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
APRIL 15, 1998
(Date of earliest event reported)
U S LIQUIDS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-13259 76-0519797
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
411 NORTH SAM HOUSTON PARKWAY EAST, SUITE 400, HOUSTON, TEXAS 77060
(Address of principal executive offices) (Zip Code)
(281) 272-4500
Registrant's telephone number, including area code
Item 2. Acquisition or Disposition of Assets.
On April 15, 1998, the Company acquired The National Solvent Exchange
Corp., a Georgia corporation ("NSX"), in exchange for approximately $3.9 million
in cash and 231,577 shares of common stock, par value $.01, of the Company.
These transactions were consummated pursuant to an Agreement and Plan of Merger,
dated April 15, 1998, between the Company, NS Acquisition Corp., a wholly-owned
subsidiary of the Company, NSX and Ronald T. Calloway and Maxwell R.
Calloway, the shareholders of NSX.
NSX is engaged in the business of processing and distilling of
commercial solvents and related items. The Company currently intends to operate
NSX in substantially the same manner as it was operated prior to this
transaction. The Company funded the cash portion of the purchase price paid for
NSX with borrowings under the Company's revolving credit facility with Bank of
America National Trust and Savings Association, BankBoston, N.A. and Wells Fargo
Bank, N.A. The purchase price was determined based upon an evaluation of the
business of NSX and the results of negotiations between the parties.
The foregoing discussion is only a summary and is qualified in its
entirety by reference to Exhibit 2.1 to this Current Report on Form 8-K filed
herewith.
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Item 7. Exhibits.
(a)-(b) Historical and pro forma financial statements are not required
and, therefore, not filed.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger, dated April 15, 1998
between U S Liquids Inc., NS Acquisition Corp., The
National Solvent Exchange Corp., Ronald T.
Calloway and Maxwell R. Calloway.
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.
U S LIQUIDS INC.
Date: April 30, 1998 By: /s/ MICHAEL P. LAWLOR
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Michael P. Lawlor, Chief Executive
Officer
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
THE NATIONAL SOLVENT EXCHANGE CORP.
US LIQUIDS INC.
AND
NS ACQUISITION CORP.
APRIL 15, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April
___, 1998, by and among The National Solvent Exchange Corp., a Georgia
corporation ("NSE"), US Liquids Inc., a Delaware corporation ("USL"), NS
Acquisition Corp., a Georgia corporation ("NSAC"), Ronald T. Calloway and
Maxwell R. Calloway. Ronald T. Calloway and Maxwell R. Calloway are hereinafter
sometimes individually referred to as "Shareholder" and collectively as
"Shareholders".
W I T N E S S E T H:
WHEREAS, USL directly owns all of the issued and outstanding stock of
NSAC;
WHEREAS, the Boards of Directors of each of NSE, USL, and NSAC (i) have
approved the merger of NSE with and into NSAC upon the terms and conditions set
forth herein and (ii) deem such merger to be in the best interests of their
respective shareholders;
WHEREAS, Ronald T. Calloway and Maxwell R. Calloway are the sole
shareholders of NSE;
WHEREAS, USL, NSAC, Ronald Calloway and Maxwell Calloway desire to make
certain representations, warranties and agreements in connection with such
merger; and
WHEREAS, it is the express intention of NSE, USL, and NSAC that the merger
constitute a tax-free reorganization for federal income tax purposes under the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code").
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and upon and subject to
the terms and the conditions hereinafter set forth, the parties do hereby agree
as follows:
ARTICLE I.
THE MERGER
1.01 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.02), NSE shall be merged with and
into NSAC in accordance with this Agreement and the separate corporate existence
of NSE shall thereupon cease (the "Merger").
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NSAC shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation"). The Merger shall have the effects
specified in Section 14-2-1106 of the Georgia Business Corporation Code (the
"GBCC").
1.02 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article VII shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article VIII, the
consummation of the Merger (the "Closing") shall take place at 10:00 a.m. on
April 15, 1998 in the offices of Long Aldridge & Norman LLP, One Peachtree
Center, 303 Peachtree Street, Suite 5300, Atlanta, Georgia 30308, or on such
other date at such other time and place as the parties shall agree (the "Closing
Date"). The parties hereto shall cause a Certificate of Merger in the form of
EXHIBIT 1.02 hereto (the "Certificate of Merger") to be properly executed and
filed with the Secretary of State of Georgia, on the Closing Date. The Merger
shall become effective at the time of filing of the Certificate of Merger or at
such later time which the parties hereto shall have agreed upon and designated
in such filing as the effective time of the Merger (the "Effective Time"). The
cash portion (as defined in Section 2.01) shall be paid to the Shareholders upon
the consummation of the Merger at the Closing
1.03 CERTIFICATE OF INCORPORATION. The Articles of Incorporation of NSAC
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
1.04 BYLAWS. The Bylaws of NSAC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE II.
THE CONVERSION
2.01 CONVERSION OF SHARES.
(a)At the Effective Time, each issued and outstanding share of NSE
Common Stock ("NSE Stock") (collectively, the "Outstanding NSE Shares")
shall, by virtue of the Merger and without any action on the part of the
holder thereof (subject to the provisions for fractional shares set forth
below), be converted into the right to receive its pro rata share of (i)
$3,870,000 in cash (the "Cash Portion") and (ii) $4,730,000 in shares of
USL common stock ("USL Common Stock") calculated using the average closing
price thereof on the American Stock Exchange for a period of five
consecutive trading days, being the tenth
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trading day through the sixth trading day prior to the date of the Closing
(the "Closing Price"); PROVIDED, HOWEVER, that should the Closing Date be
subsequent to April 15, 1998, the amount of USL Common Stock to be
delivered pursuant hereto shall be equivalent to the amount of USL Common
Stock that would have been delivered had the Closing Date been April 15,
1998. Shares of USL Common Stock so issued of a value of $1,000,000 at the
Closing Price shall bear a legend restricting their transfer or sale
during the period ending one year from the Closing Date, and additional
shares of USL Common Stock so issued of a value of $1,000,000 at the
Closing Price shall bear a legend restricting their transfer or sale
during the period ending two years from the Closing Date.
(b)NSE has presented to USL a balance sheet dated as of March 27,
1998 (the "March Balance Sheet"), a copy of which is attached hereto as
Exhibit 2.01(b). Prior to the Closing NSE shall distribute to its
Shareholders the aggregate balance of NSE's checking and savings accounts
as of the date of such distribution and/or use those funds as well as
other funds to pay off or have cancelled the "Note Payable Fidelity
Current", the "N/P - Ron Calloway" and the "Total Long Term Liabilities"
(the latter three items also shown on the March Balance Sheet and
aggregating $277,869.75). The excess of assets over liabilities of NSE as
of the Closing Date shall be $591,977.85 (the "Net Positive Asset
Amount"). One hundred twenty days from the Closing Date NSAC will present
to the Shareholders a computation and description of the actual balance
sheet as of the Closing Date prepared by NSAC's independent certified
accounting firm consistent with the March Balance Sheet (provided, that
the actual balance sheet will reflect inventory of NSE as of the Closing
Date) and NSE's past practices (the "Closing Balance Sheet"). If the
Closing Balance Sheet amount of assets exceeds liabilities by more than
the Net Positive Asset Amount, NSAC shall pay such excess to the
Shareholders (pro rata to their former share holdings in NSE) within five
(5) days. If the Closing Balance Sheet assets exceed liabilities by less
than the Net Positive Asset Amount, the Shareholders (pro rata to their
former share holdings in NSE) shall pay such shortfall to NSAC within five
(5) days. In the event the Shareholders disagree with the Closing Balance
Sheet, the Shareholders shall so notify USL in writing within ten days
following the Shareholders' receipt of the Closing Balance Sheet, and USL
and the Shareholders agree to attempt to mutually resolve any dispute
regarding the Closing Balance Sheet within 30 days after USL's receipt of
the Shareholders' notice. In the event such dispute is not so resolved,
the Shareholders and USL shall submit such matter to Vick & Co. of
Atlanta, Georgia within 45 days after USL's receipt of the Shareholders'
notice, and upon submission of such matter to Vick & Co., such firm shall
act as the final arbitrator of such dispute and shall issue its decision
as to how the Closing Balance Sheet shall be presented and how such
dispute shall be resolved. Any such decision by Vick & Co. shall be final
and
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binding upon USL and the Shareholders and any other party hereto. The fees
and costs of Vick & Co. shall be payable one-half by USL and one-half by
the Shareholders.
2.02 SURRENDER OF CERTIFICATES. No later than three days after the
Effective Time, each holder of a certificate or certificates previously
representing Outstanding NSE Shares ("NSE Certificates") shall receive a
certificate or certificates representing the number of whole shares of USL
Common Stock into which the shares represented by the holder's NSE
Certificate(s) shall have been converted and a cash payment as provided for in
Section 2.01 and Section 2.03. Notwithstanding the foregoing, no holder of any
NSE Certificate(s) shall receive any certificates representing USL Common Stock
or cash until surrender of the holder's NSE Certificate(s) to NSAC. After the
Effective Time, each NSE Certificate representing shares converted into the
right to receive USL Common Stock pursuant to Section 2.01 shall represent
ownership of the number of shares of USL Common Stock which the holder of the
NSE Certificate shall be entitled to receive. Whenever a dividend is declared by
USL on USL Common Stock after the Effective Time, the declaration shall include
dividends on all shares issued and outstanding, including those with respect to
which no certificates have been delivered hereunder; provided, however, no
distribution of such dividends shall be required to be made to any holder of NSE
Certificates until the NSE Certificate(s) representing such shares shall have
been delivered by the person, firm, trust, estate, corporation, or business
organization ("Person") entitled to such dividend. Upon delivery of such NSE
Certificate(s), or as soon as practicable thereafter, such Person shall receive
from USL an amount equal to all dividends (without interest thereon and less the
amount of taxes, if any, required to be withheld or paid thereon by USL) on the
shares of USL Common Stock formerly represented by the surrendered NSE
Certificate(s), which shall have been declared or paid between the Effective
Time and the date of delivery of such NSE Certificate(s).
2.03 NO FRACTIONAL SHARES. All fractional shares of USL Common Stock to
which a holder of Outstanding NSE Shares would otherwise be entitled at the
Effective Time shall be aggregated. If a fractional share shall result from such
aggregation, no certificate or scrip of any kind shall be issued by USL in
respect of such fractional interest, but such holder of Outstanding NSE Shares
shall be entitled to receive a cash payment equal to such fraction multiplied by
the Closing Price.
2.04 TITLE TO ASSETS AND RESPONSIBILITY FOR LIABILITIES. At the Effective
Time, the title to all real estate and other property owned by NSE shall be
vested in NSAC, as the corporation surviving the Merger, without any further act
or deed, and NSAC shall be responsible and liable for all the liabilities of
NSE.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
THE NSE SHAREHOLDERS
Each of Ronald T. Calloway and Maxwell R. Calloway, jointly and severally,
hereby represents and warrants as of the date hereof to USL and NSAC as follows:
3.01 ORGANIZATION AND AUTHORIZATION.
(a)NSE is a corporation duly organized, validly existing and in good
standing under the laws of the state of Georgia, and has all requisite
power and authority, corporate or otherwise, to carry on and conduct its
business as it is now being conducted and to own or lease its properties
and assets. NSE is duly qualified and in good standing in every state of
the United States in which the conduct of its business or the ownership of
its properties and assets requires it to be so qualified. NSE has
heretofore delivered or made available to USL and NSAC accurate and
complete copies of the Articles of Incorporation and Bylaws, as currently
in effect, of NSE.
(b)There is no entity in which NSE owns, or will own prior to the
Closing, fifty percent (50%) or more of the outstanding equity, directly
or indirectly, and the equity interest that is owned by NSE in any other
entity (an "Entity") is set forth in SCHEDULE 3.01(B). Except as noted on
SCHEDULE 3.01(B), NSE's ownership interest in each Entity is owned by NSE,
directly or indirectly, free and clear of all liens, restrictions, claims,
equities, charges, options, rights of first refusal, encumbrances or other
restrictions of any kind, with no defects of title whatsoever. NSE has
full power, right and authority to vote all of the shares of each Entity.
NSE is not a party to or bound by any agreement affecting or relating to
its right to transfer or vote the shares of an Entity.
(c)NSE has the corporate right, power and capacity to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, subject to the approval and adoption of this
Agreement by the shareholders of NSE in accordance with the GBCC and the
Articles of Incorporation and Bylaws of NSE. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by NSE's Board
of Directors. This Agreement has been duly and validly executed and
delivered by NSE and, subject to the approval and
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adoption of this Agreement by the shareholders of NSE in accordance with
the GBCC and the Articles of Incorporation and Bylaws of NSE, constitutes
NSE's legal, valid and binding obligation, enforceable in accordance with
its terms, subject to (i) bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or similar laws affecting
the rights of creditors and (ii) general principles of equity.
3.02 CAPITALIZATION. The authorized capital stock of NSE consists of
10,000 shares of NSE common stock ("NSE Common Stock"). As of the date of this
Agreement, 6,400 shares of NSE common stock were issued and outstanding. No
other capital stock of NSE is authorized or issued. All of such issued and
outstanding shares of NSE common stock are validly issued, fully paid and
nonassessable. There are no shares of capital stock held in the treasury of NSE.
3.03 ABSENCE OF OTHER CLAIMS. Except as set forth on SCHEDULE 3.03, there
are not outstanding, nor is NSE bound by, any subscriptions, options, preemptive
rights, warrants, calls, commitments or agreements or rights of any character
requiring NSE to issue or entitling any person or entity to acquire any
additional shares of capital stock or any other equity security of NSE,
including any right of conversion or exchange under any outstanding security or
other instrument, and NSE is not obligated to issue or transfer any shares of
its capital stock for any purpose. Except as set forth on SCHEDULE 3.03, there
are no outstanding obligations of NSE to repurchase, redeem or otherwise acquire
any outstanding shares of capital stock of NSE.
3.04 FINANCIAL STATEMENTS. The balance sheets of NSE as of December 31,
1995, 1996, and 1997 (collectively, the "Balance Sheets") and the related
statements of income, retained earnings and cash flows for the years then ended,
including the footnotes thereto, certified by McClellan & Randolph, CPAs, P.C.,
NSE's independent certified public accountants, for the years ended December 31,
1995, 1996 and 1997, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved and present fairly the financial position in all material respects of
NSE and the results of its operations for the periods then ended.
3.05 NO UNDISCLOSED LIABILITIES. Except as shown on the Balance Sheets or
SCHEDULE 3.05, as of the dates of the Balance Sheets, NSE had no material
liability or obligation whatsoever, whether accrued, absolute, contingent or
otherwise, which under GAAP would be required to be set forth in the Balance
Sheets and the March Balance Sheet, except for current liabilities incurred in
the ordinary course of business since the respective dates thereof. Since
December 31, 1997, NSE has not incurred any material liability or obligation,
except for (x) liabilities and obligations incurred by NSE in the ordinary
course of its business consistent with past practice or as reflected on SCHEDULE
3.05.
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3.06 NO VIOLATION OF LAW. NSE is not nor has been nor will be (by virtue
of any past or present action, omission to act, contract to which it is a party
or any occurrence or state of facts whatsoever) in material violation of any
applicable local, state or federal law, ordinance, regulation, order, injunction
or decree, or any other requirement of any governmental body, agency or
authority or court binding on it, or relating to its property or business.
3.07 REAL PROPERTY.
(a)SCHEDULE 3.07(A) sets forth a true, correct and complete schedule
of all real property owned by NSE (the "NSE Real Property"). NSE is the
owner of the title to the real property described on SCHEDULE 3.07(A) and
to all of the buildings, structures, and other improvements located
thereon free and clear of any mortgage, deed of trust, lien, pledge,
security interest, claim, lease, charge, option, right of first refusal,
easement, restrictive covenant, encroachment or other survey defect,
encumbrance or other restriction or limitation except for matters shown on
SCHEDULE 3.07(A) and taxes which are not yet due and payable
(collectively, the "NSE Permitted Liens").
(b)SCHEDULE 3.07(B) sets forth a true, correct and complete schedule
of all material leases, subleases, licenses or other agreements under
which NSE uses or occupies, or has the right to use or occupy, now or in
the future, any real property or improvements thereon (the "NSE Real
Property Leases"). Except for matters listed on SCHEDULE 3.07(B), NSE
holds the leasehold estate under an interest in each NSE Real Property
Lease free and clear of all material liens, encumbrances and other rights
of occupancy. Except as set forth on SCHEDULE 3.07(B), all NSE Real
Property Leases are valid and binding on the lessors thereunder in
accordance with their respective terms and there is not under any such NSE
Real Property Lease any existing default, or any condition, event, or act
which with notice or lapse of time, or both, would constitute such a
default.
3.08 INDEBTEDNESS. SCHEDULE 3.08 sets forth a complete and accurate list
and description of all instruments or other documents relating to any direct or
indirect indebtedness for borrowed money of NSE, as well as other material
indebtedness by way of lease-purchase arrangements, guarantees, undertakings on
which others rely in extending credit and all conditional sales contracts,
chattel mortgages and other security arrangements with respect to personal
property used or owned by NSE. NSE has made available to NSAC a true, correct
and complete copy of each of the items listed on SCHEDULE 3.08.
3.09 INTELLECTUAL PROPERTY. SCHEDULE 3.09 sets forth a complete and
accurate list of all of NSE's registered trademarks, service marks, and patents,
and trademark service mark copyrights and
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patent registration applications, and all permits, grants and licenses or other
rights running to or from NSE relating to any of the foregoing that are material
to the business of NSE taken as a whole. NSE owns, is licensed to use, or
otherwise has the right to use all registered patents, trademarks, service
marks, tradenames, copyrights and franchises set forth on SCHEDULE 3.11; NSE's
rights in the property set forth on such list are free and clear of any liens or
other encumbrances and NSE has not received written notice of any adversely-held
patent, invention, trademark, servicemark or tradename of any other person, or
notice of any charge or claim of any person, relating to such intellectual
property, and to the Shareholders' knowledge there is no basis for any such
charge or claim; and NSE and its predecessors, if any, have not conducted
business at any time during the period beginning five years prior to the date
hereof under any corporate, trade or fictitious names other than its current
corporate name except as provided in SCHEDULE 3.09.
3.10 EMPLOYEE BENEFITS. Except as described on SCHEDULE 3.10, the
employees of NSE (the "NSE Employees") do not participate in any employee
benefit plans, as defined in Section 3(3) of Employee Retirement Income Security
Act of 1974, as amended ("ERISA") nor any other type of retirement, deferred
compensation, insurance, bonus, medical, stock option or other plan (the "NSE
Employee Benefit Plans"). None of the NSE Employees participate in a
multiemployer plan (as defined in Section 3(37) of ERISA) which is subject to
Title IV of ERISA. Except as otherwise described on SCHEDULE 3.10, the NSE
Employee Benefit Plans are in material compliance with applicable local, state
and federal laws, ordinances, regulations, orders, injunctions and decrees and
any other requirement of any governmental body, agency or authority or court
binding on it (including ERISA and the Internal Revenue Code of 1986, as
amended). NSE has not received written notice that any of its assets are
currently subject to a lien or other process under Title IV of ERISA, and except
as described on SCHEDULE 3.10, it has not received written notice of any
threatened or pending action related to the NSE Employee Benefit Plans by an
employee or former employee, a plan participant, the Department of Labor,
Internal Revenue Service or Pension Benefit Guaranty Corporation or any other
party other than a routine claim for benefits. Any group health plan maintained
by NSE covering any employee or former employee has been administered in all
material respects in compliance with the health care continuation coverage
provisions of the Omnibus Budget Reconciliation Act of 1985.
3.11 LITIGATION. SCHEDULE 3.13(A)(I) sets forth all litigation, claims,
suits, actions, known investigations, indictments, informations, proceedings,
arbitrations, grievances or other procedures (including known grand jury
investigations, actions or proceedings, and product liability and workers'
compensation suits, actions or proceedings) (collectively, "NSE Claims")
pending, or to the knowledge of the Shareholders, threatened, before any court,
commission, arbitration tribunal, or judicial, governmental or administrative
department, body, agency, administrator or official, grand jury, or any other
forum for the resolution of grievances, against NSE or involving any of its
property
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or business which would have a material adverse effect upon NSE, and (ii)
indicates which of such matters are being defended by an insurance carrier, and
which of the matters being so defended are being defended under a reservation of
rights. Further, except as set forth on SCHEDULE 3.11(B), there are no material
judgments, orders, writs, injunctions, decrees, plea agreements, stipulations or
awards (whether rendered by a court, commission, arbitration tribunal, or
judicial, governmental or administrative department, body, agency, administrator
or official, grand jury or any other forum for the resolution of grievances)
against or relating to NSE or involving any of its property or business. NSE has
made available to USL true, correct and complete copies of pleadings, briefs and
other documents filed in each NSE Claim listed on SCHEDULE 3.11(A), and the
material judgments, orders, writs, injunctions, decrees, plea agreements,
stipulations and awards listed in said Schedule.
3.12 COLLECTIVE BARGAINING. Except as set forth on SCHEDULE 3.12, there
are no labor contracts, collective bargaining agreements, letters of
understanding or other arrangements, formal or informal, with any union or labor
organization covering any of NSE's employees and none of said employees are
represented by any union or labor organization. NSE has made available to NSAC a
true, correct and complete copy of each agreement listed on SCHEDULE 3.12.
3.13 LABOR DISPUTES. NSE is not nor has been nor will be (by virtue of any
past or present action, omission to act, contract to which it is a party or any
occurrence or state of facts whatsoever) in material violation of any federal
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours. NSE is not nor has been engaged in
any unfair labor practice, and no unfair labor practice complaint against NSE is
pending before the National Labor Relations Board. The Shareholders do not know
or have reason to know of any labor strike or other labor action actually
pending, being threatened against, or affecting NSE. To the Shareholders'
knowledge, there have not been, nor are there presently, any attempts to
organize non-union employees, nor are there plans for any such attempts.
3.14 ENVIRONMENTAL REQUIREMENTS.
(a)DEFINITIONS. For purposes of this Agreement, the following
definitions apply:
(i) The term "Environmental Claims" means any and all
administrative, regulatory or judicial actions or proceedings
relating to the Release (as defined in (iv) below) or alleged
Release into the environment of any Hazardous Material (as defined
in (iii) below) on or at the NSE Real Property ("Claims"),
including, without limitation, Claims by any governmental or
regulatory authority or by any third party or other person for
enforcement, mitigation, cleanup, removal, response, remediation or
other actions for damages, fines, penalties, contribution,
indemnification, cost recovery,
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compensation or injunctive or declaratory relief pursuant to any
Environmental Law (as defined in (ii) below).
(ii)The term "Environmental Laws" means all federal and state
laws, rules and regulations relating to the regulation or protection
of human health, safety, natural resources or the environment and
applicable to the business of NSE, including but not limited to the
Resource Conservation and Recovery Act, 42 U.S.C. ss.6901, ET SEQ.,
as amended; the Comprehensive Environmental Response, Compensation &
Liability Act of 1980, 42 U.S.C. ss. 9601, ET SEQ., as amended; the
Clean Water Act, 33 U.S.C. ss.1251, ET SEQ., as amended; the Clean
Air Act, 42 U.S.C. ss.7401, ET SEQ., as amended; the Toxic
Substances Control Act, 15 U.S.C. ss.2601, ET SEQ., as amended; and
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
ss.136, ET SEQ., as amended.
(iii)The term "Hazardous Materials" means any substance or
material that is included within the definition of a "hazardous
substance," "hazardous waste," "hazardous constituent," "hazardous
material," "hazardous chemical" or "extremely hazardous substance"
contained in the Environmental Laws.
(iv)The term "Release" means spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment (including the abandonment
or discarding of barrels, containers, and other closed receptacles
containing any Hazardous Materials).
(b)NSE'S PREMISES. Except as disclosed in SCHEDULE 3.14, to the
Shareholders' knowledge, during NSE's ownership and operation of its
business, there have been no Releases of Hazardous Materials on the NSE
Real Property or the property subject to NSE Real Property Leases nor are
there any material pending Environmental Claims against or relating to the
business of NSE or any NSE Subsidiary.
3.15 REQUIRED LICENSES AND PERMITS. NSE has all licenses, permits or other
authorizations of governmental authorities necessary for the conduct of its
business. A correct and complete list of all such licenses, permits and other
authorizations is set forth on SCHEDULE 3.15. NSE has made available to NSAC
true, correct and complete copies of all written licenses and permits listed on
SCHEDULE 3.15.
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3.16 INSURANCE POLICIES. Except as set forth on SCHEDULE 3.16, since April
1, 1996, neither NSE n has received notice of default under, or intended
cancellation or renewal of, any material policies of insurance which insure the
properties, business or liability of NSE .
3.17 CONTRACTS AND COMMITMENTS.
(a)All contracts of NSE ("Contracts") are valid and binding and are
in full force and effect and enforceable in accordance with their
respective terms. Except as set forth in SCHEDULE 3.17(A), 3.18 or 3.19,
(i) no approval or consent of, or notice to any person is needed in order
to ensure that such Contracts shall continue in full force and effect in
accordance with their respective terms without penalty, acceleration or
rights of early termination following the consummation of the transactions
contemplated by this Agreement, and (ii) NSE is not in violation or breach
of or default under any such Contract, nor to the Shareholders' knowledge
is any other party to any such Contract in violation or breach or default
under any such Contract.
(b) SCHEDULE 3.17(B) sets forth a list of all contracts between NSE
and any of the following: (i) any officers, directors or employees of NSE,
and (ii) any person or entity which would be considered an "Affiliate" of
NSE. For the purpose of the foregoing sentence, "Affiliate" shall mean,
with respect to such person or entity, a person or entity that, directly,
or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with such person or entity.
3.18 NO CONFLICT. Subject to obtaining the consents and approvals and
making the filings described in Section 3.19 or as otherwise expressly set forth
in this Agreement, the execution and delivery of this Agreement by NSE, the
consummation of the transactions contemplated herein by NSE, and the performance
of the covenants and agreements of NSE will not (i) violate or conflict with any
of the provisions of the Articles of Incorporation or Bylaws of NSE; (ii) except
as set forth on SCHEDULE 3.18 violate, conflict with or result in a breach or
default under or cause termination of any term or condition of any mortgage,
indenture, contract, license, permit, instrument, trust document, will, or other
agreement, document or instrument to which NSE is a party or by which NSE or any
of its properties may be bound; (iii) violate any provision of material law,
statute, rule, regulation, court order, judgment or decree, or ruling of any
governmental authority, to which NSE is a party or by which it or any of its
properties may be bound; or (iv) result in the creation or imposition of any
lien or encumbrance of any kind whatsoever upon any asset of NSE.
3.19 REQUIRED FILINGS, CONSENTS AND APPROVALS. Except as set forth on
SCHEDULE 3.19, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any
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governmental or regulatory body or authority is required or necessary by virtue
of the execution hereof by NSE or the consummation of any of the transactions
contemplated herein by NSE to avoid the violation or breach of, or the default
under, or the creation of a lien on assets of NSE or a NSE Subsidiary pursuant
to the terms of, any law, regulation, order, decree or award of any court or
governmental agency or any lease, agreement, contract, mortgage, note, license,
or any other instrument to which NSE or a NSE Subsidiary is a party or to which
it or any of its property is subject.
3.20 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth on
SCHEDULE 3.20, since the date of the Balance Sheets, NSE has conducted its
businesses only in the ordinary course in all material respects, and
specifically has not:
(a)suffered any damage or destruction;
(b)made any declaration, setting aside or payment of any dividend or
other distribution of assets (whether in cash, stock or property) with
respect to the capital stock of NSE, or any direct or indirect redemption,
purchase or other acquisition of such stock;
(c)incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) other than in the ordinary
course of business consistent with past practice;
(d)permitted any of its assets to be subjected to any mortgage,
lien, security interest, restriction, charge or other encumbrance of any
kind except for NSE Permitted Liens;
(e)waived any claims or rights;
(f)sold, transferred or otherwise disposed of any of its material
assets, except in the ordinary course of business consistent with past
practice;
(g)made any material change in any method, practice or principle of
financial or tax accounting, except such changes required by changes in
GAAP; or
(h)agreed in writing, or otherwise, to take any action described in
this Section.
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3.21 TAX MATTERS.
(a)DEFINITIONS. For purposes of this Agreement, the following
definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may
become payable in respect thereof, imposed by any federal,
territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all
income or profits taxes (including federal income taxes and state
income taxes), payroll and employee withholding taxes, unemployment
insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and
other governmental charges, and other obligations of the same or of
a similar nature to any of the foregoing, which are required to be
paid, withheld or collected by the relevant party.
(ii)The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup
withholding and other payments to third parties.
(b)RETURNS FILED AND TAXES PAID. Except as otherwise disclosed in
SCHEDULE 3.21(B): (i) all Returns required to be filed by or on behalf of
NSE have been duly filed on a timely basis and such Returns are true,
complete and correct in all material respects; (ii) all Taxes shown to be
payable on the Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, and no other Taxes are payable
by NSE with respect to items or periods covered by such Returns (whether
or not shown on or reportable on such Returns) or with respect to any
period prior to the date of this Agreement; (iii) NSE has withheld and
paid over all Taxes required to have been withheld and paid over, and
complied in all material respects with all information reporting and
backup withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party; and (iv)
there are no liens on any of the assets of NSE with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that NSE
is contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established, which contested Taxes are
disclosed on SCHEDULE 3.21(B).
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(c)TAX DEFICIENCIES; AUDITS; STATUTES OF LIMITATIONS. Except as
otherwise disclosed on SCHEDULE 3.21(C): (i) the Returns of NSE have never
been audited by a government or taxing authority, nor is any such audit in
process, pending or, to the Shareholders' knowledge, threatened (either in
writing or verbally, formally or informally); (ii) no deficiencies exist
or have been asserted (either in writing or verbally, formally or
informally) or are expected to be asserted with respect to Taxes of NSE,
and NSE has not received notice (either in writing or verbally, formally
or informally) or expects to receive notice that it has not filed a Return
or paid Taxes required to be filed or paid by it; (iii) NSE is not a party
to any action or proceeding for assessment or collection of Taxes, nor has
such event been asserted or to NSE's knowledge, threatened (either in
writing or verbally, formally or informally) against NSE or any of its
respective assets; (iv) no waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of NSE; and (v)
NSE has disclosed on its federal income tax returns all positions taken
therein, in NSE's reasonable judgement, that could give rise to a
substantial understatement penalty within the meaning of Section 6662 of
the Code.
(d)TAX SHARING AGREEMENTS. Except as otherwise disclosed on
SCHEDULE 3.21(D), NSE is not (nor has it ever been) a party to any tax
sharing agreement.
3.22 BROKERAGE. Neither NSE nor any of its officers or directors has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
under this Agreement.
3.23 ACCOUNTS RECEIVABLE. All notes and accounts receivable arising out of
or relating to the business of NSE have been included in the Balance Sheets. All
notes and accounts receivable payable to or for the benefit of NSE reflected on
the Balance Sheets are collectible in accounts not less than the aggregate
amount thereof (net of reserves established in accordance with generally
accepted accounting principles applied consistently with prior practice) carried
on the books of NSE and are not subject to any counterclaims or set-offs. Except
as set forth in SCHEDULE 3.23, none of such notes or accounts receivable is past
due more than 90 days as of the date of this Agreement.
3.24 INVENTORIES. The inventories of NSE reflected on the Balance Sheets,
or acquired by NSE after the date thereof and before the Closing Date, are or
will be carried at not in excess of the lower of cost or market value determined
in accordance with generally accepted accounting principles, and do or will not
include any inventory which is Obsolete Inventory, Surplus Inventory or
inventory not usable or saleable in the lawful and ordinary course of business
of NSE as theretofore conducted, in each case net of reserves provided therefor
on the Balance Sheets. As used
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herein, "OBSOLETE INVENTORY" is inventory which is not usable or saleable
because of legal restrictions, failure to meet specifications imposed by any
commitment, loss of market, damage, physical deterioration or for any other
cause, excluding damage or physical deterioration which occurs or has occurred
in the ordinary course of business; and "SURPLUS INVENTORY" is inventory that
exceeds known or anticipated requirements. Except as disclosed in SCHEDULE 3.24
all inventory reflected on the books and records of NSE is owned by it free and
clear of all liens and encumbrances.
3.25 CUSTOMERS, SUPPLIERS AND COMPETITORS. SCHEDULE 3.25 sets forth a
complete and correct list of (a) all customers of each of NSE with whom NSE has
or had a commitment during the fiscal year ended December 31, 1997 and from such
date to the date hereof, (b) the ten largest suppliers by dollar volume of NSE
and the aggregate dollar volume of purchases by NSE from such suppliers for such
fiscal year, (c) all customers or suppliers who within the last 12 months have
terminated any material agreement, contract or other arrangement with NSE or
with whom NSE has terminated any material agreement, contract or other
arrangement, in each case with or without cause, prior to the stated expiration
thereof. Except as disclosed on Schedule 3.25 since January 1, 1997, NSE has not
at any time delivered to, or received from, any customer or supplier any notice
or allegation of a default or breach with respect to any material agreement,
contract or other arrangement and the Shareholders have no actual knowledge that
any of such listed customers or suppliers has, or intends to terminate or not
exercise any option to renew or otherwise change significantly its relationship
with NSE. Except as disclosed in SCHEDULE 3.25 NSE has not since March 27, 1998,
granted any credit, rebate, trade-in, free return or other sales terms to
customers or others which substantially differ from terms granted in the
ordinary course of business consistent with past practice.
3.26 DISCLOSURE. No representations, warranties, assurances or statements
by NSE in this Agreement and the Schedules attached hereto and no statement
contained in any certificates to be delivered by NSE (or caused to be delivered
by NSE) to NSAC pursuant to the provisions hereof contains or will contain any
untrue statement of material fact.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF USL & NSAC
USL and NSAC hereby jointly and severally represent and warrant as of the
date hereof to NSE as follows:
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4.01 ORGANIZATION AND AUTHORIZATION.
(a)Each of USL and NSAC is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation or organization, and has all requisite power and authority,
corporate or otherwise, to carry on and conduct its business as it is now
being conducted and to own or lease its properties and assets.
(b)USL and NSAC, respectively, have the corporate right, power and
capacity to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by USL's and
NSAC's respective Boards of Directors. This Agreement has been duly and
validly executed and delivered by USL and NSAC, and constitutes USL's and
NSAC's legal, valid and binding obligation, enforceable in accordance with
its term. NSE has the corporate right, power and capacity to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, subject to the approval and adoption of this
Agreement by the shareholders of NSE in accordance with the GBCC and the
Articles of Incorporation and Bylaws of NSE. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by NSE's Board
of Directors. This Agreement has been duly and validly executed and
delivered by NSE and, subject to the approval and adoption of this
Agreement by the shareholders of NSE in accordance with the GBCC and the
Articles of Incorporation and Bylaws of NSE, constitutes NSE's legal,
valid and binding obligation, enforceable in accordance with its terms,
subject to (i) bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or similar laws affecting the rights of
creditors and (ii) general principles of equity.
4.02 NO CONFLICT. Subject to obtaining the consents and approvals and
making the filings described in Section 4.03 or as otherwise expressly set forth
in this Agreement, the execution and delivery of this Agreement by USL and NSAC,
the consummation of the transactions contemplated herein by USL and NSAC, and
the performance of the covenants and agreements of USL and NSAC will not (i)
violate or conflict with any of the provisions of the Certificate of
Incorporation or Bylaws of each of USL and NSAC; (ii) except as set forth on
SCHEDULE 4.02 violate, conflict respectively, with or result in a breach or
default under or cause termination of any term or condition of any mortgage,
indenture, contract, license, permit, instrument, trust document, will, or other
agreement, document or instrument to which USL or NSAC is a party or by which
USL or NSAC or any of its properties may be bound; (iii) violate any provision
of any material law, statute, rule, regulation, court order, judgment or decree,
or ruling of any governmental authority, to which USL or NSAC is a party
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or by which it or any of its properties may be bound; or (iv) result in the
creation or imposition of any lien, claim, charge, restriction, security
interest or encumbrance of any kind whatsoever upon any asset of USL or NSAC.
4.03 REQUIRED FILINGS, CONSENTS AND APPROVALS. Except as set forth on
SCHEDULE 4.03, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is required or necessary by virtue of the execution hereof by USL and
NSAC or the consummation of any of the transactions contemplated herein by USL
or NSAC to avoid the violation or breach of, or the default under, or the
creation of a lien on assets of USL or a USL Subsidiary pursuant to the terms
of, any law, regulation, order, decree or award of any court or governmental
agency or any lease, agreement, contract, mortgage, note, license, or any other
instrument to which USL or a USL Subsidiary is a party or to which it or any of
its property is subject.
4.04 BROKERAGE. Neither USL, NSAC, nor any of their officers or directors
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated under this Agreement.
4.05 DISCLOSURE. No representations, warranties, assurances or statements
by USL or NSAC in this Agreement and the Schedules attached hereto and no
statement contained in any certificates to be delivered by USL or NSAC (or
caused to be delivered by USL or NSAC) to NSE pursuant to the provisions hereof
contains or will contain any untrue statement of material fact.
4.06 SECURITIES DOCUMENTS. USL has timely filed all documents required by
applicable securities laws to be filed ("SECURITIES FILINGS") since December 31,
1996, and the Securities Filings have complied in all material respects with the
legal requirements therefor at the times of such filings. Since the date of the
last Security Filing, USL and NSAC know of no fact, event or occurrence or lack
thereof which would have or cause a material adverse effect on USL or NSAC or
the price of USL Common Stock.
4.07 FINANCIAL STATEMENTS. The consolidated financial statements of USL
set forth in the Securities Filings have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved and fairly present the
financial position in all material respects of USL and its consolidated
subsidiaries as of the dates thereof and the results of their operations for the
periods then ended.
4.08 CAPITALIZATION. The authorized capital stock of USL consists of
30,000,000 shares of USL Common Stock. As of December 31, 1997, 7,303,164 shares
of USL Common Stock were
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issued and outstanding. No other capital stock of USL is authorized or issued.
All of such issued and outstanding shares of USL Common Stock are validly
issued, fully paid and non-assessable. There are no shares of capital stock held
in the treasury of USL.
ARTICLE V.
INDEMNIFICATION
5.01 COVERAGE.
(a)Notwithstanding the Closing or the Merger and regardless of any
investigation at any time made by or on behalf of USL or NSAC, each of the
Shareholders, jointly and severally, shall, subject to the limitations set
forth in Sections 5.03 and 5.04 hereof, indemnify and agree to fully
defend, save and hold USL and NSAC harmless if either such party shall at
any time or from time to time suffer any damage, liability, loss, cost,
expense (including all reasonable attorneys', consultants' and experts'
fees), claim or cause of action (each, a "LOSS") arising out of, relating
to or resulting from, or shall pay or become obligated to pay any sum on
account of any and all Events of Breach (as hereinafter defined) of either
Shareholder.
(b)Notwithstanding the Closing or Merger and regardless of any
investigation at any time made by or on behalf of the Shareholders, each
of USL and NSAC, jointly and severally, shall, subject to the limitations
set forth in Sections 5.03 and 5.04 hereof, indemnify and agree to fully
defend, save and hold the Shareholders harmless if the Shareholders shall
at any time or from time to time suffer any Loss arising out of or
resulting from, or shall pay or become obligated to pay any sum on account
of any and all Events of Breach of USL or NSAC.
(c)As used herein, "EVENT OF BREACH" shall be and mean any one or
more of the following:
(i) any untruth or inaccuracy in any representation by the
indemnitor relied upon by the indemnitee or the breach of any
warranty by the indemnitor relied upon by the indemnitee, which
representation or warranty is contained in this Agreement or any
certificate or schedule specifically furnished by the other party
pursuant to this Agreement or in connection with the Closing; and
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(ii)any failure by the indemnitor duly to perform and observe any
material term, provision, covenant, agreement or condition on the
part of such indemnitor to be performed or observed under this
Agreement.
5.02 PROCEDURES. If an Event of Breach occurs or is alleged and the party
or parties entitled to receive the benefits of the indemnification provisions
hereunder (the "INDEMNIFIED PARTY"), or if any suit, action, investigation,
claim or proceeding is begun, made or instituted as a result of which the
Indemnifying Party may become obligated to the Indemnified Party hereunder, the
Indemnified Party shall give written notice to the Indemnifying Party. The
Indemnifying Party may, and at the request of the Indemnified Party shall,
participate in and defend, contest or otherwise protect the Indemnified Party
against any such suit, action, investigation, claim or proceeding by counsel of
the Indemnifying Party's choice at its sole cost and expense; provided, however,
that the Indemnifying Party shall not make any settlement or compromise without
the prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by counsel
of the Indemnified Party's choice and shall in any event cooperate with and
assist the Indemnifying Party to the extent reasonably possible. If the
Indemnifying Party fails timely to defend, contest or otherwise protect against
such suit, action, investigation, claim or proceeding, the Indemnified Party
shall have the right to do so, including, without limitation, the right to make
any compromise or settlement thereof, and the Indemnified Party shall be
entitled to recover the entire cost thereof from the Indemnifying Party,
including, without limitation, reasonable attorneys' fees, disbursements and
amounts paid as the result of such suit, action, investigation, claim or
proceeding. The indemnification provisions set forth in this Article V are the
exclusive remedy the parties hereto shall have if an Event of Breach shall occur
and a party shall incur a Loss.
5.03 MINIMUM AND MAXIMUM INDEMNITY AMOUNTS. Notwithstanding any other
provision hereof, the Indemnifying Party shall have no liability (for
indemnification or otherwise) with respect to the matters described in this
Article V until the total of all Losses with respect to such matters exceeds
$75,000, and the amount for which the Indemnifying Party shall be liable shall
be that amount which exceeds $1.00 up to a maximum aggregate of $4,000,000, and
in no event shall the aggregate liability of the Shareholders or the aggregate
liability of USL and NSAC exceed such maximum of $4,000,000. The indemnification
obligation of Shareholders under this Article V shall be the several, not the
joint, obligation of each Shareholder proportionate and limited to each
Shareholder's percentage of Outstanding NSE Shares held by each Shareholder and
converted in accordance with the terms of Article II.
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5.04 SURVIVAL. Each of the representations and warranties set forth in
Article III and Article IV shall survive the Closing for a period of two years
after the Closing Date PROVIDED, however, that claims arising out of or related
in any way to any breach of or inaccuracy in the representations and warranties
contained in Section 3.21 hereof may be made until, and can be made no later
than, thirty (30) days after the expiration of the applicable statute of
limitations relative to the liability relating to tax authorities to such
representation or warranty.
ARTICLE VI.
COVENANTS OF THE PARTIES
The parties covenant as follows (with the term "USL" being deemed to
include "NSAC" for the purposes of this Article VI):
6.01 PRE-CLOSING OPERATIONS. Except for the actions set forth on SCHEDULE
6.01, which are expressly excepted from this Section 6.01, NSE hereby covenants
and agrees that, except as consented to in writing by USL, pending the Closing,
NSE will operate and conduct its business, and that of the NSE Subsidiaries,
only in the ordinary course in accordance with prior practices. Pursuant thereto
and not in limitation of the foregoing (for purposes of the following, "NSE"
shall be deemed to include the NSE Subsidiaries):
(a)NSE shall maintain its assets in their present state of repair
(ordinary wear and tear excepted), shall use its reasonable best efforts
to keep available the services of its employees, and preserve the good
will of its business and relationships with the customers, licensors,
suppliers, distributors and brokers with whom it has business relations.
(b)NSE shall not take any of the following actions after the date of
this Agreement without the prior written consent of USL:
(i) Sell, transfer or otherwise dispose of any assets other than
in the ordinary course of business consistent with past practice;
(ii)Enter into any new material contract or commitment relating
to its business;
(iii)Mortgage, pledge or subject to liens or other encumbrances
or charges any assets, except by incurring Permitted Liens;
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(iv)Purchase or commit to purchase any capital asset for a price
exceeding $25,000; or
(v) Amend or terminate in any material respect any material
agreement, including any employee benefit plan (except as otherwise
contemplated by this Agreement) or any insurance policy, in force on
the date hereof.
6.02 ACCESS. From the date of this Agreement through the Closing Date (i)
NSE shall provide USL and its designees (including officers, counsel,
accountants, actuaries, and other authorized representatives) with such
information as USL may from time to time reasonably request with respect to NSE
and the transactions contemplated by this Agreement, and USL shall provide NSE
and its designees (including officers, counsel, accountants, actuaries, and
other authorized representatives) with such information as NSE may from time to
time reasonably request with respect to USL, NSAC and the transactions
contemplated by this Agreement; and (ii) NSE and USL shall provide each other
and their respective designees, reasonable access during regular business hours
to the books, records, offices, personnel, counsel, accountants and actuaries of
each other, as they or their designees may from time to time reasonably request.
Any investigation shall be conducted in such a manner so as not to interfere
unreasonably with the operation of the respective businesses of the parties. No
such investigation shall limit or modify in any way the parties obligations with
respect to any breach of their representations, warranties, covenants or
agreements contained herein.
6.03 INTERIM FINANCIALS. As promptly as practicable after each regular
accounting period subsequent to the date of this Agreement and prior to the
Effective Date, NSE will deliver to USL periodic financial reports in the form
which it customarily prepares for its internal purposes concerning NSE, and
unaudited statements of the financial position of NSE as of the last day of each
accounting period and statements of income and changes in financial position of
NSE for the period then ended.
6.04 TRANSFER TAXES. All sales or transfer taxes, including stock transfer
taxes, document recording fees, real property transfer taxes, and excise taxes,
arising out of or in connection with the consummation of the transactions
contemplated hereby shall be paid by NSE.
6.05 PREPARATION OF SUPPORTING DOCUMENTS. In addition to such actions as
the parties may otherwise be required to take under this Agreement or applicable
law in order to consummate this Agreement and the transactions contemplated
hereby, the parties shall take such action, shall furnish such information, and
shall prepare, or cooperate in preparing, and execute
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and deliver such certificates, agreements and other instruments as the other
party may reasonably request from time to time, before, at or after the Closing,
with respect to compliance with the obligations of NSE, NSAC, or USL in
connection with the Merger. Any information so furnished by the parties shall be
true, correct and complete in all material respects and shall not contain any
untrue statement of a material fact.
6.06 SHAREHOLDERS MEETING. As soon as practicable, NSE will take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders for the purpose of adopting and approving this Agreement and the
Merger and for such other purposes as may be necessary or desirable in
connection with effectuating the transactions contemplated hereby and thereby.
The Shareholders agree to consent to or vote in favor of the Merger.
6.07 LABOR MATTERS.
(a)Each of USL and NSAC agree that each individual employed by NSE
and/or the NSE Subsidiaries on the date immediately preceding the Closing
Date (collectively, the "NSE Employees") shall continue in employment by
NSAC (or its subsidiaries) after the Closing Date, and USL and NSAC agree
that for a period of 12 months following the Closing Date, neither USL nor
NSAC (nor any successor thereof) shall terminate the employment of any of
the NSE Employees, except that any NSE Employee who is a party to a
contract described in Schedule 3.17(b) may be terminated pursuant to the
terms of such contract and any other NSE Employee may be terminated for
"Cause." For this purpose, the term "Cause" shall mean (1) continued
failure to perform the duties of assigned job description within thirty
(30) days following written notice from and meeting with direct
supervisor; (2) indictment or conviction of a felony; (3) embezzlement,
fraud or theft from the employer; or (4) violation of employer's written
policies and procedures as communicated to employees.
(b)While the parties anticipate that provisions of the Workers
Adjustment and Retraining Notification Act of 1988, as amended ("WARN
Act"), will not apply to the transaction contemplated by this Agreement
due the provisions of subsection (a) hereof, NSE shall provide any notice
to affected employees before the Effective Time as may be required by the
WARN Act.
6.08 CONSENTS, WAIVERS, AUTHORIZATIONS, ETC. Each of NSE and USL will use
its best efforts to obtain all consents, waivers, authorizations, orders and
approvals of and make all filings and registrations with, any governmental
commission, board or other regulatory body or any nongovernmental third party,
required for, or in connection with, the performance by them of this
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Agreement and the consummation by them of the transactions contemplated hereby,
or as may be required in order not to accelerate, violate, breach or terminate
any agreement to which either party or any of their respective Subsidiaries may
be subject. Each party will cooperate fully with each other party in assisting
it to obtain such consents, authorizations, orders and approvals. The parties
will not take any action which could reasonably be anticipated to have the
effect of delaying, impairing or impeding the receipt of any required approvals,
regulatory or otherwise.
6.09 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of NSE and USL agrees to use its best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including (i) the
defending of any lawsuits of other legal proceedings, whether judicial or
administrative, challenging the Agreement or the consummation of the
transactions contemplated hereby, and (ii) obtaining all governmental consents
required for the consummation of the Merger and the transactions contemplated
thereby. Upon the terms and subject to the conditions hereof, each of the
parties agree to use any and all best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things reasonably necessary to
satisfy the other conditions of the Closing set forth herein. Each party will
consult with counsel for the other party as to, and will permit such counsel to
participate in, at such other party's expense, any lawsuits or proceedings
referred to in clause (i) above brought against any party. In case at any time
after the Effective Time any further action is reasonably necessary or desirable
to carry out the purposes of this Agreement, the officers and directors of NSAC
shall take all such reasonable, necessary action.
6.10 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, each of
NSE and USL shall not and shall cause their affiliates not to issue or cause the
publication of any press release or any other announcement with respect to the
Merger or the transactions contemplated by this Agreement without the prior
written consent of the other party, except where such release or announcement is
required by applicable law or pursuant to any listing agreement with, or the
rules or regulations of the SEC or the American Stock Exchange in which case a
copy of such release or announcement shall be furnished to the other party five
days in advance of its release.
6.11 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, all legal, accounting and other fees, costs and expenses of each
party hereto incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees, costs or
expenses except that the fees, costs and expenses of NSE relating to the
transactions contemplated herein shall be borne by the Shareholders
individually.
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6.12 NON-COMPETITION. The Shareholders acknowledge that the agreements and
covenants contained in this Section are essential to protect the value of each
of NSE's ' business and assets by virtue of their current relationship with NSE
, and that the Shareholders have obtained such knowledge, contacts, know-how,
training and experience that there is substantial probability that such
knowledge, know-how, contracts, training and experience could be used to the
substantial advantage of a competitor of NSE and to their substantial detriment.
The Shareholders also acknowledge that USL and NSAC have agreed to the Merger in
reliance on the covenants made by the Shareholders in this Section, and that USL
and NSAC would not have agreed to the Merger in the absence of covenants made by
the Shareholders in this Section. Therefore, the Shareholders agree that for a
period commencing on the date of this Agreement and ending the tenth anniversary
of the Closing Date hereunder (such period is hereinafter referred to as the
"RESTRICTED PERIOD") with respect to any location at which any of NSE or any of
their subsidiaries or affiliates (including any partnerships or joint venture in
which any of them as an interest), is on the date of this Agreement, actively
providing services or otherwise doing business, the Shareholders shall not
participate or engage, directly or indirectly, for themselves or any of them or
on behalf of or in conjunction with any person, partnership, corporation or
other entity, whether as an employee, agent, officer, director, shareholder
(excluding beneficial ownership of less than 5% of the combined voting power of
all issued and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange or quoted on NASDAQ), partner,
joint venturer, investor or otherwise, in any business if such activity consists
of any activity undertaken or expressly contemplated to be undertaken by any of
NSE on the date hereof.
6.13 REGISTRATION OF USL COMMON STOCK. USL covenants and agrees that all
of the shares of USL Common Stock to be delivered to the Shareholders pursuant
to the terms hereof will be duly authorized, fully paid and non-assessable, and
will be registered with the Securities and Exchange Commission under the
Securities Act of 1933 at the time of issuance and delivery of such shares to
the Shareholders, that such shares will be eligible for immediate resale (but
for the restriction set forth in the last sentence of Section 2.01(a)
hereinabove) and such shares will be listed for trading on the American Stock
Exchange at that time.
ARTICLE VII.
CONDITIONS
7.01 CONDITIONS TO EACH MERGING PARTY'S OBLIGATIONS. The respective
obligation of each party to effect the Merger and the other transactions to be
effected contemporaneous with or
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as a result of the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a)SHAREHOLDER APPROVAL; CONSUMMATION OF MERGER. This Agreement and
the Merger shall have been adopted at or prior to the Effective Time by
the requisite vote of the shareholders of NSE in accordance with
applicable law and the Articles of Incorporation and Bylaws of NSE, and
the Merger shall have been consummated concurrently with the Closing.
(b)NO INJUNCTION. No order, statute, rule, regulation, executive
order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or governmental authority
which prohibits or prevents the consummation of the transactions
contemplated hereby and which has not been stayed or vacated by the
Effective Time. Each of NSE, NSAC, and USL shall use its best efforts and
shall cooperate with each other to have any such order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction vacated,
lifted or stayed.
(c)REQUIRED CONSENTS. Any required consents or approvals of any
person to the Merger or the transactions contemplated hereby shall have
been obtained and be in full force and effect.
7.02 CONDITIONS TO OBLIGATIONS OF NSE. The obligation of NSE to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions, any one or more of which may be waived in
writing by NSE:
(a)OBLIGATIONS PERFORMED. Each of USL and NSAC shall have performed
and complied with in all material respects its obligations, agreements and
covenants under this Agreement which are required to be performed or
complied with by it at or prior to the Effective Time.
(b)REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. As of the
Effective Time, the representations and warranties contained in Article IV
shall be true and correct in all material respects (except in each case
for such changes that are caused by USL's or NSAC's compliance with the
terms of this Agreement).
(c)CERTIFICATE DELIVERED. USL and NSAC shall have delivered to NSE
a certificate executed on their behalf by their respective Presidents or
another authorized
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executive officer in its corporate capacity to the effect that the
conditions set forth in subsections 7.02(a) and 7.02(b) have been
satisfied.
(d)CERTIFICATE OF MERGER. NSAC shall have executed and delivered the
Certificate of Merger in accordance with Section 1.02 hereof.
(e)CORPORATE RESOLUTIONS. USL and NSAC shall have delivered
corporate resolutions duly adopted by the Boards of Directors of USL and
NSAC, and by USL as sole shareholder of NSAC, authorizing the execution,
delivery and performance of this Agreement, duly certified by the
Secretary of each, and an incumbency certificate certifying the names and
true signatures of the officers of each such corporation executing and
delivering this Agreement.
(f)EMPLOYMENT AGREEMENT AND CONSULTING AGREEMENT. USL and NSAC shall
have executed and delivered to (i) Maxwell Calloway the Employment
Agreement in the form of Exhibit 7.02(g)(1) and (ii) Ronald Calloway the
Consulting Agreement in the form of Exhibit 7.02(g)(2).
(g)CASH. USL and NSAC shall have delivered to the Shareholders the
cash portion of the merger consideration described in Section 2.01(a).
7.03 CONDITIONS TO OBLIGATIONS OF USL. The obligation of USL and NSAC to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions, any one or more of which
may be waived in writing by USL:
(a)OBLIGATIONS PERFORMED. NSE shall have performed and complied with
in all material respects its obligations, agreements and covenants under
this Agreement which are required to be performed or complied with by it
at or prior to the Effective Time.
(b)REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. As of the
Effective Time, each of the representations and warranties contained in
Article III shall be true and correct in all material respects (except in
each case for such changes that are caused by NSE's compliance with the
terms of this Agreement).
(c)CERTIFICATE DELIVERED. NSE shall have delivered to USL a
certificate executed on its behalf by its President or another authorized
executive officer in its corporate capacity to the effect that the
conditions set forth in subsections 7.03(a) and 7.03(b) have been
satisfied.
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(d)CERTIFICATE OF MERGER. NSE shall have executed and delivered the
Certificate of Merger in accordance with Section 1.02 hereof.
(e)CORPORATE RESOLUTIONS. NSE shall have delivered corporate
resolutions duly adopted by the Board of Directors of NSE, and by the
Shareholders, authorizing the execution, delivery and performance of this
Agreement, duly certified by the Secretary, and an incumbency certificate
certifying the names and true signatures of the officers of NSE.
ARTICLE VIII.
TERMINATION PRIOR TO CLOSING
8.01 TERMINATION OF AGREEMENT. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, whether before or after approval by the shareholders of NSE:
(a)By the written agreement of NSE and USL;
(b)By either of NSE or USL if the Merger shall not have been
consummated on or before April 30 (or such later date as may be agreed to
by NSE and USL); PROVIDED THAT, neither NSE nor USL may terminate this
Agreement under this Section if the failure has been caused by such
party's breach or default of its obligations under this Agreement;
(c)By NSE in writing, without liability, if USL or NSAC shall breach
any of their respective representations, warranties or covenants contained
herein, which failure or breach is not cured within thirty (30) days after
NSE has notified USL of its intent to terminate this Agreement pursuant to
this subparagraph (c);
(d)By USL and NSAC in writing, without liability, if NSE shall
breach any of its representations, warranties or covenants contained
herein, which failure or breach is not cured within thirty (30) days after
USL has notified NSE of its intent to terminate this Agreement pursuant to
this subparagraph (d); or
(e)By either NSE or USL in writing, without liability, if there
shall be any order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have
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been enacted, entered, promulgated or enforced by any court or
governmental authority which prohibits or prevents the consummation of the
transactions contemplated hereby, provided that USL, NSAC and NSE shall
have used their respective best efforts to have any such order, statute,
rule, regulation, executive order, stay, decree, judgment or injunction
vacated, lifted or stayed and the same shall not have been vacated, lifted
or stayed within 30 days after entry, by any such court or governmental or
regulatory agency.
8.02 TERMINATION OF OBLIGATIONS. Termination of this Agreement pursuant to
this Article VIII shall terminate all obligations of the parties hereunder,
except for the obligation under Section 9.07 hereof; provided, however, that
termination pursuant to subparagraphs (b), (c) or (d) of Section 8.01 hereof
shall not relieve a defaulting or breaching party from any liability to the
other party hereto.
ARTICLE IX.
MISCELLANEOUS
9.01 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits) constitutes the sole understanding of the parties with respect to the
subject matter hereof.
9.02 AMENDMENT. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
9.03 PARTIES BOUND BY AGREEMENT; SUCCESSORS AND ASSIGNS. The terms,
conditions and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto prior to the Effective
Time without the prior written consent of the other parties hereto. Except for
the parties hereto and any person or entity covered by an indemnification
provision hereunder, this Agreement is not intended to confer upon any other
person any rights or remedies hereunder.
9.04 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
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9.05 HEADINGS. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
9.06 MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to be or shall constitute a waiver of any other provision hereof
(whether or not similar).
9.07 EXPENSES. If the Merger is not consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs or expenses, subject to
the rights of such party with respect to a breach, violation or default by the
other party hereto.
9.08 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail
(including by overnight courier or express mail service), postage or fees
prepaid, or sent by facsimile with original sent by overnight courier,
if to NSE to:
The National Solvent Exchange Corp.
1184 Logan Circle, NW
Atlanta, Georgia 30318
with a copy to:
Stanley H. Smith, Jr., Esq.
Womble, Carlyle, Sandridge & Rice, PLLC
1275 Peachtree Street, NE
Suite 700
Atlanta, Georgia 30309-3574
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if to USL or NSAC to:
W. Gregory Orr, President
US Liquids Inc.
411 N. San Houston Pkwy. E., Suite 400
Houston, Texas 77060
with a copy to:
Charles T. Zink, Esq.
Long Aldridge & Norman LLP
One Peachtree Center
303 Peachtree St., N.E., Suite 5300
Atlanta, Georgia 30308
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
local time of the recipient, on the fourth business day after the day it is so
placed in the mail or, if earlier, the time of actual receipt.
9.09 GOVERNING LAW. This Agreement is executed by the parties hereto in
and shall be construed in accordance with and governed by the laws of Georgia
without giving effect to the principles of conflicts of law thereof.
9.10 NSE'S KNOWLEDGE. As used herein, the terms "NSE's knowledge" and "to
the knowledge of NSE" with respect to NSE shall mean the actual knowledge of the
Shareholders.
9.11 USL'S KNOWLEDGE. As used herein, the terms "USL's knowledge" and "to
the knowledge of USL" with respect to USL shall mean the actual knowledge of any
officer of USL listed on SCHEDULE 8.11.
9.12 "INCLUDING." Words of inclusion shall not be construed as terms of
limitation herein, so that references to "included" matters shall be regarded as
non-exclusive, non-characterizing illustrations.
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9.13 "GENDER AND NUMBER." Where the context requires, the use of a pronoun
of one gender or the neuter is to be deemed to include a pronoun of the
appropriate gender, singular words are to be deemed to include the plural, and
vice versa.
9.14 REFERENCES. Whenever reference is made in this Agreement to any
Article, Section, Schedule or Exhibit, such reference shall be deemed to apply
to the specified Article or Section of this Agreement or the specified Schedule
or Exhibit to this Agreement.
9.15 SEVERABILITY. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date indicated on the first page
hereof.
THE NATIONAL SOLVENT EXCHANGE CORP.
By: /s/ MAXWELL R. CALLOWAY
Name:
Title: President
US LIQUIDS INC.
By: /s/ DAVID J. TURKAL
Name:
Title: Authorized Representative
NS ACQUISITION CORP.
By: /s/ DAVID J. TURKAL
Name:
Title: Authorized Representative
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