any increase in, or any addition to, other
benefits to which any of its directors, officers or employees or any
Securityholder may be entitled; or
(r) entered into any transaction other than in the ordinary course of
its business consistent with past practice.
Except as disclosed on Schedule A.2.8 hereto, since December 31, 1995, Boone has
not made or suffered any amendment to or termination of any material contract or
commitment (including without limitation all international contracts and
commitments) to which it is or was a party or by which it or any of its
properties are or were bound.
A.2.9 ASSETS AND PROPERTIES.
(s) Boone owns outright and has good, valid and marketable title to all
of its properties and assets, real, personal and mixed, including
without limitation all of the properties and assets reflected on the
December 31, 1995 Balance Sheet and those acquired since December
31, 1995 (except in each case for properties and assets sold or
otherwise disposed of since December 31, 1995 in the ordinary course
of its business consistent with past practice), free and clear of
all mortgages, liens, pledges, security interests, charges, claims,
restrictions and other encumbrances and defects of title of any
nature whatsoever, except liens for current taxes not yet due and
payable and items disclosed on Schedule A.2.9 hereto. All leases,
licenses, permits and authorizations in any manner related to the
assets, properties or business of Boone and all other instruments,
documents and agreements pursuant to which Boone has obtained the
right to use any real or personal property are in good standing,
valid and effective in accordance with their respective terms, and
there is not under any of such leases, licenses, permits,
authorizations, instruments, documents or agreements any existing
default or event which with the giving of notice or lapse of time,
or both, would constitute a default.
(t) All facilities, buildings, vehicles, equipment, furniture and
fixtures, leasehold improvements and other material items of
tangible personal property owned or used by Boone is in good
operating condition and repair, subject to normal wear and
maintenance, are useable in the regular and ordinary course of their
businesses and conform to all applicable laws, ordinances, codes,
rules and regulations relating thereto and to the construction, use,
operation and maintenance thereof.
A.2.10 TAXES AND TAX RETURNS AND REPORTS. With respect to Boone (referred to in
this Section A.2.10 as the "COMPANY"), (a) all reports, returns, statements
(including without limitation estimated reports, returns or statements), and
other similar filings required to be filed on or before the Closing Date by the
Company (the "TAX RETURNS") with respect to any Taxes (as defined in this
Section A.2.10) have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to be
filed, and all such Tax Returns correctly reflect the liability of the Company
for Taxes for the periods, properties or events covered thereby, (b) all Taxes
payable with respect to the Tax Returns, and all Taxes accruable with respect to
events occurring prior to the Closing Date, whether disputed or not, and whether
or not shown on any Tax Return, will have been paid in full prior to the Closing
Date,
<PAGE>
APPENDIX A-7
or an adequate accrual in accordance with generally accepted accounting
principles is provided with respect thereto on the Closing Balance Sheet, (c) no
deficiency in respect of any Taxes which has been assessed against any Company
remains unpaid and neither Boone nor any Securityholder has knowledge of any
unassessed Tax deficiencies or of any audits or investigations pending or
threatened against the Company with respect to any Taxes, (d) there is in effect
no extension for the filing of any Tax Return and the Company has extended or
waived the application of any statute of limitations of any jurisdiction
regarding the assessment or collection of any Tax, (e) no claim has ever been
made by any Tax authority in a jurisdiction in which the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction, (f)
there are no statutory liens for Taxes upon any asset of the Company except for
statutory liens for current Taxes not yet due, (g) no issues have been raised in
any examination by any Tax authority with respect to the Company which, by
application of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined, (h) the Company is a
party to any Tax allocation or sharing agreement or otherwise under any
obligation to indemnify any person with respect to any Taxes, (i) the Company is
a party to any joint venture, partnership or other arrangement that is treated
as a partnership for income tax purposes, (j) there are no accounting method
changes or proposed accounting method changes of the Company that could give
rise to an adjustment under the ITA or under section 481 of the Internal Revenue
Code of 1986, as amended (the "CODE"), for periods after the Closing Date, (k)
there are no requests for rulings in respect of any Tax pending between the
Company and any Taxing authority, (l) since the date of its ownership by the
Securityholder, the Company has been a member of any affiliated group other than
the affiliated group of which Boone is the common parent and (m) the Company has
timely made all deposits required by law to be made with respect to employees'
withholding and other employment taxes.
For purposes of this Agreement, "TAXES" means any taxes, duties, assessments,
fees, levies or similar governmental charges, together with any interest,
penalties and additions to tax, imposed by any taxing authority, wherever
located (i.e. whether federal, provincial, state, local, municipal or foreign),
including without limitation all net income, gross income, gross receipts, net
receipts, sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment,, workers'
compensation, excise, severance, property, windfall profits, value added, ad
valorem, occupation or any other similar governmental charge or imposition.
A.2.11 BOOKS OF ACCOUNT. The books of account of Boone reflect all of its items
of income and expense, and all of its assets and liabilities required to be
reflected therein, in accordance with generally accepted accounting principles.
A.2.12 LEGAL PROCEEDINGS; ETC. Except as disclosed on Schedule A.2.12, there are
no disputes, claims, actions, suits or proceedings (including without limitation
local zoning or building ordinance proceedings), arbitrations or investigations,
either administrative or judicial, pending or, to the knowledge of Boone or any
Securityholder, threatened or contemplated, by or against or affecting Boone or
its assets or business, before or by any court or governmental or regulatory
official, body or authority, or before an arbitrator of any kind. Neither Boone
nor any Securityholder has any knowledge of any condition or state of facts or
the occurrence of any event that might reasonably form the basis of any claim,
liability or litigation against Boone. Boone is not a party to or otherwise
bound or affected by the provisions of any judgment, order, writ, injunction or
decree of any court, arbitrator or governmental or regulatory official, body or
authority.
A.2.13 COMPLIANCE WITH LAW. Boone has complied in all material respects with
each, and is not in violation of any, law, rule or regulation to which it or its
business is, or its operations, assets or properties
<PAGE>
APPENDIX A-8
are, subject and has not failed to obtain or adhere to the requirements of any
license, permit or other authorization necessary to the ownership of its assets
and properties or to the conduct of its business.
A.2.14 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. The execution, delivery and
performance hereof by the Securityholder will not contravene or violate (a) any
law, rule or regulation to which Boone is subject, (b) any judgment, order,
writ, injunction or decree of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to Boone or (c) the
charter documents of Boone; nor will such execution, delivery or performance
violate, be in conflict with or result in the breach (with or without the giving
of notice or lapse of time, or both) of any term, condition or provision of, or
require the consent of any other party to, any contract, commitment, agreement,
lease, license, permit, authorization, document or other understanding, oral or
written, to or by which Boone is a party or otherwise bound or affected or by
which any of the assets or properties of Boone may be bound or affected or give
any party with rights thereunder the right to terminate, modify, accelerate,
renegotiate or otherwise change the existing rights or obligations of Boone
thereunder.
A.2.15 INSURANCE. Schedule A.2.15 contains a true and complete description of
the insurance coverage in effect now or at any time during the past five years
with respect to Boone and its business and properties, together with a
description of all insurance claims in any one case in excess of $25,000.00 made
by Boone during the past five years. Boone has at all times during the past five
years maintained insurance coverage substantially similar to the insurance
coverage currently in effect. There is no default under any such current
coverage, nor has there been any failure to give any notice or present any claim
under any such coverage in a timely fashion or in the manner or detail required
by the policy or binder. There are no outstanding unpaid premiums, and there are
no provisions in any insurance coverage of Boone for retroactive or
retrospective premium adjustments. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such coverage has been
received by Boone. All products liability and general liability insurance
policies maintained by Boone are and historically have been occurrence policies
and not claims made policies. There are no outstanding performance bonds or
other surety arrangements covering or issued for the benefit of Boone or its
business or as to which Boone has or may incur any liability.
A.2.16 CONTRACTS AND COMMITMENTS. Except as listed and described on Schedule
A.2.16 hereto or, in the case of benefit plans and arrangements, Schedule A.2.18
hereto, Boone is not is a party to or otherwise bound or affected by any written
or oral:
(u) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for the
employment of any person, including without limitation any
consultant;
(v) agreement, contract, commitment or arrangement with any labour union
or other representative of employees;
(w) agreement, contract or commitment for the purchase of, or payment
for, supplies or products, or for the performance of services by a
third party, involving in any one case $5,000.00 or more;
(x) agreement, contract or commitment to sell or supply products or to
perform services, involving in any one case $5,000.00 or more;
<PAGE>
APPENDIX A-9
(y) agreement, contract or commitment not otherwise listed on Schedule
A.2.16 hereto and continuing over a period of more than six months
from the date hereof or exceeding $5,000.00 in value;
(z) representative or sales agency agreement, contract or commitment;
(aa) real property sale agreements wherein Boone is the vendor or
purchaser, real property lease agreements wherein Boone is the
lessor or the lessee and all chattel lease agreements wherein Boone
is the lessor or the lessee;
(bb) note, debenture, bond, conditional sale agreement, equipment trust
agreement, letter of credit agreement, loan agreement or other
agreement or contract, commitment or arrangement for the borrowing
or lending of money (including without limitation loans to or from
officers, directors, any Securityholder or any member of any of
their immediate families), agreement, contract, commitment or
arrangement for a line of credit or guarantee, indemnity, pledge or
undertaking in any manner whatsoever of the indebtedness of any
other person;
(cc) agreement, contract or commitment for any charitable or political
contribution;
(dd) agreement, contract or commitment for any capital expenditure in
excess of $5,000.00;
(ee) agreement, contract or commitment limiting or restraining it from
engaging or competing in any lines of business with any person, nor
is any officer or employee of Boone subject to any such agreement;
(ff) license, franchise, distributorship or other similar agreement,
contract or commitment, including without limitation those which
relate in whole or in part to any patent, trademark, trade name,
service mark or copyright or to any ideas, technical assistance or
other know-how of or used by Boone; or
(gg) material agreement, contract or commitment not made in the ordinary
course of business.
Except as may be disclosed on Schedule A.2.16 hereto, each of
the agreements, contracts, commitments, arrangements, leases and other
instruments, documents and undertakings listed on Schedule A.2.16 hereto is
valid and enforceable in accordance with its terms, and the parties thereto are
in compliance with the provisions thereof, no party is in default in the
performance, observance or fulfilment of any material obligation, covenant or
condition contained therein, and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as may be disclosed on Schedule A.2.16 hereto,
no such agreement, contract, commitment, arrangement, lease or other instrument,
document or undertaking, in the reasonable opinion of Boone or any
Securityholder, contains any contractual requirement with which there is a
reasonable likelihood Boone or any other party thereto will be unable to comply.
A.2.17 ADDITIONAL INFORMATION. Schedule A.2.17 hereto contains, to the extent
not described in some other Schedule hereto, accurate lists and summary
descriptions of the following:
(hh) all vehicles, equipment, furniture and fixtures, leasehold
improvements and other material items of personal property owned or
leased by Boone, specifying which are owned and which are leased
and, with respect to leased property, specifying the identity of the
lessor, the rental rate and the unexpired term of the lease, and
also specifying serial numbers (where appropriate) and location;
<PAGE>
APPENDIX A-10
(ii) all real property and interests in real property owned, leased or
otherwise held by Boone specifying which are owned and which are
leased and, with respect to leased property, specifying the identity
of the lessor, the rental rate and the unexpired term of the lease;
(jj) the names of all present directors of Boone;
(kk) the names and current annual salary or hourly rates of all present
officers and employees of Boone together with a statement of the
full amount of any bonuses, profit sharing or other remuneration
paid to each such person and to any director during the current or
the last fiscal year or payable to each such person in the future
and the basis therefor;
(ll) the names and addresses of each bank and other financial institution
or fund in which Boone maintains an account (whether checking,
savings, money market or otherwise), lock box or safe deposit box,
and the account numbers and names of persons having signing
authority or other access with respect thereto;
(mm) a listing and description of all cash equivalent items held by
Boone;
(nn) a list of all of licenses, permits and authorizations of Boone;
(oo) the names of all persons authorized to borrow money or incur or
guarantee indebtedness on behalf of Boone;
(pp) the names of all persons holding powers of attorney from Boone and a
summary statement of the terms thereof; and
(qq) a listing of all current liabilities of Boone in excess of
$5,000.00.
A.2.18 BENEFIT PLANS AND ARRANGEMENTS.
(rr) Schedule A.2.18 hereto lists all employee benefit plans, funds,
policies, arrangements, practices, customs and understandings or
programs, whether or not they are or are intended to be (i) covered
or qualified under the ITA, the Code, ERISA or any other applicable
law, (ii) written or oral, (iii) funded or unfunded or (iv)
generally available to any or all employees (or former employees) of
Boone (and/or their beneficiaries or dependents), which were or are
established, contributed to or maintained by Boone, including
without limitation welfare, fringe benefit, pension, profit sharing,
retirement, stock purchase, stock option, stock bonus, disability or
wage continuation, sick pay or vacation pay, supplemental
unemployment, severance or deferred compensation plans (the
"PLANS"). For purposes of this Section A.2.18, the term "BOONE"
shall include any corporation which is a member of a controlled
group of corporations (as defined in section 414(b) of the Code)
which includes Boone, any trade or business (whether or not
<PAGE>
APPENDIX A-11
incorporated) which is under common control (as defined in
section 414(c) of Code) with Boone, any organization (whether
or not incorporated) which is a member of an affiliated
service group (as defined in section 414(m) of the Code) which
includes Boone and any other entity required to be aggregated
with Boone pursuant to the regulations issued under section
414(o) of the Code.
(ss) With respect to any such Plans, Boone has made all contributions
thereto which it has accrued on its financial statements and other
books and records as a liability and Boone has delivered or made
available to the Buyer true, accurate and complete copies of (i) all
documents governing such Plans, and all amendments thereto, (ii) all
reports filed by Boone or Plan officials with respect to such Plans
with the United States Department of Labor, the Internal Revenue
Service (the "IRS") and any other federal, provincial or state
regulatory agency, (iii) all summary plan descriptions, notices and
other reporting and disclosure material furnished to participants in
any of such Plans, (iv) all actuarial, accounting and financial
reports prepared with respect to any of such Plans and (v) all
currently effective IRS ruling or determination letters on any of
such Plans.
(tt) The Plans and provisions thereof, the trusts created thereby, and
the operation of the Plans are (and have at all times been) in
compliance with and conform (and at all times have conformed) to the
applicable provisions of the ITA, the Code, ERISA, other applicable
statutes and governmental rules and regulations.
(uu) There is no action, claim or demand of any kind (other than routine
claims for benefits) which has been brought or, to the knowledge of
Boone or any Securityholder threatened, against any Plan or the
assets thereof, or against any fiduciary of any such Plan.
(vv) No Plan is, and Boone does not have any liability, actual or
contingent, with respect to any plan that is (i) a defined benefit
pension plan subject to Title IV of ERISA, (ii) a multi-employer
pension plan, as that term is defined in sections 4001(a)(e) and
3(37) of ERISA, (iii) a plan providing life, health or medical
benefits to retired employees or (iv) a self-insured welfare benefit
plan.
(ww) With respect to any Plan that is an employee welfare benefit plan
(within the meaning of section 3(1) of ERISA) (a "WELFARE PLAN"),
(i) each Welfare Plan for which contributions are claimed as
deductions under any provision of the Code is in compliance with all
applicable requirements pertaining to such deductions and (ii) any
Plan that is a group health plan (within the meaning of section
5000(b)(1) of the Code) complies, and in each and every case has
complied, with all of the requirements of section 4980B of the Code,
ERISA, Title XXII of the Public Health Service Act and the
applicable provisions of the Social Security Act.
(xx) The Buyer has not made any commitment regarding the continuation of
any Plan maintained by Boone after the Closing Date and the Buyer
will be free, in its sole discretion, to cause Boone to amend,
cancel, terminate or otherwise modify in any and all respects any
such Plan.
A.2.19 ENVIRONMENTAL MATTERS. In addition to the representations and warranties
in Section A.2.13 hereof and not in limitation thereof, (a) no releases of
Hazardous Materials (as defined in this Section
<PAGE>
APPENDIX A-12
A.2.19) have occurred at or from any property which is the subject of this
transaction or which was otherwise owned or used at any time by Boone or any of
its predecessors for management of Hazardous Materials, (b) there are no past,
pending, or threatened Environmental Claims (as defined in this Section A.2.19)
against Boone, (c) there are no leaking underground storage tanks owned by
Boone, or located at any facility owned or operated by Boone and (d) there are
no facts, circumstances, or conditions that could reasonably be expected to
restrict, under any Environmental Law or Environmental Permit (each as defined
in this Section A.2.19) in effect prior to or at the Closing Date, the
ownership, occupancy, use or transferability of any property owned, operated or
leased by Boone. As used in this Section A.2.19:
(i) "ENVIRONMENTAL CLAIMS" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, violations or
proceedings related to any applicable Environmental Law or any
Environmental Permit brought, issued or asserted by: (A) a governmental
authority for compliance, damages, penalties, removal, response,
remedial or other action pursuant to any applicable Environmental Law or
(B) a third party seeking damages for personal injury or property damage
resulting from the release of a Hazardous Material at, to or from any
facility of Boone, including without limitation Boone employees seeking
damages for exposure to Hazardous Materials;
(ii) "ENVIRONMENTAL LAWS" means all federal, provincial,
state and local laws, statutes, ordinances, codes,
rules and regulations related to protection of the
environment or the handling, use, generation,
treatment, storage, transportation or disposal of
Hazardous Materials;
(iii) "ENVIRONMENTAL PERMIT" means all permits, licenses,
approvals, authorizations or consents required by any
governmental authority under any applicable
Environmental Law and includes any and all orders,
consent orders or binding agreements issued or
entered into by a governmental authority under any
applicable Environmental Law; and
(iv) "HAZARDOUS MATERIAL" means any hazardous or toxic
substance, material or waste which is regulated as of
the Closing Date by any federal, provincial, state or
local governmental authority under any Environmental
Law now or hereafter effective, including, without
limitation, any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special
waste, petroleum or petroleum-derived substance or
waste, or any constituent of any such substance or
waste.
A.2.20 INTELLECTUAL PROPERTY.
(yy) The patents, patent applications, trademarks, trademark
applications, trade names and trade name applications and licenses
in respect thereof as set forth in Schedule A.2.20 hereto annexed
are:
(i) the only ones necessary so as to enable Boone to carry on its
business as presently conducted; and
<PAGE>
APPENDIX A-13
(ii) to the knowledge of the Securityholder, Boone is
entitled to use the same and the Securityholder is
not aware of any other person using the same in any
jurisdiction where Boone carries on business.
(zz) Boone owns or licenses or otherwise has the right to use all
material licenses, permits, patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, copyright applications, franchises, authorizations and
other intellectual property rights that are necessary for the
operations of its assets and business, without infringement upon or
conflict with the rights of any other person with respect thereto,
including, without limitation, all trade names associated with any
private label brands of Boone. To the best knowledge of the
Securityholder, no slogan or other advertising, device, product,
process, method, substance, part or component or other material now
employed, or now contemplated by be employed, by Boone infringes
upon or conflicts with any rights owned by any other person, and no
claim or litigation regarding any of the foregoing is pending or
threatened. No patent, invention, device, application, principle and
no statute, law, rule, regulation, standard or code involving the
intellectual property is pending or, to the knowledge of the
Securityholder, proposed, except where the consequences in the
aggregate have no material adverse effect on Boone or its business.
A.2.21 NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, to or in any third person to acquire any of the
assets or properties of Boone or any interest therein, except for those
contracts entered into in the ordinary course of business consistent with past
practice for the sale of Boone's' products and services.
A.2.22 SCHEDULES; DELIVERY OF DOCUMENTS; CORPORATE RECORDS. The Securityholder
has delivered or made available to the Buyer the originals or true and complete
copies of all documents, including without limitation all amendments,
supplements or modifications thereof or waivers currently in effect thereunder,
referred to on the Schedules hereto or otherwise material to the representations
and warranties in this Agreement and have also delivered to the Buyer copies of
the constating documents of Boone and all amendments thereto and the By-Laws, as
amended, of Boone. The minute and stock record books of Boone, which have been
made available to the Buyer for its inspection, contain complete and correct
copies of all charter documents and the records of all meetings and consents in
lieu of meeting of the Boards of Directors (and any committees thereof) and
voting shareholders of Boone since the dates of their incorporation.
A.2.23 COMPLETENESS OF DISCLOSURE. No representation or warranty by any
Securityholder contained in this Agreement, and no representation, warranty or
statement contained in any list, certificate, Appendix, Schedule, Exhibit or
other instrument, document, agreement or writing furnished or to be furnished
to, or made with, the Buyer pursuant hereto or in connection with the
negotiation, execution or performance hereof, contains or will contain any
untrue statement of a material fact or omits or will omit to state any fact
necessary to make any statement herein or therein not misleading. No
Securityholder has any information or knowledge of any fact not communicated to
the Buyer and relating to Boone which, if known to the Buyer, might reasonably
be expected to deter the Buyer from entering into this Agreement or from
completing the transactions contemplated by this Agreement. All facts known to
such Securityholder which are material to an understanding of the business of
Boone have been disclosed to the Buyer.
<PAGE>
APPENDIX A-14
A.3 REPRESENTATIONS AND WARRANTIES OF THE BUYER.
A.3.1 REPORTING ISSUER STATUS. The Buyer is a "reporting issuer" as that term
is defined in the Securities Act (Alberta) and the common shares of the Buyer
are listed for trading on the Nasdaq National Market.
A.3.2 AUTHORIZED CAPITAL. The authorized capital of the Buyer consists of an
unlimited number of common shares, of which 3,004,050 common shares are issued
and outstanding.
A.3.3 CORPORATE EXISTENCE. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta.
A.3.4 CORPORATE POWER AND AUTHORIZATION. The Buyer has the corporate power to
execute, deliver and perform this Agreement. The execution, delivery and
performance hereof by the Buyer have been duly authorized by all necessary
corporate action. This Agreement is a legal, valid and binding obligation of the
Buyer and is enforceable against the Buyer in accordance with its terms.
A.3.5 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. The execution, delivery and
performance hereof by the Buyer will not contravene or violate (a)any law, rule
or regulation to which the Buyer is subject, (b) any judgment, order, writ,
injunction or decree of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to the Buyer or (c) the
Certificate of Incorporation or ByLaws of the Buyer; nor will such execution,
delivery or performance violate, be in conflict with or result in the breach
(with or without the giving of notice or lapse of time, or both) of any term,
condition or provision of, or require the consent which has not been obtained of
any other party to, any contract, commitment or agreement, oral or written, to
or by which the Buyer is a party or otherwise bound or affected or by which any
of the Buyer's assets or properties may be bound or affected. No authorization,
approval or consent, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery and performance hereof by the Buyer.
