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 (DATE OF EARLIEST EVENT REPORTED): JULY 29, 1996
DAWSON PRODUCTION SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-27732 74-2231546
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
901 N.E. LOOP 410, SUITE 700
SAN ANTONIO, TEXAS 78209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE)
(210) 828-1838
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 29, 1996, the registrant, Dawson Production Services, Inc.
("Dawson") closed a transaction (the "Closing") pursuant to which it acquired
all of the issued and outstanding capital stock of Taylor Companies, Inc., a
Texas corporation. In connection therewith, Dawson acquired substantially all of
the assets of Taylor Companies, Inc. and its 12 wholly owned subsidiaries which
are Taylor Interests, Inc., Taylor SWD Operating, Inc., Taylor Environmental,
Inc., Taylor Disposal, Inc., Production Disposal, Inc., Taylor Injection
Systems, Inc., DeBerry SWD, Inc., Tatum SWD, Inc., Taylor Water Injections,
Inc., Newton County SWD, Inc., Teague Interests, Inc., all of which are Texas
corporations, and Taylor Caldwell Properties, L.L.C., which is a Texas limited
liability company (together the "Taylor Entities").
Dawson acquired from PSD Investments, Ltd., a Texas limited partnership
(the "Seller") all of the issued and outstanding capital stock of Taylor
Companies, Inc. and in connection therewith, the obligations of the Taylor
Entities, including but not limited to ongoing payments under certain truck
leases in the approximate total amount of $1.98 million, and substantially all
of the assets used in the Taylor Entities' business, including cash, accounts
receivable, vehicles, real estate, leases and other contracts and equipment
(the "Assets"). The Assets include yards or salt water disposal wells which are
either owned or leased in each of the following Texas counties: Burleson;
Newton; Freestone; Marion; Fayette; Brazos; Gregg; Limestone; Jasper; Lee; and
Rusk. In addition, the Taylor Entities lease a yard in Vernon Parish, Louisiana.
Prior to the Closing, the Taylor Entities used the Assets to operate a liquid
services business which includes vacuum truck services, frac tank rental and
salt water injection services. Dawson intends to continue to use the Assets
for the same purposes.
The consideration paid to the Seller for the stock of the Taylor Entities
at the Closing consisted of approximately $8.47 million in cash and a $1.75
million subordinated promissory note. As part of the transaction, Dawson caused
Taylor Interests, Inc. to pay approximately $2.51 million to John Randall Taylor
as repayment in full of all amounts owed by one or more of the Taylor Entities
to Mr. Taylor who is the sole managing general partner of the Seller. In
accordance with the terms of the Stock Purchase Agreement dated July 8, 1996, by
and among Dawson, the Seller, John Randall Taylor, an individual residing in
Panola County, Texas, in his individual capacity, and as general partner and
sole managing partner of the Seller and Mr. Taylor's spouse, Kathy Dianne
Taylor, who is also an individual residing in Panola County, Texas, in her
individual capacity and as a general partner of the Seller, as amended (the
"Stock Purchase Agreement"), the consideration for the purchase by Dawson may be
increased or decreased after the Closing depending upon certain factors such as
the amount of the Taylor Entities' expenditures on capital improvements and
equipment maintenance and repairs between June 1, 1996 and July 29, 1996,
certain adjustments for taxes, and the financial statements of the Taylor
Entities as of and for the seven-month period ended July 29, 1996. The Seller at
its expense is also obligated to perform certain specific environmental
remediation steps following the Closing.
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The amount of consideration paid by Dawson for the Taylor Entities was
arrived at through arms'-length negotiations between Dawson and the Seller and
was based on a variety of factors, including the historical book value and
historical cash flow of the Taylor Entities, the value of the goodwill of the
Taylor Entities and the nature of the industry. Dawson financed the transaction
with some of the proceeds from its initial public offering which closed March
26, 1996 and from proceeds received pursuant to a short term loan in the
original principal amount of $7 million from The Frost National Bank of San
Antonio which loan is due to be repaid in full on or before November 25, 1996.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the financial statements required by
Item 7(a) at the time this report is filed. The registrant will file
such financial statements as soon as practicable, but no later than
60 days after this report is required to be filed.
(b) Pro Forma Financial Information.
It is impracticable to provide the financial statements required by
Item 7(b) at the time this report is filed. The registrant will file
such financial statements as soon as practicable, but no later than
60 days after this report is required to be filed.
(c) Exhibits
10.23 Stock Purchase Agreement dated July 8, 1996 by and among Dawson
Production Services, Inc., a Texas corporation (the "Buyer"), PSD
Investments, Ltd. a Texas limited partnership (the "Seller"), John
Randall Taylor, an individual residing in Panola County, Texas, in
his individual capacity, and as general partner and sole managing
partner of the Seller and his spouse, Kathy Dianne Taylor, who is
also an individual residing in Panola County, Texas, in her
individual capacity and as a general partner of the Seller.
10.24 First Amendment to Stock Purchase Agreement dated July 29, 1996 by
and among Dawson Production Services, Inc., a Texas corporation (the
"Buyer"), PSD Investments, Ltd. a Texas limited partnership (the
"Seller"), John Randall Taylor, an individual residing in Panola
County, Texas, in his individual capacity, and as general partner
and sole managing partner of the Seller and his spouse, Kathy Dianne
Taylor, who is also an individual residing in Panola County, Texas,
in her individual capacity and as a general partner of the Seller.
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SIGNATURES
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 hereunto duly authorized.
DAWSON PRODUCTION SERVICES, INC.
(Registrant)
Date August 13, 1996 By: /s/ MARK STARK
P. Mark Stark, Chief Financial Officer
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DAWSON PRODUCTION SERVICES, INC.
Form 8-K
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.23 Stock Purchase Agreement dated July 8, 1996 and First
Amendment to Stock Purchase Agreement dated July 29, 1996 both
among Dawson Production Services, Inc., a Texas corporation
(the "Buyer"), PSD Investments, Ltd. a Texas limited
partnership (the "Seller"), John Randall Taylor, an individual
residing in Panola County, Texas, in his individual capacity,
and as general partner and sole managing partner of the Seller
and his spouse, Kathy Dianne Taylor, who is also an individual
residing in Panola County, Texas, in her individual capacity
and as a general partner of the Seller.
10.24 First Amendment to Stock Purchase Agreement dated July 29,
1996 by and among Dawson Production Services, Inc., a Texas
corporation (the "Buyer"), PSD Investments, Ltd. a Texas
limited partnership (the "Seller"), John Randall Taylor, an
individual residing in Panola County, Texas, in his individual
capacity, and as general partner and sole managing partner of
the Seller and his spouse, Kathy Dianne Taylor, who is also an
individual residing in Panola County, Texas, in her individual
capacity and as a general partner of the Seller.
UNDERTAKING AS TO SCHEDULES
Registrant agrees to furnish supplementally a copy of any omitted schedule
to the Stock Purchase Agreement to the Commission upon request.
STOCK PURCHASE AGREEMENT
AMONG
DAWSON PRODUCTION SERVICES, INC.,
A TEXAS CORPORATION
AND
JOHN RANDALL TAYLOR,
KATHY DIANNE TAYLOR, AND
PSD INVESTMENTS, LTD.
JULY 8, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. PURCHASE AND SALE OF SHARES.................................... 1
1.1. BASIC TRANSACTION................................... 1
1.2. PURCHASE PRICE...................................... 2
1.3. EARNEST MONEY DEPOSIT. ............................ 3
1.4. THE CLOSING......................................... 3
1.5. DELIVERIES AT THE CLOSING........................... 3
2. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION...... 4
2.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND TAYLOR ........................................ 4
2.2. REPRESENTATIONS AND WARRANTIES OF THE BUYER......... 5
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES ........ 6
3.1. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.... 6
3.2. NONCONTRAVENTION.................................... 6
3.3. BROKERS' FEES....................................... 7
3.4. TITLE TO ASSETS..................................... 7
3.5. CAPITALIZATION...................................... 7
3.6. FINANCIAL STATEMENTS................................ 7
3.7. EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END.... 8
3.8. UNDISCLOSED LIABILITIES.............................10
3.9. LEGAL COMPLIANCE....................................10
3.10. TAX MATTERS.........................................11
3.11. REAL PROPERTY.......................................12
3.12. INTELLECTUAL PROPERTY...............................15
3.13. TANGIBLE ASSETS.....................................17
3.14. CONTRACTS...........................................18
3.15. NOTES AND ACCOUNTS RECEIVABLE.......................19
3.16. POWERS OF ATTORNEY..................................19
3.17. INSURANCE...........................................19
3.18. LITIGATION..........................................20
3.19. WARRANTY............................................20
3.20. EMPLOYEES...........................................20
3.21. EMPLOYEE BENEFITS...................................21
3.22. GUARANTIES..........................................23
3.23. ENVIRONMENT, HEALTH, AND SAFETY.....................23
3.24. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANIES...24
3.25. DISCLOSURE..........................................24
3.26. BUSINESS OF THE COMPANIES ..........................24
4. PRE-CLOSING COVENANTS...........................................24
4.1. GENERAL.............................................24
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4.2. NOTICES AND CONSENTS................................24
4.3. OPERATION OF BUSINESS...............................25
4.4. PRESERVATION OF BUSINESS............................25
4.5. FULL ACCESS.........................................25
4.6. NOTICE OF DEVELOPMENTS..............................25
4.7. EXCLUSIVITY.........................................25
4.8. ESTOPPEL CERTIFICATES...............................25
4.9. EMPLOYMENT AGREEMENTS...............................26
5. POST-CLOSING COVENANTS..........................................26
5.1. GENERAL.............................................26
5.2. LITIGATION SUPPORT..................................26
5.3. TRANSITION..........................................26
5.4. CONFIDENTIALITY.....................................26
5.5. COVENANT NOT TO COMPETE.............................27
5.6. USE OF FABRICATION SHOP.............................27
5.7. PRICE GUARANTY......................................27
5.8. REMOVAL OF TAYLOR AS REGISTERED AGENT...............27
5.9. REMOVAL OF TAYLOR FROM TEXAS RAILROAD COMMISSION
FORM P-5...........................................28
6. CONDITIONS TO OBLIGATION TO CLOSE...............................28
6.1. CONDITIONS TO OBLIGATION OF THE BUYER...............28
6.2. CONDITIONS TO OBLIGATION OF THE SELLERS.............30
7. REMEDIES........................................................30
7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........30
7.2. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.31
7.3. ENVIRONMENTAL INDEMNITY AND RELEASE.................31
7.4. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE
SELLER.............................................34
7.5. MATTERS INVOLVING THIRD PARTIES.....................34
7.6. DETERMINATION OF ADVERSE CONSEQUENCES...............35
7.7. SET-OFF UNDER BUYER NOTE............................35
7.8. OTHER INDEMNIFICATION PROVISIONS....................35
7.9. RELIANCE UPON INSURANCE.............................36
8. TERMINATION.....................................................36
8.1. TERMINATION OF AGREEMENT............................36
8.2. EFFECT OF TERMINATION..............................36
8.3. LETTER OF INTENT...................................37
9. ARBITRATION....................................................37
9.1. NEGOTIATION PERIOD..................................37
9.2. COMMENCEMENT OF ARBITRATION.........................37
9.3. CONSOLIDATION OF HEARINGS...........................37
9.4. DISCOVERY...........................................37
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9.5. CONCLUSION OF ARBITRATION...........................38
9.6. EXPENSES OF ARBITRATORS.............................38
10. MISCELLANEOUS...................................................38
10.1. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.............38
10.2. NO THIRD PARTY BENEFICIARIES........................38
10.3. ENTIRE AGREEMENT....................................38
10.4. SUCCESSION AND ASSIGNMENT...........................38
10.5. COUNTERPARTS........................................39
10.6. HEADINGS............................................39
10.7. NOTICES.............................................39
10.8. GOVERNING LAW.......................................39
10.9. AMENDMENTS AND WAIVERS..............................39
10.10.SEVERABILITY........................................40
10.11.EXPENSES............................................40
10.12.CONSTRUCTION........................................40
10.13.SPECIFIC PERFORMANCE................................40
10.14.SUBMISSION TO JURISDICTION..........................40
10.15. CONSTRUCTION.......................................41
10.16. GOOD FAITH.........................................41
DEFINITIONS:
The definition of "Agreement" can be found on page 1.
The definition of "Effective Date" can be found on page 1.
The definition of "Buyer" can be found on page 1.
The definition of "PSD Investments" can be found on page 1.
The definition of "Taylor" can be found on page 1.
The definition of "Sellers" can be found on page 1.
The definition of "Companies" can be found on page 1.
The definition of "Shares" can be found on page 1.
The definition of "Excluded Assets" can be found on page 1.
The definition of "Purchase Price" can be found in Section 1.2.
The definition of "Buyer Note" can be found in Section 1.2(a).
The definition of "Closing Financial Statements" can be found in
Section 1.2(b)(iii).
The definition of "Earnest Money Deposit" can be found in Section 1.3.
The definition of "Closing" can be found in Section 1.4.
The definition of "Closing Date" can be found in Section 1.4.
The definition of "Liability" can be found in Section 2.1(c).
The definition of "Securities Act" can be found in Section 2.1(d).
The definition of "Security Interest" can be found in Section 2.1(d).
The definition of "Taxes" can be found in Section 2.1(d).
The definition of "Most Recent Balance Sheet" can be found in Section 3.4.
The definition of "Ordinary Course of Business" can be found in Section 3.4.
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The definition of "Financial Statements" can be found in Section 3.6.
The definition of "Most Recent Fiscal Year End" can be found in Section 3.6.
The definition of "Most Recent Financial Statements" can be found in
Section 3.6.
The definition of "Most Recent Fiscal Month End" can be found in Section 3.6.
The definition of "GAAP" can be found in Section 3.6.
The definition of "Person" can be found in Section 3.7(e).
The definition of "Intellectual Property" can be found in Section 3.7(i).
The definition of "ERISA" can be found in Section 3.7(q).
The definition of "Employee Benefit Plan" can be found in Section 3.7(q).
The definition of "Affiliates" can be found in Section 3.9.
The definition of "Tax Returns" can be found in Section 3.10(a).
The definition of "Knowledge" can be found in Section 3.10(c).
The definition of "Code" can be found in Section 3.10(e).
The definition of "Affiliated Group" can be found in Section 3.10(e).
The definition of "Reportable Event" can be found in Section 3.21(b)(i).
The definition of "Prohibited Transactions" can be found in Section 3.21(b)(ii).
The definition of "Fiduciary" can be found in Section 3.21(b)(ii).
The definition of "Confidential Information" can be found in Section 5.4.
The definition of "Adverse Consequences" can be found in Section 7.2(a).
The definition of "Contamination" can be found in Section 7.3(a)(i).
The definition of "Environmental, Health and Safety Laws" can be found in
Section 7.3(a)(ii).
The definition of "Environmental Loss" can be found in Section 7.3(a)(iii).
The definition of "Hazardous Substance" can be found in Section 7.3(a)(iv).
The definition of "Release" can be found in Section 7.3(a)(v).
The definition of "Remediation" can be found in Section 7.3(a)(vi).
The definition of "Costs" can be found in Section 7.3(b).
The definition of "Indemnified Party" can be found in Section 7.5(a).
The definition of "Third Party Claim" can be found in Section 7.5(a).
The definition of "Indemnifying Party" can be found in Section 7.5(a).
The definition of "Negotiation Period" can be found in Section 9.1.
The definition of "Dispute Notice" can be found in Section 9.1.
The definition of "Final Arbitrator" can be found in Section 9.2.
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("AGREEMENT") is entered into on July 8,
1996 (the "EFFECTIVE DATE"), by and among Dawson Production Services, Inc., a
Texas corporation (the "BUYER") and PSD Investments, Ltd., a Texas limited
partnership (the "SELLER"), John Randall Taylor, an individual residing in
Panola County, Texas, in his individual capacity, and as general partner and
sole managing partner of the Seller and his spouse, Kathy Dianne Taylor, who is
also an individual residing in Panola County, Texas, in her individual capacity
as a general partner of the Seller. In the Agreement, the term "TAYLOR" shall
mean and be defined to include both John Randall Taylor and Kathy Dianne Taylor.
RECITALS:
John Randall Taylor and Kathy Dianne Taylor are the general partners of
and John Randall Taylor is the sole managing partner of PSD Investments which,
as of the Effective Date, owns all of the outstanding capital stock of Taylor
Companies, Inc. which owns all of the issued and outstanding capital stock or
membership interests of the other entities listed on EXHIBIT A. In this
Agreement, the term "COMPANIES" shall mean and be defined collectively as all of
the entities identified on EXHIBIT A.
The Buyer wishes to purchase from the Seller, and the Seller wishes to
sell to the Buyer, all of the outstanding capital stock and all of the
membership interests in the Companies (the "SHARES") in return for cash and the
Buyer Note, and upon the other terms and conditions set forth in this Agreement.
It is the intention of the Buyer and the Seller that all damages,
liabilities and losses not in the ordinary course of business that occur or
result from events or conditions that occur or exist prior to the Closing
(whether or not reported prior to the Closing) shall be the financial
responsibility of the Seller and Taylor and subject to the indemnification
provisions provided in Section 7.2 and 7.3 of this Agreement, and that all such
damages, liabilities and losses that occur or result from events or conditions
that occur or exist after the Closing shall be the financial responsibility of
the Buyer and subject to the indemnification provisions provided in Section 7.4
of this Agreement.
Now, therefore, in consideration of the premises and the mutual promises,
and of the representations, warranties, and covenants contained in this
Agreement, the parties agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1. BASIC TRANSACTION. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Seller, and the
Seller agrees to sell to the Buyer, all of the Shares for the
consideration specified in Section 1.2. Notwithstanding the foregoing,
however, immediately prior to the transfer, the Companies shall distribute
to the Seller
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the assets listed on EXHIBIT B (the "EXCLUDED ASSETS"), to which the Buyer
shall have no right, title or interest following this transaction.
1.2. PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, the Buyer agrees to pay to the Seller the following as
consideration for the purchase of the Shares (the "PURCHASE PRICE"):
(a) Payable at Closing. At the Closing (as hereinafter
defined), the Buyer shall pay to the Seller the following: (i) the Buyer's
promissory note (the "BUYER NOTE") in the form of EXHIBIT C in the
aggregate principal amount of $1.5 million, and (ii) cash in the amount of
$10.5 million (plus or minus the adjustments set forth below in this
Section 1.2) payable by wire transfer or delivery of other immediately
available funds, with delivery to the Seller of the Earnest Money Deposit
(as hereinafter defined) being credited to such cash payment.
In addition, at the Closing, the Buyer shall cause Taylor Companies,
Inc. to pay $2,505,629 to John Randall Taylor as a repayment in full of
all of the outstanding principal and interest owed by Taylor Companies,
Inc. to John Randall Taylor pursuant to that certain promissory note by
and between Taylor Companies, Inc. as Maker and John Randall Taylor as
Payee (which is listed in the Most Recent Balance Sheet as "Subordinated
payable to stockholder" and has been included in the adjustments to the
cash payment provided in this Section 1.2(a) immediately below) and, upon
receipt of such payment, John Randall Taylor shall return the original of
such promissory note marked on its face, "Paid in Full and Canceled"
followed by his signature.
The cash portion of the Purchase Price shall be reduced to the
extent that the (z) total liabilities of the Companies excluding deferred
revenue as reflected on the Most Recent Balance Sheet (as hereinafter
defined) and excluding $126,094.62 for vehicle financing obtained
subsequent to the Most Recent Balance Sheet exceed the total of (x)
current assets of the Companies as reflected on the Most Recent Balance
Sheet and (y) the difference between the termination value of the TRAC
Leases (as shown on Exhibit G) at December 31, 1995 and the termination
value of the TRAC Leases at the date of the Most Recent Balance Sheet.
(Decrease in cash to the Seller = z - (x+y)).
The cash portion of the Purchase Price shall be increased to the
extent that (x) the current assets of the Companies as reflected on the
Most Recent Balance Sheet, and (y) the difference between the termination
value of the TRAC Leases (as shown on Exhibit G) at December 31, 1995 and
the termination value of the TRAC Leases at the date of the Most Recent
Balance Sheet exceed (z) the total liabilities excluding deferred revenue
of the Companies as reflected on the Most Recent Balance Sheet and
excluding $126,094.62 for vehicle financing obtained subsequent to the
Most Recent Balance Sheet. (Increase in cash to the Seller = (x+y) - z).
(b) Post-Closing Adjustments. The Purchase Price shall be further
adjusted following the Closing based on the matters set forth below. Such
adjustments
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shall be payable by the Buyer or the Seller, as appropriate, to the other
within 45 days following the submission of documentation describing in
reasonable detail the factual basis for the adjustment:
(i) The Purchase Price shall be decreased to the extent
that the Companies, between June 1, 1996 and the date of Closing,
failed to expend a monthly average of at least $70,000, on a
combination of capital expenditures and equipment maintenance and
repairs (whether or not such expenditures are capitalized).
(ii) All taxes of the Companies, including without
limitation all corporate income taxes, excise taxes, ad valorem
personal property taxes, ad valorem real estate taxes, sales and use
taxes, and corporate franchise taxes, shall be adjusted to the date
of Closing and the Closing Financial Statements (defined below)
shall reflect all accrued but unpaid taxes up to the date of
Closing. No adjustments shall be made by reason of this Section
1.2(b)(ii) for any federal income taxes incurred by Seller pursuant
to the transactions contemplated by this Agreement.
(iii) The Purchase Price shall be either reduced or
increased to the extent of the difference in the net amount of the
adjustments as defined in Section 1.2(a) calculated based on the
Most Recent Balance Sheet and the adjustments as defined in Section
1.2(a) calculated based on consolidated unaudited financial
statements of the Companies at and as of the date of Closing (the
"CLOSING FINANCIAL STATEMENTS").
1.3. EARNEST MONEY DEPOSIT. Prior to the execution and delivery of
this Agreement, the Buyer has deposited with Mike Parker, counsel for the
Seller, cash in the amount of $275,000 (the "EARNEST MONEY DEPOSIT"). At the
Closing, the Earnest Money Deposit will be transferred to the Seller, by wire
transfer, and credited against the cash portion of the Purchase Price scheduled
to be paid at the Closing.
1.4. THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Jenkens &
Gilchrist, A Professional Corporation, in Austin, Texas, commencing at 9:00
a.m., local time, on July 30, 1996, or such other date as the Buyer and the
Seller may mutually determine (the "CLOSING DATE"); provided, however, that the
Closing Date shall be no later than August 14, 1996.
1.5. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6.1, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 6.2,
(iii) the Seller will deliver to the Buyer stock certificates representing all
of the Shares, properly endorsed or accompanied by duly executed assignment
documents for transfer to the Buyer, free and clear of all liens, pledges,
Security Interests (as hereinafter defined),
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claims, encumbrances or restrictions, and (iv) the Buyer will deliver to the
Seller the consideration specified in Section 1.2.
2. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
2.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND TAYLOR. The
Seller and Taylor, jointly and severally, represent and warrant to the Buyer
that the statements contained in this Section 2.1 are correct and complete as of
the Effective Date and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
Effective Date throughout this Section 2.1) with respect to each of them, except
as set forth in Seller's Disclosure Schedule.
(a) AUTHORIZATION OF TRANSACTION. The Seller has full power
and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in accordance with
its terms and conditions. Except as set forth in Section 2.1 of Seller's
Disclosure Schedule, the Seller need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(b) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated by
this Agreement, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Seller or Taylor is subject or, any provision of the articles of
incorporation or bylaws or articles of organization or regulations of any
of the Companies, or (ii) except as set forth in Section 2.1 of Seller's
Disclosure Schedule, conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller or Taylor is a party or by which the
Seller or Taylor is bound or to which any of their assets is subject.
(c) BROKERS' FEES. The Seller does not have any liability,
whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and whether due or to
become due (a "LIABILITY") or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated
by this Agreement.
(d) COMPANY SHARES. The Seller holds of record and owns
beneficially all of the Shares, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act of 1933, as
amended (the "SECURITIES ACT") and state securities laws), Taxes (as
hereinafter defined), Security Interests (as hereinafter defined),
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands.
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Neither the Seller nor Taylor is a party to any option, warrant, purchase
right, or other contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock or membership
interests of any of the Companies (other than this Agreement). Neither the
Seller nor Taylor is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock
or membership interests of any of the Companies. As used in this
Agreement, "SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet
due and payable or for Taxes that the taxpayer is contesting in good faith
through appropriate proceedings (and which are adequately reserved or
provided for on the face of the Most Recent Balance Sheet), (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business (as hereinafter defined) and not incurred in connection with the
borrowing of money. As used in this Agreement, "TAXES" means any federal,
state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
2.2. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that the statements contained in this
Section 2.2 are correct and complete as of the Effective Date and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the Effective Date throughout this Section
2.2), except as set forth in Buyer's Disclosure Schedule.
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Texas.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The Buyer
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
(c) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its articles of incorporation or bylaws or
(ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any
5
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which the Buyer is bound
or to which any of the assets of the Buyer is subject.
(d) BROKERS' FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES. The Seller and
Taylor, jointly and severally, represent and warrant to the Buyer that the
statements contained in this Section 3 are correct and complete as of the
Effective Date and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
Effective Date throughout this Section 3), except as set forth in Seller's
Disclosure Schedule.
3.1. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each entity
which is one of the Companies is a corporation or, in the case of Taylor
Caldwell Properties, LLC, a limited liability company, duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each of the Companies is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each of the Companies has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and in which it presently
proposes to engage and to own and use the properties owned and used by it.
Section 3.1 of Seller's Disclosure Schedule lists the directors and officers of
each of the Companies and the members and managers of Taylor Caldwell
Properties, LLC. The Seller has delivered to the Buyer correct and complete
copies of the articles of incorporation and bylaws or the articles of
organization and regulations, as applicable, of each of the Companies (as
amended to date). The minute books (containing the records of meetings and
actions taken without a meeting of the shareholders, the board of directors, and
any committees of the board of directors), the stock certificate books, and the
stock record books of each of the Companies are correct and complete. None of
the Companies is in default under or in violation of any provision of its
articles of incorporation or bylaws or under its articles of organization or
regulations, as applicable.
3.2. NONCONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Companies is subject or any
provision of the articles of incorporation or bylaws of any of the Companies or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any of the Companies is a
party or by which they are bound or to which any of their assets are subject (or
result in the imposition of any Security Interest upon any of their assets).
Except as set forth in Section 3.2 of Seller's Disclosure Schedule, none of the
Companies is required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
6
governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.
3.3. BROKERS' FEES. None of the Companies has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
3.4. TITLE TO ASSETS. Each of the Companies has and through the date
of Closing will have good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, listed on
Seller's Disclosure Schedule, or shown on the balance sheet (the "MOST RECENT
BALANCE SHEET") contained within the Most Recent Financial Statements (as
hereinafter defined) or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the ordinary
course of business consistent with past custom and practice, including customs
and practices relating to quantity and frequency (the "ORDINARY COURSE OF
BUSINESS") since the date of the Most Recent Balance Sheet.
3.5. CAPITALIZATION. Section 3.5 of Seller's Disclosure Schedule
sets forth for each of the Companies (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of each
class of its capital stock, (iii) the number of issued and outstanding shares of
each class of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, and (iv) the number of shares of its
capital stock held in treasury. All of the issued and outstanding shares of
capital stock of each Company have been duly authorized and are validly issued,
fully paid, and nonassessable. The Seller or one of the Companies holds of
record and owns beneficially all of the outstanding shares of each of the
Companies, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Seller or any of the Companies
to sell, transfer, or otherwise dispose of any capital stock of any of the
Companies or that could require any of the Companies to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. Except as
set forth on Section 3.5 of Seller's Disclosure Schedule, there are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any of the Companies. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of any
capital stock of any of the Companies. None of the Companies controls directly
or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not
listed on EXHIBIT A. All of the statements made in this paragraph are true and
correct not only with respect to the corporations listed on EXHIBIT A, but also
with respect to Taylor Caldwell Properties, LLC, except that all references to
stock shall mean membership interests, all references to articles of corporation
shall mean articles of organization, and all references to bylaws shall mean
regulations.
3.6. FINANCIAL STATEMENTS. Attached hereto as EXHIBIT D are the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
audited consolidated and unaudited consolidating balance sheets and statements
of income, changes in shareholders' equity
7
and cash flows, and unaudited earnings before interest, taxes, TRAC Leases,
depreciation and amortization ("ADJUSTED EBITDA") as of and for the fiscal years
ended December 31, 1994, and December 31, 1995 (the "MOST RECENT FISCAL YEAR
END") for the Companies; and (ii) unaudited consolidated and consolidating
balance sheets and statements of income, changes in shareholders' equity and
cash flows and Adjusted EBITDA (the "MOST RECENT FINANCIAL STATEMENTS") as of
and for the five months ended May 31, 1996 (the "MOST RECENT FISCAL MONTH END")
for the Companies. The Financial Statements (including the notes thereto) have
been prepared in accordance with generally accepted accounting principles as in
effect from time to time ("GAAP") applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Companies
as of such dates and the results of operations of the Companies for such
periods, are correct and complete, and are consistent with the books and records
of the Companies (which books and records are correct and complete); provided,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not be material, individually or in the
aggregate) and lack footnotes and other presentation items required by GAAP.
3.7. EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Other than as
stated in Section 3.7 of Seller's Disclosure Schedule, since the Most Recent
Fiscal Year End there has not been, and through the date of the Closing there
will not have been, any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of any of the
Companies. Without limiting the generality of the foregoing, since that date:
(a) none of the Companies has sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(b) none of the Companies has entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $5,000 or outside the
Ordinary Course of Business;
(c) no party (including any of the Companies) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
involving more than $5,000 to which any of the Companies is a party or by
which any of them is bound;
(d) none of the Companies has imposed any Security Interest
upon any of its assets, tangible or intangible;
(e) none of the Companies has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other
individual, partnership, corporation, association, joint stock company,
trust, joint venture, unincorporated organization, or governmental entity
or any department, agency, or political subdivision thereof (each, a
"PERSON") nor has any of the Companies made a series of related capital
investments, loans, and acquisitions either involving more than $5,000 or
outside the Ordinary Course of Business;
8
(f) none of the Companies has issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either
involving more than $5,000 individually or $25,000 in the aggregate;
(g) none of the Companies has delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(h) none of the Companies has canceled, compromised, waived,
or released any right or claim (or series of related rights and claims)
either involving more than $5,000 or outside the Ordinary Course of
Business;
(i) none of the Companies has granted any license or
sublicense of any rights under or with respect to any (i) trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all adaptations and combinations thereof and including all
goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (ii) trade secrets and confidential
business information (including ideas, research and development, know-how,
designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals),
(iii) other proprietary rights, and (iv) copies and tangible embodiments
thereof, in whatever form or medium (items (i) through (iv) collectively
referred to in this Agreement as the "INTELLECTUAL PROPERTY");
(j) there has been no change made or authorized in the
articles of incorporation or bylaws or the articles of organization or
regulations of any of the Companies;
(k) none of the Companies has issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion, exchange,
or exercise) any of its capital stock;
(l) none of the Companies has declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(m) none of the Companies has experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(n) none of the Companies has made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business;
9
(o) none of the Companies has entered into any employment
contract or collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement;
(p) none of the Companies has granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(q) none of the Companies has adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers,
and employees or taken any such action with respect to any (i)
nonqualified deferred compensation or retirement plan or arrangement which
is an "Employee Pension Benefit Plan" (herein so called) within the
meaning set forth in Sec. 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), (ii) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan,
(iii) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan as defined
in ERISA Sec. 3(37)), or (iv) "Employee Welfare Benefit Plan" within the
meaning set forth in ERISA Sec. 3(1) or material fringe benefit plan or
program (each, an "EMPLOYEE BENEFIT PLAN");
(r) none of the Companies has made any other change in
employment terms for any of its directors, officers, and employees outside
the Ordinary Course of Business;
(s) none of the Companies has made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(t) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of the Companies; and
(u) none of the Companies has committed to any of the
foregoing.
3.8. UNDISCLOSED LIABILITIES. Other than as listed on Section 3.18
(Litigation) of Seller's Disclosure Schedule, none of the Companies has any
Liability and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability), except for (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in
the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
3.9. LEGAL COMPLIANCE. Each of the Companies and their respective
predecessors and "AFFILIATES" (as defined in Rule 12-2 promulgated under the
Securities Exchange Act of 1934)
10
has complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof),
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure so to comply.
3.10. TAX MATTERS.
(a) Each of the Companies has filed each and every return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof (collectively, the "TAX RETURNS") that it
was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by any of the Companies (whether or not shown
on any Tax Return) have been paid. None of the Companies currently is the
beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where any of
the Companies does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of
the assets of any of the Companies that arose in connection with any
failure (or alleged failure) to pay any Tax.
(b) Each of the Companies has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder, or
other third party.
(c) Neither the Seller nor Taylor nor any director or officer
(or employee responsible for Tax matters) of any of the Companies expects
any authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of any of the Companies either (i) claimed or raised by any
authority in writing or (ii) as to which the Seller, Taylor or any of the
directors, officers (and employees responsible for Tax matters) of the
Companies has actual knowledge after reasonable investigation
("KNOWLEDGE") based upon personal contact with any agent of such
authority. Section 3.10 of Seller's Disclosure Schedule lists all Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Seller has delivered to the Buyer
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by
any of the Companies since December 31, 1993.
(d) None of the Companies has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) None of the Companies has filed a consent under Sec.
341(f) of the Internal Revenue Code of 1986, as amended (the "CODE")
concerning collapsible corporations. None of the Companies has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate
11
it to make any payments that will not be deductible under Code Sec. 280G.
None of the Companies has been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). Each of the
Companies has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Sec. 6662. None of the
Companies is a party to any Tax allocation or sharing agreement. None of
the Companies (i) has been a member of an "AFFILIATED GROUP" (as defined
in Code Section 1504) filing a consolidated federal income Tax Return
(other than a group the common parent of which was one of the Companies)
or (ii) has any Liability for the Taxes of any Person (other than any of
the Companies) under Treas. Reg. ss.1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(f) Section 3.10 of Seller's Disclosure Schedule sets forth
the following information with respect to each of the Companies as of the
most recent practicable date (as well as on an estimated pro forma basis
as of the Closing giving effect to the consummation of the transactions
contemplated hereby): (i) the basis of the shareholder(s) of each Company
other than the Seller in its stock (or the amount of any Excess Loss
Account (within the meaning of Treas. Reg. ss.1.1502-19)); (ii) the amount
of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to
each of the Companies; and (iii) the amount of any deferred gain or loss
allocable to each of the Companies arising out of any "DEFERRED
INTERCOMPANY TRANSACTION" (within the meaning set forth in Treas. Reg.
ss.1.1502-13). In addition, a document describing the asset tax basis for
each of the Companies has been delivered to the Buyer.
(g) The unpaid Taxes of each of the Companies (i) did not, as
of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (ii) do not
exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the
Companies in filing their Tax Returns.
3.11. REAL PROPERTY.
(a) Section 3.11(a) of Seller's Disclosure Schedule lists and
describes briefly all real property owned by each of the Companies. The
Seller has delivered to the Buyer correct and complete copies of the deeds
for each property listed in Section 3.11(a) of Seller's Disclosure
Schedule together with the Bill of Sale and Assignment relating to all
personal property or fixtures located thereon, and a copy of any and all
easement agreements described in Section 3.11(a)(ix). With respect to each
such parcel of owned real property:
12
(i) the identified owner has good and marketable title
to the parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of
the property subject thereto;
(ii) there are no pending or, to the Knowledge of the
Seller, Taylor or any of the directors and officers (and employees
with responsibility for real estate matters) of the Companies,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property or other matters affecting
materially and adversely the current use, occupancy, or value
thereof;
(iii) the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines of
the described parcels of land, are not in violation of applicable
setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming
structure" classifications), and do not encroach on any easement
which may burden the land, and the land does not serve any adjoining
property for any purpose inconsistent with the use of the land, and
the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary
to the use thereof have not been obtained;
(iv) all facilities have received all approvals of
governmental authorities (including licenses and permits) required
in connection with the ownership or operation thereof and have been
operated and maintained in accordance with applicable laws, rules,
and regulations;
(v) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the
parcel of real property;
(vi) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion
thereof or interest therein;
(vii) there are no parties (other than the Companies) in
possession of the parcel of real property, other than tenants under
any leases disclosed in Section 3.11(a) of Seller's Disclosure
Schedule who are in possession of space to which they are entitled;
(viii) all facilities located on the parcel of real
property are supplied with utilities and other services necessary
for the operation of such facilities, all of which are adequate in
accordance with all applicable laws,
13
ordinances, rules, and regulations and are provided public roads or
permanent, irrevocable, appurtenant easements benefitting the parcel
of real property; and
(ix) each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a public
road via a permanent, irrevocable, appurtenant easement benefitting
the parcel of real property, and access to the property is provided
by paved public right-of-way with adequate curb cuts available.
(b) Section 3.11(b) of Seller's Disclosure Schedule lists and
describes briefly all real property leased or subleased to any of the
Companies. The Seller has delivered to the Buyer correct and complete
copies of the leases and subleases (as amended to date) listed in Section
3.11(b) of Seller's Disclosure Schedule. With respect to each lease and
sublease listed in Section 3.11(b) of Seller's Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the lease or sublease has repudiated
any provision thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations
and warranties set forth in subsections (i) through (v) above are
true and correct with respect to the underlying lease;
(vii) none of the Companies has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold;
(viii) all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
14
(ix) all facilities located on the parcel of real
property are supplied with utilities and other services necessary
for the operation of such facilities, all of which are adequate in
accordance with all applicable laws, ordinances, rules, and
regulations and are provided public roads or permanent, irrevocable,
appurtenant easements benefitting the parcel of real property;
(x) to the Knowledge of the Seller, Taylor or any of the
directors and officers (and employees with responsibility for real
estate matters) of the Companies, the owner of the facility leased
or subleased has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of special
easements not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property subject
thereto; and
(xi) each parcel of leased or subleased real property
abuts on and has direct vehicular access to a public road, or has
access to a public road via an appropriate easement benefitting the
parcel of real property, and access to the property is provided by
paved public right-of-way with adequate curb cuts available.
3.12. INTELLECTUAL PROPERTY.
(a) Each of the Companies owns or has the right to use
pursuant to a license or other agreement all Intellectual Property
necessary or desirable for the operation of the businesses of the
Companies as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by any of the
Companies immediately prior to the Closing will be owned or available for
use by the Companies on identical terms and conditions immediately
subsequent to the Closing. Each of the Companies has taken all necessary
and desirable action to maintain and protect each item of Intellectual
Property that it owns or uses.
(b) None of the Companies has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and neither the Seller nor any of the
directors, officers (or employees with responsibility for Intellectual
Property matters) of the Companies has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any
of the Companies must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Seller,
Taylor or any of the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Companies, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of any
of the Companies.
15
(c) Section 3.12(c) of Seller's Disclosure Schedule identifies
each registration which has been issued to any of the Companies with
respect to any of its Intellectual Property, identifies each application
for registration which any of the Companies has made with respect to any
of its Intellectual Property, and identifies each license, agreement, or
other permission which any of the Companies has granted to any third party
with respect to any of its Intellectual Property (together with any
exceptions). The Seller has delivered to the Buyer correct and complete
copies of all such registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section
3.12(c) of Seller's Disclosure Schedule also identifies each trade name or
unregistered trademark used by any of the Companies in connection with any
of their respective businesses. With respect to each item of Intellectual
Property required to be identified in Section 3.12(c) of Seller's
Disclosure Schedule:
(i) the Companies possess all right, title, and interest
in and to the item, free and clear of any Security Interest,
license, or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending nor,
to the Knowledge of the Seller, Taylor or any of the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Companies, is threatened which challenges
the legality, validity, enforceability, use, or ownership of the
item; and
(iv) none of the Companies has ever agreed to indemnify
any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) Section 3.12(d) of Seller's Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and that any
of the Companies uses pursuant to license or other agreement. The Seller
has delivered to the Buyer correct and complete copies of all such
licenses and agreements (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 3.12(d) of
Seller's Disclosure Schedule:
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the license or agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the Closing;
16
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations
and warranties set forth in subsections (i) through (iv) above are
true and correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to
the Knowledge of the Seller, Taylor or any of the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Companies, is threatened which challenges
the legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(viii)none of the Companies has granted any sublicense
or similar right with respect to the license, sublicense, agreement,
or permission.
(e) To the Knowledge of the Seller, Taylor or any of the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Companies, none of the Companies will interfere
with, infringe upon, misappropriate, or otherwise come into conflict with,
any Intellectual Property rights of third parties as a result of the
continued operation of its business as presently conducted and as
presently proposed to be conducted.
3.13. TANGIBLE ASSETS. To the Knowledge of the Seller, Taylor, or
any of the directors and officers (and employees with responsibility for matters
relating to the ownership and performance of tangible assets) of the Companies,
the Companies own or lease all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of their businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from defects, patent and latent, has been maintained in accordance with
normal industry practice, is in good operating condition and repair, subject to
normal wear and tear, and is suitable for the purposes for which it presently is
used and presently is proposed to be used.
17
3.14. CONTRACTS. Section 3.14 of Seller's Disclosure Schedule lists
the following contracts and other agreements to which any of the Companies is
a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per year;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a material loss to any of the Companies or involve consideration
in excess of $25,000;
(c) any agreement establishing a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $100,000
or under which it has imposed a Security Interest on any of its assets,
tangible or intangible;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any agreement with the Seller and its Affiliates (other
than the Companies);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(h) any collective bargaining agreement;
(i) any written agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis;
(j) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business; and (k) any agreement under which the
consequences of a default or termination could have a material adverse
effect on the business, financial condition, operations, results of
operations, or future prospects of any of the Companies.
The Seller has delivered to the Buyer a correct and complete copy of (or have
made available for copying) each written agreement (as amended to date) listed
in Section 3.14 of Seller's Disclosure Schedule and a written summary setting
forth the terms and conditions of each oral agreement
18
referred to in Section 3.14 of Seller's Disclosure Schedule. With respect to
each such agreement: (i) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (ii) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (iii) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement.
3.15. NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Companies are reflected properly on their books and records,
are valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts (which is adequate
in amount to cover any such receivables not collected) set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Companies. Section 3.15 of Seller's Disclosure Schedule
correctly identifies all notes and accounts receivable.
3.16. POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of any of the Companies or affecting any of
the Shares.
3.17. INSURANCE. Section 3.17 of Seller's Disclosure Schedule sets
forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which any of the Companies has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past three years:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) none of the Companies nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no
19
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or acceleration,
under the policy; and (iv) no party to the policy has repudiated any provision
thereof. Each of the Companies has been covered during the past three years by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during such period. Section 3.17 of Seller's Disclosure
Schedule describes any self-insurance arrangements affecting any of the
Companies.
3.18. LITIGATION. Section 3.18 of Seller's Disclosure Schedule sets
forth each instance in which any of the Companies (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to or, to the Knowledge of the Seller, Taylor, or any of the directors and
officers (and employees with responsibility for litigation matters) of the
Companies is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 3.18 of Seller's Disclosure Schedule could
result in any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of any of the Companies.
Neither the Seller, nor Taylor, nor any of the directors or officers (or
employees with responsibility for litigation matters) of the Companies has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against any of the Companies;
PROVIDED, HOWEVER, that to the extent that insurance does not compensate the
Buyer or the Companies for any damages, liabilities or other losses incurred in
connection with any matter identified in Section 3.18 of Seller's Disclosure
Schedule, the Seller shall reimburse and indemnify (as provided in Section 7 of
this Agreement) the Buyer for such losses.
3.19. WARRANTY. The service provided by the Companies has, in each
case, been in conformity with all applicable contractual commitments and all
express and implied warranties, and none of the Companies has any Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for warranty claims set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Companies. No services provided by any of
the Companies is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. Section 3.19 of
Seller's Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for each of the Companies (containing applicable
guaranty, warranty, and indemnity provisions).
3.20. EMPLOYEES. To the Knowledge of the Seller, Taylor or any of
the directors and officers (and employees with responsibility for employment
matters) of each of the Companies, no executive, key employee, or group of
employees (other than John Randall Taylor, Grady Moore, Calvin Grace and Jeannie
Hollingshead) has any plans to terminate employment with any of the Companies.
None of the Companies is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. None of the
Companies has committed
20
any unfair labor practice. Neither the Seller, Taylor, nor any of the directors
and officers (and employees with responsibility for employment matters) of the
Companies has any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Companies.
3.21. EMPLOYEE BENEFITS.
(a) Section 3.21 of Seller's Disclosure Schedule lists each
Employee Benefit Plan that any of the Companies maintains or to which any
of the Companies contributes.
(i) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(ii) All required reports and descriptions have been
filed or distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Sec. 4980B have been met with respect
to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Companies. All
premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a "qualified
plan" under Code Sec. 401(a) and has received, within the last two
years, a favorable determination letter from the Internal Revenue
Service.
(v) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than
any Multiemployer Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in accordance
with Pension Benefit Guaranty Corporation ("PBGC") methods, factors,
and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(vi) The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions,
the most recent
21
determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that any of the
Companies (within the meaning set forth in Code Sec. 1563) maintains or
ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(i) No such Employee Benefit Plan which is in Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a
"REPORTABLE EVENT" (within the meaning set forth in ERISA Sec. 4043)
as to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted
or, to the Knowledge of the Seller, Taylor or any of the directors
and officers (and employees with responsibility for employee
benefits matters) of the Companies threatened.
(ii) There have been no "PROHIBITED TRANSACTIONS" (as
defined in ERISA Sec. 406 and Code Sec. 4975) with respect to any
such Employee Benefit Plan. No "FIDUCIARY" (within the meaning set
forth in ERISA Sec. 3(21)) has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of the Seller, Taylor or
any of the directors and officers (and employees with responsibility
for employee benefits matters) of the Companies, threatened. Neither
the Seller, Taylor nor any of the directors and officers (and
employees with responsibility for employee benefits matters) of the
Companies has any Knowledge of any basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) None of the Companies has incurred, and neither
the Seller, nor Taylor nor any of the directors, officers (or
employees with responsibility for employee benefits matters) of the
Companies has any reason to expect that any of the Companies will
incur, any Liability to the PBGC (other than PBGC premium payments)
or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
(c) None of the Companies contributes to, ever has contributed
to, or ever has been required to contribute to any Multiemployer Plan or
has any Liability (including withdrawal Liability) under any Multiemployer
Plan.
22
(d) None of the Companies maintains or ever has maintained or
contributes, ever has contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
3.22. GUARANTIES. None of the Companies is a guarantor or otherwise
is liable for any Liability or obligation (including indebtedness) of any
other Person.
3.23. ENVIRONMENT, HEALTH, AND SAFETY.
(a) Each of the Companies and their respective predecessors
and Affiliates has complied with Environmental, Health, and Safety Laws
(as herein defined), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
threatened, filed or commenced against any of them alleging any failure so
to comply. Without limiting the generality of the preceding sentence, each
of the Companies, and their respective predecessors and Affiliates has
obtained and been in compliance with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under,
and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
(b) To the Knowledge of the Seller, Taylor or any of the
directors and officers (and employees with responsibility for
environmental, health and safety matters) of each of the Companies, none
of the Companies has any Liability (and none of the Companies, and their
respective predecessors and Affiliates has handled or disposed of any
substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form the basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of the
Companies giving rise to any Liability) for damage to any site, location,
or body of water (surface or subsurface), for any illness of or personal
injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(c) All properties and equipment used in the business of the
Companies and in the business of their respective predecessors and
Affiliates are free of Contamination (as hereinafter defined).
(d) The Seller has provided the Buyer all information in the
Seller's or Taylor's or the Companies' control or possession relating to:
(1) the existence of Contamination (as herein defined) on or affecting all
properties used in the business of the Companies, their respective
predecessors and Affiliates; (2) compliance with all Environmental, Health
and Safety Laws by the Sellers, the Companies, their respective
23
predecessors and the Affiliates; and (3) any alleged or actual
Environmental Losses (as hereinafter defined).
(e) Except the Master Service Agreements and the lease
agreements listed in Section 3.11(b) of Seller's Disclosure Schedule, no
oral or written agreements exist between the Seller, the Companies, their
respective predecessors or the Affiliates, or between such parties and any
third parties, relating to or concerning the environmental, safety or
health conditions of the properties used in the business of the Seller,
the Companies, their respective predecessors or the Affiliates.
3.24. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANIES. Except as
set forth in Section 3.24 of Seller's Disclosure Schedule, neither the Seller
nor any of its Affiliates has been involved in any business arrangement or
relationship with any of the Companies within the past 12 months, including
without limitation, the purchase or sale of any goods or services, and the
Seller and its Affiliates do not own or have any rights to or interest in any
asset, tangible or intangible, which is used or, within the past 12 months has
been used, in the business of any of the Companies, as such business is set
forth in the Financial Statements.
3.25. DISCLOSURE. The representations and warranties contained in
this Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
3.26. BUSINESS OF THE COMPANIES. The Financial Statements fairly
present all of the activities of the Companies that will be part of the
operations and business of the Companies at Closing, and all assets, tangible or
intangible, and all contracts, formal or informal whether or not in writing,
necessary to conduct the business of the Companies, as set forth in the
Financial Statements, will be owned by the Companies (in the case of such
assets) and will be in full force and effect (in the case of such contracts) at
the Closing.
4. PRE-CLOSING COVENANTS. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
4.1. GENERAL. Each of the parties will make reasonable efforts to
take all action and to do all things necessary, proper, and advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 4.)
4.2. NOTICES AND CONSENTS. The Seller will cause each of the
Companies to give any notices to third parties, and will cause each of the
Companies to use commercially reasonable efforts to obtain any third party
consents, that the Buyer may request in connection with the matters referred to
in Section 3.2. Each of the parties will (and the Seller will cause each of the
Companies to) give any notices to, make any filings with, and use its efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Sections
2.1(b), 2.2(c), and 3.2.
24
4.3. OPERATION OF BUSINESS. The Seller will not cause or permit any
of the Companies to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Seller will not cause or permit any of the
Companies to declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire any
of its capital stock, or otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Section 3.7.
4.4. PRESERVATION OF BUSINESS. The Seller will use its best efforts
to cause each of the Companies to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
employees.
4.5. FULL ACCESS. The Seller will permit and will cause each of the
Companies to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Companies to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to each of the Companies. In addition, the Seller will provide to the
Buyer the informal unaudited balance sheet and income statement of the Companies
as of and for the six month period ended June 30, 1996 as soon as practicable
but in no event later than July 22, 1996.
4.6. NOTICE OF DEVELOPMENTS. The Seller and the Buyer will each give
the other prompt written notice of any material adverse development causing a
breach of any of the representations and warranties in Sections 2 and 3. No
disclosure by any party pursuant to this Section 4.6, however, shall be deemed
to amend or supplement the Disclosure Schedule provided by that party or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
4.7. EXCLUSIVITY. The Seller will not (and the Seller will not cause
or permit any of the Companies to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets of, any of the Companies (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Seller will not vote (or cause to
be voted) any of the Shares in favor of any such acquisition structured as a
merger, consolidation, or share exchange. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
4.8. ESTOPPEL CERTIFICATES. With respect to each parcel of real
estate that any of the Companies leases or subleases, the Seller will cause the
Companies to obtain an estoppel certificate from each lessor and sublessor in a
form satisfactory to the Buyer.
25
4.9. EMPLOYMENT AGREEMENTS. The Seller shall assist the Buyer's
efforts, if any, to enter into employment agreements acceptable to the Buyer
with such managers and employees of the Companies as the Buyer shall have
identified in writing to the Sellers.
5. POST-CLOSING COVENANTS. The parties agree as follows with respect to
the period following the Closing.
5.1. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section 7). The Seller acknowledges and agrees that from and after the Closing
the Buyer will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating to
the Companies.
5.2. LITIGATION SUPPORT. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Companies, each of the other parties
will cooperate with them or it and their or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
party (unless the contesting or defending party is entitled to indemnification
therefor under Section 7).
5.3. TRANSITION. Neither the Seller, nor Taylor will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of any of the
Companies from maintaining the same business relationships with the Companies
after the Closing as it maintained with the Companies prior to the Closing. The
Seller and Taylor will refer all customer inquiries relating to the businesses
of the Companies to the Buyer from and after the Closing.
5.4. CONFIDENTIALITY. The Seller will treat and hold as confidential
all information concerning the businesses and affairs of the Companies that is
not already generally available to the public (the "CONFIDENTIAL INFORMATION"),
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all tangible expressions (and all copies) of the
Confidential Information which are in their possession. If the Seller is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Seller will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 5.4. If, in the absence of a protective order or the receipt of a
waiver hereunder, the Seller is, on the
26
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller may disclose the
Confidential Information to the tribunal; provided, however, that the Seller
shall use its reasonable efforts to obtain, at the reasonable request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate.
5.5. COVENANT NOT TO COMPETE. For a period of five years from and
after the Closing Date, neither the Seller nor Taylor will engage directly or
indirectly in any business that any of the Companies conducts as of the Closing
Date (including but not limited to any saltwater disposal business, vacuum truck
business or frac tank business) in any geographic area in which any of the
Companies conducts that business as of the Closing Date; provided, however,
neither the Seller nor Taylor shall, through ownership directly and indirectly
of less than 1% of the outstanding equity interest of any corporation,
partnership or other entity, be deemed to be engaged solely by reason thereof,
in any of their businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 5.5 is invalid
or unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed. With the Buyer's prior written consent, the
Seller or Taylor may operate disposal wells otherwise in violation of this
Section 5.5 and such consent is hereby given to permit the Seller or Taylor to
operate Cavern Disposal, Inc. and Butler SWD, Inc.
5.6. USE OF FABRICATION SHOP. The Buyer and the Seller shall enter
into a lease, in a form reasonably satisfactory to the Buyer, providing that,
for a period of six months following the Closing, the Buyer may use the Seller's
fabrication facility located at 1126 Hills Lake Road in Carthage, Texas at no
cost to Buyer. The Buyer agrees to maintain property insurance coverage for such
fabrication facility during such six month period.
5.7. PRICE GUARANTY. The Seller and Taylor agree that if at any time
that the Seller or Taylor (or any company or entity in which the Seller or
Taylor maintains, directly or indirectly, a controlling interest) sell or agree
to sell material, equipment or services to the Buyer, the Seller or Taylor will
offer and sell such material, equipment or services to the Buyer at a price
which is no higher than the lowest price at which the same or similar materials,
equipment or services are sold by the Seller or Taylor (or any company or entity
in which the Seller or Taylor maintains, directly or indirectly, a controlling
interest) to any other customer at such time. This price guaranty applies to
materials, equipment and services of the type offered and sold by the Seller and
Taylor on the Effective Date; it does not apply to any materials, equipment or
services provided by any new businesses which are not of the same type or in the
same industry as the Seller's or Taylor's operations as of the Effective Date.
5.8. REMOVAL OF TAYLOR AS REGISTERED AGENT. No later than 10
business days after the Closing, the Buyer shall file Statements of Change of
Registered Agent to remove John
27
Randall Taylor as Registered Agent of each of the Companies and appoint a
Registered Agent of its choice for each of the Companies.
5.9. REMOVAL OF TAYLOR FROM TEXAS RAILROAD COMMISSION FORM P-5. No
later than 15 business days after the Closing, the Buyer shall file the
appropriate documents to cause John Randall Taylor's name to be removed from all
Form P-5s relating to the Companies filed with the Texas Railroad Commission.
6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section
2.1 and Section 3 shall be true and correct in all material respects at
and as of the Closing Date;
(b) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) the Companies shall have procured all of the third party
consents specified in Section 3.2, all of the estoppel certificates
specified in Section 4.8;
(d) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the
Buyer to own the Shares and to control the Companies, or (iv) affect
adversely the right of any of the Companies to own their respective assets
and to operate their respective businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(e) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified in Section 6.1(a)-(d)
has been satisfied in all respects;
(f) the Seller or Taylor shall have caused both Cavern
Disposal, Inc. and Butler SWD, Inc., both of which are corporations wholly
owned by the Seller or Taylor, to enter into agreements, in form and
substance satisfactory to the Buyer, providing for use by the Buyer, at
rates which meet the specifications established in Section 5.7 of this
Agreement, of all saltwater disposal wells now owned or subsequently
acquired by either Cavern Disposal, Inc. or Butler SWD, Inc.;
28
(g) the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in EXHIBIT E attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
(h) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Companies other
than those whom the Buyer shall have specified in writing at least three
business days prior to the Closing;
(i) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyer;
(j) the Buyer's due diligence investigation shall not have
revealed a material misstatement or omission in any of the Financial
Statements or in the Representations and Warranties provided in Section
2.1 and in Section 3 of the Agreement;
(k) between the date of the Most Recent Financial Statements
and the Closing Date, neither the Companies nor any of their assets shall
have experienced or been subject to a material adverse change or loss,
including without limitation the loss of a material customer relationship
or a loss by strike, fire, flood, explosion, earthquake, accident or other
calamity of such character as to interfere materially and adversely with
the conduct of the business and operations of the Companies, regardless of
whether or not such loss shall have been insured; and, from the date of
the Most Recent Financial Statements through the end of the most recent
month ending at least 20 days prior to the Closing Date there shall not
have been an adverse change of 15% or more in the net income of the
Companies on a consolidated basis or an adverse change of $420,000 or more
in Adjusted EBITDA (on an annualized basis or $35,000 per month) after, in
each such instance, adjustments for (i) the legal and accounting costs
related to the transactions that are the subject of this Agreement and
(ii) non-recurring employee bonuses paid in connection with such
transactions.
(l) the Buyer shall have received environmental reports of all
real properties owned, leased or occupied by the Companies and their
predecessors, and such reports as to such properties shall not indicate
the existence of a material adverse condition, or a condition in violation
of any applicable laws relating to the protection of the environment, and
Buyer shall have determined, in its sole discretion, to accept such
reports;
(m) the Buyer shall have received from the Seller consolidated
audited and unaudited financial statements of the Companies substantially
in compliance with a letter from Buyer (signed by Mark Stark) to Taylor
Service Company (addressed to Jeannie Hollingshead) dated June 5, 1996,
and assurances from the independent accountants performing such audits
that they will provide to Buyer manually signed reports and
29
consents in the future as required under the rules of the Securities and
Exchange Commission.
The Buyer may waive any condition specified in this Section 6.1 if it executes a
writing so stating at or prior to the Closing.
6.2. CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section
2.2 shall be true and correct in all material respects at and as of the
Closing Date;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement or
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(d) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified in Section 6.2(a)-(c)
is satisfied in all respects;
(e) the Buyer shall have obtained a complete release from
personal liability of the Seller for all debt of the Companies, which debt
is listed on Section 6.2(e) of Seller's Disclosure Schedule;
(f) the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in EXHIBIT F attached
hereto, addressed to the Seller, and dated as of the Closing Date; and
(g) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 6.2 if they execute
a writing so stating at or prior to the Closing.
30
7. REMEDIES.
7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing
except as disclosed on Seller's Disclosure Schedule) and continue in full force
and effect forever subject only to any applicable statutes of limitations.
7.2. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(A) IF THE SELLER OR TAYLOR BREACHES (OR IF ANY THIRD PARTY
ALLEGES FACTS THAT, IF TRUE, WOULD MEAN THE SELLER OR TAYLOR HAVE
BREACHED) ANY OF THEIR REPRESENTATIONS, WARRANTIES, AND COVENANTS
CONTAINED IN THIS AGREEMENT, THEN THE SELLER AND TAYLOR AGREE, JOINTLY AND
SEVERALLY, TO INDEMNIFY THE BUYER FROM AND AGAINST THE ENTIRETY OF ANY AND
ALL ACTIONS, SUITS, PROCEEDINGS, HEARINGS, INVESTIGATIONS, CHARGES,
COMPLAINTS, CLAIMS, DEMANDS, INJUNCTIONS, JUDGMENTS, ORDERS, DECREES,
RULINGS, DAMAGES, DUES, PENALTIES, FINES, COSTS, AMOUNTS PAID IN
SETTLEMENT, LIABILITIES, OBLIGATIONS, TAXES, LIENS, LOSSES, EXPENSES, AND
FEES, INCLUDING COURT COSTS AND ATTORNEYS' FEES AND EXPENSES (THE "ADVERSE
CONSEQUENCES") THE BUYER MAY SUFFER THROUGH AND AFTER THE DATE OF THE
CLAIM FOR INDEMNIFICATION (INCLUDING ANY ADVERSE CONSEQUENCES THE BUYER
MAY SUFFER AFTER THE END OF ANY APPLICABLE SURVIVAL PERIOD) RESULTING
FROM, ARISING OUT OF, RELATING TO, IN THE NATURE OF, OR CAUSED BY THE
BREACH (OR THE ALLEGED BREACH). THIS INDEMNIFICATION SHALL ALSO APPLY TO
ANY ADVERSE CONSEQUENCES THE BUYER MAY SUFFER IN CONNECTION WITH ANY ONE
OR MORE OF THE LITIGATION MATTERS IDENTIFIED IN SECTION 3.18 OF SELLER'S
DISCLOSURE SCHEDULE.
(B) THE SELLER AND TAYLOR AGREE, JOINTLY AND SEVERALLY, TO
INDEMNIFY THE BUYER FROM AND AGAINST ANY ADVERSE CONSEQUENCES THE BUYER
MAY SUFFER RESULTING FROM, ARISING OUT OF, RELATING TO, IN THE NATURE OF,
OR CAUSED BY ANY LIABILITY OF ANY OF THE COMPANIES FOR THE UNPAID TAXES OF
ANY PERSON (OTHER THAN ANY OF THE COMPANIES) UNDER TREAS. REG. SS.1.1502-6
(OR ANY SIMILAR PROVISION OF STATE, LOCAL, OR FOREIGN LAW), AS A
TRANSFEREE OR SUCCESSOR, BY CONTRACT, OR OTHERWISE.
7.3. ENVIRONMENTAL INDEMNITY AND RELEASE.
(A) DEFINITIONS. THE TERMS SET FORTH BELOW SHALL HAVE THE
MEANINGS SET FORTH OPPOSITE SUCH TERMS:
(I) "CONTAMINATION" - THE RELEASE OR PRESENCE OF
HAZARDOUS SUBSTANCES IN, ON, UNDERLYING OR SURROUNDING (INCLUDING
INTO AIR, SOILS, SURFACE WATER OR GROUNDWATER) THE COMPANIES'
PROPERTIES LISTED IN SECTION 3.11(A) AND 3.11(B) OF SELLER'S
DISCLOSURE SCHEDULE (HEREINAFTER DEFINED AS "PROPERTIES"), INCLUDING
MIGRATION OF OR DEPOSITING OF HAZARDOUS SUBSTANCES ONTO OR FROM
ADJOINING OR NEIGHBORING PROPERTIES OR THE RELEASE OR PRESENCE OF
HAZARDOUS
31
SUBSTANCES FROM OR ASSOCIATED WITH THE OPERATIONS CONDUCTED ON ANY
ONE OR MORE OF THE PROPERTIES WHEN SUCH HAZARDOUS SUBSTANCES HAVE
BEEN TRANSPORTED TO ANY OTHER OFFSITE LOCATION; PROVIDED, HOWEVER,
THAT SUCH TERM SHALL NOT INCLUDE CONTAMINATION WHICH IS CAPABLE OF
BEING REMEDIATED TO MEET THE REQUIREMENTS OF ALL ENVIRONMENTAL,
HEALTH AND SAFETY LAWS, IF SUCH REMEDIATION DOES NOT COST MORE THAN
$7,500 AT ANY ONE PROPERTY. THE TERM CONTAMINATION ALSO SHALL NOT
INCLUDE WASTES INJECTED INTO SALTWATER DISPOSAL WELLS, LOCATED ON
THE PROPERTIES, IN FULL COMPLIANCE WITH ENVIRONMENTAL, HEALTH AND
SAFETY LAWS.
(II) "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" - ANY AND
ALL FEDERAL, STATE OR LOCAL LAWS (INCLUDING COMMON LAW), RULES,
REGULATIONS, ORDERS, AGREEMENTS, ORDINANCES, PERMITS,
AUTHORIZATIONS, WRITS, JUDGMENTS, INJUNCTIONS, DECREES OR
DETERMINATIONS, OR SIMILAR REQUIREMENTS, WHETHER ISSUED BY A COURT
OR A GOVERNMENT AGENCY, RELATING TO THE PROTECTION OF THE
ENVIRONMENT, THE RELEASE OF ANY HAZARDOUS SUBSTANCES INTO THE
ENVIRONMENT, THE GENERATION, MANAGEMENT, TRANSPORTATION, STORAGE,
TREATMENT AND DISPOSAL OF HAZARDOUS SUBSTANCES, PUBLIC HEALTH AND
SAFETY, OR EMPLOYEE HEALTH AND SAFETY, INCLUDING LAWS RELATING TO
EMISSIONS, DISCHARGES, RELEASES, OR THREATENED RELEASES OF
POLLUTANTS, CONTAMINANTS, OR CHEMICAL, INDUSTRIAL, HAZARDOUS, OR
TOXIC MATERIALS OR WASTES INTO AMBIENT AIR, SOILS, SURFACE WATER,
GROUND WATER, OR LANDS OR OTHERWISE RELATING TO THE MANUFACTURE,
PROCESSING, DISTRIBUTION, USE, TREATMENT, STORAGE, DISPOSAL,
TRANSPORT, OR HANDLING OF POLLUTANTS, CONTAMINANTS, OR CHEMICAL,
INDUSTRIAL, HAZARDOUS, OR TOXIC MATERIALS OR WASTES (INCLUDING,
WITHOUT LIMITATION, THE CLEAN AIR ACT, THE TOXIC SUBSTANCE CONTROL
ACT, THE CLEAN WATER ACT, THE OIL POLLUTION ACT OF 1990, THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY
ACT, AND THE RESOURCE CONSERVATION AND RECOVERY ACT, THE
OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970, ALL AS AMENDED,
INCLUDING SIMILAR STATE OR LOCAL LAWS.)
(III) "ENVIRONMENTAL LOSS" - ANY AND ALL CLAIMS,
DAMAGES, LOSSES, EXPENSES, COSTS, DEFICIENCIES, PENALTIES, LIENS,
INTEREST, FINES, ASSESSMENTS, CHARGES, COMPENSATION, OBLIGATIONS AND
LIABILITIES OF ANY KIND, WHETHER KNOWN OR UNKNOWN, IMPOSED BY
PRIVATE PARTIES OR GOVERNMENTAL AGENCIES IN CIVIL, CRIMINAL OR
ADMINISTRATIVE PROCEEDINGS, OR INCURRED BY, UNDER OR PURSUANT TO
ENVIRONMENTAL, HEALTH AND SAFETY LAWS, WHETHER BASED ON NEGLIGENCE,
STRICT LIABILITY OR OTHERWISE, UNDER ANY THEORY OR PROCESS OF
RECOVERY OR RELIEF, AT LAW OR AT EQUITY, INCLUDING REMEDIATION,
RESTORATION, ABATEMENT, INVESTIGATION, TESTING, MONITORING, PERSONAL
INJURY, DEATH AND PROPERTY DAMAGE COSTS, BUSINESS LOSSES,
CONTRIBUTION FOR, OR RECOVERY OF SUCH COSTS UNDER THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT, AS AMENDED,
OR SIMILAR STATE OR FEDERAL LAWS, AND REASONABLE ATTORNEYS FEES,
COURT COSTS AND INTEREST PAID OR ACCRUED, RELATED TO THE
32
CONTAMINATION OF THE PROPERTIES OR OFFSITE LOCATIONS ARISING FROM
OPERATIONS OR ACTIVITIES ON THE PROPERTIES OR THE REMEDIATION
THEREOF.
(IV) "HAZARDOUS SUBSTANCE" - ANY TOXIC OR HAZARDOUS
SUBSTANCE, MATERIAL OR WASTE, POLLUTANT, HAZARDOUS SUBSTANCE OR
WASTES, PETROLEUM OR PETROLEUM DERIVED SUBSTANCE OR WASTE, SALT
WATER, OIL AND GAS WASTE, RADIOACTIVE SUBSTANCE, MATERIAL OR WASTE,
ASBESTOS CONTAINING MATERIALS, OR ANY CONSTITUENT OF ANY SUCH
SUBSTANCE OR WASTE REGULATED UNDER OR DEFINED BY OR PURSUANT TO ANY
ENVIRONMENTAL, HEALTH AND SAFETY LAW.
(V) "RELEASE" - ANY RELEASE, SPILL, EMISSION, LEAKING,
PUMPING, INJECTION, DEPOSIT, DISPOSAL, DISCHARGE, DISPERSAL,
LEACHING OR MIGRATION INTO THE ENVIRONMENT OR INTO OR OUT OF THE
PROPERTIES, INCLUDING THE MOVEMENT OF HAZARDOUS SUBSTANCES THROUGH
OR IN THE AIR, SOIL, SURFACE WATER OR GROUNDWATER OF THE PROPERTIES
OR ADJOINING PROPERTIES, PROVIDED HOWEVER THAT THE TERM RELEASE
SHALL NOT INCLUDE THE INJECTION OF WASTES INTO SALT WATER DISPOSAL
WELLS, LOCATED ON THE PROPERTIES, IN FULL COMPLIANCE WITH ALL
ENVIRONMENTAL, HEALTH AND SAFETY LAWS.
(VI) "REMEDIATION" - ALL ACTIONS, WHETHER UNDERTAKEN
PURSUANT TO JUDICIAL OR ADMINISTRATIVE ORDER OR OTHERWISE,
REASONABLY NECESSARY TO COMPLY WITH APPLICABLE ENVIRONMENTAL, HEALTH
AND SAFETY LAWS, TO (A) INVESTIGATE, CLEAN UP, REMEDIATE, REMOVE,
TREAT, COVER OR IN ANY OTHER WAY ADJUST HAZARDOUS SUBSTANCES IN OR
AROUND THE PROPERTIES; OR (B) PREVENT OR CONTROL THE RELEASE OF
HAZARDOUS SUBSTANCES SO THAT THEY DO NOT MIGRATE OR ENDANGER OR
THREATEN TO ENDANGER PUBLIC HEALTH OR WELFARE OR THE INDOOR OR
OUTDOOR ENVIRONMENT.
(B) THE SELLER'S AND TAYLOR'S RELEASE, INDEMNIFICATION AND
OTHER OBLIGATIONS RELATING TO ENVIRONMENTAL LOSSES. NOTWITHSTANDING ANY
OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, THE SELLER AND TAYLOR
HEREBY RELEASE THE BUYER AND ITS RESPECTIVE SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS AND AFFILIATES, SEPARATE
CONSIDERATION FOR WHICH IS HEREBY ACKNOWLEDGED, OF AND FROM, AND AGREE,
JOINTLY AND SEVERALLY, TO HOLD HARMLESS AND INDEMNIFY BUYER AND ITS
RESPECTIVE SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS
AND AFFILIATES, IN CONNECTION WITH THE DEFENSE, PROSECUTION, SATISFACTION,
SETTLEMENT, OR COMPROMISE, INCLUDING THE REASONABLE COST AND EXPENSE OF
LITIGATION (INCLUDING REASONABLE ATTORNEYS FEES, CONSULTANT FEES AND
ACCOUNTANTS FEES, TRAVEL EXPENSE, JUDGMENTS, COURT COSTS, AND RELATED
LITIGATION EXPENSES AND SUCH OTHER ACTUAL AND REASONABLE COSTS IN
CONNECTION WITH THE DEFENSE, PROSECUTION, SATISFACTION, SETTLEMENT OR
COMPROMISE) (ALL OF SUCH AMOUNTS, COSTS AND EXPENSES HEREIN CALLED
"COSTS") OF (I) ANY ENVIRONMENTAL LOSSES IN CONNECTION WITH, RELATING TO,
OR ARISING FROM OWNERSHIP OR MANAGEMENT OF THE COMPANIES, THEIR RESPECTIVE
PREDECESSORS OR AFFILIATES AND/OR THE PROPERTIES PRIOR TO THE DATE OF
CLOSING, (II) REMEDIATION OF ANY HAZARDOUS SUBSTANCES OR CONTAMINATION (X)
AT, ON OR UNDER THE PROPERTIES OR NEIGHBORING OR ADJACENT PROPERTIES OR
(Y) AT ANY
33
OFFSITE LOCATION, WHERE SUCH HAZARDOUS SUBSTANCES OR CONTAMINATION ARISES
FROM, IS CONTRIBUTED TO OR IS IN CONNECTION WITH, OPERATIONS OR ACTIVITIES
OF THE COMPANIES, THEIR RESPECTIVE PREDECESSORS OR AFFILIATES AND/OR
OPERATIONS OR ACTIVITIES ON THE PROPERTIES PRIOR TO THE DATE OF CLOSING,
OR (III) ANY CLAIMS ARISING FROM, IN CONNECTION WITH, OR RELATING TO, ANY
BREACH OF THE REPRESENTATIONS OR WARRANTIES OF THE SELLER OR TAYLOR SET
FORTH IN THIS AGREEMENT.
7.4. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. IF THE
BUYER BREACHES (OR IN THE EVENT ANY THIRD PARTY ALLEGES FACTS THAT, IF TRUE,
WOULD MEAN THE BUYER HAS BREACHED) ANY OF ITS REPRESENTATIONS, WARRANTIES, AND
COVENANTS CONTAINED IN THIS AGREEMENT, THEN THE BUYER AGREES TO INDEMNIFY THE
SELLER FROM AND AGAINST ANY ADVERSE CONSEQUENCES THE SELLER MAY SUFFER THROUGH
AND AFTER THE DATE OF THE CLAIM FOR INDEMNIFICATION (INCLUDING ANY ADVERSE
CONSEQUENCES THE SELLER MAY SUFFER AFTER THE END OF ANY APPLICABLE SURVIVAL
PERIOD) RESULTING FROM, ARISING OUT OF, RELATING TO, IN THE NATURE OF, OR CAUSED
BY THE BREACH (OR THE ALLEGED BREACH).
7.5. MATTERS INVOLVING THIRD PARTIES.
(A) IF ANY THIRD PARTY SHALL NOTIFY ANY PARTY (THE
"INDEMNIFIED PARTY") WITH RESPECT TO ANY MATTER (A "THIRD PARTY CLAIM")
WHICH MAY GIVE RISE TO A CLAIM FOR INDEMNIFICATION AGAINST ANY OTHER PARTY
(THE "INDEMNIFYING PARTY") UNDER THIS SECTION 7, THEN THE INDEMNIFIED
PARTY SHALL PROMPTLY NOTIFY EACH INDEMNIFYING PARTY THEREOF IN WRITING;
PROVIDED, HOWEVER, THAT NO DELAY ON THE PART OF THE INDEMNIFIED PARTY IN
NOTIFYING ANY INDEMNIFYING PARTY SHALL RELIEVE THE INDEMNIFYING PARTY FROM
ANY OBLIGATION HEREUNDER UNLESS (AND THEN SOLELY TO THE EXTENT) THE
INDEMNIFYING PARTY THEREBY IS PREJUDICED.
(B) ANY INDEMNIFYING PARTY WILL HAVE THE RIGHT TO DEFEND THE
INDEMNIFIED PARTY AGAINST THE THIRD PARTY CLAIM WITH COUNSEL OF ITS CHOICE
REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY SO LONG AS (I) THE
INDEMNIFYING PARTY NOTIFIES THE INDEMNIFIED PARTY IN WRITING WITHIN 15
DAYS AFTER THE INDEMNIFIED PARTY HAS GIVEN NOTICE OF THE THIRD PARTY CLAIM
THAT THE INDEMNIFYING PARTY WILL INDEMNIFY THE INDEMNIFIED PARTY FROM AND
AGAINST THE ENTIRETY OF ANY ADVERSE CONSEQUENCES THE INDEMNIFIED PARTY MAY
SUFFER RESULTING FROM, ARISING OUT OF, RELATING TO, IN THE NATURE OF, OR
CAUSED BY THE THIRD PARTY CLAIM, (II) THE INDEMNIFYING PARTY PROVIDES THE
INDEMNIFIED PARTY WITH EVIDENCE ACCEPTABLE TO THE INDEMNIFIED PARTY THAT
THE INDEMNIFYING PARTY WILL HAVE THE FINANCIAL RESOURCES TO DEFEND AGAINST
THE THIRD PARTY CLAIM AND FULFILL ITS INDEMNIFICATION OBLIGATIONS
HEREUNDER, (III) THE THIRD PARTY CLAIM INVOLVES ONLY MONETARY DAMAGES AND
DOES NOT SEEK AN INJUNCTION OR OTHER EQUITABLE RELIEF, (IV) SETTLEMENT OF,
OR AN ADVERSE JUDGMENT WITH RESPECT TO, THE THIRD PARTY CLAIM IS NOT, IN
THE GOOD FAITH JUDGMENT OF THE INDEMNIFIED PARTY, LIKELY TO ESTABLISH A
PRECEDENTIAL CUSTOM OR PRACTICE MATERIALLY ADVERSE TO THE CONTINUING
BUSINESS INTERESTS OF THE INDEMNIFIED PARTY, AND (V) THE INDEMNIFYING
PARTY CONDUCTS THE DEFENSE OF THE THIRD PARTY CLAIM ACTIVELY AND
DILIGENTLY.
34
(C) SO LONG AS THE INDEMNIFYING PARTY IS CONDUCTING THE
DEFENSE OF THE THIRD PARTY CLAIM IN ACCORDANCE WITH SECTION 7.4(B), (I)
THE INDEMNIFIED PARTY MAY RETAIN SEPARATE CO-COUNSEL AT ITS SOLE COST AND
EXPENSE AND PARTICIPATE IN THE DEFENSE OF THE THIRD PARTY CLAIM, (II) THE
INDEMNIFIED PARTY WILL NOT CONSENT TO THE ENTRY OF ANY JUDGMENT OR ENTER
INTO ANY SETTLEMENT WITH RESPECT TO THE THIRD PARTY CLAIM WITHOUT THE
PRIOR WRITTEN CONSENT OF THE INDEMNIFYING PARTY (NOT TO BE UNREASONABLY
WITHHELD), AND (III) THE INDEMNIFYING PARTY WILL NOT CONSENT TO THE ENTRY
OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WITH RESPECT TO THE THIRD
PARTY CLAIM WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY
(NOT TO BE UNREASONABLY WITHHELD).
(D) IF ANY OF THE CONDITIONS IN SECTION 7.4(B) IS OR BECOMES
UNSATISFIED, HOWEVER, (I) THE INDEMNIFIED PARTY MAY DEFEND AGAINST, AND
CONSENT TO THE ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WITH
RESPECT TO, THE THIRD PARTY CLAIM IN ANY MANNER IT REASONABLY MAY DEEM
APPROPRIATE (AND THE INDEMNIFIED PARTY NEED NOT CONSULT WITH, OR OBTAIN
ANY CONSENT FROM, ANY INDEMNIFYING PARTY IN CONNECTION THEREWITH), (II)
THE INDEMNIFYING PARTY WILL REIMBURSE THE INDEMNIFIED PARTY PROMPTLY AND
PERIODICALLY FOR THE COSTS OF DEFENDING AGAINST THE THIRD PARTY CLAIM
(INCLUDING REASONABLE ATTORNEYS' FEES AND EXPENSES), AND (III) THE
INDEMNIFYING PARTY WILL REMAIN RESPONSIBLE FOR ANY ADVERSE CONSEQUENCES
THE INDEMNIFIED PARTY MAY SUFFER RESULTING FROM, ARISING OUT OF, RELATING
TO, IN THE NATURE OF, OR CAUSED BY THE THIRD PARTY CLAIM TO THE FULLEST
EXTENT PROVIDED IN THIS SECTION 7.
7.6. DETERMINATION OF ADVERSE CONSEQUENCES. The parties shall take
into account the time cost of money in determining Adverse Consequences for
purposes of this Section 7. All indemnification payments under this Section 7
shall be deemed adjustments to the Purchase Price.
7.7. SET-OFF UNDER BUYER NOTE. THE BUYER SHALL HAVE THE OPTION OF
RECOUPING ALL OR ANY PART OF ANY ADVERSE CONSEQUENCES IT MAY SUFFER, TOGETHER
WITH ANY AND ALL OTHER AMOUNTS THE BUYER IS ENTITLED TO RECEIVE FROM THE SELLER
OR TAYLOR PURSUANT TO THE TERMS OF THIS AGREEMENT AFTER EXHAUSTION OF ALL
APPLICABLE INSURANCE COVERAGE ASSUMING THERE IS A REASONABLE ARGUMENT THAT SUCH
COVERAGE EXISTS (IN LIEU OF OR IN ADDITION TO SEEKING ANY INDEMNIFICATION TO
WHICH IT IS ENTITLED UNDER THIS SECTION 7), BY NOTIFYING THE SELLER 30 DAYS IN
ADVANCE THAT THE BUYER IS OFFSETTING SUCH AMOUNTS AGAINST ACCRUED BUT UNPAID
INTEREST OR THE PRINCIPAL AMOUNT OUTSTANDING UNDER THE BUYER NOTE. ANY SUCH
OFFSET SHALL RELIEVE THE BUYER (MAKER) FROM THE NEXT PAYMENT(S) DUE UNDER THE
BUYER NOTE, TO THE EXTENT OF SUCH OFFSET.
7.8. OTHER INDEMNIFICATION PROVISIONS. THE FOREGOING INDEMNIFICATION
PROVISIONS ARE IN ADDITION TO, AND NOT IN DEROGATION OF, ANY STATUTORY,
EQUITABLE, OR COMMON LAW REMEDY ANY PARTY MAY HAVE FOR BREACH OF REPRESENTATION,
WARRANTY, OR COVENANT. THE SELLER AND TAYLOR HEREBY AGREE THAT NEITHER OF THEM
WILL MAKE ANY CLAIM FOR INDEMNIFICATION AGAINST ANY OF THE COMPANIES BY REASON
OF THE FACT THAT ANY OF THEM WAS A DIRECTOR, OFFICER, EMPLOYEE, OR AGENT OF ANY
SUCH ENTITY OR WAS SERVING AT THE REQUEST OF ANY SUCH ENTITY AS A PARTNER,
TRUSTEE, DIRECTOR, OFFICER, EMPLOYEE, OR AGENT OF ANOTHER ENTITY (WHETHER SUCH
CLAIM
35
IS FOR JUDGMENTS, DAMAGES, PENALTIES, FINES, COSTS, AMOUNTS PAID IN SETTLEMENT,
LOSSES, EXPENSES, OR OTHERWISE AND WHETHER SUCH CLAIM IS PURSUANT TO ANY
STATUTE, CHARTER DOCUMENT, BYLAW, AGREEMENT, OR OTHERWISE) WITH RESPECT TO ANY
ACTION, SUIT, PROCEEDING, COMPLAINT, CLAIM, OR DEMAND BROUGHT BY THE BUYER
AGAINST THE SELLER OR TAYLOR (WHETHER SUCH ACTION, SUIT, PROCEEDING, COMPLAINT,
CLAIM, OR DEMAND IS PURSUANT TO THIS AGREEMENT, APPLICABLE LAW, OR OTHERWISE).
7.9. RELIANCE UPON INSURANCE. Notwithstanding any other provision of
this Section 7, the Buyer agrees to provide insurance coverage for the
Companies' assets to the same or a similar extent as the Buyer insures its other
assets. The Buyer agrees not to enforce against the Seller or Taylor the
indemnity provisions provided in Section 7.2 or Section 7.3 of the Agreement to
the extent that the Buyer has insurance coverage which is available to reimburse
the Companies or the Buyer, as applicable, for Adverse Consequences; PROVIDED,
HOWEVER, that this Section 7.9 shall not apply to the extent such Adverse
Consequences are subject to a deductible borne by the Buyer or the Companies to
the extent such deductible is not in excess of the applicable deductible borne
by the Seller or Taylor prior to the Closing, or to the extent that an insurance
carrier refuses to cover all or any part of any Adverse Consequences. The Buyer
further agrees to request and to use its best efforts to cause its insurance
carriers to name the Seller and Taylor as named insureds on the Buyer's
insurance policies that apply to the Companies. The Seller, Taylor and the Buyer
agree to cooperate with any and all such insurance carriers and with each other
in the defense of any and all claims brought against the Companies or against
the Buyer.
8. TERMINATION.
8.1. TERMINATION OF AGREEMENT. The parties may terminate this
Agreement as provided below:
(a) The Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(b) The Buyer may terminate this Agreement and receive a
return of the Earnest Money Deposit by giving written notice to the Seller
at any time prior to the Closing if (i) the Seller or Taylor has breached
any material representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Seller of
the breach, and the breach has continued without cure for a period of 15
days after the notice of breach; (ii) the Closing shall not have occurred
on or before September 30, 1996, by reason of the failure of or refusal of
the Seller or Taylor to perform any condition precedent under Section 6.1
(unless the failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(iii) any of the conditions to the obligation of the Buyer to close, set
forth in Section 6.1 hereof, have not been satisfied, and the parties do
not obtain any required regulatory approvals for the transactions
contemplated by this Agreement, despite Buyer's diligent efforts to obtain
such approvals.
36
8.2. EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to Section 8.1, all rights and obligations of the parties hereunder
shall terminate without any Liability of any party to any other party (except
for any Liability of any party then in breach). If this Agreement is terminated
pursuant to Section 8.1, the Buyer shall be entitled to a refund of the Earnest
Money Deposit and all interest earned thereon. If this Agreement is terminated
for any other reason, the Seller shall be entitled to retain the Earnest Money
Deposit and the Buyer shall pay the Seller an additional $225,000, as liquidated
damages, and not as a penalty, as the Seller's sole remedy for the Buyer's
failure to close.
8.3. LETTER OF INTENT. Upon execution of this Agreement, the Letter
of Intent dated May 20, 1996, and executed May 28, 1996, by the Buyer and by
John Randall Taylor, individually and as President on behalf of the Taylor
Group, shall be null and void and deemed superseded by the provisions hereof.
9. ARBITRATION.
9.1. NEGOTIATION PERIOD. All disputes arising under this Agreement
(other than a suit for injunctive relief) or arising with respect to any
transaction contemplated hereby will be subject to binding arbitration in
accordance with this Section 9. If such a dispute exists, the parties shall
attempt for a thirty-day period (the "NEGOTIATION PERIOD") from the date any
party gives any one or more of the other parties notice (a "DISPUTE NOTICE")
pursuant to this section, to negotiate in good faith, a resolution of the
dispute. The Dispute Notice shall set forth with specificity the basis of the
dispute and shall be delivered to each party to this Agreement to whom the
dispute relates. During the Negotiation Period, representatives of each party
involved in the dispute who have authority to settle the dispute shall meet at
mutually convenient times and places and use their best efforts to resolve the
dispute.
9.2. COMMENCEMENT OF ARBITRATION. If a resolution is not reached by
the parties prior to the end of the Negotiation Period, each party shall have
ten days from the end of such period to give each other party who received a
Dispute Notice written notice of the selection of an independent arbitrator. If
only one party gives such written notice, the arbitrator selected by that party
(the "FINAL ARBITRATOR") shall make a final and binding determination as to the
parties' respective rights and obligations with respect to the matters set forth
in the Dispute Notice. If more than one party selects an arbitrator, the
arbitrators so selected shall, within ten days of the last timely notice of
selection of an arbitrator, select a different independent arbitrator (also
referred to herein as the "FINAL ARBITRATOR") who shall make a final and binding
determination of the parties' respective rights and obligations with respect to
the matters set forth in the Dispute Notice. Following the selection of the
Final Arbitrator, the other arbitrators selected shall have no further
responsibilities hereunder. Each arbitrator selected hereunder shall be
experienced in the arbitration of complex commercial disputes.
9.3. CONSOLIDATION OF HEARINGS. If more than one party delivers a
Dispute Notice to one or more other parties pursuant to this Section 9, the
Final Arbitrators selected with respect to each such Dispute Notice may elect,
in their sole discretion, to combine the matters set forth in one or more, but
not necessarily all, of the Dispute Notices into one or more hearings, in which
37
case, the Final Arbitrators shall adjust the time deadlines set forth herein as
they determine appropriate, and shall decide which one of them will hear the
evidence and render a final determination with respect to each hearing.
9.4. DISCOVERY. Each party to an arbitration shall be entitled to
one deposition, lasting no more than one day, of a designated representative of
each other party to the arbitration prior to the arbitration hearing; and each
party shall be entitled, within thirty days of the appointment of the Final
Arbitrator, to serve upon each other party one set of Interrogatories (seeking
no more than thirty responses), one set of Requests for Production (limited to
thirty requests) and one set of Requests for Admission (limited to thirty
requests), each of which shall be answered by the recipient thereof within two
weeks of its receipt. Otherwise, the arbitration shall be conducted in
accordance with the rules of the American Arbitration Association.
9.5. CONCLUSION OF ARBITRATION. The decision of the Final Arbitrator
as to the parties' respective rights and obligations shall be made within sixty
days of the end of the Negotiation Period and shall be binding on the parties.
The Final Arbitrator may determine that a party is entitled to damages hereunder
from one or more other parties, and the manner in which such damages shall be
assessed against the other parties. However, the Final Arbitrator may not award
emotional distress or punitive damages.
9.6. EXPENSES OF ARBITRATORS. The expenses of the Final Arbitrator
shall be shared equally by the parties to the arbitration. The expenses of each
other arbitrator selected hereunder shall be borne by the party selecting such
arbitrator.
10. MISCELLANEOUS.
10.1. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other party to this
Agreement; provided, however, that any party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing party will use its reasonable efforts to advise the other parties
prior to making the disclosure).
10.2. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
10.3. ENTIRE AGREEMENT. This Agreement (including the Exhibits,
Disclosure Schedules and other documents referred to herein) constitutes the
entire agreement among the parties and supersedes any prior understandings,
agreements, or representations by or among the parties, written or oral, to the
extent they related in any way to the subject matter hereof. References to
section numbers and exhibits are to sections of this Agreement and Exhibits to
this Agreement unless otherwise specified. All Exhibits and the Disclosure
Schedules are incorporated in this Agreement as if set forth in full in this
Agreement.
38
10.4. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of their or its rights, interests, or obligations hereunder without the
prior written approval of the Buyer and the Seller; provided, however, that the
Buyer may (i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
10.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO THE SELLER: COPY TO:
PSD INVESTMENTS, LTD. MIKE PARKER, ESQ.
P.O. DRAWER B 109 SOUTH SYCAMORE STREET
CARTHAGE, TEXAS 75633 P.O. BOX 1011
CARTHAGE, TEXAS 75633
IF TO THE BUYER: COPY TO:
DAWSON PRODUCTION SERVICES, INC. JENKENS & GILCHRIST
901 N.E. LOOP 410 A PROFESSIONAL CORPORATION
SUITE 700 600 CONGRESS AVENUE, SUITE 2200
SAN ANTONIO, TEXAS 78209 AUSTIN, TEXAS 78701
ATTN: J. ROWLAND COOK
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other
39
communications hereunder are to be delivered by giving the other party notice in
the manner set forth in this Agreement.
10.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
10.9. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.10.SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
10.11.EXPENSES. Each of the parties and each of the Companies will
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
10.12.CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty, and covenant contained in this Agreement
shall have independent significance. If any party has breached any
representation, warranty, or covenant contained in this Agreement in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant.
10.13.SPECIFIC PERFORMANCE. The Seller acknowledges and agrees that
the Buyer would be damaged irreparably if any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, the Seller agrees that the Buyer shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions of this Agreement in any action instituted in any court of the United
States or any state thereof having
40
jurisdiction over the parties and the matter (subject to the provisions set
forth in Section 10.14), in addition to any other remedy to which they may be
entitled, at law or in equity.
10.14.SUBMISSION TO JURISDICTION. Each of the parties submits to the
jurisdiction of any state or federal court sitting in Bexar County, Texas, in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other party with respect thereto. Each
party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
10.15. CONSTRUCTION. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any party.
10.16. GOOD FAITH. The parties agree to act in good faith in the
performance and enforcement of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
BUYER:
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Title: CHAIRMAN, CEO
SELLER:
PSD INVESTMENTS, LTD.
By: /s/ JOHN RANDALL TAYLOR
Title: GENERAL PARTNER
41
TAYLOR:
/s/ JOHN RANDALL TAYLOR JOHN RANDALL TAYLOR,
individually and as general partner and sole
managing partner of PSD Investments, Ltd.
/s/ KATHY DIANNE TAYLOR
KATHY DIANNE TAYLOR, individually
and as general partner of PSD Investments,
Ltd.
EXHIBITS:
Exhibit A - The Companies
Exhibit B - Excluded Assets
Exhibit C - Buyer Note
Exhibit D - Financial Statements
Exhibit E - Opinion of Seller's Counsel
Exhibit F - Opinion of Buyer's Counsel
Exhibit G - Termination Value of the TRAC Leases
SELLER'S DISCLOSURE SCHEDULES:
SDS 3.5 - Capitalization Schedule
SDS 3.7(a) - Sale of Assets
SDS 3.7(f) - Insurance Schedules
SDS 3.7(m) - Schedule of Vehicle Accidents
SDS 3.7(q) - Monthly Bonus Plan and Fringe Benefit Summary
SDS 3.10(e) - Election Schedule for Controlled Group of Corporations
SDS 3.14(a) - Leased Truck Schedule
SDS 3.14(b) - Customer Warranty Labor Rate and Schedule of Utilities
SDS 3.14(d) - List of Company Visa Cards and Credit Card Policy
SDS 3.14(d) - Schedule of Notes Payable
SDS 3.14(k) - Central Texas and East Texas District Price List for
Saltwater Disposal
SDS 3.15 - Accounts Receivable and Customer Lists
SDS 3.17 - Worker's Compensation Retro Calculation 4/1/95 to 3/31/96
SDS 3.17(iii)- Insurance Coverage for Policy Periods in 1994, 1995 and 1996
SDS 3.17(iv) - Worker's Compensation Retrospective Rating Exhibit / Excess
Loss Insurance Contract Policy Schedule of Excess Loss
SDS 3.18 - Litigation Schedule
SDS 3.19 - Terms of Sale and Conditions of Sales (Sample Invoice)
42
EXHIBIT A
THE COMPANIES
Taylor Companies, Inc., which is the 100% parent of each of the following:
Taylor Interests, Inc.
Taylor SWD Operating, Inc.
Taylor Environmental, Inc.
Taylor Disposal, Inc.
Production Disposal, Inc.
Taylor Injection Systems, Inc.
DeBerry SWD, Inc.
Tatum SWD, Inc.
Taylor Water Injections, Inc.
Newton County SWD, Inc.
Teague Interests, Inc.
Taylor Caldwell Properties, LLC
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (the "AMENDMENT") amends
certain provisions of the Stock Purchase Agreement dated July 8, 1996 (the
"STOCK PURCHASE AGREEMENT"). This Amendment is entered into on July 29, 1996
(the "EFFECTIVE DATE"), by and among Dawson Production Services, Inc., a Texas
corporation (the "BUYER") and PSD Investments, Ltd., a Texas limited partnership
(the "SELLER"), John Randall Taylor, an individual residing in Panola County,
Texas, in his individual capacity, and as general partner and sole managing
partner of the Seller, and his spouse, Kathy Dianne Taylor, who is also an
individual residing in Panola County, Texas, in her individual capacity, and as
a general partner of the Seller (together "TAYLOR"). In this Amendment,
capitalized terms shall have the meanings given to them in the Stock Purchase
Agreement.
RECITALS:
WHEREAS, the parties previously entered into the Stock Purchase Agreement
relating to the sale of the shares and membership interests of certain entities
owned directly or indirectly by Seller; and
WHEREAS, the parties reaffirm all of the terms, covenants and commitments
including the representations and warranties set forth in the Stock Purchase
Agreement; and
WHEREAS, the parties desire to amend the Stock Purchase Agreement to add
several additional provisions;
NOW, THEREFORE, in consideration of the premises and the mutual promises,
and of the representations, warranties, and covenants contained in this
Amendment, the parties agree as follows:
1. SECTION 3.7.Seller's Disclosure Statement shall be amended to include
the items listed on Exhibit A to this Amendment.
2. ENVIRONMENTAL. Seller and Buyer agree as follows:
(a) NORM WASTES. Within 10 days after the Closing, the Buyer, at its
sole cost, shall retain a consultant experienced with naturally occurring
radioactive materials ("NORM") associated with the oil and gas industry, which
consultant shall be reasonably acceptable to Seller, for the purpose of sampling
for NORM at the facilities to determine whether sludges, sediments or other
solids will be subject to NORM disposal requirements pursuant to Texas Railroad
Commission Rule 94. All samples shall be taken within 21 days after the Closing,
and the Buyer shall have notified the Seller of the results within 45 days after
the Closing. If after such sampling all of the following conditions are
determined by the Buyer to exist within any of the tanks located at the
facilities, the Seller shall, within 120 days after notification from the Buyer,
remove and
1
properly dispose of in accordance with all Environmental, Health and Safety
Laws, all sludges, sediments and other solids and sediments within such tank:
(i) Sludges, sediments or other solids within a tank are
determined to exhibit characteristics which subject the materials to the
disposal requirements of Rule 94 for NORM wastes by the Texas Railroad
Commission;
(ii) Such sludge, sediments or other solids have accumulated
to a depth of six inches or more; and
(iii) The cost of properly removing and disposing of all such
sludge, sediment or solids within all tanks at such facility, using the
most cost-efficient process that is in accordance with all Environmental
Health and Safety Laws, exceeds seven thousand five hundred dollars
($7,500.00), as reasonably estimated by such consultant; PROVIDED,
HOWEVER, that the provisions of Section 7.3(a)(i) of the Stock Purchase
Agreement shall apply with respect to the allocation of the payment of the
total environmental remediation costs attibutable to any facility which
costs shall include any costs associated with the removal of any such NORM
waste.
The Buyer and the Seller agree to use reasonable efforts to cooperate in
such activities. The Seller and the Buyer further agree that any such
remediation shall not result in unreasonable disruption to the operations of the
facility or damage to the facility; PROVIDED, HOWEVER, that the Buyer
acknowledges that the removal of such sludge, sediment or solids will require
that the operations with respect to such tank cease temporarily and the Buyer
agrees to remove the fluid from the tanks to the extent necessary to remove the
sludge, sediment or solids from the tanks.
(b) PERMIT AMENDMENT. The Seller shall use its best efforts to
obtain an amendment, within 90 days from the date of Closing, of the Centex Pit
B permit to authorize the storage of solids in Centex Pit B. If such permit
amendment is not obtained within such time period, the Seller, at its sole cost,
shall immediately, and in accordance with all Environmental, Health and Safety
Laws, remove and properly dispose of all solids within Centex Pit B and take
such other actions as are necessary to ensure Centex Pit B conforms to the
existing permit. The Buyer agrees to load and transport such clean-out material
to the Freestone Cavern and the Seller agrees to reimburse the Buyer its costs
for such loading and transportation.
(c) LABELING. The Seller shall, within 90 days after the date of
Closing, cause all tanks and containers to be labeled in accordance with OSHA
Hazard Communication standards.
(d) DRUM REMOVAL. The Seller shall, within 30 days after Closing,
remove and dispose of, in accordance with all Environmental, Health and Safety
Laws, any and all drums, which in the Buyer's reasonable opinion, are not
required for the ongoing operation of the facilities. Within 10 business days
after the Closing, the Buyer shall identify all such drums for the Seller.
2
(e) REMEDIATION. The Seller shall remediate the lube oil release at
the Easton yard by fertilizing and tilling the soil.
(f) SPILL CONTAINMENT. The Seller shall, within 30 days after
Closing, improve the spill containment system surrounding the diesel fuel tank
at the Easton yard to meet the requirements of any applicable spill prevention
or control requirements imposed by EPA or the TNRCC.
(g) SPCC PLANS. The Seller shall, within 120 days after Closing,
prepare SPCC plans meeting the requirements of 40 CFR Part 112. The Seller
further agrees, at its sole cost, to prepare any plans and to implement any
physical changes at the facilities, and to cooperate with Buyer in the selection
of any physical or procedural requirements that need to be implemented, as a
result of the requirements of 40 CFR Part 112.
(h) STORMWATER PERMIT. The Seller agrees, within 120 days after
Closing, to obtain all necessary state and federal permits required for the
discharge of storm water from the Carthage, Caldwell and Pineland facilities.
The Seller further agrees, at its sole cost, to prepare any plans and to
implement any physical changes at the facilities, and to cooperate with the
Buyer in the selection of any physical or procedural requirements that need to
be implemented, as a result of the requirements of such stormwater permit(s).
(i) SARA TITLE III. The Seller agrees, within 120 days after
Closing, to make all reports and notices required by 40 CFR Part 370. The Seller
further agrees to cooperate with the Buyer in the determination of the form and
content of such reports.
(j) WELLHEAD MAINTENANCE. The Seller agrees, within 30 days after
Closing, to remove overgrown grass and weeds around the wellheads of each of the
facilities.
(k) PIT CLEANOUT. The Seller agrees, within 90 days after Closing,
to clean out any pits which are reasonably determined by Buyer to have less than
80% capacity due to the accumulation of solids or sediments. The Buyer agrees to
load and transport such clean-out material to the Freestone Cavern and Seller
agrees to reimburse the Buyer its costs for such loading and transportation.
(l) UPDATE RECORDS. The Seller agrees to use its best efforts to
cause the Texas Railroad Commission to update, within 90 days after Closing, its
records concerning the State Wide Rule 14(b)(2) exemption status of the Deberry
SWD #1 and Brady SWD #1A wells.
(m) TATUM SWD #1. If the Buyer notifies the Seller within 60
business days after the Closing, the Seller shall properly plug and abandon
Tatum SWD No. 1 in accordance with all Environmental Health and Safety Laws. If
the Buyer notifies the Seller prior to conducting any repair operations (as
opposed to diagnostic evalutations), of its election to require the Seller to
plug and abandon the Tatum SWD No. 1, the Seller shall pay all costs associated
with such operations and shall be entitled to the salvage. If the Buyer notifies
the Seller of its election to require the Seller to plug and abandon the Tatum
SWD No. 1 after repair operations
3
have been performed, the Seller shall pay the first $10,000 of the expenses
associated with such operations and shall be entitled to the salvage.
(n) The Buyer and the Seller have reviewed the environmental issues
raised in the memorandum dated July 22,1996 to Dawson Production Services from
Steve Morton, Counsel to the Buyer, regarding recommendations on environmental
issues. The Seller agrees that disclosure of the issues contained in such
memorandum and the provisions of this Agreement do not constitute a waiver of
any rights granted to the Buyer by the Stock Purchase Agreement or this
Amendment.
3. LITIGATION. The parties acknowledge that the following lawsuits have
been filed since the Effective Date of the Agreement: (i) a case styled E.E.
Baldwin Trust vs. Randy Taylor and Taylor Service Company, Cause No. 467,
pending in Small Claims Court, Precinct No. 5, Jim Wells County, Texas filed on
or about July 10, 1996 (the "BALDWIN LAWSUIT"); and (ii) a case styled Texas
Workers' Compensation Insurance Facility vs. Taylor Interests, Inc., D/B/A
Taylor Service Company, and John Randall ("Jr.") Taylor, Individually, Cause No.
9608303 pending in the 250th Judicial District Court of Travis County, Texas
Taylor Service Company and John Randall Taylor, individually filed on or about
July 25, 1996 (the "WORKERS' COMPENSATION LAWSUIT"). The parties reaffirm and
agree that to the extent that insurance does not compensate the Buyer or the
Companies for any damages, liabilities or other losses incurred in connection
with any matter identified in Section 3.18 of Seller's Disclosure Schedule, in
connection with the Baldwin Lawsuit or the Workers' Compensation Lawsuit or any
other currently threatened or pending litigation, including losses resulting
from any retroactive adjustment of insurance premiums, or in connection with any
other matter for which the Buyer is entitled to indemnification under the Stock
Purchase Agreement, that the Seller and Taylor shall reimburse and indemnify (as
provided in Section 7 of the Purchase Agreement) the Buyer for all such losses.
4. DEFENSE OF LITIGATION.
With respect to the Workers' Compensation Lawsuit, the case styled Vortoil
Separation Systems, USA v. Taylor Interests, Inc. dba Taylor Service Company,
Cause No. 1996-A-146 pending in the 123rd Judicial District Court of Panola
County, Texas, the case styled Allison v. Taylor Interests, Inc., Cause No.
1993-A-132, pending in the 123rd District Court of Panola County, Texas and any
other lawsuit that is threatened or pending at the time of the Closing and not
defended in its entirety by an insurance carrier, the parties agree that the
Seller will conduct and directly pay for the defense of such lawsuit and that
the terms of Section 7.5 of the Stock Purchase Agreement shall govern such
defense.
5. GUARANTIES. The Buyer agrees to use its best efforts to cause the
release of the following personal guaranties within 10 business days of the
Closing, but shall obtain such release in no event later than 30 business days
after the Closing. If any one or more such releases are not obtained, the Buyer
agrees to indemnify John Randall Taylor or Kathy Taylor, as applicable, to the
extent that John Randall Taylor or Kathy Taylor are required to honor such
guaranties: (a)Continuing Guaranty to SAFECO Credit Company, Inc. dated April
19, 1994, executed by
4
John R. Taylor; (b)Continuing Guaranty to SAFECO Credit Company, Inc. dated
September 22, 1992, executed by John R. Taylor; (c) Continuing Guaranty to
SAFECO Credit Company, Inc. dated February 8, 1991, executed by John R. Taylor;
(d) Personal Guaranty to General Electric Capital Corporation executed on or
about December 16, 1993, by Randy Taylor; (e) Personal Guaranty to General
Electric Capital Corporation executed on or about December 16, 1993, by Kathy D.
Taylor; (f) Personal Guaranty to MetLife Capital Corporation and/or MetLife
Capital, Limited Partnership, executed on or about August 23, 1993, by John R.
Taylor and Kathy Taylor; (g) Personal Guaranty to MetLife Capital Corporation
and/or MetLife Capital, Limited Partnership, executed on or about February 4,
1994, by John R. Taylor and Kathy Taylor; (h) Continuing Guaranty to Associates
Leasing, Inc. dated July 7, 1989, executed by Randy Taylor; (i) Continuing
Guaranty to Associates Commercial Corporation dated July 8, 1994, executed by
Randy Taylor; (j) Continuing Guaranty to Associates Commercial Corporation dated
December 16, 1992, executed by Randy Taylor; (k) Continuing Guaranty to
Associates Commercial Corporation dated November 17, 1992, executed by Randy
Taylor; (l) Continuing Guaranty to Associates Commercial Corporation dated
February 27, 1992, executed by Randy Taylor; (m) Undated Continuing Guaranty to
Associates Commercial Corporation executed by Randy Taylor; (n) Undated
Continuing Guaranty to Associates Commercial Corporation executed by Randy
Taylor; (o) Continuing Guaranty to Associates Commercial Corporation dated
August 7, 1989, executed by Randy Taylor; (p) Continuing Guaranty to Associates
Commercial Corporation dated June 2, 1988, executed by Randy Taylor; (q)
Guaranty of Randy Taylor reflected in that certain Loan Agreement dated July 19,
1994 between Taylor Interests, Inc. and Panola National Bank; (r) Guaranty of
Randy Taylor provided in the Real Estate Lien Noted dated April 15, 1994 between
Taylor Caldwell Properties, LLC and Citizen's State Bank; and (s) Continuing
Guaranty to Premier Bank, National Association (now Bank One, Louisiana, NA)
dated December 16, 1992 executed by John Randall Taylor; (t) Continuing Guaranty
to Premier Bank, National Association (now Bank One, Louisiana, NA) dated
December 16, 1992 executed by Kathy D. Taylor. In addition to the foregoing, the
Buyer agrees to use its best efforts to obtain releases of any and all
guaranties, copies of which are provided to Buyer by the Seller or Taylor within
one year from the Closing, the releases to be obtained within the time frames
set forth above, as long as the debt covered by such guaranties is disclosed on
Section 3.14(d) to Seller's Disclosure Schedule.
6. REPAYMENT OF DEBT. The Seller and Taylor represent and warrant that as
of the date of Closing and after the payment by Taylor Interests, Inc. to John
Randall Taylor of $2,505,629, that there are no outstanding notes or other
obligations by any of the Companies to the Seller, to John Randall Taylor or to
Kathy Taylor. If, following the closing, John Randall Taylor or Kathy Taylor
come into possession of a promissory note to one or both of them from any one or
more of the Companies which is not cancelled and delivered at the closing, they
shall promptly mark such promissory note "Paid in Full and Cancelled" and
deliver it to the Seller.
7. VEHICLE TITLES. Within 10 days of the Closing, the Seller and Taylor
shall have caused all vehicle titles to be signed by the appropriate officers of
Taylor Interests, Inc. or of the Company holding title and furthermore, the
Seller or Taylor shall have taken the appropriate action and paid all fees
necessary to transfer title to the following trucks into the name of Taylor
Interests, Inc.:
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Unit No. 104 held in the name of John Randall Taylor
Unit No. 105 held in the name of John Randall Taylor
Unit No. 114 held in the name of Associates Leasing, Inc.
Unit No. 516 held in the name of Associates Leasing, Inc.
Unit No. 517 held in the name of Ford Equipment Leasing
Unit No. 518 held in the name of Ford Equipment Leasing
8. EMPLOYEE BENEFITS. The Seller acknowledges, reaffirms and agrees that
any penalties resulting from the failure of any one or more of the Companies at
any time prior to the Closing to file a Form 5500 or other form required by any
government entity and any costs, including but not limited to legal and
accounting costs associated with the preparation and filing of such forms that
should have been filed prior to Closing, shall be the responsibility of the
Seller and that any liabilities resulting from the Seller's or any of the
Companies failure to operate any Employment Benefit Plan according to the terms
of such plan and according to the law shall be the responsibility of the Seller.
9. PURCHASE PRICE. Section 1.2 of the Stock Purchase Agreement is hereby
amended to the extent necessary to provide that the Buyer's Note shall be in the
amount of $1.75 million, and shall be in the form attached to this Amendment as
Exhibit B, and the cash portion of the purchase price shall be reduced
accordingly to $10.25 million. The remaining provisions of Section 1.2 are
hereby affirmed in all respects.
10. CASH AT CLOSING. Attached as Exhibit C is a statement showing the
proper adjustments to the Purchase Price as provided in Section 1.2(a) of the
Stock Purchase Agreement.
11. RESIGNATION OF KATHY TAYLOR. Within three days of the Closing, Seller
shall provide Buyer with the resignation, effective as of the Closing, of Kathy
Dianne Taylor as Secretary of each of the Companies.
12. AFFIRMATION OF STOCK PURCHASE AGREEMENT. All provisions of the Stock
Purchase Agreement are hereby affirmed as if set forth in this Agreement in
full. The Buyer and the Seller agree and reaffirm that the fact that the Buyer
has conducted a review of some of the Seller's records shall not cause a waiver
of any provision of the Stock Purchase Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the Effective Date.
BUYER:
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Michael E. Little
Title: CEO
SELLER:
PSD INVESTMENTS, LTD.
By: /s/ JOHN RANDALL TAYLOR
John Randall Taylor
Title: Sole Managing Partner
TAYLOR:
/s/ JOHN RANDALL TAYLOR
John Randall Taylor
/s/ KATHY DIANNE TAYLOR
John Randall Taylor
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